This month’s column is different from the others in the series as both of us have been continually asked to predict where casino marketing is going, and "why is it so tough these days?" We will give you some of our observations and review some trends, and at the end give you some general profit enhancing advice.

The relationship between the main elements of the formula used to calculate a player's worth in all invited guest programs; average bet, hours played (decisions per hour) and the theoretical hold on the game, have remained largely unchanged for 20 years. Once the worth is determined, the casino then gives back a percentage of that value to the player. In Las Vegas and Atlantic City, that amount is in the 30% to 40% range, in other markets it varies from 10% to as high as 60%.

This formula does not consider time with the importance that it should. Proof of this is the fact that one can double the average bet and halve the time played, and attain the same theoretical worth on a player. However, this increases volatility, an important factor for all who have to work with quarterly budgets. It is therefore essential that the casino receive the correct amount of time played for each level of customer to reduce the instability on the hold.

Historically, the success of casino programs has occurred in spite of having to (dubiously) carry players that are marginal as defined by the aforementioned formula. With the majority of the players being profitable, the casinos were willing to subsidize the marginal players as the program as a whole made a profit.

Those Were The Days…..

The days when casinos were a novelty for most visitors are finished. Over 80% of the U.S. population are within two hours drive of a casino. The gaming product no longer holds the mystique or mystery that it did in the past. A by-product of this convenience and familiarity has been an accelerated education on gaming matters. As a result of this familiarity and blasé disposition toward gaming, the majority of players barely reach the minimum time requirements — they would rather be doing traditional leisure and vacation activities, such as going to a show, playing golf, tennis, or lying on the beach. Data compiled by Las Vegas Convention & Visitors Authority (see chart) bears this out. The average playing time in Las Vegas, among those who gambled, has declined from 5.0 hours per day in 1991 to 3.9 hours per day in 1997 — a 22% decrease! One year in the period, 1994, saw a rise back to 5.0 hours per day, primarily due to the three new mega-casinos that opened that year, and the large increase in Asian Baccarat play in Las Vegas by individuals who play for 10 to 14 hours per day. This trend in decreased playing time by rated customers, which is now starting to be noticeable, and is borne out in comments made by various industry leaders such as Mirage Resort’s CFO Dan Lee, who last year was quoted in the Wall Street Journal as saying; "…gamblers may also be spending less time at blackjack, baccarat and other table games."

Another factor is that the customers’ learning curve has also improved in the last twenty years. To illustrate this, consider the reputation of the Latin American invited guest. These players, with the exception of a few and scarce high rollers, are considered the toughest players to hold a profit margin on, and have been for the last 10 years. They know all the angles, take advantage of them, and are shamelessly bold in demanding and maximizing complimentaries. Management, for a long time has considered this market an aggravating, but necessary segment of their marketing mix. For various cultural reasons, the players just evolved faster and were smarter than their North American counterparts. As an aside, we may add that the cultural warmth and friendliness necessary to attract and keep these players (and in which the Latin-marketing executives excel) are not balanced with the proper business disciplines that have as an end the "Holy Grail" of all companies — profit.

What does it all mean? In short, the North American players in the 40 to 60 year old age bracket — the prime invited guest customers at the height of their earning power, have evolved into a smarter, more discerning adversary. Most of them know as much (or more) about "earning potential" and the various scoring methods to get complimentaries as the casino executive that they are dealing with. When one then considers the fact that these players are, by definition, successful in a very competitive economy, and that many casino executives came up through the ranks without formal business training, it is not hard to judge who is getting the best of whom!

Sadly, for all of us in the gaming industry, the profile of the player who visits the casino, gambles and drinks all night, and loses his complete bankroll is increasingly rare these days — that player has been eliminated by his liver and the casinos that have opened in 18 states in the United States over the last 10 years.

The result of continuing moribund marketing programs as a form of self-preservation is that there is a bias for casino management to "over comp" players who technically do not qualify. This is done for all kinds of reasons, but primarily to encourage the players to return to the property. The lack of complimentary discipline is similar to the many disastrous bus promotions for slot players in Atlantic City. Having set revenue target, management does just about anything to keep the business rolling in. This method of operating benefits every participant (players, airlines, limousines, room, food, beverage, golf, tennis, spa and line employees) in the chain — except the casino!

So, what can you do about this?

Take Five Steps To Marketing Sanity

1. Direct the people who talk to the customer to learn to do the hardest thing of all — say "NO!" without alienating the valuable guest. Require that your marketing people acknowledge this new reality and take responsibility for it by working within the new parameters — or else! Also, recognize that this is ever more difficult to do with shortage of qualified executives, and the fact that the easiest solution seems to be to promote promising looking people and then let them "learn on the job".

Stop listening to the siren songs of customer agents, representatives and anyone whose true loyalty lies with the customer, not with your casino. There are more of these individuals now than ever before, chasing the same number of customers for many more properties. Think about the consequences of that last sentence, and you will see that the only way that representatives and agents can make a living is by having you, and your casino, lower the standard for rewarding complimentaries.

Cut the agents off or put them on a realistic performance diet. Those that quit were not producing real bottom line revenue for you anyway, and they will leave to damage a competitor.

Recognize that the new customer and his partners (the representatives and agents) know that you and the casino are hungry and will always hope for the best, and pray for a better result "next time". Don’t be fooled, next time will be like last time.

Think of the customer as a typical English Lord — wants all the privileges of a VIP (complimentaries and all the other perks) without the responsibility that goes with it (putting in time actually playing the games, and yes be willing to lose).

This all sounds easy of course, but it is not. The "execusaurs" in your management and marketing (yes, marketing is full of them) —will resist to the last man; (see Dennis Conrad’s June column for marketing practices from the Jurassic age that he would like to see gone).

We have had the opportunity to implement this with clients, and guess what? You actually lessen your workload and drop, but the margins all go up. The agents and representatives, after an appropriate period of sulking, start delivering players to you again. In the end you will emerge with a slimmer, rational marketing program that delivers what it is supposed to do — positive bottom line results.