Operators get new tools to figure bottom line on player offers

January 3, 2023 8:41 PM

Operators get new tools to figure bottom line on player offers

Photo: Shutterstock
  • Mark Gruetze, CDC Gaming Reports
January 3, 2023 8:41 PM
  • Mark Gruetze, CDC Gaming Reports
  • United States
  • Commercial Casinos
  • Suppliers

Despite differing perspectives, casino-marketing directors and the players they pursue look at comps with the same question in mind: What’s it worth to me?

Free play, free or discounted meals and hotel rooms, giveaways, and other player rewards make up the biggest part of a casino’s marketing effort and marketers naturally want to get the most bang for their buck. Just as naturally, players want a reward that has value for them; a free steakhouse meal won’t entice a vegan.

New analytical tools give marketing executives deeper insights into how individual players use offers, thus allowing casinos to fine-tune their comps and offers. That has the potential to target incentives more effectively, perhaps reducing overall costs; some players might see their offers decrease, while others find theirs more valuable. It’s something of a numbers game for givers and receivers.

“Gaming has always been ahead of the curve in analytics,” said Andrew Cardno, co-founder and chief technology officer for Quick Custom Intelligence, one of a handful of companies that consume and analyze data to customize offers. “As an industry, we’re very numbers-centric. It’s all we have. We don’t have products in the traditional retail sense.”

Gene Johnson, executive vice president of gaming consulting company Victor-Strategies, said casinos enjoyed a post-COVID revenue boom from pent-up demand, meaning they had to do little marketing. “It’s not so much that they’ve tightened their comp policies as they haven’t had to expand them. But if we get into a recession and discretionary spending falls, we’ll definitely see casinos doing more to incentivize players.”

Anthony Curtis, publisher of Las Vegas Advisor, said casino comp policies have tightened since the COVID reopening. “The casinos get away with what they can get away with. They’ll take advantage of the situation, which is people continuing to come through the doors no matter what. (Comp awarding) almost has to get better. I think we’re at the peak of how tight Vegas can be.”

Operators base monthly offers on a percentage of a player’s perceived value to the casino. Cardno said a typical marketing-department “reinvestment” rate, or margin, is about 20 percent of the casino’s theoretical win from the player.

That number might work out over a large swath of players, but vary widely by individual. For example, three players with the same theoretical value to a casino might each receive monthly offers for $25 free play, a hotel room, a $50 dining comp, and a spa visit. One player redeems all four offers, while the others avail themselves of just one or two.

Knowing how much the casino actually spends for each player changes how marketers evaluate their programs, Cardno said. Customizing offers, in what he calls “dynamic reinvestment,” allows operators to reallocate on an individual basis, such as eliminating the spa offer for players who don’t use it and increasing the free play or dining offers they do redeem.

“(Casinos) lose margin very easily,” Cardno said. “We’re saying margin is actually the core thing that determines the offer value. We’re giving marketers the tool to control the reinvestment level, while providing more value to players through personalized relevant offers.”

Cardno said the reinvestment margin varies “wildly,” from as low as 10 percent to more than 50 percent in a hyper-competitive market. Even with the eternal debate about the actual cost of free play, casinos put their own value on it, along with the cost of a room or food comp. “This is a question around how to control investment and forecast and manage it appropriately for each person,” he said.

Cardno said dynamic reinvestment provides operators with cost stability based on the giveback rate set by the casino and can give them a leg up on competitors.

For example, a casino using traditional comp offers might see a cost-per-player ranging from 10 percent to 30 percent of the expected win, while a competitor using dynamic reinvestment might spend 20 percent of the expected win from each person. If players head to the casino they perceive as offering better comps, Cardno said, those using offers reflecting just 10 percent of their expected value at the first casino will head to the second. Conversely, those redeeming offers at 30 percent of their value at the first casino will stay there, increasing that operator’s overall cost per player.

For players, dynamic reinvestment means offers are fair, in the sense that everyone gets the same level based on the amount of play.

“Do players like fair? I don’t think so,” Cardno said. “But now we’ve got a fair program that, from the casino’s perspective, is targeting the right level of reinvestment.”

Surveys by Victor-Strategies consistently rank free play as the most popular offer among players, followed by room and food offers. “What the players value most is a blend of offers and the ones tailored to their individual preferences,” Johnson said.

He noted that rewards programs for regional or drive-in casinos differ from those at destination sites. “For Las Vegas, you get really lucrative free play and room offers,” he said, while gas cards were particularly popular this summer at many regional casinos. Regional operators also might bump up offers for “faders,” whose play level has dropped, and for players who haven’t visited for six months or more.

Some offers that might not seem attractive to marketers, such as a two-for-one buffet coupon, are important to a large body of customers, Johnson said.

Direct mail, once the dominant method of reaching players, is losing ground to social media and email offers. “Today, you can do much more targeting of individual customers on a granular level,” Johnson said.

He cautioned that any analysis of spending on player comps requires accurate information on their play, which can be difficult to acquire. He said 30 percent or more of slot play is uncarded, due to card-reader error or players not using a card, due to superstition, ignorance, privacy concerns, or simply not having one with them.

Then there’s the value of the offers. “If you’re not offering them comps and perks that they feel are significant or influential, they don’t have a reason to use that player’s card,” he added.

Historically, table-game play has been difficult to track, because it relies on observations by pit supervisors; however, developments such as video analytics and RFIDs in playing chips are changing that.

Curtis said that the Las Vegas Advisor, a 39-year-old newsletter focusing on casino advice, news, and bargains, has felt a post-COVID drop in casino marketing efforts.

“For us, the roughest thing was the buffets going away,” he said. “One of the best ways for the casinos to promote was the two-for-one buffet.” Instead of the 25 to 30 such coupons that newsletter subscribers received in the annual Member Rewards Book pre-COVID, the 2022 edition had just one. “This is impacting us in our work on Member Rewards, but we still have a good book (for 2023),” Curtis said.

He sees better times ahead for bargain seekers. “If things start to dry up in the casinos, two things happen: Room rates go down and promotions go up,” Curtis said. “My prediction is that going into 2023, it’s going to be a better landscape for freebies and comps.”

From an operator viewpoint, Cardno said dynamic reinvestment adds “the next level of detail.”

“I think the industry needs this,” he said. “It’s an incredibly volatile time. The (era) of the gaming market being so predictable is just gone. Now it’s variable all the time.”

Mark Gruetze is a veteran journalist from suburban Pittsburgh who covers casino gaming issues and personalities.