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Player Rewards: A Self-fulfilling Prophecy

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June 01, 2013
Gaming & Loyalty
Bill Geoghegan

A modern interpretation of marketing is the way companies interact with consumers to create relationships that are beneficial to both parties. As a prerequisite, businesses use marketing to identify their audience before advertising to them.

Until the middle of the 20th Century, the marketing mindset of businesses centered on production, product quality and selling. Until the late 1950s, businesses concentrated on increasing sales in order to gain economies of scale. Selling additional product frequently resulted in a lower per unit cost of production, thus raising profits on each item sold. 

Frequently, the unintended result of higher production volume was a poor quality product, which in turn caused a loss of customers, so the quality of the product along with the quantity produced became the focus of businesses.  Additionally, the assumption was that people would buy a high quality product with less regard to the price.

In the 1970s, the product was no longer the focus, but rather the consumer, resulting in a shift to marketing orientation.  Focus groups and market research methods were used to create products and services that the consumer wanted, with research and development resources tasked with developing those products, and promotional techniques were used to ensure that potential customers knew that product existed.  At the same time, many new businesses provided services rather than products, and even those product producers started providing services as part of their offering.

The American Marketing Association defines marketing as the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large.?

Holistic marketing looks at marketing as a complex activity and acknowledges that everything matters in marketing–and that a broad and integrated perspective is necessary in developing, designing and implementing marketing programs and activities. The four components that characterize holistic marketing are relationship marketing, internal marketing, integrated marketing and socially responsive marketing.
Loyalty clubs and players clubs are primarily relationship marketing tools.  Loyalty clubs, also known as rewards cards, points cards and club cards, are structured marketing efforts that reward and encourage loyal buying behavior.  By presenting the card or an identifying number, the purchaser may be entitled to a discount on the current purchase, or the accumulation of points that can be used for future purchases. In the case of hotel or airline brands, the point accumulation is used to enhance or maintain brand loyalty, offering the travelers free trips, stays or upgrades at a future time.

Players clubs, also known as slot clubs, were born in Atlantic City in the early 1980s when the casinos there were trying to find a way to keep players from hopping from one casino to the next. By offering a reward for loyalty the casinos were able to incentivize players to keep playing and coming back in the future.  Now slot clubs are found in almost all casinos. The cards are not just for slots. Most casinos combine the table game and slot machine play into one player’s account.

Some of the major gaming companies have loyalty cards that are designed to enhance both brand loyalty and to reward players for their level of play. Caesars Entertainment’s Total Rewards program allows points to be earned at any of its local casinos, and redeemed at any of its other locations including destination properties in Atlantic City or Las Vegas.

With the explosion of casinos throughout the country, the vast majority of properties are not destinations, but rather facilities that cater to locals. As such, the slot club data provides a well qualified list of players to whom marketing and advertising can be targeted based on recent play. Alternatively, some advertising may be directed at mining players who have not played recently, in an attempt to get them back into the property. Generally, these clubs use various methods of advertising to reach their desired audience. Post cards, direct mail offers and electronic delivery (email, tweets and texts) are all methods of reaching that desired target audience, each having specific value and associated costs. 

While there are certainly strategic goals associated with that advertising, the primary goal of direct communication with members of any loyalty program is an attempt to modify behavior in a way that benefits the enterprise. For slot club members, this can take the form of free gifts, comps that can be earned at certain play levels, point multipliers, free money, show tickets or some other incentive.

One of the most popular and easiest to implement incentives is the offer of free play.  An offer of some amount of money in the form of free play that is only available on a single day or for a small range of dates will certainly modify the behavior of many players, bringing them into the casino at times that casino management desires more traffic.  But it can also have the opposite effect, causing players that might normally come in on a Friday without any incentives, to come on Thursday to take advantage of the free money, losing their potential business on Friday. 

In many cases, players will retrieve their free play money but leave as soon as the free play money is used.  If a player gets a bit lucky, the $10 in free play can result in a $20 payout or more, which the player has won without putting any money at risk.  Some systems force the player to make an investment by matching paid play with free play.  The player must put $10 at risk to get the $10 free play, ensuring that the casino has some chance of winning.

Another popular incentive is to give away gifts to players on a specific date.  Some gifts are available to all members, but some are only available to a player who has achieved a certain level of play. While many gifts can bring a large number of players into the casino, a poorly planned and poorly staffed promotion can create long lines of players waiting to receive their gifts, but never playing because of the time waiting in line.  Once players receive their gifts, many will simply leave without playing.

Casinos also run the risk of alienating their better players with some of these offers. For many, waiting in line with hundreds of other players only to get a near worthless gift results in a strongly negative impression.  Alternatively, restricting those gifts to better players runs the risk of upsetting a player when his or her gift level is reduced.

In effect, when players are offered incentives, their play habits can be modified in a way that benefits the casino, but when those incentives are reduced or removed, that player’s loyalty may diminish, and, he or she feel slighted, choosing to reduce play or find another location.

Many marketing managers do a poor job of anticipating the results of their marketing programs. Offering the better players an incentive to come to the casino on desired dates may certainly cause that player to modify his or her behavior, supporting the anticipated positive result of the campaign.

 On the other hand, when a player’s incentives are reduced, that player’s loyalty may suffer, and the player will in fact play less.  Some marketing managers will look at this as “we predicted that,” when in reality they caused that result. Many times, outside factors cause a player to change his or her habits, and clubs are too quick to reduce those incentives if a player did not achieve a required level of play. Prophesy of the reduced play becomes a reality because their incentives have been reduced. 

Airline and hotel loyalty clubs publish a clear set rules and rewards, allowing a traveler to understand how many miles or nights are required to receive an upgrade, free ticket or free stay.  In many cases, when a traveler fails to achieve the level of last year, they are offered a clear path to remain at that level.

Slot clubs should make their policies easy to understand and easily available to all players.  Mysterious changes in reward level can be quite confusing to a player, and when that player’s rewards are reduced for example, $10 in free play last month becomes $5 this month, the result is exactly what was predicted – less play. Finding the right program for your property and its loyal guests and players is the key to success.

Bill Geoghegan is a consultant in Las Vegas. He can be reached for comment at Bill@LGTConsulting.com.

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