1 Introduction to Casino Marketing Topics Principles of Casino Marketing

2 Abundant Expertise How does casino marketing expertise differ from legal or accounting expertise? How does casino marketing expertise differ from legal or accounting expertise? –It is far more abundant!

3 Success: The Burden of Proof Where does this burden lie? Where does this burden lie? –With the marketing activity  That is, the activity is a failure, until “proven” successful  A declaration of success, it just that - a declaration –Such declarations are common, but are usually poorly supported Why are such claims of success poorly supported? Why are such claims of success poorly supported?  There are considerable measurement challenges

4 Measurement Challenges What are the sources of these challenges? What are the sources of these challenges? –Failure to develop a measurement plan in the proposal/planning process –Unrecorded transactions –The complex casino environment  i.e., many factors influence gaming volumes

5 Unrecorded Transactions What are the sources of unrecorded transactions? What are the sources of unrecorded transactions? –Many table game players go unrated  Plus, many observed ratings lack integrity  Few reliable automated tracking systems for table games –Many slot players do not insert tracking cards  Many gaming venues throughout world do not have an online slot system

6 Complex Casino Environment Besides the marketing activity of interest, what other factors could affect gaming volumes? Besides the marketing activity of interest, what other factors could affect gaming volumes? –Day of the week –Hotel occupancy –Food offers –Holiday periods –Special events –Direct mail offers, & many more!

7 Casino Marketing History How has historical performance influenced modern casino marketing practices? How has historical performance influenced modern casino marketing practices? –Many executives believe that the marketing activities of historically profitable times led to the success of those times  In reality, it was favorable supply-demand conditions that fueled the success

8 Bottom-line Justification What is it? What is it? –Using summary-level financial success as evidence of marketing success, with respect to specific casino marketing activities

9 Activity vs. Success What is the issue here? What is the issue here? –In short, it is quantity over quality –However, the opposite condition is recommended  i.e., quality over quantity

10 From Innovation to Failure Can you describe the troubling pattern of many successful casino marketing efforts? Can you describe the troubling pattern of many successful casino marketing efforts? –A successful activity is created –It is replicated too often –Excessive replication = diminished results –Marketers work accounting magic –Creative accounting is exposed, & activity dies

11 Figure 1.1. Customer Draw Power: Gaming vs. Amenities Within The Casino Life Cycle Framework Introduction Decline Maturity Growth Amenity Offerings Gaming Activities Importance ( + ) ( - ) Casinos in New Gaming Jurisdictions Las Vegas Hotel-Casinos Phase of the Gaming/Casino Life Cycle

12 Figure 1.2. Table Game Profit Margin By Average Bet: After Expenses (comp, labor, gaming taxes, etc.) Profit Margin 0% 100% Average Bet $5$25$75$100$200$500$10,000 $1,000

13 Figure 1.3. Table Game Profit Margin By Average Bet: After Expenses and Discounts Profit Margin 0% 100% Average Bet $5$25$75$100$200$500$10,000 $1,000

14 Figure 1.4. Slot Profits, Bet per Spin, & Player Supply: Before Premium Player Incentives (Low) # of Players Profit Per Player (High) (Low) Amount Wagered Per Spin (High)

15 The Customer Experience In general how will this affect casino marketing activities? In general how will this affect casino marketing activities? –No marketing activity can survive poor customer experiences

16 Home of the Smiling Dealers What was the moral of this story? What was the moral of this story? –Management must understand that the treatment of employees affects how they treat customers  A desired customer experience cannot be produced by putting a slogan on a t-shirt

17 Line-item Management What is it? What is it? –Assumes that each line of the income statement is independent, specifically…  Revenues and expenses are unrelated –Typically occurs as part of an unimaginative cost-cutting effort  Such cost-cutting leads to unfavorable customer experiences, which…  Leads to decreased repatronage intentions, and, ultimately, decreased L-T profit

18 Line-item Management What are some of the common causes? What are some of the common causes? –Difficult economic conditions –Austerity programs –S-T profit focus –Newly hired CEO, w/ a cost-cutting focus –Also, Wall Street analysts can pressure public gaming companies into line-item management  Usually in the form of ill-advised cost cutting, over concern for quarterly earnings – i.e., S-T focus

19 Customer Service: Value v. Cost The value of customer service can be difficult to quantify The value of customer service can be difficult to quantify Unfortunately, the cost of customer is much easier to quantify Unfortunately, the cost of customer is much easier to quantify These conditions fuel short-sighted cost- cutting adventures These conditions fuel short-sighted cost- cutting adventures

20 Discussion Items In your view, what was the moral of the free-bottled-water story? In your view, what was the moral of the free-bottled-water story? –What action would you have taken? What was your take on the across-the- board cost-cutting story? What was your take on the across-the- board cost-cutting story? –This happens frequently in the gaming industry –Is there any defense for such actions?