Making Player Reinvestment Meaningful and Ethical
by Sudhir Kale

One of the advantages of being a player as well as a gaming scholar is the opportunity to see various casinos’ marketing strategies in action. Just last week, I had the experience of witnessing extremely poor player reinvestment in operation at my local casino on the Gold Coast in Australia.
As most readers know, player reinvestment is a strategy to reward loyal customers through targeted offers. The intent is to show appreciation to your loyal customers with the hope of retaining them and enhancing their lifetime value.
With the casino in question, the management succeeded in creating just the opposite impact on yours truly in a matter of 24 hours. Let me explain. Last week, I played Blackjack for 10 hours, betting around $75 a hand on two boxes. The net result was a loss of $4,450 over the ten hour period. The next day, I requested a comp voucher for a meal from the Casino Rewards Desk. To my utter surprise, I was told that my play translated into comps worth $36. To justify his point, the desk attendant informed me that someone else had dropped $15,000 in slots just a day ago and got $35 in comps.
I am not so naïve as to expect 25% or even 20% of my losses in comps. Using the house advantage of 0.55% for Blackjack, the theoretical win for the casino in this case would be around $500. Andrew Klebanow, a casino consultant and friend, has conducted surveys of several casino markets in the U.S. to understand the level of player reinvestment. His conclusion was that by 2009, player reinvestment rates were between 25-43% of the casino’s theoretical win. By any objective assessment, the comp offered to me by the casino was way below standard rates. I approached a pit boss in the private gaming area (we’ll call him Paul) to ask him about the miniscule comp. He said he was busy and directed me to another person (we’ll call her Jackie). Jackie looked at the computer again, verified the time and average bets with me, and concluded that the comp calculation was right. “I am sorry, they just don’t give back what they used to,” was her explanation. For one, she wasn’t really sorry, and second, if that’s the casino’s new comp policy, then “they” certainly do not deserve my business.
On reaching home, I found a whole bunch of coupons from this casino in my mailbox. One of them offered a “free MP3 player valued at $49” for me to pick up if I came in on the next Sunday between 10 a.m. and 6 p.m. Not that I was crazy about this MP3 player (which can be bought on e-bay for $20), but since it was raining, the family wanted to go out somewhere covered for dinner. So we went to the casino. As instructed, I went to the VIP Reception desk to pick up my MP3 player. This time, I was told that they had run out of the product. I was asked to sign a form and was told that “they” will call me when new supplies arrive so that that I come to the casino and pick it up.
Now I am as yet uncertain about the specific laws in Australia when it comes to casino promotions. To me, this was a classic case of “bait and switch,” a ploy meant to make hundreds if not thousands of customers come to the casino twice instead of one time, under the pretext of getting their free MP3 player. This outcome, intended or not, was most definitely unethical if not illegal. That night I called the casino manager to inquire about this “bait and switch” like strategy. He was interstate, and pleaded no knowledge of the promotion whatsoever. The next day, I got an e-mail from the casino’s marketing manager. By way of explanation, she wrote, “Please be assured that at the time of implementing this promotion we considered that we had ordered sufficient quantities to meet demand. This belief was based on data recorded from previous similar offers.” Just imagine, thousands of customers being sent home empty handed, with probably a lighter wallet, having to come back again to claim the MP3 player and go home again with probably a lighter wallet. A deliberate ploy on the part of the casino? Probably. An unethicaloutcome? Most certainly.
My friends in this casino and other fine gaming establishments, please try never to lose sight of the essence of player reinvestment. Sure, you want additional visits from your players when planning and implementing promotions. Most certainly, you want to ensure that you are not just buying profitability but also revenues when you conduct your promotions. But do ensure that your promotions are always way above board in intent as well as outcome, and that they result in happy and satisfied customers. When player reinvestment strategies have the opposite impact, as it did with me in relation to my local casino, you are alienating the very customers whom you are trying to retain and nurture. By the way, any lawyer types out there who have an opinion of the legality of the MP3 player promotion?

Date Posted: 12-Jan-2011

Sudhir Kale, Ph.D. is Professor of Marketing at Bond University on the Gold Coast in Australia. He is also the Founder of GamePlan Consultants, a company that advises casino companies on ethical ways with which to develop customer relationships and maximize customer lifetime value. You can write to Sudhir at skale@gameplanconsultants.com, or visit his website: http://www.gameplanconsultants.com.

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