by Andrew Klebanow
The economic downturn has had a curious effect on the people who market gaming properties. Rather than cut costs and turn down the volume on marketing offers, many marketers have turned the knob to the right and dramatically increased the number and value of promotions with the hope of increasing market share at any expense. Worse, because of their growing reliance on promotions, these marketers are unable to establish any baseline period on which to measure the effect of promotions.
Many casino marketers are gripped by fear. They fear that doing less might cause a diminution in coin handle or gross gaming revenue. They fear what members of the casino’s gaming enterprise board or tribal council might think if they reduce the amount of promotional spending. They fear what loyal customers might say or do.
There is a fear that if promotions stop, it would cause a fatal disruption to the business. It is as if the process of conducting promotions is as critical to the gaming operation as is Payroll or Accounting. The unrelenting fear of doing nothing, even for one month, is a common affliction in the gaming industry. This fear has a clinical name and it is called Nopromophobia.
People who suffer from Nopromophobia are referred to as Nopromophobes. Philosophically, Nopromophobes believe that casinos must promote every day of the year. A series of blank days on the promotional calendar is a cause for disaster. They believe that the role of casino marketing is to promote the casino through an endless stream of drawings, mail offers and giveaways. They do not believe people visit a casino solely for entertainment but must be encouraged to return each and every time. They view the casino, not as something made of steel, bricks and mortar with its own sense of attraction but as a living and breathing animal. And like all animals, it must be fed. In the case of the casino animal, a steady diet rich in promotional spending is the preferred form of nutrition.
It is generally believed that there are a number of possible causes of Nopromophobia. The affliction most often strikes people working in the Promotions Department of a casino. Most probably, people who are involved in the design and implementation of promotions have a healthy fear that if promotional spending is eliminated, their budgets may be cut. Rather than question their own efforts and attempt to refine their methodologies, those people afflicted with Nopromophobia are compelled to spend every last dollar budgeted for promotional spending, lest they lose it during the next budget cycle. They also fear that any reduction in the number and size of promotions would impact their employment status.
Promotions are, by definition, incentives used to stimulate sales on a short-term basis. In the hospitality industry they are used to stimulate business during off-periods when the normal business flow is inadequate to maintain maximum patronage. And yet, in the gaming industry, promotions are habitually used during peak demand periods, often on weekends and holidays when the gaming facility is operating at or near full capacity. Nopromophobes do not ascribe to the traditional notion of conducting promotions tactically during soft periods of demand or as a way of stimulating trial. Rather, they view promotions as a fundamental marketing strategy. Thus, it is not uncommon to find casinos giving away $50,000 vehicles on Saturday afternoons or conducting $25,000 drawings on Friday nights. Often the term, “peak the peak” is used to rationalize this behavior. It is, nonetheless, a manifestation of Nopromophobia.
Curiously, there are people in the gaming organization who appear to be immune to Nopromophobia. They are usually people who work in the Accounting office of the casino. While more research is needed to explain why those people tend to be immune, preliminary data indicates that people who actually have to write the checks to pay for all of those promotions tend to be resistant to the affliction. They instinctively believe that promotions are most effective if used judiciously with sound methodologies that measure their effectiveness. But they also intuitively know that their voices would not be heard or worse, they would be perceived as not being team players should they share their opinions. Thus, they stay quiet.
Nopromophobes are eager to rationalize and defend their position. They can cite reams of analyses that clearly indicate that their promotions work. Of course, those promotions are never benchmarked to non-promotional periods. Rather, their analyses shows the number of participants and the theoretical win of those participants, compared to the costs associated with the promotions. While they would not argue that comparing the effects of promotions to periods when there are none is a sound methodology, they steadfastly refuse to create test periods when there are no promotions in effect. Their fear is over-riding. Thus, there can never be a baseline period to compare promotions to.
In reality, every casino must periodically establish baseline periods when there is no promotional spending. It is critical to understand what levels of revenues and cash flow a casino can generate solely because its doors are open. Once baseline periods are established, the casino marketer can then test the effects of a drawing; then test the effects of a direct mail campaign; then test the effects of a headline act, each independently, against the baseline period. Periodically, those baseline periods must be re-established. By doing so, casino marketers can better understand when and how to use promotions.
Testing the effectiveness of promotions is easy. Establish baseline periods when there are no promotions in effect; conduct a promotion; then measure the results against the baseline period. It is overcoming the fear of doing nothing that is the hard part.
Date Posted: 07-Nov-2008
Andrew M. Klebanow is a Principal in Gaming Market Advisors, a Las Vegas based
consulting company specializing in gaming market assessments, feasibility analysis,
operations analysis, marketing plan development and player reward program design
for both US and International gaming markets. Mr. Klebanow can be reached at
Andrew@gamingmarketadvisors.com or +1 (702) 547-2225