WINNING THE SINGAPORE BID: A LESSON IN PRODUCT ATTRIBUTES AND POSITIONING
by Sudir Kale
Congratulations to Sheldon Adelson, Bill Weidner and the rest of the Las Vegas Sands brain trust (not to mention the Sands financial backers) on clinching the Marina Bay Integrated Resort license to build the first land-based casino in Singapore. From an initial tally of nineteen contenders, it came down to four likely candidates. And then there was one, Las Vegas Sands, whose planets seem to be on the ascendancy ever since being awarded the first foreign license to build a highly successful casino in Macau.
Sands’ Singapore coup is all the more amazing because the company decided to go it alone, after its local partner City Developments decided to pull out of the deal claiming high discomfort with the probity checks imposed by the Singaporean government. In a country where the relationships between government and industry are thick and mutually advantageous, not having a local equity partner could not have worked out to Sands’ advantage. So, how did Sands’ succeed amidst competition from giants such as MGM, Genting, and Harrah’s? To me, a large part of the success lies in how Sands’ positioned its proposal (or “product”).
Product Components
A product is a bundle of benefits provided to consumers. In this instance, Sands’ had to first sell its product concept to the Singaporean government before it could sell it to consumers when it opens for business in 2009. Sands has a rich and well-deserved reputation of effectively organizing and facilitating conventions and trade shows. After all, it was COMDEX, the long-running and highly successful computer trade show that made Sheldon Adelson rich, and a precursor to his becoming a major player in the gaming industry. This non-gaming history coupled with the Las Vegas Venetian’s high proportion of non-gaming revenues probably most impressed the Singaporean government. Singapore is aiming to double its tourist arrivals to 17 million and triple tourism receipts to $30 billion by 2015. The integrated resort (IR) figures prominently in the government’s plan to achieve these objectives. Enthusiastic as Mr. Adelson is about trade shows and conventions, few at Sands would claim that the company would have been interested in the Singapore integrated resort if it did not include a casino or if the Singaporean government had signalled its intentions to levy high taxes on gaming revenue. In other words, what the government valued most from the IR concept has been quite different from what Sands expects the IR to achieve. What is core product to the government probably represents supplementary aspects of the product to Sands and vice versa. Figure 1 depicts Sands’ representation of the IR to government authorities.
All products have two “levels,” the core product and the augmented product. The core product represents the fundamental service or benefit inherent in the product offering. So, the core benefit or core product is the same for a Mercedes 320 and a Hyundai Excel – motorized transportation. What sets the two vehicles apart are the supplementary aspects such as style, comfort, prestige, and service. The core product, when combined with the supplementary aspects, results in the augmented product. For example, while the core product offered by a hotel is rest and sleep, the augmented product could include supplementary aspects and services such as a TV set, express check-out, and fine dining. In the case of Sands, the core product (or primary benefits package) conveyed to the Singaporean government is very different from the core product that the company expects to make bulk of its money from.
The Singaporean government wants more tourists to visit Singapore, especially the ones visiting for meetings, incentives, conventions, and exhibitions (MICE). Rightly or otherwise, the government expects the IR to actively bring in more of these highly sought-after visitors. Sands capitalized on this expressed need and drafted its IR proposal accordingly. Let’s look at the numbers. An average foreign visitor spends S$705 (~ US$450) per trip in Singapore; an average business traveler spends S$900-1,000 per trip, whereas a MICE visitor spends S$1,500-S$1,800 per trip. The reason for the Singaporean government’s wooing of the MICE segment is obvious!
According to a recent article in The Straits Times, Sands’ trump card was its promise to bring convention visitors to Singapore with its 110,000 square metre convention center, representing half the convention space earmarked for the downtown business district. Interestingly, at the press conference held by the judging panel of five ministers to announce the winning entry, little was said about the casino, which incidentally was not listed as an evaluation criterion. Sands’ successful orchestration of core and supplementary benefits made it stand apart from the crowd, resulting in the award of gaming license. In promoting itself, the company proclaimed that it could bring 20 exhibitions and more than 350 business meetings to Singapore every year. It has also pledged to target sectors valued by Singapore such as pharmaceuticals, biotech, banking, and finance.
Let’s not confuse ourselves here. Sands aggressive pursuit of a gaming license in Singapore probably has little to do with the core product as presented to the government. Sands has its eyes set on the gaming revenues, and many Sands insiders will tell you that the company cannot wait to replicate in Singapore the tremendous success it has had with its gaming operations in Macau. The number of visitors from China to Singapore currently stands at just under a million, and this number has been growing at a compounded rate of 18 percent over the last decade. It is the promise of luring these visitors from the mainland to the casino that excites Sands. Gaming analysts such as DBS Group Research (2006) estimate that the EBITDA on gaming revenues for the IR will be 30 percent whereas that for non-gaming revenues will be only 5 percent. Clearly, Sands has its eyes set on the gaming aspects of the IR. What has made targeting the Chinese gaming customers a possibility is the smart repackaging of the IR concept to impress Singaporean authorities.
Getting the license to build the IR is only the first step. How will Sands prioritize its operations once the IR is fully functional? Will it place equal emphasis on gaming operations vis a vis the non-gaming operations such as conventions, entertainment, F&B;, and hotel? How hard will it try to bring in MICE visitors to Singapore? How profitable will the MICE game be for the company? Answers to these questions will ultimately determine the success or failure of Marina Bay Sands -- for Las Vegas Sands and for Singapore!
The company has exhibited a very solid grasp of product positioning in its representation to the government. Will it display the same savvy in strategy and marketing once it commences operations? When it comes to the “real thing,” a blurred understanding of the core and supplementary aspects of the IR could prove very expensive for all parties.
Date Posted: 11-Jul-2006
About the Author: Sudhir H. Kale, Ph.D., is the founder of GamePlan Consultants (www.gameplanconsultants.net) and Associate Professor of Marketing at Bond University. He has published around fifty articles on the marketing and management aspects of gaming. He also trains and consults for casinos on all continents. You can write to Sudhir at skale@gameplanconsultants.net.
