Inside Asian Gaming

July 2010 | INSIDE ASIAN GAMING 43 giveaways that are made available to members of the casino’s database. Most often, participation in these promotions requiresplayerstousetheirrewardscards, either to gain entry or to earn drawing tickets. Also, additional entries are given to players who earn more points. Those promotions that are predicated on some form of gaming activity are considered a form of player reinvestment. (7) Food Discounts to Carded Players. Often Casino Marketing will give food discounts to players who present their rewards card to restaurant cashiers. The difference between the retail price of those meals and the discount price is a form of player reinvestment. A casino may also offer a promotion in which players must earn a minimal number of bonus points in order to get a free buffet. Once again, the costs of those free meals are considered player reinvestment. Tracking Player Reinvestment The total of these various player reinvestment costs makes up the numerator while the denominator is carded/tracked win. With this data it is then a fairly easy exercise to track a casino’s player reinvestment rate on a monthly basis. This is illustrated in accompanying table. Experimentation to Find the Right Reinvestment Rate Once the data has been collected and a snapshot taken of the player reinvestment rate, the astute operator can then adjust his marketing campaigns to yield better results. For example, by adjusting the amount of mail offers sent and/or their values, it would be logical to see a change in the amount of mail offers redeemed as well as changes in carded win. By monitoring these changes and tracking their results over time, it is possible to determine the optimal amount of to spend on each marketing program to maximize return. The Right Reinvestment Rate Once an ongoing player reinvestment analysis is in place, the question that is often asked is, “what is the right player reinvestment rate?” The answer is, “it depends.” In highly competitive and mature markets player reinvestment rates can rise to 30% while in monopoly environments they rarely reach 20%. Casinos that spend above 35% risk entering a danger zone where they are simply buying loyalty. Ultimately, each casino operator must determine their own optimal player reinvestment rate. Further, by monitoring spending levels for each component of player reinvestment on a monthly basis, each property can find its own marketing sweet spot, which is the right spending level for each component of player reinvestment. Andrew Klebanow is Principal of Gaming Market Advisors. He can be reached by calling (702) 547-2225 or email andrew@ gamingmarketadvisors.com and can be redeemed by the player directly at a gaming device. Since this kind of premium is predicated on carded gaming activity, it is a form of player reinvestment. Casinos also send table game players coupons redeemable for non-negotiable gaming chips. The value of these offers is predicated on a player’s theoretical win and serves both as an incentive to visit and a reward for past visitation and is thus a form of player reinvestment. (4) Direct Mail Offers Redeemed. Mail that is sent to various segments of the casino’s database in which some kind of premium is offered is generally considered a formof player reinvestment. However, only the direct costs associated with the redemption of these offers is a component of player reinvestment. The costs of printing and mailing these offers to the database are not part of the player reinvestment matrix but simply a form of casino marketing. The logic behind this is simple: why charge the costs of say, a 10,000 piece mailing to those people who actually redeemed their offers? Thus, printing and mailing costs are excluded from the player reinvestment analysis. (5) Special Events. Casinos conduct special events such as player appreciation dinners, receptions and other private parties for their premium players. All costs associatedwith this loyaltyprogram are part of the player reinvestment matrix. They include the exorbitant costs for meals charged by the Food and Beverage Department to the Marketing Department, the various gifts and cash drawings that are often part of these events as well as the incremental labour costs generated by the Security Department and Engineering Department that are necessary to stage these events. (6) Promotions. The category “Casino Promotions” is an ill-defined term. It is often used as a blanket term to describe a wide range of marketing activities. In this context, promotions are the various drawings for cash, motor vehicles and other prizes; merchandise giveaways, random “hot player” promotions, scratch cards, card swipe promotions, and other Marketing Player Reinvestment Analysis % of CardedWin Total Gaming Revenue $6,500,000 Carded/TrackedWin $4,030,000 Total Comps $180,000 4.5% Bonus Ponts Redeemed $66,300 1.6% Free Play Redeemed $225,500 5.6% Other Mail Offers Redeemed $210,000 5.2% Special Events $45,000 1.1% Promotions $75,000 1.9% Food Discounts to Players $22,000 0.5% Amount of Player Reinvestment $823,800 Player Reinvestment Rate 20.4% Source: Gaming Market Advisors