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Loyalty in the casino gaming market

The need for customer segmentation

Finaccord, a British market research company, has recently stated^[1] that globally at least 650 million consumers are likely to have membership of at least one loyalty programme. Their estimate equates to around 14.4% of the world's adult population. The research covered 115 programmes including airline, hotels, retailing and other sectors across a wide range of countries. This is a significant finding that is surely a truly staggering figure even if it is out by some margin.

Consumer loyalty programmes globally are expanding due to the following trends:

• consumer loyalty programmes have become the dominant currency of exchange between organisations trying to understand their rapidly changing customers and the customers themselves who are wanting a supplier to acknowledge their value as an individual;
• the on-line, always connected, web 2.0 world will continue to shape and impact loyalty programmes, especially in the consumer markets;
• cost saving and sustainable business model aspects to loyalty programmes will become more important in getting senior management attention;
• social networks such as Facebook, Friends Re-united and LinkedIn etc are starting to explore consumer loyalty approaches as a means to add value for members and create income streams for the network sites;
• large scale coalitions such as 'payback' in Germany and Air Miles in Canada will continue to build a solid base of partners and customers as they mature;
• the Tesco/ Dunnhumby approach to customer insight will continue to be the most respected and emulated because it can give evidence of its impact on the bottom line;
• ethnic and culturally focused loyalty programmes will start to emerge to respond to the needs of large migrant populations, especially within EU markets amongst younger consumer groups; peer-to-peer recommendations will be stronger than any supplier based loyalty.

To acquire and then keep customers in the 21^st century is going to require some new thinking. The mindset that starts from the perspective of the customer in asking 'what will it take to keep me as a customer' is the only approach that seems likely to succeed in a market oversupplied with everything except time. Customised products are replacing mass produced off-the-rack offers for all items from cars to books.

To acquire and then keep customers in the 21^st century is going to require some new thinking. The mindset that starts from the perspective of the customer in asking 'what will it take to keep me as a customer' is the only approach that seems likely to succeed in a market oversupplied with everything except time. Customised products are replacing mass produced off-the-rack offers for all items from cars to books.

The international casino and gaming sector, both in-house at the gaming table or on-line at the 'virtual' table will itself have to respond to these trends: it cannot remain detached from the changing attitudes and lifestyles of its customers. One notable programme is that operated by one of the world's largest casino companies, which has already embarked on its most ambitious foray beyond gambling--by partnering with retail giants to get the attention of millions of shoppers for whom gambling, and even Las Vegas, might be an afterthought. Caesars Entertainment's Total Rewards Marketplace, introduced last month, allows shoppers at more than 350 online retailers in the USA market to earn rewards points that can be redeemed for free hotel rooms, meals, shows and many other casino perks typically reserved for big gamblers. The partnership may give the company an edge with current customers by giving them more reasons to visit a Caesars-owned property in order to redeem points. Others must surely follow this trend.

Large gaming groups invest millions of dollars to attract customers to their casinos or on-line gaming sites. However, customer retention is surely going to assume greater importance as competition forces gaming organisations to focus more on customer segment, insight and retention initiatives. But understanding customer preference in the gaming sector has exactly the same challenges as in retailing generally:

• you need to understand what gaming offers I want to play,
• identify who I am,
• speak to me in a style of communication relevant to my lifestyle,
• offer me relevant gaming content and rewards,
• and do this at a time and by a channel of my selection!

In most of the big customer loyalty programmes with which I have personally been involved, the crucial importance of the high spending, or potential high spending, customers as having far greater impact on profit emerges once the programmes begin to understand their membership's different levels of interaction with the brand. Vast numbers of loyalty currency collectors do not automatically translate into improved corporate profits: in fact it is sometimes the reverse. This is where customer segmentation and insight is going to be crucial to cost-effective loyalty in the gaming market. The gaming sector consumer can no longer be treated as the passive target of a one-way street of marketing stimulus-response initiatives. Good loyalty programmes should be created to enable gaming organisations to create a win-win scenario in the mind of the customer, with mutual benefit between the programme operator and the gambling loyalty programme member.

Many organisations understand the need for the customisation of marketing--in all its forms--so that the business enterprise can develop closer and more personalised relationships with its customers. And this understanding leads to an immediate requirement for the business to break down its total customer base into distinct segments, each of which warrants its own unique marketing approach.

Two problems are then commonly encountered. First, the task of performing segmentation (if it is to extend beyond trivial or crude division of the business's market-place, which yields only very limited benefits) entails the application of data mining. The majority of data mining tools of necessity involve highly complex algorithms, but have not developed applications that exploit these algorithms and are easy to use by marketing professionals.

Secondly, the data available as a basis for segmentation is usually limited to transaction data. This typically concerns what a customer has previously purchased from the business, the value and timing of such purchases, the channel used by the customer, and customer payment data. In some cases, even this basic level of transaction data can be hard to access and/or use: the data are often spread across different systems in different parts of the business enterprise, of variable (including poor) quality, incomplete, and contain inconsistencies that make them unusable in their existing form. More importantly, transaction data do not normally include personal data concerning customer attitudes, preferences, and non-transactional behaviour. In addition, transaction data concern only existing customers. Marketing is often concerned not only with existing customers of the business but also with consumers who have not yet become customers. But such prospective customers are of interest only provided the enterprise has data pertaining to attributes of those prospects, or has in place a means of obtaining such data.

21^st century loyalty in the casino and gaming sector will need to be built around integrated customer management: it will need to be based on trust; it will probably feature alliances and partnerships; it will be wired into the real-time world; and it will polarise into those organisations that understand the importance of this business model and those who are still operating in a world of anonymous 'players' and less efficient marketing interventions.

[1] ^ Finaccord, Global Coalition Loyalty Programs: Affinity Marketing Opportunities for Financial Services Institutions and Other Organisations, 2011. See the report prospectus.