Randall A. Fine of Fine Point Group discusses the increasingly crucial role of marketers in the casino industry.

Randall A. Fine is managing director of the Fine Point Group, a leading full-service gaming consulting and management company. He has made a significant impact in just nine years in the casino business. At Harrah’s Entertainment, Fine was corporate vice president of a 40,000-machine slot operations group; at the $350 million Greektown Casino in Detroit, he served as chief executive officer. On the marketing side, he served as chief marketing officer for Carl Icahn’s gaming company, and as corporate vice president of Total Rewards for Harrah’s. A persuasive believer in the importance of marketing in today’s casino industry, Fine recently spoke with Charles Anderer, Casino Journal executive editor, about the crucial role of marketers and how the Fine Point Group has put his vision into practice.

Last year you caused a bit of a stir at the Casino Marketing Conference by saying that marketing is not only the most important function at a casino, but that the CEO should also be a marketing specialist. This year, we are looking forward to your presentation called, “Why Marketers Rule.” Sounds like you are sticking to your guns.

Fine: I think the industry is transitioning to a world where marketing really is the most important function inside any casino. Five or 10 years ago, when we didn’t have that many casinos, you could make a fair amount of money just by being open. It was critical, once you were open and customers streamed through your doors, to give them good service and handle those transactions in an effective way, so operations was king. The notion that casinos would go bankrupt, that casinos would be unprofitable, that there would be state licenses that no one would want, that would have been heresy five years ago. But today, we’re in a world where, in some markets, we have too many casinos, and others where casinos don’t cover their operating expenses. The only solution to that is punching above your weight in terms of your market share. And the way you do that is through marketing. This is why I think in today’s world of highly competitive casino markets, marketers should be running the show.

You’ve had the chance to put that theory in action at Greektown. What were some of things you were able to do there that would have been difficult to achieve if you were in a more traditional structure?

Fine: Well, in four months, we went from 22 percent market share to 27 percent market share, in a market that was shrinking. We were able to dramatically increase revenue and profits, which rose by 80 percent year-over-year, because we not only marketed, we marketed more efficiently. We took a casino that no one wanted to buy for $350 million, to the point where, one year later, people were suing each other for the right to buy it for $650 million. When you let marketers be marketers, you can unleash huge amounts of value relatively quickly.

Was it common sense stuff, investments in technology, strategic changes with the database; what drove those increases at Greektown?

Fine: It was all of the above. A lot of it was common sense, but the funny thing is common sense isn’t common. For example, it never ceases to amaze me that when I drive in and around a casino market and I will see a casino that buys 10 or 15 or 20 billboards, and then they put a different message on every billboard. They feel like people only need to see a message one time to internalize it into their daily life. We stopped doing that. We put one message on every billboard, and then we hoped that the consumer would be able to remember that one message. What we have to do in this business is one thing and do it well.

On the technology side, we rolled out some new business intelligence software which allowed us to extract more from the data that we had. And database marketing is critical to everything that we do. So we went from a world of relatively unsophisticated segmentation, say up to 20 differentiated segments, to virtually infinite segmentation, where we literally were putting the right offer in the right customer’s hands with unique direct mail communications. Casinos send every customer one offer a week, which seems to be the standard way monthly mail programs work. We don’t do that; there’s no point in sending someone who comes to your casino once a month four coupons. It’s obviously not working. Maybe you should send them two and make the second one worth a lot. Or, why send someone who comes to your casino 25 times a month four coupons? Maybe you don’t need to send them any if they’re coming for other reasons.

How do you segment the market differently from, say, the typical casino marketer?

Fine: Most new clients that we work with tend to segment their database into between five and 10 segments. They normally call them by a letter; A, B, C, etc., and they segment by one dimension. We’ve seen it based on average daily theoretical, total theoretical, total loss or total coin in. We’ve seen it a lot of different ways, but only using one dimension. As we’ve been on this journey to improve our analytics over the last five years, we’ve come to realize there are many different criteria that affect a customer’s propensity to gamble. How much they gamble is obviously one criterion.

The second and most obvious is how often they visit. A customer that visits once a month and spends $1,000 compared with a customer who visits 10 times a month and spends $100 per visit are both worth $1,000, but we would tell a client to focus more on the $1,000 one-time visitor because, odds are, they are making a $1,000 visit to other casinos on other nights. We only know how much a customer gambles with us. We don’t know how much they gamble overall, so we have to make guesses as to what percentage we are getting so that we can try to get more of it. The customer who is gambling with us 25 days a month is probably giving us all of their business; there’s not lot of incentive to get more targeted with our segmentation with that customer.

Where you live is also huge. A customer who lives one mile away, as opposed to 10 or 100 miles; we talk to them the same way. Age, gender, home ownership, having children or grandchildren; all of these things matter. We’ve come up with over 70 variables that we’ve found to be accurate predictors of a customer’s propensity to gamble with us. When you factor in all of those, you come up with very granular segments, almost to the point where each customer is in their own segment.

On the execution side, does it take time to get your arms around a more segmented market?

Fine: It does; it’s definitely more work. But it’s doable. This is an industry where we’ll spend millions of dollars to refurbish a buffet. If you can increase your revenue 10, 15 or 25 percent, isn’t that worth it to have a couple more direct mail coordinators?

Is the marketing function becoming more integrated with other functions within gaming organizations, such as gaming operations and IT?

Fine: That is less of a challenge. Marketing and operations tend to work well together because they both are incented to. Operations wants to know whatever marketing programs are out there. Marketing and IT, on the other hand, can either be a great relationship or a disastrous one. It usually has a lot to do with how IT is run and who sets their priorities. We’ve seen examples where IT works for a CFO and all that department works on is financial reporting. We’ve seen other examples where IT’s priorities are set by a steering committee, where every department, including marketing, gets a bite of the apple, to try to ensure that their projects get done. I prefer a set-up where IT reports to marketing because then you have IT focused on things that are going to drive revenue, which is one of the things that we did at Greektown. That’s not necessarily fair, because there are other priorities; having IT report to a steering committee is ultimately the best approach.

There is a lot of marketing-oriented technology out there, be it business intelligence packages or the basic slot systems themselves. How do you rate the quality of these solutions?

Fine: There is a lot of marketing-oriented activity on the vendor side. What I would say on a high level is that all of those systems are generally fine. The problem is not the systems, it’s with the users. To some degree, you have systems providers that are out there building Ferraris, when you have casinos that don’t know how to drive Fords. None of these systems do the work for you. Excel is a great tool, but if you don’t know how to use it, it doesn’t do you a whole lot of good. Where the disconnect happens with a lot of these systems is, somehow, people believe that they will install a business intelligence systems and, like a robot in a movie, it‘s going to tell them what to do. It’s a great control device, if the end-user knows what kinds of questions to ask and how to interpret the data. That’s where users of these programs tend to run into trouble.

We find many clients who are only using one-third of the capabilities of the systems that they have already bought and they are considering buying new systems. There is this hope that buying new systems will be some sort of silver bullet that will solve a mythical problem. We don’t want for capabilities in this industry. What we have is a shortage of people who know how to leverage the capabilities that exist. These capabilities tend to be highly analytic and require sophisticated mathematical skills. That’s where the opportunity is, both for firms like ours and people in general who are very good at analytics.

Many people in the industry worry about aging players not being replaced as more people find their entertainment, say, online, instead of in traditional venues. As a marketer, do you worry at all that the casino industry has a product problem?

Fine: Not really. People always talk about older gamers and what will happen when that generation passes on. But what happens is that as one generation moves on, another generation moves in and occupies that space, because they end up wanting what gaming provides. Gaming provides a sense of excitement to people who are retired and have plenty of time and money. They no longer have exciting jobs, careers or the excitement of raising kids, so the casino business provides an outlet for them. That said, creating games that bring a video gaming component into casino gaming, is important. Imagine if you could play Halo, but for money. There’s a lot of opportunity in that direction, and gaming manufacturers are going there slowly, with more and more advanced bonus screens, for instance. Moving to a pure video gaming environment where there is no reel spinning, or the entire game is a bonus screen, is where the market could really open itself up.

Is social media something you keep your eye on as a casino marketer?

Fine: I do. But the core casino marketing tool of the database, direct mail, and the U.S. Postal service, is still so underleveraged. If we could get casino marketers to get 100 times better as social media marketers, it would create 5 percent of the impact of a 10 percent improvement in database marketing. We have the ability to effectively mail customers free money, and very few other industries can do that. Making those offers as intelligent and as targeted as we can moves the needle in a huge way, and in a way that social media can’t today.

This is something that is unique to gaming. If I was in the business of selling t-shirts at The Gap and the most I can put in the mail is a 10 percent-off coupon, then social media would be a critical part of my strategy. But when I can send customers $10, $20 or $1,000 or $2,000 in cash per month, deploying that in a targeted way is almost always where I get the most bang for my buck.

What do you make of the 360-degree view of customers gaming and non-gaming behaviors and leveraging that to communicate value?

Fine: I think the 360-degree view makes a lot of sense if you’re operating a property in Las Vegas, where you’re getting a huge percentage, if not a majority of value, from non-gaming sources. But for your average riverboat, where 80-90 percent of your revenue, and all of your profit, comes from gaming, spending an immense amount of time to track a few cash transactions in your hotel and beverage outlets is not a bad idea, it’s just low priority. Having more data is never a bad thing; we just have to choose our priorities. The total view of the customer is a grand slam in the state of Nevada, but it’s a hard sell anywhere else.

Where do you come down on the question of promoting value to the player through the marketing of “looser slots”?

Fine: I’m not a big fan of that. Customers can’t really measure “loose slots.” It’s not as if we’re like Wal-Mart and there’s a price tag in front of each slot machine. People often times believe slot machines have lower holds than they actually do, or they believe the opposite. I believe in providing value for those things that do carry a price tag, like food, a hotel room, or a promotional activity. Rather than cutting or raising hold, my first focus is looking at whether we are using food as a value driver and an integral part of the experience? Are we pricing our hotel rooms in a way that will keep them full with people who will gamble more because they can stay overnight, or they can come visit us from further way? Do our promotions create a sense of fun, excitement and value? Those are areas where a casino can be perceived as offering value. Having a hold percentage that is 10 or 20 basis points below the competition does not really get you anything.

Named to In Business Las Vegas’ 2009 “40 Under 40,” Randall A. Fine, managing director of the Fine Point Group, has an equal mix of casino operations and marketing experience gained from stints with Carl Icahn and Harrah’s Entertainment. Before entering the gaming industry, Fine worked at McKinsey & Company, Lehman Brothers, and for the U.S. House of Representatives, and taught Economics at Harvard College. He holds both his undergraduate degree magna cum laude, and his MBA degree, with high honors, from Harvard University.