In the landscape of today’s hypercompetitive Las Vegas Strip gaming market, casino executives have become increasingly aware of the benefits of providing accurate profitability metrics for their hosts and marketing professionals in order to grow—and sustain—their business development efforts. To support the delivery of such metrics, large investments in the data infrastructure necessary to aggregate, analyze and provide insight into total gaming and nongaming spend have been made across the industry.
Despite those efforts, there is increasing evidence that for their dollars spent at the land-based casinos they frequent, all casino guests (members and nonmembers alike) will continue to demand broader-based value—in the forms of more-personally-tailored experiences; knowledge and understanding of their interactions across channels and time; dramatic enhancements to current loyalty program offerings; and even changes in the types and quality of hosting activities—than has been offered traditionally.
We believe casino executives must thoughtfully accelerate the adoption of big data and analytics: not only considering the right information technology (IT) investments but paying equal attention to organizational and process improvements as well, all of them driven by the business. Executives who take those actions will become able to address shifts in customer behavior that will inevitably improve loyalty and continue to win market share in all customer segments.
Note that many companies confuse such terms as analytics, advanced analytics andreporting. We describe analytics as having four components: historical descriptions (typical reporting), predictive analytics (estimations of future activity at the customer, product line, or corporate level), prescriptive analytics (given a prediction about the future, the specific actions that should be taken), and scenario planning (after a taken action, the likely reaction—or game theory evolution—of the market). All four are important, but it is crucial to understand the differences and organize a company accordingly.
THE CURRENT STATE OF LOYALTY MANAGEMENT
Initial efforts to comprehensively record accurate measurements of casino guests’ activities—in terms of their behaviors and preferences—can be traced back to 1994, when Harrah’s (now Caesars Entertainment) began work on WINnet (which represented stage 0). Augmented by its patented Total Gold (now Total Rewards) loyalty program in 1997, the model that Harrah’s pioneered to collect, integrate, and link individual member data from various source systems in order to better identify customer market segments, create appealing offers, and predict future activity has been adopted across the industry. Walk into any major Las Vegas casino today, and prepare to be bombarded by offers to sign up for a member card that links you to the casino’s loyalty program.
Despite that industry-wide evolution toward more accurate measurement, at least three pervasive problems are left unresolved. First, the current programs were designed for gaming activity only. But many of today’s programs include nongaming activity, and the processes for collecting and linking the data are poorly implemented, leaving large holes in recordable activity. Second, current programs were not designed for a multichannel experience. Typical programs assume a guest is in-house. Better programs begin guest management at the tip of the marketing funnel and integrate all of the touch points, including online, call center, in-house and mail. Third, specific and timely recommendations and offers while guests are in-house (called trigger-based marketing) are not considered in operational processes, organizational structures, or data analytics. That leaves considerable value on the table that could otherwise be captured to improve guest satisfaction and lead to increased profitability.
As casinos struggle to balance traditional gaming operations management, typified by the so-called rated play, with broad extensions of a comprehensive loyalty program such as Disney’s My Disney Experience—which attempts to identify, collect and utilize a guest’s every interaction—profits are leaking out of the properties (stage 1). Up to 70 percent of gaming is tracked (rated) at major casinos, but the majority of nongaming activities are ignored. That wasn’t a problem when the first loyalty programs were rolled out 17 years ago, but there has been a seismic shift in the mix of aggregate department revenue at Las Vegas Strip–based casinos. From 1997 to 2013, total revenue more than doubled from $7 billion to $15.5 billion while gaming revenue as a proportion of that total steadily declined from 52 percent to 37 percent (figure 1). Guests are voting with their feet and their wallets; gaming is just not as important as it once was. Casinos are left with operational systems designed and built for customer interactions that are becoming less and less meaningful. The successful casinos of the next decade will likely become full-channel, multi-experience venues where guests are tracked through the complete marketing funnel encompassing every interaction, from initial investigation through multi-trips.
Today’s casino customer loyalty management programs are in the beginning stages of evolution in terms of engagement capability and sophistication (figure 2).
The next phase of evolution (stage 2) will see casinos adopt best practices from other industries such as entertainment, electronic commerce, and financial services. Loyalty programs will become enhanced to include all interactions: before, during and after a trip. All online activity will be collected, mined and associated with a guest. Recommendations around entertainment, dining and other events will be made for each guest at specific times. By the end of this phase, casinos will be able to adeptly manage the following scenario: A future guest accesses the casino website, looking into entertainment, restaurants and poker tournaments. This mid-value guest books a hotel room by using a promotional code offered during the online session, prompted by the casino host. The guest had gone into four pages of depth in the Britney Spears concert web pages but didn’t book tickets. When the guest arrives at check-in, an offer for 20 percent off Britney Spears tickets is made because the recommendation engine matched the guest’s interest in the concert with the revenue management identification of excess inventory and the forecast value of the guest’s trip. The associated analysis included all data points from all captured online sessions, dozens of propensity calculations and revenue management calculations not just for hotel room occupancy and average daily rate but also for every venue and event at the resort as well as guest expected value under numerous scenarios of offers.
The aforementioned scenario is completely possible with current technology. The gap for casino adoption lies in the deployment of big-data collection, linking and hygiene; robust analytics; organizational structures; and operational process adoption. Many casinos have grown into their current capability states through a series of acquisitions, siloed projects and homegrown technology. But to deliver maximum guest value, casinos must adopt a customer-centric, multichannel approach, which necessitates an enterprise-wide data and analytics strategy. Such a strategy must be driven by the business—not by IT; it must be comprehensive; and it must incorporate long-term goals while delivering value in the immediate term.
USING BIG DATA AND ANALYTICS
The psychological appeal of being given a personal casino host is strong. All casino executives know this, and it is the reason—beyond just the enablement of better data collection—that tiered loyalty management programs have spread so pervasively in the past two decades. Everyone wants to be special; they want a personalized VIP experience. But what if that personalized experience could be afforded not only through increased guest gaming spend but simply by applying advanced analytics to operate on the big data produced by all of a guest’s current and previous interactions with the casino?
The following phase of the next-generation casino (stage 3) will enable deep customer engagement as described here: A guest family checks in to a casino resort for the sixth time in five years. The family has a suite with two bedrooms to accommodate the two parents and two children, boys aged 10 and 12 years. Upon check-in, they receive some interesting offers tailored to their specific family, the channel they used for booking their trip, previous trip history, family members included, ages of children, time of day and so on. The two boys download the casino mobile application on their smartphones (from a Quick Response code at check-in) and immediately see notifications of events designed for their ages. The family settles in to the hotel room and makes plans for dinner. Not seeing any reservations made with casino venues, the mobile app sends an alert about dinner specials at restaurants similar to ones the family has preferred in the past, including available table options and the ability to click to confirm a reservation for four. The next day, as the algorithms employed by the casino process the location and activities of each family member (as well as gaming losses and wins), specific notifications get sent to the family’s casino host as well as directly to the family members. Smart routing technology indicates the availability of a less-crowded area of the casino. The host contacts the family with an offer for free child care and then books a restaurant for the parents that evening. The next day . . .
Casinos can progress from a stage 1 corporation, focusing primarily on gaming loyalty, to a stage 2 organization, focusing on the entire trip value of a guest. Three critical success factors will determine the winners.
• Use proven technology and processes. Success can be achieved by using today’s technology: all of the aspects of a stage 2 enterprise have been proven and are in place in other industries.
• Let the business be the driving force. Success is alarmingly rare when the business itself is not setting the stage for these efforts, which require a corporate strategic focus. IT is not equipped to manage this on its own.
• Maintain a long-term plan with short-term objectives.Success requires years to come to full fruition. Plan for that. Also plan for intermediate releases of big value along the way. The organization must be motivated every few months with incremental value to maintain the momentum.