To control free play you must measure, and react to, the behavior of each individual customer. Begin by dividing the universe of all potential customers—anyone of legal age with a budget to spend—into three groups:
- Players—customers who gamble more than they win and are the source of all casino profits.
- Prospects—a group that includes anyone that might become a player, as well as players who might be encouraged to gamble more.
- Pretenders—resort visitors that use gambling incentives to take home more than they spend.
THE GREAT PRETENDER
A few years ago I toured several southern California casinos with a game salesman I’ll call Dave. We had a list of appointments but began the day at a casino not on that list.
“Why are we stopping here?” I asked.
Dave grinned. “I’m collecting the route. It’ll only take a few minutes. You’ll see.” He pulled an envelope from above his car’s sun visor and removed a $40 coupon. “I belong to every casino’s loyalty club in my territory, and every month I get free play. So far this month I’ve won $321. If I win more than $64 today, I’ll set a new record!”
Inside Dave redeemed his award, wagered exactly $40, won $31 and cashed out. We drove away just 22 minutes after arriving and, by day’s end, ‘collected the route’ at three more casinos. Dave achieved a new monthly record of $467—all without risking a dime.
Dave is a pretender who simply wants to, as he puts it, “beat the house at its own game.” There are plenty of Daves in the world—perhaps more than a few in your club.Each pretends to be a player and every one of them steals from profits.
MAKE A LIST, CHECK IT TWICE
Just as Santa makes a list of naughty children who get no toys, you must create a list of pretenders who are denied free play because their behavior isn’t profitable.
Profits don’t occur until a customer’s theoretical losses exceed the amount of free play redeemed, plus communication and redemption costs. Example: you spend 50 cents to tell each player about their award and another 25 cents to place each award onto that player’s account. $10 of free play redemption requires $10.75 of player loss to break-even.
My son Noah believes losses must be 10 percent higher than redeemed free play to offset what he calls, “a free shot to win a big jackpot.” Even though such costs are amortized within the payback percentage, Noah argues that a big win—say $500 or more—tempts even good players to collect their winnings and go home.
No matter your philosophy, determine a break-even level you trust and test each customer’s theoretical losses against it. Those that fail the test go on your list. Be cautious though. Even excellent players sometimes have to suddenly go home and you’ll want to judge each across at least a couple of redemptions before putting them on your exclusion list.
FINDING A LEVEL
Giving even good players too much free play might reduce profits. Example: Mary and Ted hire a babysitter every Tuesday night from 6:00 p.m. to 9:00 p.m. so they can spend a few hours at the casino. They work from a combined $100 budget and gamble until the budget is gone or 8:45, whichever comes first.
A weekly free-play award of $20 gives just enough incentive to ensure they gamble instead of going to a movie. Giving $100 in free play won’t drive more visits but does increase the number of times they have to leave before spending their budget—and that’s lost profit.
Make sure to only compare losses against redeemed free play, as unredeemed offers cost you nothing.While unredeemed free play has no gambling cost, a low redemption rate could signal that free play is offered too frequently. Doing so diminishes emotional impact and trains customers to expect discounts.
Sadly our systems, reports and marketing methods were designed in earlier times when players were plentiful and casinos few. Today’s reality requires us to think, experiment and adjust more than ever.