Authors’ Note: We are excited to present this first article in our 12 part series on customer-centric gaming floors. In this series we will dig deep into the modern gaming floor, showing how this area needs to be managed using a customer-centric model. In this article, we will delve into customer preference and show how this powerful view changes one’s perspective of the gaming floor. Furthermore, we will examine the hot topic of Millennials, showing how preference teases out the real numbers on Millennial gaming desires.
Slot machine customer preferences are vital to understanding how players are spending money on the casino floor. Often referred to as “Market Basket Analysis”—which invokes the image of a grocery store customer checking out with a basket of goods—this study of customer preference can lead to a large number of interesting and deep metrics into slot players’ purchasing behaviors. In this article, we will examine one of those metrics, by looking at new customer preferences for a particular slot machine.
At this year’s Global Gaming Expo, the central theme was skill-based gaming and its ability to turn Millennial casino visitors into Millennial gamblers. A wide variety of skill-based games are about to hit the casino market, and this brand new style of gambling is likely to be ignored by today’s slot gamblers—those players who as a group skew older. However, as we will examine in this article, catering to today’s older gamblers while ignoring future gamblers (including potentially the very large group of Millennials) is an extremely risky proposition for a casino.
The Silverton Casino has been operating with sophisticated business intelligence for over 10 years and has collected 15 years of detailed history on game play and preferences. While we should not say that the Silverton Casino is representative of gaming across the country, it is a real data point and digging into this real world customer database gives us clues as to what is happening across the industry. To get some insight into a very long view of the customer base, we examined the average age of players who played at Silverton. This is shown in Figure 1 (note the actual age numbers are removed for confidentiality). The important trend to note is that over the last 10 years the average age of the casino patron is decreasing while the spread (shown with the dotted lines) is increasing. In short, it seems like new customers are joining Silverton, but they are more diverse and younger than the previous audience. This hard data indicates that some properties are not being struck with the Millennial problem and that more research is needed on the future of gamers.
GO WITH THE FLOW
Customers flow into and out of a business at a huge rate. We call this “customer flow” or just “flow” for short. The rate is a fantastic metric when comparing properties. Our experience across the industry shows that flow ranges from 10 percent to 40 percent, depending on the market. Intuitively the flow rate of customers should dramatically change the nature of the gaming environment. Furthermore analysis of the “new” customers is very important as they are likely to be reflected in the future mix of customers.
Before we dig into the math of how to analyze the nature of the gaming floor, we will present the Red Beaker Analogy, this analogy will present a way of visualizing the impacts of flow on the gaming environment.
To imagine the impacts of flow on a customer database imagine that the current database—what we might term “original customers” from today’s perspective—are all represented by red liquid in a beaker. Then let’s watch this beaker change as we move forward in time, with new customers being represented by adding blue fluid to the flask, and departing customers (through attrition) represented by slowly draining red fluid. Let’s consider three stages.
Initial Stage Red: Initially the new customers will be impossible to see and applying our Red Beaker analogy the beaker will appear completely red. The danger is that in the initial stages the addition of new customers is hard to see analytically. Consider the example of the customer database after just one month; the Red Beaker Analogy indicates that the new customers have had an imperceptible impact on the mix of customers.
Middle Stage Purple: In the middle stage the customers will appear very different now heavily influenced by the new customers. This stage tends to sneak up on you; it is like a sudden transformation to purple. It seems like a tipping point has happened overnight; in fact what has happened is that there are now enough blue customers to change the color of the overall customer solution.
Final Stage Blue: In the final stage there are no more red customers and, the customer base is now transformed into “blue” customers. Eventually the blue customer fluid will wash out the old customer database and the beaker will appear completely blue. Strangely this will take quite some time as a small amount of original customer database keeps a distinctly purple color to the fluid. This stage is deceptive as we think we now have a mix of customers; in fact, we are transforming into a completely new customer database.
Of course, the Red Beaker Analogy is happening continuously as our customer base evolves naturally over time. In particular, we can reset the analogy at any time, rerun the thought experiment, and we will always see the red beaker eventually change to blue as more new customers continue to enter our database, and current red customers slowly attrite.
BEWARE THE BEAKER TRAP
The Red Beaker Analogy presents us with a trap common to slot analytics—that of using simple averages to determine good vs. bad games. If we think of each quarter as a new “red beaker” experiment, then our floors will always be suited to today’s business and will be ignoring business in the future, as the first three months of any red beaker experiment will almost always be in the initial stage, where our blue customers are far outnumbered by our red customers. However, while following the slot averages and thus naturally catering to red customers seem like the right thing to do, we ignore blue customers at our future peril. They are the future of our business, and a lost new customer today could mean multiples more lost in the future.
In analytics asking the right question is essential; to illustrate the red beaker trap we will layout two simple questions relating to understanding the gaming floor.
Question One: What is my highest performing strongest gaming machine?
Question Two: What gaming machine do new (blue) customers prefer?
Answer To Question One—Theoretical Win per Day: The first question is easy… we just look at the Theoretical Win per day (TWPD) of the gaming machines and we can say which machines are the strongest.
Answer Question Two—Blue Wallet Share: The second question is harder… we need to look at customers and in particular what games the new customers like to play. Let’s call this “new player wallet share”—the percentage of new customer spend on a game. In other words, a game with 60 percent means that new players (blue) spend at 60 percent of their total gaming spend on this game, and zero percent means that blue players spend nothing on this game.
TO HAVE & HAVE NOT
To further examine this let’s break the machines into a quadrant analysis cross tabulating question one and question two— this will illustrate how it is a combination of the two metrics (or questions) that truly show what is happening on the gaming floor. This brings us to four groups of gaming machines—sleepers, keepers, dogs and the walking dead (see Figure 2).
Sleepers: These games are little treasures waiting to happen since they appeal to Millennials; watch them carefully. Before ditching these low theo win games, you need to look at questions like what other games do these players like to play. For example, at the Silverton Casino an electronic table game (ETG) was clearly underperforming; however careful analysis showed that these games were sleepers. What was even more interesting was that the players were Millennials and they seemed to enjoy more social games in an “active” area near a bar. Now after this analysis the decision was made to keep the ETG as the numbers showed the revenue generated was incremental.
Keepers: Oftentimes these games become great games with titles like Buffalo or Wheel of Fortune. Quite simply, these classics are the drivers on your floor today and will likely be the same tomorrow.
Dogs: These games are great candidates for removal since they will likely decrease further over time as the Red Beaker effect comes into play. In other words, as the new players’ game preferences become stronger, the overall game performance of the dogs will decrease in performance.
Walking Dead: These games are amongst the hardest to manage as their numbers are currently high, but the Red Beaker effect will drive them down slowly over time. As such they appear alive and well but are in fact on an almost inevitable path toward becoming a dog. This does not mean we should just rip out all the walking dead as the actual performance is high, but we should be very careful about adding additional games of this type as they have a negative long-term outlook.
BRINGING IT ALL TOGETHER
Much of the discussion around Millennials has fallen into one of two camps: marketing and new products. On the marketing side, casinos are trying to create new areas of excitement that will draw Millennials into gambling while they enjoy their current casino entertainment options of choice, like shows and dining. On the product side, slot operators are beginning to explore the concept of skill-based slot machines.
However, both of these camps are taking a narrow view of the problem. In fact, casinos and Millennials is not a new problem; it is simply a manifestation of the Red Beaker analogy. Furthermore it is apparent from the Silverton age data analysis that the challenge of Millennials needs hard data specific to each property. Casino customer databases are always churning, and it is always difficult to think about the future when the beaker turns blue, when today the beaker is so red. We hope this article gave some insight on the importance of looking to the future while managing today’s casino floor.