During my time in the gaming industry, I have witnessed more table game promotions fail than succeed. In some instances, management never realized that a promotion resulted in a negative return for the casino. They didn’t understand the cost of the promotional tool, i.e., the coupon or promo chip. They didn’t know how to measure the end result of the promotion. They didn’t take into consideration all the costs involved in the implementation of the promotion. In essence, they were navigating the ship through uncharted waters without the use of a compass or a depth gauge, and without an established course beforehand. No wonder they ran aground on the rocks.
To give your operation a chance to succeed in the murky waters of table games promotions, the wise manager needs to take into consideration the following issues. Just as a new business needs a business plan before opening the doors, management needs to decide which table game promotion to implement. Without direction and planning, they greatly reduce the chances that a promotion will successfully increase table games business and drive game revenue. In many situations, the implemented promotion quickly sours and fails to produce the required increase in win. In some cases, a poorly planned and incorrectly calculated promotion will result in a disastrous loss of revenue. Anyone who has offered an unlimited two to one promotion on player blackjacks knows exactly what I am talking about. Following are several “failure” issues that the smart casino executive needs to take into consideration before signing off on his or her next table game promotion.
Failing to Know the Cost of Promotional Tools
What’s the cost of a match play coupon, and how is the cost absorbed by your gaming operation? Most executives don’t know the exact cost of the different promotional tools before they are chosen and implemented, and, for some reason, never ask what they are. They assume marketing knows the actual cost, and take their informal assessment as gospel. In most situations, management has no idea regarding the cost of a $10 match play coupon, or changes to that cost, based on game types and payoff multipliers. As far as most members of upper management are concerned, the cost of the promotion is absorbed by the table games win/loss and represents no “black and white” expense.
A more extreme example occurs when the casino attempts to attract high-end players by discounting a player’s gaming loss. If a player is rebated part of his or her loss after a period of play, how can that represent a “cost”? Isn’t the money already in the drop boxes? If the casino experiences the same positive and negative financial result during different qualifying periods with the win and loss offsetting, and the player receiving a rebate during the negative swing, how can the casino come out ahead? If theoretical discount of loss is actually higher than your theoretical win, the casino “draws dead” to the promotion. If there is any doubt, look at what high-limit blackjack player Don Johnson did in Atlantic City.
Failing To Correctly Calculate the Cost
There are a number of examples of this” failure” problem over the past year on the Las Vegas Strip. The biggest culprit: casinos that use promotional chips to attract moderate- to higher-limit customers. “We’ll give you 5 percent of your front money deposit in multi-play promotional chips (also known as ‘play-till-you-lose’ chips) if you play in our casino.” This promotion might result in profitability if the costs are calculated correctly and the rules of the promotion set accordingly. In this situation, the casinos utilizing this incentive took a “bath” due to poor rule structuring. Their requirements: (1) the customer must place $50,000 on deposit, (2) he or she will receive 5 percent or $2,500 in multi-play chips, (3) the customer must play through two baccarat shoes (approximately 150 decisions) and (4) at a $1,000 minimum bet. One casino lost close to $250,000 over the course of a single weekend. The problem: the cost of the promotional is approximately $2,400 and the theoretical win from $150,000 in wagers is approximately $1,600. What is the monetary return to the casino if the customer plays within the minimum guidelines of the promotion? The casino will experience a theoretical negative result of $800 per $50,000 depositor.
I’ve witnessed similar problems when casinos utilize other promotions such as match play coupons, single play promo chips, Ace promotion coupons, rare hand combination bonuses and value added (like scratch-off cards) promotions. They fail to do the math!
Failing To Get All Departments Onboard
A number of years ago, one of the Strip casinos decided to hold a poker tournament on the casino floor. The night before the tournament began, the maintenance department was tasked with removing a number of blackjack tables from the floor. Unfortunately, security, the cage and surveillance were not brought into the “information loop” and were unaware of the table move. They quickly became aware when four men in overalls wheeled a blackjack table that still possessed a tray full of casino chips and a drop box with cash off the casino floor. Be sure to make all departments aware of any upcoming promotion.
A real embarrassment to the casino is when table game employees don’t know their own department’s promotion. Once I witnessed a player walk up to a blackjack table and present the dealer with a match play coupon. The dealer stared at it for a few seconds with a puzzled look on his face. He called the floor supervisor over to his table, and they both looked at it as if it was something from outer space. After discussing the situation, the floor supervisor told the customer that he would have to check with his manager. The customer waited for a short while, became disgusted and departed the game. Shortly afterward, the floor supervisor returned to find the customer had left. He then advised the dealer that the coupon was some new casino promotion, and advised the dealer to accept all coupons in the future. What about the previous customer? One has to wonder about a management team that implements a new promotion, but fails to properly inform the personnel involved in the direct process.
There is another issue involved. Letting the other casino/hotel departments know about table game promotions allows the guest room attendant, the valet parker, the front desk clerk and the restaurant food server to answer customer question regarding the promotion. If a guest reads an advertisement or casino signage about an upcoming or present promotion, all employees should be able to answer basic questions such as time, dates and who to talk to about more promotion details. There is nothing worse than an employee who answers the question with a shrug and an “I don’t know.”
Even if the department is not directly involved in the promotion, management needs to let everyone know about the promotion’s who, what, where, when, why and how.
Failing to Work Out Details Before Implementation
The old maxim, “Failing to plan is planning to fail” is very true when contemplating table game promotions and programs. When you do plan, remember the most important, and the most cost-saving step is to work through the entire promotion, from beginning to end, in pre-implementation planning meeting. Everyone involved in the process needs to explain how each step will be performed, from the time the coupons are designed and ordered, through the accounting for the coupons at the completion of the promotional process. If you walk through the entire promotional process in the meeting room and discover bottlenecks in the system and other problems, it will cost less money to correct them before you’ve begun the promotion and need to correct problems on the casino floor.
Two important factors to consider are (1) coupons and promo chips are the same as “money” and need to be strictly accounted for, and (2) time limitations need to be considered and used to control the length of any promotion. A number of match play promotions were designed to distribute the coupons via the free and uncontrolled source of newspaper ads. The lack of control allowed certain players to flood the table games with coupons rendering the promotion unproductive and costly. Failing to limit the time use of the coupon eliminates management’s ability to control their use.
A “December promotion” involving coupons that were intended for use to drive business during the slower period prior to Christmas became costly when a majority of the coupons were used on New Year’s Eve. The “good through December” conditioning on the coupon needed to be reworded with the exact dates of the intended use period.
Failing to Measure the Early Results
How do you know your promotion is on track? It needs to be measured, not only at the conclusion, but also during the course of the promotion. If the promotion isn’t accomplishing the desired results, management has a chance to modify it, or in some situations, cancel it completely. Unfortunately, most promotions are not designed with periodical “milepost” goals, but reviewed only when it appears to be a complete disaster. Building in measurable milepost goals allows management to examine the promotion effectively to determine whether they need to keep the promotion but make changes, leave the promotion alone but continue monitoring, or to terminate it entirely. Even when a promotion appears to be a total disaster, if it has no measurable goals, management will hesitate to “pull the trigger” and kill the promotion. I know of a number of situations where a terribly flawed promotion remained in operation and cost the casino thousands of dollars because management thought there was a chance that the results would eventually turn around.
How would you measure promotions? Recently I was asked to review the mathematics on a blackjack promotion. Management wanted to offer customers a two to one on a specifically suited blackjack combination during the pre-Christmas period. It was determined that the two to one blackjacks would reduce the game’s house advantage by 0.15 percent, or approximately 10 percent of the game’s total house advantage (average player).
What milepost metric would you establish to measure this program? The best milepost would be a minimal increase in wagering “handle” of approximately 15 percent. This increase in wagering would cover the cost of the promotion plus return a slight theoretical win to the casino. However, this method would be quite difficult to calculate using the casino’s present collectable financial metric. It would be more prudent for management to use a metric they already use; blackjack table game win. The milepost should be based on win per day per table (unit), and compared to the previous December. If the average win per day showed a reasonable increase during the established milepost periods, the promotion was working effectively. If the average win per day has dropped, the promotion needs to be adjusted or terminated.
Failing to Examine the Promotion at Conclusion
While managing a casino in California, in a marketing meeting I mentioned a promotion I believed would increase play in the casino. I was informed by the director of marketing that they had used that same promotion in the past, but that it didn’t work. “Why not,” I asked. No one at the meeting could give me an answer. Why? Because they never took the time to evaluate the promotion and determine exactly why it had failed.
In many instances, management fails to examine a promotion at its conclusion. If the promotion appears to be a success, no one wants to ask why, since it was a success. It’s not important to them whether or not the promotion could be altered or changed to make it more effective the next time marketing wanted it implemented. What happens if a promotion fails? The promotion is relegated to the “loser promotions” graveyard—never to be evaluated, and never to be used again. There’s an old maxim that states, “You learn more from your failures than you do from your successes.” Just because the promotion was a failure doesn’t mean you can’t learn from it. In most cases, understanding the underlying cause of the failure, not just of the symptom of the failure, will help management create better promotions in the future.
I can say with a great degree of confidence that our industry loses more money each year to bad promotions than it does to cheating, theft and advantage play. Much more. Failing to plan is planning to fail. Do not implement a table game promotion without examining the promotion from all angles. Do not blindly implement a promotion because “the other guy” is doing it. Most casinos don’t put pencil to paper when determining whether or not to implement a promotion or program. Do the work yourself so you don’t inherit the other guy’s failures.