The Bottom Line: Player Reinvestment – Can It Be Done without Being Overdone?

One of the most popular questions we field when speaking with operators and marketers is “how much should our property be spending in promotional credit?” My answer, however frustrating, is always the same…

“It depends.”

The real answers are available and require a bit more homework to discover. So what are the variables that ultimately determine the optimal amount of free play that should be issued by any given property?

Here are some factors we consider:

  • The number and quality of properties that comprise the competitive set
  • The currently established market position of each property (leader, challenger, incumbent, start-up)
  • Socioeconomic attributes of the defined market area (income distribution, housing costs, employment rate, lifestyles)
  • The aggressiveness of retail promotion spending
  • Game count
  • Average machine age
  • Hourly utilization rates
  • Current and historical rated play percentages
  • And a host of variables from the property’s player tracking system that tell what we have to know about specific player behaviors across multiple segments of the database.

Due to the fact promotional credit/free play spending should always be success-based, providing an exact number that any property should spend on this specific type of reinvestment is a really tall order. Instead, we prefer to focus on the efficiency of the promotional credit currently being issued.

Depending on the market and the composition of the casino player database, our established ROI benchmarks for actual gaming dollars returned for each promo dollar issued will range between 4:1 and 5:1. A typical scenario when properties are underutilizing free play will produce a rate of return measurement at or near 6:1 and players will behave in a low-frequency trip pattern.

While conservative levels of promo credit issuance do a great job of protecting margins, these levels of reinvestment are not adequate to produce the optimal number of profitable trips available in a given market. Leaving gross gaming revenue uncaptured is the result of under-reinvestment.

On the flip-side, a typical measurement for properties that are over-utilizing free play will be less than a 4:1 ratio of actual gaming dollars returned for each promo dollar issued and the players will behave in an ultra-high frequency pattern specially in the lower worth segments of the database. In addition to the rate-of-return measurement for real green dollars, here are some other questions to answer in order to determine when your property may be operating in an under or over-reinvestment scenario:

  • Does your property consistently show a significant variance between theoretical and actual slot win?
  • On average, how much promotional credit does each player spend on a per-trip basis?
  • What percentage of trips by rated players at your property involve the redemption of some type of promo credit or free play incentive?
  • In what worth segments do the players eating away at your free margins reside? (hint: look towards the bottom)
  • What percentage of your total promo credit / free play spend is being used by MVP/VIP type players?

It is critical that property leaders have the tools necessary to identify under and over-reinvestment scenarios. Over the years, we’ve partnered with properties on both ends of this scale with one goal in mind – capture a premium share of the market with targeted and customized database marketing strategies. Looking at the 25+ casinos we have supported for database services, no two programs are the same.

We treat each client-partner on their own merit and the solutions developed are based on each specific market, property amenities and operating conditions.

The bottom line is this: we get aggressive in attracting your players to your property.

Until next time,
Chris Province
Research

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The Bottom Line: Player Reinvestment – Can It Be Done without Being Overdone?