Measuring the impact of casino promotions and campaigns is essential to formulating a successful long-term marketing strategy — after all, how can you confidently plan a marketing calendar if you don’t know what has worked and what hasn’t? The pervasive problem at many (if not most) casinos is the inaccurate measurement of that impact. Marketers tend to greatly overstate the revenue gains generated by the promotions they roll out. This explains the contradiction between a marketer stating every campaign had a positive ROI while Finance reports a casino-wide revenue total that is down, or only up modestly, year-over-year.
Why does this happen? At most casinos, the revenue attributed to a campaign is the sum total of all revenue generated by every player who participated in that campaign. That is, if you invited people to pick up a free coffee maker on October 14, and 2000 people actually did, then all 2000 players’ total revenue on October 14 would be counted towards the coffee maker promotion. But wait, you might be saying, that’s not true — we de-layer the players’ revenue, so it doesn’t all go towards the coffee maker (if you are not familiar with de-layering, please see the footnote below). Still, the flaw is that every dollar of revenue is attributed to some marketing campaign — implicitly assuming that every visit by every player who redeems an offer was incented by your marketing. This is demonstrably false. Many players happily accept the free slot play, free gifts, free food, and whatever else your casino offers them — yet this is not the primary reason they visit, nor would their play completely dry up if these incentives were reduced or eliminated.
So going back to the coffee maker example… let’s assume the 2000 players who picked up their gift lost $120,000 in total on this day, for a $60 average. To attribute the entire $120,000 in revenue to the coffee maker is simply wrong. Instead, you must have some benchmark that measures what the likely revenue would have been without the incentive, and then calculate the difference. Only this amount can be attributed to the promotion. If these players would have generated $90,000 on a typical day, then the lift from the coffee maker giveaway was $30,000. If each coffee maker cost the casino $12, so total cost was $24,000, then we have a “profit” of $6,000 and an ROI of 25%. Which is certainly nice, but far different than a 400% ROI, which is what we’d have if we assumed all $120,000 was generated by the promotion. It seems obvious, yet many casino analysts don’t perform their calculations this way.
So how do we create accurate benchmarks in order to determine lift? Stay tuned, we’ll look into that in a future post.
De-layering: splitting up a player’s total revenue into smaller pieces, assigning a unique piece to multiple “layered” marketing offers. So imagine a player in the above example who lost $240 on his/her trip, during which s/he picked up a coffee maker, and also redeemed a $40 free play coupon, and also enjoyed a free buffet. An analyst would likely attribute $80 (1/3) towards each of the three offers. This prevents double- or triple-counting, where the full $240 would be counted three times, as each of the three promotions was analyzed.
Read more in Part 2...