A very important aspect of running a casino is understanding your customers. When we incent the wrong behavior in our customers we get it. Many times we create situations which can escalate customer expectations to the point our incentives make the customer not profitable. Many times we are incenting the wrong customers with generous offers and at the same time not offering proper incentives to our better customers. This set of analyses involves understanding our customers and using that information to drive desired results. We have a series of 7 methodologies we use to drive customer profitability.
The first part of our analysis will be to append Demographic/Physiographic information to all available customer records. Defining audiences by factors such as age, gender, ethnicity, marital status, income, etc. — has been used by marketers for decades to help define their target audience profiles. But as countless real-world marketing campaigns have shown, it is not uncommon for people who fall within the same demographic profile to act in radically different ways. While this doesn't invalidate the use of demographics — after all, they can be excellent starting points — it does underscore the need for brands to seek more nuanced information about their target audience. Enter psychographics. This field of study focuses on collecting and analyzing the characteristics of an audience that are slightly more intangible, such as interests, habits, attitudes, emotions, and preferences. Armed with this information, marketers can infer not only what product or service a customer might buy, but also why they would buy it. In other words, psychographics provides marketers and providers with a window into the motivations, values and desires of a target audience, offering a substantial amount of insight into the drivers of consumer behavior from several different angles. Psychographic segmentation is the act of identifying and classifying groups of people based on these shared data points, so that you can customize your brand’s tone and message to better connect with the people you’re trying to reach.
Customer profitability – our next step is to determine customer profitability. This can be very complicated or simple. A lot of the difficulty would be the grain and thoroughness at which we have collected our data. We should have all of our carded players information if they use their card dilitgently. We also need to ensure we have information regarding any incentives we have given the customer (free play, gifts, rooms, meals, jackpots/winnings, etc). We also need to tabulate any money the customer has spent at our casino (rooms, store purchases, gambling, golfing, meals, etc). If we choose to get very deep into profitability we can get into activity based costing (ABC) to determine costs down to a transactional level. So basically we can get down to the cost of pushing a button on a slot machine or dealing a hand of poker. This can be a considerable investment of time and money. Using just what a customer spends and what we give them will give us a relative profitability and give us a sense of which customers we want to invest more versus less in.
The next several methods will rely on our transactional/operational data as well as our demographic & psycographic data. There are nuances to each and there are reasons to use each one – but basically we are trying to partition our customers into groups based on characteristics that make them more alike than not. This then allows us to determine the proper treatments for each group.
COHORT analysis - Cohort analysis is a subset of behavioral analytics that takes the data from a given data set and rather than looking at all users as one unit, it breaks them into related groups for analysis. These related groups, or cohorts, usually share common characteristics or experiences within a defined time-span. Cohort analysis allows a company to “see patterns clearly across the life-cycle of a customer (or user), rather than slicing across all customers blindly without accounting for the natural cycle that a customer undergoes.” By seeing these patterns of time, a company can adapt and tailor its service to those specific cohorts. Cohort analysis is specifically the analysis of cohorts in regards to big data and business analytics, while in cohort study, data is broken down into similar groups.
Customer Segmentation & profiling Customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests and spending habits.
Clustering Cluster analysis is a statistical method for processing data. It works by organizing items into groups, or clusters, on the basis of how closely associated they are. Cluster analysis, like reduced space analysis (factor analysis), and is concerned with data matrices in which the variables have not been partitioned beforehand into criterion versus predictor subsets. The objective of cluster analysis is to find similar groups of subjects, where “similarity” between each pair of subjects means some global measure over the whole set of characteristics. Cluster analysis is an unsupervised learning algorithm, meaning that you don’t know how many clusters exist in the data before running the model. Unlike many other statistical methods, cluster analysis is typically used when there is no assumption made about the likely relationships within the data. It provides information about where associations and patterns in data exist, but not what those might be or what they mean.
ARIMA model - ARIMA is short for ‘Auto Regressive Integrated Moving Average’ it is actually a class of models that ‘explains’ a given time series based on its own past values, that is, its own lags and the lagged forecast errors, so that equation can be used to forecast future values. To this point we have enriched our data with demographic & pshycographic information. We have also determined a value of our customers and used several methodologies to segment them into groups. An ARIMA model will allow us to make accurate predictions of customer visits over different periods of time. To be successful we must understand each customer – traditionally finance organizations will take averages for planning purposes. We need to understand the behavior of each customer not the average behavior. When you understand each customer – things like seasonality don’t come into play. We can do these ARIMA’s on segments or the value of customers this will give us specific information need to drive behavior.
Marketing events & gift giveaways ROI
Marketing is everything a company does to acquire customers and maintain a relationship with them. It is not an exact science, but it is getting better. The biggest questions companies have about their marketing campaigns entail what return on investment (ROI) they're getting for the money they spend.
Calculating Simple ROI
The most basic way to calculate the ROI of a marketing campaign is to integrate it into the overall business line calculation.
You take the sales growth from that business or product line, subtract the marketing costs, and then divide by the marketing cost.
The simple ROI is easy to do, but it is loaded with a pretty big assumption. It assumes that the total growth is directly attributable to the marketing campaign. What if you have multiple campaigns going on ? What if the customer was going to come and gamble anyway ? What would the organic growth been without the campaign ?
These are all great questions and very easy to answer if we set up a disciplined campaign strategy and measure results. Using control groups isn’t popular sometimes, but to definitively know if what we are doing is working – its one of the few way to be confident that what we are doing is having the intended results.
We need to ensure we are interacting with our customers based on their preferences. This includes a digital strategy, email, direct mail and an interactive app – with tracking capabilities. Remember marketing is a long-term, multiple-touch process that leads to growth over time. The month-over-month change we were using for simplicity's sake is more likely to be spread over several months or even a year. The ROI of the initial months in the series may be flat or low as the campaign starts to penetrate the target market. As time goes by, sales growth should follow and the cumulative ROI of the campaign will start to look better. Although things like brand awareness via media mentions, social media likes, and even the content output rate are important – the primary purpose of marketing campaigns is to drive increases in sales.
Marketing is an essential part of most businesses and can pay many times over what it costs. To make the most of your marketing spend, however, you need to know how to measure its results. Marketing firms will sometimes try to distract you with softer metrics, but ROI is the one that matters for most businesses.
Using these 7 methodologies will allow us to better understand our customers, make effective use of our marketing dollars, incent the right behavior from our customers, and drive ROI and profitability up.
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