In The Beginning
Well, we’re not going all the way back to Bugsy, but more toward the corporate era of gaming. Let’s say the early 90s when casino marketing wasn’t especially hard or scientific. Demand exceeded supply for the longest time so keeping the doors unlocked, slot machines powered up and table games staffed was the strategy. Then politicians discovered a popular way to grow state revenue without cutting budgets. Open casinos … and open A LOT of them. Expansion was everywhere and suddenly fat margins and market share were under attack and operators began turning to analytics for answers. Marketers with MBAs were in demand and simply putting a car drawing on the last Saturday of the month because “when we did it a few months ago, the casino was packed” wasn’t good enough. Enter the marketing proforma.
Numbers Game
The proforma became a way to help GMs and VPs of Finance feel confident about marketing spend. In the early 2000s, marketing spend quickly rose to the top of the expense charts, with a bullet, where it remains today. Right under payroll … and in some jurisdictions, second runner up to state taxes. So the proforma began as one worksheet for every item on the marketing calendar to make sure the event or promotion is profitable or within an acceptable ROI range based on property targets.
While at times the process is frustrating, the proforma is actually a valuable exercise for marketers. It ties the marketing calendar to revenue forecasts and budgets. In the beginning it was simple enough. Answer the following questions and plug in corresponding data. What is the goal of the event/promotion? Who are we inviting? What is the projected response rate? What is the player worth per trip? What are the associated expenses? So total guests x average daily worth – expenses = profit. Then at the conclusion of the event/promotion, the finance team slides in the actual results next to marketing’s projected results and declares victory or defeat. It’s a common practice, but, is it enough? Should we dig deeper?
Advanced Promotional Analysis
Yes, we should dig deeper. Way deeper than the basic assessment described above. As marketers, our goals are straight forward. Drive incremental, profitable revenue. But we don’t learn that from basic postforma metrics. Therefore additional insights are not simply a nicety, they are a necessity from our data and finance teams. A deeper dive can result in additional understandings which in the end will provide a unique competitive advantage in your market.
So what are additive insights? Beyond basic casino performance metrics from the response audience on the date of the promotion, we should be considering overall player behavior. Did attending the event, promotion, gift giveaway, etc., truly change behavior? Was there an incremental visit achieved or did a player simply shift their weekly visit from a non event day to the promotional date? Or perhaps the data will indicate an incremental visit during the month, but no incremental spend. The player simply split their wallet over two visits. There will be times you won’t know that in the month of the event. You will need to study player behavior in the appropriate time period prior to the promotion as well as a month or two post promotion.
Another analtyic component to consider is layering. With competitive pressure comes aggressive marketing which can create unintentional consequences. That is the ability for a player to participate in, or redeem, multiple offers in one visit, and one visit shows up in multiple postformas. Those situations have to be identified and the play discounted accordingly or the postformas will be overstated.
Final Report
A full promotional analysis should: Restate the objective, report actual play metrics compared to marketing’s projection and summarize net profit, incremental profit and delayered profit. Include overal property revenue vs budget for that day as well, and a brief description of the weather for future reference. When possible the analysis should also call out opportunity segments. Perhaps it’s a cluster of guests who show no behavior change from the promotion and should be considered for exclusion from further invites to similar promotions. Or in contrast, a group of players who respond well and similar promotions can be added for this audience to grow visitation and steal market share.
In the end, most events and promotions will show overall profit at first glance. But there is always an underlying nugget or two of key learning when you dig deeper.
Steve Dahle serves as the Chief Innovation Officer for Mille Lacs Corporate Ventures and has been a Raving Partner for three years. Mille Lacs Corporate Ventures is owned by the Mille Lacs Band of Ojibwe and manages its numerous businesses, including Grand Casino Mille Lacs, Grand Casino Hinckley, the InterContinental Saint Paul Riverfront Hotel, the DoubleTree Hilton in St. Paul, Minn., the DoubleTree by Hilton Minneapolis Park Place in St. Louis Park, Minn., Embassy Suites by Hilton Oklahoma City, SLOTCO, Makwa Global, Big Sandy Lodge & Resort, Eddy’s Resort, and other businesses such as a commercial laundry facility, cinema, a grocery store, gas/convenience stores, a golf course, and a wastewater treatment plant.
