I have had the opportunity over the past several weeks to spend a significant amount of time on the road and in casinos again. In fact, I am writing this article today while sitting on a Southwest Airlines flight. As I had some time to reflect on what I have seen over the last few weeks, it made me remember a mantra that a mentor of mine told me years ago.
“Busy is not a strategy.”
Although there is another surge of COVID-19 occurring as I am typing, it is clear that casinos around the country have started moving back to the “big weekend promotion.” I’m not here to say whether that is right or wrong for your market, but I want to make sure that everyone is taking the time to review and analyze their promotions. It is far too easy for a casino marketing or operations executive to walk down on the floor and look around at the sea of people and say, “yep, it worked,” without even looking at the profitability of the promotion. If there is one thing that I can say post-pandemic (if we are there yet), it is to take the time to understand where every dollar invested in marketing promotions is going and what the return on investment is after layering costs.
I said it, the dreaded word that every marketing director hates to hear in a meeting, “layering.” We have all sat through one of those dreaded marketing review meetings where an inexperienced marketing manager drones on about how three different promotions on the same day all drove an incremental one million dollars in coin-in. Then to have a CFO or COO point out that the casino didn’t even have three million dollars in coin-in on the day they are referencing. This scenario is how marketing managers get a bad name, and something that we are here to fix today. Layering isn’t always the enemy, and there are times that it will be necessary in order to compete. You need to make sure that you are doing it for a reason! With that having been said, let’s talk about analysis and the marketing pro forma and post forma.
Know Your “Why” for Each Promotion
Every casino promotion should have a reason for existence, and it doesn’t matter if that is the weekly kiosk game or the new Ford Bronco giveaway at the end of the month. The promotion should have goals, a budget, guest lists, and targeted revenue and profitability. This is the information that we populate the pro forma with and what we, as marketers, will hold ourselves accountable to at the end of the day. Now, I know a group of you out there just got nervous and said to yourselves, “we don’t do this.” It is going to be okay. All I am asking you to do is start the process the next time that you sit down with your team to plan out promotions. It will take a few iterations to get the process going, but at the end of the day you will be in a better place and create far better promotions once you start this process.
Armed with our pro formas, the marketing team executes all of the promotions flawlessly during the month, and guests rave about how great the promotions were. The month wraps up, and the real work begins on understanding precisely what worked and what didn’t when it comes to the profitability of the promotions.
Power in the Pro and Post Forma
When building the promotional post forma, it is essential to have more than just coin-in, win, promotional cost, and profitability. To help with future planning and understanding the overall profitability of the month, we always encourage adding players mailed, players redeemed, redemption rate, trips, walk rate (players redeemed with no play), and the layered costs of the promotion. What is a layered cost, you might ask? The easiest way to explain it is by using common examples: Do you have a two-for-one promotion in your restaurant the night of a primary promotional drawing? Does your weekly free play flight fall on a day when you have a monthly kiosk game running? If either of these examples rings true, you likely have layering within your programs. The layering itself is often not the issue, rather it is the fact that it gets lost on most promotional post formas. We encourage our clients to break out these costs on their own line so that it is obvious what the costs are and how they affect the promotion. We like to include other free play, points, comps, other promotion costs and hotel comps, to name a few.
With all of the information from above, we have the data points necessary to build our modified post forma. Starting with the actual win (coin-in should just be used as a data point), from our group of guests we can begin subtracting the actual and layered costs from the campaign and get to true profitability that everyone can agree upon. Furthermore, comparing these numbers to the pro forma will help the planning process for future promotions and help make you a better marketer. Use these concepts to build better promotions and then move on to every other aspect of marketing to build a data-based system rather than having gut feelings. Imagine understanding the actual profitability of a convention and feeding the sales team data on the best conventions to attract, or using real redemption data to pick continuity gifts that matter to your guests.
