CRM, BI and U: VGT and Class II Systems

Our continued examination of CRM/BI systems steps into the Class II market this month and introduces Video Gaming Technologies Inc. (VGT). As Class II is considerably different from the Class III market, you’ll find VGT’s CRM/BI system is just as different. For the Class II market, it is important to consider CRM/BI in the broadest sense and not just as a software system.

While Class III has various communication protocols and levels of networked configurations, Class II is, and always has been, a network-based installation. Class II is typically based on bingo, but it specifically has players competing against each other instead of against the house. As a central-determination system, Class II requires a complete server-based network installation. As a result, Class II installations have typically been more data-oriented and have had the ability to collect more data quicker and easier due to the underlying structure of the technological implementation. In most casinos­—both Class II and Class III—there are vendor-based or third-party back-end systems collecting data from various gaming machines on the floor.

The primary regulator in Class II is the tribal government, while Class III is regulated by the state government. When a tribe negotiates a compact with the state for Class III gaming, it is required to pay fees to the state. They are called “fees” because they are government-to-government charges, as opposed to taxes, although the concept is certainly similar. When you consider that Class II does not have these fees and that in some markets Class II outperforms Class III, you have a real winner. Furthermore, the tribes get technological benefits for free due to revenue-sharing arrangements. In the current economic climate, where revenues may be decreasing, many tribes are seeing Class II as a way to maximize revenues. If Class II games were to underperform Class III games in a casino, when you remove the compact fees, they may come out ahead in terms of real revenue.

VGT is the largest Class II manufacturer in the United States. The company has more than 20,000 machines currently operating in the field. “The Class II model is a revenue-sharing lease model, not a sales model,” Steve Wilson, western divisional sales director of VGT, explained. “There are casinos in multiple states (Washington and Oklahoma) where Class II games outperform Class II compacted games. As technology has evolved and more and more Class III vendors are finding the merits of central determinant systems to be attractive, it is the Class II vendors that have led the way, that are more sophisticated in this area and that are more highly involved in this area. In that way, Class II vendors may actually lead the way in terms of the next generation of casino gaming devices.”

VGT operates in “partnership” with tribal operators. It is a revenue-sharing partnership, and it is key to remember that they are not operating partners. Only tribes can operate casinos. VGT’s partnership helps maximize game floor revenues by providing various business intelligence and customer relationship management value.

Slot systems, according to Wilson (the other Wilson), can provide three kinds of functionality. “First, there is amalgamation, integration and summation of slot accounting,” he explained. “Second, these systems integrate player tracking. Third, they provide integrated ticketing, or TITO. Those things are what slot systems do, and if they are very robust, they might include functionality of restaurant, hospitality, etc., although they are separate to the gaming floor.”

The System
VGT’s system was created about eight years ago. Refinement and updating is the norm, and new versions are frequently released. Version 6.18 was scheduled for release in September 2009, with version 6.19 following in November. Backward compatibility is essential so that operators are not forced to upgrade if they want to remain on a previous version. Their gaming devices are an integral part of their system, however, and not an “out of the box” slot game. As technology advances quickly, that slot game—specifically, as a device—can quickly become obsolete. By leasing, the operator maximizes the technology available, not only from a systems standpoint but from a game standpoint as well. New software systems and upgrades are provided free of charge. Older games do not have to be amortized, so there is no penalty or cost for upgrading.

VGT’s back-end system is fairly rudimentary. It relies on third-party vendors to provide this capability. And this is where its CRM/BI “system” begins to shine. While at first appearing to be a paradox, its system—again, in the broadest sense of the word—is more than just software. It is an integral part of VGT’s business model.

A feature of many other traditional CRM/BI systems, VGT offers a bonusing function on its games. Operators may set a win level for their games and any player obtaining this level or higher triggers the bonus system. Using the ticket printer in the game, a ticket will print out, providing an extra win for the player. This may be a ballot for entry into a draw, a coupon for food, gaming money or anything that the operator desires. This encourages play on the machine and offers a real-time reward to the player. Rather than create a mailing promotion in an attempt to have the player return to the casino, they are offered a reward while they are still there. This encourages them to remain at the casino, playing longer and taking advantage of additional products or services—plus, players can see the actual cause of their bonus. It also promotes entertainment value, as they receive a secondary win for their primary win. If the ticket is a ballot for a draw, this draw could take place on a traditionally quiet night, encouraging them to return. VGT provides prizes for drawing as part of their partnership. With the lease-sharing model, everyone wins. Giving away four flat-screen TVs at a cost of $20,000 could generate an additional $100,000 in increased play and additional play on the drawing night. It’s a win-win situation that isn’t going to occur in the Class III market. If VGT can increase an operator’s revenue, they in turn increase their own. For VGT specifically, it can increase brand loyalty from the player. By increasing player entertainment and familiarity with the VGT brand, the company’s share of market on the floor can also increase.

VGT’s products are very character driven as well. With strong character identification, such as Hot Red Ruby, players identify with the VGT brand and the promotions it offers. This creates a local market draw that helps build the awareness and brand presence and allows operators to share in the benefits of that equity, using those characters as a draw. This creates a symbiosis with the operators. It also creates an identity for the players, which increases loyalty. VGT marketing and promotion staff is assigned to customers over the long haul so that they know their customers’ business. Some of VGT’s staff members have been working with the same casino for six years. This eases the transition if there is turnover in the operator’s marketing or slot management staff.

More CRM, More Revenue, No Cost
“Periodically, we review all of our games on the floor,” Wilson explained. “Suppose an operator has 100 VGT games. We’ll analyze them and determine the bottom 10 percent. We’ll determine that we need to change those titles and take the whole box out and put in a new box. Replacing the bottom 10 percent performing games with the ones from the top performing 10 percent of games, we maximize revenue and handle. And it’s all free to the operator. We’re both on the same page, and it benefits everyone. The casino doesn’t have to buy a new game or convert an existing one.”

VGT staff will do the actual conversion since VGT owns the machines. This is financially beneficial for the operator and increases revenue by decreasing costs. “If you have a vendor that does a good job of supporting your machines, that’s just a big headache you don’t have to deal with,” Wilson said. And this is where the CRM/BI system begins to really take shape.

“We not only service the machines, we promote them,” Wilson continued. “We have a whole marketing department and, within it, a whole promotions department that has experts who know how to promote the casinos. They are out there every day getting regulatory approvals. We have professional talent, in character costumes, at the casino on the nights of a drawing. They are practiced, experienced, and can lather up the crowd. We have people who go out every night to do this. We consider this a cost of doing business.”

Data, Data Everywhere

With any major system, CRM/BI being no exception, there is the necessity of upper management buying into the entire package. Not only is there the cost of the system, including maintenance fees, but there is a staffing issue as well. Skilled staff must be recruited if it is not already available in-house, and training must be continually provided. The skill set in employees is perhaps the most vital, and arguably the most costly element.

With VGT, you have the flexibility of selecting any third-party back-end system you wish. One system may be more flexible for your requirements, your staff may have experience in one vendor area, or one vendor’s system may better suit an operator’s particular enterprise, market, objectives, skill sets, etc.

“Your typical casino marketing manager is not a database expert,” Wilson said. “They aren’t experts in working with the database and in how they can work in productive ways. We are becoming experts in all of the player tracking systems. These systems are complex, as complex as you want to make them. We’re becoming experts in the six-player tracking systems out there. We can help them with the system they purchase—we know it better than the operator will. It’s a value-added feature. We can create a promotion based upon their data, which is far more than just printing a ticket. VGT will put radio advertising on, buy newspaper advertising and use their database to create a mailing campaign. We have our own art department that will do the casino ad for them, experts who will negotiate television, newspaper and radio ads. VGT will put the mailer together and help the operator use this plethora of data to generate revenue for them. These are all revenue producing activities for both us (VGT) and the operator.”

Jim Nulph, director of marketing at VGT, talks about the company’s ability to work with various data warehouses. “Because we are a server-based gaming system, we have an incredible amount of data that allows us to understand, from a numeric standpoint, what the consumer activity is looking like on all of our games,” he said. “And having that data available and being able to aggregate it across multiple casinos and multiple markets gives us a view of activity that is fairly rare in the industry. That perspective allows us to match the consumer performance and player activity as it relates to different games, denomination, floor placement and promotional activity and place it with secondary sources of data that are able to characterize the nature of the market where that activity occurs.”

Being able to develop programs that are more customized to the nature of the casino operations, both in terms of the casino itself and as it relates to the market in which the casino does business, is a benefit for the operator’s business. VGT will model different economic and demographic factors against other product usage, player attitudes and lifestyles to form a broad view of how many of those factors come into play. Nulph explains:  “How that translates to business intelligence value to our casino customers is that we are able to do this as it relates to our games, as we don’t have data on competitors’ games. This helps the operators with game mix—floor placement, denomination, titles, paytables or different categories of games, like 5-reel video, progressive, 3-reel mechanical, different bonus structures, etc. By modeling and analyzing all of the characteristics of our product we can help develop a floor mix that optimizes the operator’s revenue potential with our games.”

Taking this business intelligence model further, product promotion has similar market intelligence capabilities. Those are enhanced by the fact that VGT executes an average of 150 promotions per year, examines the strengths and weaknesses of those promotions, and improves them over time. In any CRM/BI system, the post-event analysis is just as critical as the analysis that created the event. With proper post-event analysis, future events can be improved upon and will yield better results fo­r the operator. VGT has developed a set of best practices that are experience driven, data driven and can help address a wide variety of market products that a casino can have. The gaming device becomes a promotional device as well, allowing casinos to forward some of their business objectives. “We work hard to be a business consultant for the casino product mix as a whole and look for that sweet spot where using our install base, our machines, and our marketing budget, staff and resources help the casino and ourselves. That is where can we create a promotion that will help drive play of our games but also drive general marketing activities for the casino,” Nulph explained.

It is important to note that VGT protects one of the casino’s most valuable assets—its data. The company will utilize the data resources but must protect the sensitive asset. If an operator has multiple casino locations, it can analyze the aggregate data across the enterprise. However, competing casinos in the same market may also be VGT customers. In this case, each data is utilized separately, and at no time will information from one facility be used to benefit another. Nulph explained: “We do some pretty significant promotions with our larger clients that, in some cases, have become staples of their annual marketing plan. We put a firewall between our use of that data so that we may help design a program, but the data is never in our hands. It’s always in the hands of those companies that the casino has contracted with to manage and protect that data. While they are all our customers in the same market, they are all competitors of one another. We understand and respect that, and I don’t think the casinos would use us and allow us to work with them if we didn’t protect their insights into their marketing plans and business goals from the guy down the road. And so we are very attentive to the competitive considerations that go into working with multiple casinos that have different owners.”

VGT’s Staff is Your Staff
VGT has one promotions coordinator for every 15–20 casinos. A skilled internal staff manages the data warehouse and the staff that does the analytics. While VGT does develop its own software, it may outsource some analytical design development to further utilize skilled resources. Nulph noted that VGT has a close relationship with Raving Consulting and has worked with that company exclusively in the Class II market. Part of their relationship involves Raving keeping VGT up to date with marketing activities, including areas where VGT is not currently working. This furthers the BI plan that is available to customers. Operators are also sponsored for Raving conferences and training to further the knowledge base and CRM/BI capabilities.

Product Design CRM
A final benefit from VGT’s CRM/BI system and philosophy is that the close relationship with operators helps with product design. The data provides a good quantitative read very early in the launch cycle for the performance of the game. This directly relates to customer relations, as VGT understands different market reactions to different features. VGT may work with a casino to customize game content for that casino’s market and sometimes to bring in promotional opportunities that would be appropriate for launching a particular game in that market. With the ability to react to product issues and to advise the operators when there are opportunities to improve what they have on their floor, everyone wins.

Nulph concluded:  “There is, under the broad umbrella of product management, resources that we can bring to bear to help casinos in [the Class II] area. This is not one-size-fits-all. We work hard to provide the breadth of customized product management and marketing services to the customer.”

The Complete Package
VGT’s CRM/BI system is strikingly different from those found in Class III markets. But the differing market design, specifically its revenue-sharing lease model, allows VGT to provide extra capabilities and value. By removing the burden of retaining specialized, skilled analytics staff and technicians, the operator has much to gain. VGT’s staff members are much more specialized and skilled due to their wide exposure to the market and analytical experience. It is a system that enables VGT to offer great technological expertise in both customer relationship management and business intelligence.

Leave a Comment