Knowledge as a Sustainable Competitive Advantage

In the casino industry, with the economy being what it is today and exploding supply increases in many jurisdictions, it is important for operators to work tirelessly to create sustainable competitive advantages. Lenders, owners, boards of directors and investors, rightfully, are demanding these efforts from their operators. The key is sustainability. It is not sustainable to buy visits with ever-increasing offers or promotions. Even advantages created by improved amenities or product offerings can eventually be matched or exceeded.

One sustainable advantage that operators can create is to have a better understanding of their data than the other operators in their competitive set. This understanding must be throughout the organization. It is not enough for planning and analysis or IT to crank out countless reports. This applies to all functional areas within your operation. Marketers, in particular, must have a thorough understanding of their database and the broader target market in order to effectively drive profits.

This understanding comes from a combination of data from the player tracking system as well as carefully crafted market research. One aspect of this competitive advantage that makes it sustainable is that it is unlikely to be recognized by the competition. And if they can’t recognize that you have the advantage of knowledge, they are less likely to be able to compete with it.

Information from the player tracking system, such as life cycle, geography, frequency, game preference and worth, must be analyzed at a very granular level in order to segment the database. Direct mail and special events require this granular analysis in order to ensure that the right offers are going to the right people at the right time. It is also important for the analysis to be fast and have an ease of use that enables everyone—from front-line staff to the CEO—to visualize the data and be a productive contributor to the marketing process.

Let’s face it. Some incentives appeal more to some guests than to others. The further away a guest lives from the casino, for example, the more attractive a comp room is. Conversely, a quality gift is more likely to appeal to a guest who lives near the property and can easily stop by to pick up that gift. Also, you wouldn’t deliver the same message to a new customer as you would to a lapsed customer who you haven’t seen in six months. Each component of the segmentation scheme has a purpose and must be utilized in order to increase the profit-driving ability of the campaign.

Carefully constructed data warehouses and OLAP cubes, combined with powerful business intelligence tools, are the only way to achieve the ease of use, high functionality and fast solutions that are needed to create sustainable competitive advantages with respect to having the best understanding of your database. Properly built business intelligence solutions have all of the complicated SQL statements and calculations built into them. This leaves the marketing team with a tool that provides the answers they need quickly and easily.

But having a complete understanding of the customer base is only half of the battle. It is critically important to have an equally thorough understanding of the attitudes of the target market within your company’s trade area as well as the customers already in your database. Two separate pieces of market research must be completed in order have the required level of knowledge about both. Market research must be executed on a continuous basis in order to measure the effectiveness of the organization’s strategies and tactics as well as the actions taken by its competitors.

Attitude awareness and utilization (AAU) studies are conducted against a broad market of people who live in the geographical trade area where the company operates. It measures how the market views the company’s properties as well as the competitors’. This research will give the company empirical evidence of how much the broad market knows about its property. This knowledge may be different than what the property thinks of itself. Many marketing mistakes are made because of the gap between what management thinks its strengths and weaknesses are and what the guests think they are.

The role of the marketer is to close this gap, and this is generally accomplished through various advertising and PR channels. For example, if you think you have great food at reasonable prices, you may buy an ad in a local newspaper highlighting that aspect of your property. Your guests may agree that your food is terrific, but they might think the price is too high. Creating an ad around an early bird special or discounts offered to player’s club members might enable you to take advantage of your quality and mitigate a perceived pricing issue without impacting the food margin by lowering prices.

Guest satisfaction studies are conducted against the property’s database. They attempt to discern much of the same information as an AAU study but against a much more defined target market. In fact, guest satisfaction studies are most effective when compiled with player tracking data. This enables all of the database segmentation elements to be melded with the guest satisfaction survey responses. The result of this type of market research is most effectively used by marketers when drafting direct mail messages. It can also be used by operators to capitalize on what they do well and work on the areas where the guests’ perceptions are less than desirable.

It isn’t always easy to justify spending scarce resources on knowledge. It is easy to assume that what we believe to be true is actually true. Sometimes the cost of that assumption is poorly crafted messages, off-point advertising and wasted reinvestment. When we consider the millions of dollars spent in media buys, direct mail and invitation printing, and all of our reinvestment vehicles, it seems obvious that an investment in quality business intelligence and sound market research is well worth the expense. Actionable business intelligence and quality market research will cost less than 0.5 percent of marketing costs. The increased productivity of the effected marketing plans will more than offset the small investment and, in fact, will yield substantial returns.

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