Do Macau and Singapore’s loyalty programs deliver bang for their buck?

Loyalty programs have been in vogue in the casino industry for around thirty-five years, but are operators in Macau and Singapore getting the most from their offerings?

Taking a leaf from grocery stores’ discount cards and the frequent flyer programs of airlines, the basic model of a “slot club” was implemented in 1980s. Then in 1997, Harrah’s (now Caesars) rolled out a loyalty card program called Total Rewards, which tracks customers' gaming activity and gives them rewards to encourage them to spend more money at the slots and tables.

In short order, Total Rewards became the gold standard of loyalty programs, with casino companies all over the world wanting to emulate and, if possible, replicate the revenue growth and increased profitability attributable to Harrah’s Total Rewards. Even today, though Caesars is going through bankruptcy, its Total Rewards program is valued at over $1 billion.

The experience of other casino companies with regard to player's clubs has not been so fecund. Despite the passage of time and the ample opportunities to “get it right” most casino companies struggle to truly comprehend the logic and mechanics of loyalty programs (or player's clubs). As one executive candidly admitted, “You know, I have this customer reward program. It is kind of expensive but I feel like I have to have a program because everyone else has one. Honestly, I don’t know what if anything it actually does for me.”

Every major casino operator in Macau and Singapore has a player’s club. All programs are based on about the same point system ($10,000 in bets = 1 point) and similar return to players, and all are based on a tiered system, e.g. Gold, Ruby, Diamond and Apex at Sands China, or Classic, Silver, Gold, Maxims and Maxims Platinum at Genting Rewards Club in Singapore. Every operator provides players with some incentives, such as free parking or a free lunch, if the player accumulates more than three points in the course of a day, with no points deducted. Points and tiers also allow players to participate in various baccarat tournaments.

On the face of it, these player’s club programs should engender customer loyalty. For sure, operators wouldn’t be spending millions of dollars on the loyalty programs if the end result is not customer loyalty. But has this assumption been well and truly validated? Moreover, does loyalty always result in increased profitability?

We are often told that the best customers are loyal ones. Conventional folklore has it that they cost less to serve, they’re usually willing to pay (play?) more than other customers, and they often act as word-of-mouth marketers for your casino. Furthermore, every time a customer uses a card while playing slots or gambling at a table, the casino can gather important data about the player and his, or her, preferences. “Purchasing” such customer data has been a driving force behind the marketing strategies of many casinos in Asia. Skimpily clad young girls are often used to intercept hordes of crowds at busy way fares within the Macau casino properties, offering each taker MOP$100 ($12.5) simply to sign up for a loyalty card.

Player’s club hosts parade up and down the casino floor looking for takers to sign up for the program so that they can achieve their sign-up quota. The Senior Vice President in charge of player loyalty wants to crow about the increase in weekly sign-ups in executive meetings, player’s club hosts want to fulfill the sign-up quotas assigned to them, and the recruits are happy to have received a meal and possibly a gift in return for sign-up. And, despite the best intentions, should the loyalty executive find the efforts of the team amounting to less than the targeted result, there are always other sources of reinforcements such as slot attendants and pit supervisors available for signing up players off the floor. Such mass recruitment efforts pay no regard to the caliber of the player being welcomed into the program.

Generally speaking, because of the aggressive drive toward member sign-up, a lot of customers who sign up for the incentives do not exhibit any intent to be serious spenders inside the casino. Not surprisingly, every casino’s loyalty database reveals that only a small percentage of all player’s club members are “active,” in the sense of having gambled at the membership issuer’s property within the past year. Sure, casinos may have all the demographic data on all members, but these data are of little value if they are not actionable. This is where the loyalty programs of most casino companies in Macau and Singapore falter. Data on club membership are generally worthless when it comes to designing appropriate strategies for branding, designing value propositions, property positioning, market segmentation, targeting, and customer relationship management.

If casino companies want to get better returns from their loyalty programs, they need to divorce themselves from the herd mentality and undertake an honest appraisal of the costs and benefits associated with these programs. Such analysis should be based on answers to questions such as:

• What are my objectives in setting up and continuing with the loyalty program?
  

• What proportion of my player’s club members are active?
  

• How much does the loyalty program cost my company (including salaries, overheads, and administrative costs)?
  

• How do I use the player data that have been generated from my loyalty program? What is the monetary value of these data?
  

• What is the “lift” in patron’s share-of-wallet as a result of membership in the loyalty program? Is the share-of-wallet trending up or down since the patron signed up for membership?
  

• Do I periodically conduct an analysis of performance of my loyalty group vis-à-vis an appropriate group of matched non-members to assess the incremental action generated from the program?
  

• Do the rewards I provide my members have enough value for the members to engender their loyalty?
  

• Is my loyalty program purely about “earn and burn,” or do I use the insights generated from my data to provide meaningful and differentiated experiences to my valued customers?                                                                                                                                                                                                                                                        
  

Sudhir Kale, Ph.D., is an AGB Advisor, and Founder & CEO of GamePlan Consultants, a boutique consultancy that advises casino companies on marketing and customer service initiatives. He has published over 100 articles on gambling and responsible gambling. Sudhir has consulted for casino companies and policy makers on five continents. He can be reached at [email protected].