Macau industry observers, gaming analysts, and even casino operators are now admitting that the decade-old party has run out of steam, if not over. The “build it and they will come” maxim and its attendant hubris that has characterized the Macau gaming industry since 2003 are now causing deep concern to operators and investors alike. Both VIP and mass revenues are in decline for 22 months, and the much vaunted “stabilization” remains confined to a word in Glosbe, the English-Cantonese online dictionary. What we witness with every quarterly earnings report are platitudes and vacuous statements from board chairmen about how well their company performed amid “challenging circumstances.”
Sure, every industry and every region experiences ups and downs, and Macau’s casino industry is no exception. During trying times, company management seeks to put in place certain measures that will minimize downturn damage to staff and shareholders. However, when it comes to Macau, most measures are dictated not by long-term sustenance but by austerity applied to marketing and customer service.
These cost-cutting measures directly and adversely impact the customer experience and customer loyalty, at a time when loyal customers are gold, rare and valuable. Surveys suggest that most tourists coming to Macau these days tend to be repeat visitors. These tourists are mostly day-trippers, with limited time on their hands and limited bank notes in their wallets. The casino they first visit will most likely claim around two-thirds of their gaming budget.
Given these commonly known realities, one would surmise that customer retention and customer experience would top the strategy agenda of Macau’s casino operators. Yet these are the precise two areas where you see trimming of costs. Furthermore, companies typically engage in advertising to increase sales or revenues. What you see among Macau’s casino operators is a huge cut back in advertising at a time when revenues are sorely needed.
Window dressing of financial reports and cost cutting measures that cut through to the roots of customer loyalty are measures guaranteed to keep Macau’s casinos in turmoil for a long, long time. Savvy operators need to realize that beneath every challenge lurks huge opportunities, and capitalizing on these opportunities can create true long-term competitive advantages.
I am talking about investing in the customer experience, which has always been a scarce commodity in Macau casinos, particularly with regard to the mass market. The mass market is almost three times as profitable as the VIP market, and needs to be nurtured and cultivated as such.
Companies desirous of creating a long-term consumer franchise in the mass market should put customer experience at the top of their priorities. To convert this priority into action, the mass market needs to be meaningfully segmented based on customer needs and preferences, not their ADT values. Having segmented the market, the customer journey of each segment should be mapped, charting every touchpoint from the first contact with the casino company all the way through to the customer from that segment exiting the property. Such diagnosis will bring to the fore “fail points,” touch points where the company performs below standard norms of customer service. Humans are affected by negative feelings a lot more than they are by positive feelings. Fixing the fail points encountered by the customers along their journey will reduce customers’ frustrations, cut down on time wasted waiting for casino shuttles or standing in line for hotel check in, and deliver non-fatigued, optimistic minded customers to the gaming floor. What’s more, the property with an early mover advantage with regard to superior customer experience will most likely be the first casino on the list of visits for customers. Not only will the casino have a crack at getting most of the customer’s gambling budget, a smooth and trauma-less customer journey will also ensure that the customer remains loyal to the property.
Unlike their counterparts in the VIP segment, mass market customers are pretty modest with regard to their expectations about service quality and experience. They want to be acknowledged as people, not walking wallets. They would like to interact with employees who are friendly. They want to walk into a place where the employees are perceived as serving the customer, not serving a life sentence. And, if their gaming experience encompasses snippets of a hero’s journey, customers will not only be loyal to your property, they will be your most ardent brand ambassadors.
Creating an experience that will be appreciated by a particular segment of customers involve three steps: (1) Understanding customer expectations through voice of the customer initiatives; (2) Mapping the existing customer journey to discover fail points and to identify touch points where customer expectations uncovered in step one could be catered for; and (3) Optimizing the customer experience by aligning culture, employee engagement, and cost-benefit analysis of touchpoint enhancement.
If business environment in Macau is tough today, it is only going to get tougher. Earlier this month, Morgan Stanley warned investors, “Stable demand is facing significant capacity addition (6,000 rooms and 750 new tables) between the third quarter of 2016 and the first quarter of 2017. This could result in either cannibalization or rise in competition – thus, margin erosion.”
Companies desirous of avoiding ruinous price competition have but one option, to ramp up the experience offered to their customers. In so doing, they will have plenty of positive company. According to a recent Gartner study, 89 percent of the companies surveyed will be competing on the basis of customer experience in 2016, nearly a three-fold increase from five years ago.
Sudhir H. Kalé, Ph.D. is the Founder and CEO of GamePlan Consultants, a company that specializes in customer experience, customer loyalty, and CRM. He is the creator of CÉDIO (Customer Experience Diagnosis, Ideation, and Optimization), a proprietary methodology for delivering a compelling customer experience. Sudhir has written over a hundred papers on the marketing and management of casinos, and has consulted for casinos and clubs across five continents. You can write to him at [email protected].
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