Taking China out of the marketing loop

The last five years have seen a tumultuous business environment for casino operators in Australasia. Barely five years ago, CFOs of two of the largest concessionaires in Macau were predicting annual revenues in excess of US$100 billion by 2020. After all, they argued, less than five percent of the adults from China had been to Macau, and hence the “true” long-term potential was almost limitless.

Countries such as Singapore, the Philippines, and Australia also made similar bets. Billions of dollars have been spent on the building and upgrading of IR facilities for the well-heeled Chinese high-roller. The prodigal Chinese tourist became a handy carrot for casino companies to dangle in front of federal or state governments in their pursuit of a casino license.

For sure, casinos the world over have benefited from the rising economic prowess of China over the last decade. However, the “true” revenue potential of Mainland China may turn out to be little more than the mechanical rabbit at a greyhound track. The Chinese government has become quite serious about the outflow of money across its borders, and is clamping down on overseas gambling activities on the part of its citizens. Crown Resorts in Australia learnt first-hand what can happen to an operator who contravenes gambling-related regulations in China.

Besides coming down hard on Australian casino employees (and the South Koreans before them), the government has come up with a series of initiatives to stem the outflow of currency normally used for gambling overseas. Facial recognition features on ATMs in Macau, requiring collection of information about overseas transactions exceeding RMB 1,000 (US$147) that involve Mainland China issued bank cards, and the introduction of a currency declaration requirement for all travellers to and from Macau are some of the regulations that have recently been put in place or will be taking effect very soon.

The short- to medium-term economic outlook for China also looks relatively unpromising. A recent study by Harvard University’s Center for International Development has projected a dramatic fall in China’s economic growth to 4.41 percent in the coming years until 2025. Even Indonesia, Vietnam, Uganda, Kenya, and Mexico are expected to perform a lot better than the world’s second largest economy. Tighter regulations combined with a weaker economic performance forecast calls into question the attractiveness of Mainland China as a casino market.

Given an impending slowdown in Chinese tourism and VIP business, what should be the course of action for casino operators in Macau, Singapore, and Australia? Australia’s Star Entertainment Group chairman John O’Neill advises, “We have got, at all costs, to avoid complacency with China,” and goes on to add, “There are other important markets in Southeast Asia, including Thailand, Singapore and Indonesia.” Perhaps, more important than the choice of market will be the choice of marketing strategy that casino operators in Australasia pursue.

The new marketing strategy will be a departure from the “build it and they will come” paradigm to which Australasian casino operators have become so habituated. Macau, till 2014, was the beneficiary of huge pent-up demand from Mainland China and Hong Kong. Australia has, thus far, enjoyed a regional monopoly that will soon be ending, and Singapore operators are beneficiaries of a duopoly wherein the operators have profited from eager punters not just from China, but also from a healthy injection of revenue from the locals.

To be successful over the next decade casino operators will, first and foremost, have to desist from their long-standing practice of taking their customers for granted. This shift in paradigm will then allow for serious efforts directed toward meaningful market segmentation, increasing employee engagement, devising loyalty programs that go beyond the “earn and burn” routine, and branding based on customer experience that creates a positive emotional connection with targeted customer segments.

All of these activities will require a corporate culture that is truly committed to employee well-being and customer-centrism. Several years ago, John Kotter, the resident organizational culture guru at Harvard, stated that organizations that invest in a culture of personal and professional development, among other factors, can outperform the competition by 500 percent or more.

It is time that the casino industry realized the immense latent potential of harnessing the collective energy and efforts of its employees. As companies such as Zappos, Southwest Airlines, and the Container Store have repeatedly shown, investing in employees provides far greater returns than investing in a me-too customer loyalty program.

I am not implying that employee engagement should occur at the expense of customers. Indeed, a company that is customer-centric and employee oriented will deliver a better customer experience. It is the experience that a customer has with a casino brand that ultimately determines a company’s net promoter score (NPS), customer loyalty, and spend. Ultimately, customer experience is the Holy Grail that alone can ensure enduring brand loyalty.

As Peter Kriss from Medallia concludes, “It is time to stop the philosophical debate about whether investing in the experience of your customers is the right business decision. This isn’t a question of beliefs—it’s a question about the behaviour of your customers. Connect the right data, and not only is it possible to quantify the impact of the difference between delivering a great experience and delivering a poor one—but it will demonstrate to everyone in your organization just how big the impact can be.”

To summarise, the next decade for the casino industry will involve significant weaning from the Mainland Chinese customers. Casino companies that perform well under the new paradigm will be those that create and execute a seamless marketing strategy with a dual focus on internal marketing and on delivering a truly outstanding customer experience. It will be interesting to observe which companies can rise amid the ebbtide of Mainland Chinese customer.

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Sudhir Kalé, Ph.D., is the Founder of GamePlan Consultants, a boutique consulting organization that creates value for gaming businesses through alignment in culture, values, branding, targeting, and customer experience. He has published more than one hundred articles on the marketing and management of casinos. You can reach Sudhir at [email protected].