Slots management 101 Slots of strategy or not!

By Andy Cosgrove

In the first part of a two part series on slots strategy we’re going to explore what a good slots strategy shouldn’t look like because so many executives seem to miss the point and mistake goals for strategy without first framing the key opportunities that they wish to exploit.Many operators define strategy as goals and initiatives that symbolize progress without having a coherent approach and the necessary understanding of the resources required to actually achieve them and measure their success. The most basic definition of strategy is the application of strength against weakness. It’s the “how” of achieving your goals and the creation of new strengths that by exploring new sources of advantage and weakness that will keep you ahead of the competition, keep your slots fans raving about their experience, keepyour team motivated, and maybe even make your boss happy. The following are examples of bad strategy and a brief analysis of why they were doomed to fail.

Open the doors and they will come – This is a bit like betting on a horse to win a race that the horse isn’t scheduled to race in and still expecting them to win! Anyone who has even considered opening a casino and done even some minimal research knows how expensive it can be so it’s vital to have a strategy that sets out what success looks like, how success will be achieved and how momentum will be maintained in the long term. Simply building a casino and opening the doors won’t work without first answer the question of, “what is it we want to achieve, and how do we achieve it?” Not answering this question could result in a combination of any of the following: opening a casino without a market; opening a locals casino in a high end tourist location; opening a casino in an area where video poker is popular and not installing video poker…, and the list goes on!

Our new strategy is to focus only on high rollers – Anybody who knows who Vilfredo Pareto is knows that in the casino business 80% of your revenues come from just 20% of your customers and any good casino manager knows that they need to have a good strategy in place to attract the 20% of high roller’s in a way that adds real value to their customer experience and that exceeds the competitors ability to do the same. That’s all fine and well, and isn’t any great secret, but what about the other 80% of your customers? Is it really a good strategy to leave them out in the cold? I was once asked to do a root cause analysis to discover why revenue had fallen by 20% since the then new CEO had been hired. I didn’t surprise me to find out that the sudden fall in revenues was due to the new CEO’s strategy for the casino to focus on high rollers. I produced a timeline of new policies that had been implemented alongside the fall in revenues. The evidence couldn’t have been more convincing and proved that the 20% drop in revenues was due to the casino losing 80% of it’s customers. Upon presenting the results of the root cause analysis to the new CEO, he refused to believe that he was wrong. Let’s just say that he wasn’t CEO for long! In failing to take care of all his customers, the strategy crumbled before it even got off the ground.

We don’t need new slots to attract customers, all we need is a nice looking casino – As hard as it may be to believe, this actually happened! This so called strategy came direct from the owners and nobody from the casino management team questioned it’s logic! This strategy could work if you have a captive audience such as on a cruise ship, at an airport or inside a remote all-inclusive hotel, but if you’re in a mature, competitive locals market the opposite strategy might be a good idea as was the case with this particular operation. The biggest flaw in this strategy was that the casino management team had failed to question the logic behind the proposal mainly because they had failed to identify the market they were in and they failed to frame the correct strategy to capture customers in a mature, competitive locals market! Or were they afraid to disagree with the owners?

Give them free slots play and we’ll make money – This is a great strategy for attracting customers and it works every time because who doesn’t like free money? I personally have never met a casino slots player (or anybody else for that matter) who doesn’t love freeplay, especially the type that you can cash out and redeem at the cash desk. However, from the “we’ll make money” perspective, there isn’t anything further from the truth. I once worked with a company that were losing 50% of their net win through free play and still couldn’t understand why. The Casino was packed but very few people were actually gambling their own money. Once I presented my findings, the management team were afraid of cancelling the free play promotion and having to explain the mass exodus of customers that could potentially happened to their bosses! Free play is a great marketing tool and it can be used strategically with great success, but it should be used as an incentive and given away in small amounts. Nothing is for free, as the then casino management team soon found out after their contract was cancelled.

We need to make more money so let’s tighten up the slots – Any slots manager worth their title knows that tightening up slots is not always a good idea at the best of times but to do it in order to make more money is like not playing the lottery and expecting to win. It’s a well known fact that not all slots are created equal and that depending on factors such as location, denomination and stepper slots or video reels, the volume of play will vary and that the volume of play can and will determine how a slot machines payback percentage is set, but to just lower all percentages by 2% in the hope that the casino will make more money is nothing more than utopian wishfulthinking. The end of this failed strategy happened when the customer count diminished as fast as the revenues and once the pay back percentages were increased, it took a real good marketing strategy, a lot of time and a lot of money to attract the customers back. Hopefully some strategic lessons were learned!

Conclusion – As you can see, basing your slots strategy on your idea of suc- cess alone without first examining how to use your strengths and resources to exploit and gain advantage from an opportunity, your idea, vision, goal, and mission holds with it a higher risk and a greater chance of failure. I don’t know about you, but I’m of the opinion that failure isn’t a word that’s going to help you find your next job or create your next winning strategy.A good one however will help you every time. In the next article we’ll examine what a good strategy looks like and how it can help you achieve consistency and keep your customers coming back for more.

Andrew Cosgrove is a seasoned slot operations veteran and certified project manager with over 24 years of hands on experience in Latin America and the Caribbean. Andrew has worked on both the operator and supplier side of casino slots and is available to help you succeed and exceed customer expectations via contracted consultancy services. Andrew can be reached at andy.cosgrove@henimgwaycasinoconsulting.com or seehttps://hemingwaycasinoconsulting.com/