Despite the growth of the gaming industry in the past 10 years and the recent challenges of the recession, most gaming research has focused on the problems of excessive play and has neglected fundamental business aspects of casinos and casino hotels such as brand choice, loyalty and price sensitivity.
As a result, Market Metrix has developed a new customer segmentation model for the gaming industry based on 280,000 survey responses obtained in 2008 and 2009. The purpose of this model is to identify critical behaviors and trends of casino customers that will help casino management better understand and connect with their target customers. The new segmentation model splits the industry into distinct customer groups based on geo-demographic, behavioral and attitudinal dimensions. The results offer insight into brand preferences, the impact of loyalty programs, the role of social media, price sensitivity, key emotional drivers of loyalty, and demographic profiles of the casino customer.
Here is a brief description of each segment (numbers in parentheses represent the percentage represented by each group):
HIGH FREQUENCY / more than 15 nights per year
Mr. Deep Pockets. (4.1%) This mostly male group represents high spenders with high incomes who travel frequently on business and pleasure to a variety of casino hotels. They don’t join loyalty clubs but are fairly satisfied with their overall experience. They are pessimistic about their chances of winning and feel less pampered and important than other segments perhaps contributing to their lack of loyalty. Typical properties include: Bellagio, Encore, Venetian, Wynn
Elder Elites. (11.2%) This is the oldest group of customers who also have elite member status in the casino hotel’s loyalty club program. They are predominantly male with high incomes, travel more often than non-elite members, are generally satisfied, but not optimistic about winning. Their brand loyalty is supported more by a friendly casino staff rather than the excitement and entertainment options of the casino. Typical properties include: Harrah's, Caesar's Palace, Trump, Bally's
MEDIUM FREQUENCY / 10-15 nights per year
Unmoved Members. (33.0%) This large group of customers are regular loyalty members but have the lowest satisfaction among all members. Unmoved Members feel uninspired and would appreciate more pampering. They give lackluster ratings to staff and low scores for casino ambiance. Unmoved Members take shorter trips and have an average likeliness to recommend and return. Typical properties include: Tropicana, Orleans, Harrah's
True Blue. (11.9%) True Blues are regular loyalty members who feel especially welcome at their brand of choice. They score highest in satisfaction among members and are very likely to recommend and return. They appreciate special promotions and casino ambiance. Typical properties include: Foxwoods, Mohegan Sun, Paris Las Vegas
LOW FREQUENCY / less than 10 nights per year
Happy-go-lucky. (9.3%) This group includes happy non-members who are very satisfied with service they receive and optimistic about their gambling odds. They are young with average incomes but are likely to recommend and return (with multiple trips) and would pay a premium to stay in their brand of choice. These younger folks are well treated, feeling especially pampered, respected and important. Typical properties include: Hard Rock, New York-New York
Ice Queens. (9.4%) This group includes hard-to-please non-members who are not satisfied with service and very pessimistic about their chances of winning. They don’t feel respected or welcome and are unsure about returning or recommending. Ice Queens are young, predominantly female, have average incomes and often rely on reviews for selection. Typical properties include: Circus Circus, Excalibur, Mandalay Bay, Imperial Palace
Accidental Travelers. (21.0%) This group visits casinos the least. They are non-members, fairly optimistic about winning and generally satisfied with their overall experience. Accidental Travelers don’t feel the casino excitement and are not inspired by the whole experience. These persons are young with average income and say they may return but seldom seem to do so. Typical properties include: Luxor, Excalibur, MGM Grand, Treasure Island, Palms
Comparing each segment’s “annual room nights” and “willingness to recommend” we identified which groups are more desirable for casinos. These two measures effectively separate the segments, revealing more desirable groups (Elder Elites, True Blue, Mr. Deep Pockets, Unmoved Members and Happy-Go-Lucky) and less desirable groups of customers (Ice Queens and Accidental Traveler).
Casino segments are displayed here in terms of their value (number of nights per year spent in casinos and their level of advocacy (willingness to recommend to others). The numbers in parentheses represent the absolute size of each segment.
Of particular interest was the Unmoved Members, the largest segment with 33% of the market. These customers are ambivalent about their loyalty despite their membership in a hotel’s loyalty program. This represents both a problem and an opportunity. Unmoved Members represent a big opportunity for brands to ramp up their loyalty program to get these customers more engaged, and also to recruit customers from competitors. One area that appears at least partly responsible for the lackadaisical attitude of Unmoved Members is the casino experience, with low scores reported across several dimensions (e.g., friendliness of casino staff).
This segmentation research indicates a variety of challenges for gaming operators. In general, they need to systematically evolve their understanding of current and potential customers. This insight will allow them to better compete in a fast-changing, increasingly hostile business environment, characterized by growth in entertainment alternatives, declining population of potential customers, and higher cost of capital.
Jonathan Barsky is a principle with Market Metrix LLC (www.MarketMetrix.com), a firm that provides multi-channel survey, analysis and service improvement tools and benchmarking data for the hospitality industry. For more information, call (800) 239-7515.
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