Jumping the Curve
Guy Kawasaki (managing director of Garage Technology Ventures, an early-stage venture capital firm and a columnist for Entrepreneur Magazine and previously, he was an Apple Fellow at Apple Computer, Inc.) speaks of a concept called “jumping the curve.”
I was fortunate enough to listen to Guy speak at Preview Las Vegas in 2008. The long and short of it is that companies often fall victim to success and don’t invest in the next evolution of their industry. One example Guy uses is the business of keeping food cold. Originally people had to go up to high altitudes to get ice for storing food. Then factories began to produce ice and delivered it to customers. Finally we had the home refrigerator which could freeze ice, eliminating the need for delivery. No one company survived all three stages of this evolution. Prior businesses died out and a host of new businesses emerged at each stage of the evolution. The moral is that your business is relevant one day and can lose relevance if you don’t pay attention.
The Gaming Curve
As a long-time veteran of casino partnerships, experience tells me that the trend of adoption and the use of SMS will follow the same rates of adoption, success and failure that I’ve seen in 7 years in the casino entertainment industry for other new channels, especially email. Casino properties sell “entertainment,” nothing more. At least in Las Vegas, the value proposition is very broad with offerings from high-end spa to low-brow topless shows. This melting pot of time-eating fun is based on one thing.
I have had the privilege of working closely with some of the greatest minds in the gaming world. Jenny Holaday, a seasoned revenue management, marketing and branding whiz kid who is widely known for her role with Harrah’s Entertainment as Regional VP of Marketing in Atlantic City overseeing over $2B in revenue for 4 premiere properties, said the most interesting thing to really break down the fundamental problem in finding gamers. She said, “You can have two twins with identical habits, incomes, attitudes, etc. and one’s a gamer and one’s not and there’s nothing that will tell you who is who until they come into the casino and game.” With this in mind, we understand that gaming customers are identified over time through their gaming history and why the industry is so offer-based.
The Email Jump
Direct mail is the backbone of casino marketing and has been for over 30 years. Gamers are conditioned to receive offers in their mailbox. They crave the next exciting offer and will often complain when the offers they “earned” are not received. This conditioning of anticipating offers in the mailbox has not been an easy habit to break. The use of email marketing by casino marketers has only recently been widely used in this decade. The more progressive markets that have developed a “best practices” approach to email marketing like many Las Vegas resorts experience high rates of return, reduced expense over direct mail and shorter implementation periods for loyalty campaigns.
In working with the most progressive property on the Las Vegas Strip, I saw first hand the initial depression of open rates and click-thrus while increasing deliverability and database size. In 2006 this property began utilizing email for hotel and gaming offers dropping their direct mail expenses nearly 50% over 2 years allowing for the rapid development of a robust and effective email program. From 2006 to 2007 this property experienced a 6% drop in email open rates (from 50% to 44%), sending nearly 3MM emails in 2007, an increase of almost 16% over 2006. The number of email campaigns increase by 18% from 2006 to 2007 with 202 campaigns sent in 2007. The trend is higher deliverability (through an obvious attention to “best practices”,) more campaigns, more recipients, lower open rates and lower click-thru rates. This property adhered to compliance with the guidelines set by all the major ISP’s and maintained a very clean database.
It is safe to say that these rates have continued to drop as email boxes become more and more saturated with marketing messaging, spam filters block more mail, the target audience becomes desensitized to messaging and other environmental factors. Email response rates will normalize over time giving casino marketers a reliability to deliver messages and offers to customers, but the early days of abnormally high ROI will be a forgotten side-effect of ideal market conditions for those that started right and started early with their email marketing program. For those that began late, that high rate of return will never be realized. As bad as this sounds, email marketing should be utilized by each and every casino in every gaming market throughout the world as the most cost-effective direct marketing method available.
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