Can Obama’s braintrust really help a casino?

Today’s fascinating New York Times article focused on a young company, Analytics Media Group (A.M.G.), which is essentially a spin-off of Barack Obama’s analytics team during his 2012 bid for re-election. With the election over, the company, which was founded in December, is now selling its brainpower and marketing expertise to companies. And the Times article details one of its first major clients — Caesars Entertainment.

Caesars, led by former Harvard Business School professor Gary Loveman, flaunts its expertise in technology and analytics any chance it gets. In magazine articles, books, blogs and in person, it loves to brag that it’s the leader in the gaming industry when it comes to brainpower (it should be noted that all this so-called expertise contributes to a company which has lost $3 billion total in its last 3 fiscal years, so the effectiveness of Caesars’ strategies to increase profits is far from proven). So the chance to work alongside the analytic geniuses behind the Obama re-election must have been exceptionally attractive.

My question is how well-suited A.M.G. is for this job, whether their area of expertise translates well to the needs of a company like Caesars. Off the top of my head, I can think of numerous significant distinctions between an election and a company:

1) Caesars is an ongoing concern, that needs to attract players day after day, month after month, year after year. Caesars needs to stimulate repeatable demand in order to be successful — there is no end date. An election is a single event on a single day. The campaign team only needs voters to take an action once, all on a single day, which allows for greatly coordinated action and communication, and requires no ongoing commitment from voters (i.e. customers).

2) To a campaign, every person is equal, worth exactly the same amount — one vote. If the campaign can convince ten people to vote for Obama, that’s 10 votes. For Caesars, every person has a different dollar value, based on how much they gamble (less how much they consume in offers, comped food, free hotel rooms, etc). Caesars could successfully market to 10 new players and later find out they all have very low spend, meanwhile it may have ignored one individual whose spending is greater than all 10 combined.

3) The campaign can appeal to voters in intangible, but admirable, ways — civic duty, patriotism, controlling one’s future, etc. There is nothing like that for Caesars to use to generate action.

4) As a publicly-traded company, it’s not enough for Caesars to generate revenue or show a profit (although, having lost money for the last 3 years, just showing any profit would be welcomed). It needs to constantly grow, i.e. beat last year’s numbers. Thus, the bar gets higher every year, and all the gains in one year need to be improved upon in the next. Growth didn’t matter to the Obama campaign — in 2008, he earned 52.9% of the popular vote, but his burden was not to beat that in 2012, just get over 50% (and he only got 50.95%). In electoral votes, which is what really matters, Obama earned 365 in 2008, then just 332 in 2012. This performance would not be acceptable for a public company, but works just fine for a winner-takes-all campaign.

5) Because electoral votes, and not the popular vote, is what really determines the winner, and because electoral votes are awarded by state, the campaign was able to count on winning certain states without having to do much work (and knew it would lose some states no matter how hard it fought). This enabled the campaign to ignore a huge majority of the country (California, Texas, New York, etc) and concentrate all their efforts on just a few swing states that could potentially go for either Obama or Romney. Caesars doesn’t have that luxury, it can’t just take entire states and write them off. Therefore, its resources will be spread much thinner (including internationally).

6) The Obama campaign could count on tons of free marketing assistance from neighborhood leaders and organizers. People who would knock on doors, plant signs, and make phone calls on behalf of the president without compensation. Pretty sure that Caesars won’t get the same kind of volunteer support.

7) Casinos rely on their player database for nearly all targeted marketing, which leads to a bit of a Catch-22 — players won’t visit Caesars until they receive a marketing offer, but they won’t receive a marketing offer until they visit a Caesars casino. Marketing to unknowns is possible, but it’s expensive — purchasing customer lists from credit card companies, hotel chains or airlines, sending hosts out on recruiting missions, lots of mass media. This limits the company’s ability to generate new customers. Meanwhile the campaign had access to voter rolls, census data and other public information in order to find “un-engaged” voters and recruit them to the Obama side.

8) The Obama campaign had one opponent to beat, Mitt Romney. Caesars has tons of competition to which a loyal customer can defect. In fact, it’s likely that the majority of Caesars customers already have a relationship with one or more competing casinos, so they are likely receiving marketing offers from companies besides Caesars. Further, the competitive landscape is far different across various geographic areas. Caesars is the market leader in some jurisdictions, and it trails in others. The company can’t be laser-focused on a single competitive threat like the Obama campaign could.

I’m sure there are other major differences — these are the ones that quickly come to mind. These are certainly plenty to wonder whether the A.M.G. team can translate its campaign experience effectively into a commercial marketing tool. The article doesn’t state whether A.M.G. actually landed the gig with Caesars, nor does A.M.G.’s web site provide a list of clients.

Despite the concerns listed, there are a few ideas from the campiagn that could improve the effectiveness of a casino’s marketing strategy. Maybe A.M.G. covered these in their discussions with Caesars. My primary takeaways would include:

1) Seek out the customers with the most upside potential and market to these players in a disproportionate manner. Although Caesars can’t completely ignore customers as in Obama’s “swing state” example, the company can mine its database to find players with high upside and focus a large percentage of its effort on these individuals. This doesn’t simply mean more offers and more costs — it could mean assigning hosts to players who might not currently play enough to receive personal attention, make offers more flexible, perhaps sharing information with these players like which slot machines have the lowest hold percentage, etc. Earning loyalty early can have a huge payoff in the long-term.

2) Innovate on the measures used to evaluate players. Nearly every casino segments customers by their average gaming spend, or a derivation (average daily theo, average daily worth, average trip theo, etc). The fallacy here is using a universal measure across all players. So if a company decides to look backwards for 6 months, it generally does that for everyone — whether the customer has visited once in that 6 month period, or 60 times. Not only is the relevancy of the earlier months vastly different between these players, but computing an average ignores directional trends, doesn’t differentiate on recency, hides max and min values, lacks statistical significance with too few samples, etc etc. The Obama campaign switched from traditional Nielsen television ratings to better data from a new company called Rentrak. Similarly, perhaps it’s time for casinos to move beyond simple averages to more sophisticated statistical analysis.

3) Consolidate the marketing calendar into fewer, bigger events. Many casinos feel pressure to “drive the day,” every day — therefore there aren’t any empty, non-promotional days left on their calendars. They do this despite the fact that most players also receive individually-targeted offers, so they would never be completely without incentives to visit, even on a “blank” day. The problems with this strategy are that a) expanding the marketing calendar doesn’t necessarily expand the customers’ bankroll… yes, you may be stealing share from a competitor, but you’ve also given loyal players a reason to split their spending over multiple days to take advantage of multiple offers (and higher costs to you) and b) the individual days’ promotions will be less special… splitting a marketing budget over 30 days means smaller promotions than splitting it over, say 12 or 20 days. As mentioned in #1 above, coordinating efforts to maximize the impact of a single event will likely prove more effective than spreading out resources. A single event isn’t realistic for a casino, but it can reduce the number and make them more impactful.

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