Vol. 5, No. 4, April 2008
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Tiers Without Tears
Why casinos should have an open-tier player’s club
Slot clubs were invented in Atlantic City, and the industry’s oldest player’s clubs are here. Many are being overhauled and re-tooled to current realties—the games on today’s casino floor, the modern customer base, innovations possible through new technology.
One of the most common possibilities discussed during a slot club overhaul is open-tiering: creating additional card levels, each based on a player’s action over a certain period of time. The reason for the word “open” is that all casinos already tier their benefits. The top players get the best goodies. Once-in-a-lifetime, low-potential visitors get almost nothing.
While no two casinos are alike—nor are two player’s clubs alike—most marketing executives confront similar issues when they decide to open-tier a club. Studying how others have handled these issues can help them avoid the most common pitfalls.
There are several reasons behind the increase in open-tiered player’s clubs. Most airline reward systems (a model for casino player’s clubs) are tiered, as are several high-profile casino industry leaders including Harrah’s Total Rewards. Technology has made the entire process easier.
But the most important reason is the tremendous growth of local-market properties, essentially all Atlantic City properties. Open-tiered clubs work extremely well in casinos that measure player worth based on a month, three months, six months or a year of action as opposed to those destination casinos that still use a theoretical per-trip measurement.
What is open-tier? Why do it?
Again, all casinos have tiered benefit systems. Comps are based on a percentage of theoretical win, and direct mail offers are split into three or four groups with the top tier getting a comped three-day weekend while the bottom tier receives a weekday discount.
So when a casino and its player’s club are creating a tier structure, they are not creating new benefits as much as they are telling the players what benefits exist and what they have to do to get them. This may be the perfect opportunity to create a special parking area for your platinum members, but most casinos already offer room and meal comps, line passes and special events.
A well-designed open-tier player’s club can accomplish several things. Most importantly, it tells your players what benefits they already have coming and what they can get by playing more at your casino. Most Atlantic City players, even the best customers, tend to play at more than one property. One goal of an open-tier club is to increase trips to your casino from four-out-of-10 to six-out-of-10.
An open-tier club can also improve the fairness of your overall comp distribution. There are many profitable customers on the floor who don’t use their fair share of benefits because they’re unaware that they earned them. If they took better advantage of what was coming to them, they would form a much closer bond to your property.
On the flip side, you have customers long past their prime playing days who get more than their share because they know how to work the system (i.e., your staff). An open-tier player’s club sends more benefits to the deserving than to the demanding.
Before you begin, do a formal study of your competition’s club—how they reward players at different levels, and the overall strengths and weaknesses of their reward system. If you’re able to address a problem in their reward setup (badly constructed tiers or a lack of coherent information given to members regarding their club), it could give you a competitive edge without a costly benefit war.
Setting Up Open Tiers
How many tiers should you have? Probably the fewer the better; there are successful player’s clubs with only two open tiers. For a first-time effort, three or four tiers are better, based on the following:
Top Tier—the top 1 percent of your database.
Second Tier—the next 9 percent of your database.
Third Tier—? If you have a third tier (with the base card being the fourth tier), consider aiming for the middle of your business—so everyone with this card is in the next 40 percent of your database.
Or do what Station Casinos does and make the third tier extremely easy to obtain ($500 coin-in every three months), thus putting the majority of your active customers into some sort of VIP status.
Run a list based on the percentages above (or similar scenarios) and see how many people fall into each category. Increase that number by 20 percent and decide what benefits would work (and what you can afford) based on those numbers. That will give you a good idea what to base your tier point minimums on.
It’s true there are still a few player’s clubs out there that don’t disclose exact point-earning information to their players. Please realize that a player’s enthusiasm in pursuing a goal is directly tied to his knowledge of what’s involved. At the very least, he should know how many points (or whatever) are needed to reach each tier—even if he doesn’t exactly know how to earn each point.
How long should the earning period and subsequent benefit period be? Much of it depends on your current technology and staff skills, but six-month periods are a good beginning. For example: players earning 12,000 points between January and June 2008 automatically become Diamond Members and maintain that status through December 2008 (or possibly June 2009). Three-month periods can be overwhelming to your staff and/or system, and one-year periods create too long a benefit period for declining players.
After they were up and running awhile, many open-tier player’s clubs including Station Casinos’ Boarding Pass, Harrah’s Total Rewards and My Borgata created an uppermost “stealth” tier for their absolute best players. Besides requiring at least $1 million in coin-in per year, the tiers are invitation-only, allowing management to completely review a player’s record including number of visits and overall profitability before handing out unlimited rooms, comps and entertainment.
Benefit Construction
The first area to research in setting up open-tier benefits is whatever the casino currently offers. If these benefits are in line money-wise and working marketing-wise, why not tell everyone about them? Yes, your benefits will (and should) increase because more people know about them, but the purpose of this entire effort is to increase awareness, to increase comp effectiveness, to increase player interest—and so increase profitable business.
Almost every benefit listed on an open-tier player’s club brochure falls into one of the four following categories:
Hard Cost Benefits that begin when a player attains the tier. These costly cookies include an additional cashback percentage or automatic point multipliers; cash bonuses or gifts given upon tier attainment; automatic meal discounts or point redemption discounts; guaranteed invitations to special tournaments and events; free self-parking and/or monthly car wash; and membership to an exclusive on-site club.
Although these are frequently the benefits that really sell a tier (especially to players who read the brochure very carefully), they can be very expensive, and require both marketing and financial analysis—especially for benefits that do not require continued play.
If your casino is like most (where the top 10 percent of players earn 90 percent of the points), think carefully before offering increased cashback. This goes double for casinos that also have low-hold (99 percent-100 percent optimal payback), $1-and-up video poker on the floor.
Priority Service—including line passes, VIP check-in, preferred restaurant and showroom seating, host assignment, VIP cashier/player’s club line, special parking area or priority valet parking. Managed correctly, these benefits benefit the casino as much as the upper-tier player (who has more time to play while not standing in line) at relatively low cost. And mixed properly with the list above it can create a very effective (and competitive) menu of benefits—with one caveat.
Make sure that your regular check-in, player’s club and cashier services are above-average. It’s bad enough to (overly) remind new customers that they are not among the elite. It’s even worse if they have been standing and waiting 10 minutes to cash in their voucher or pick up a player’s club card.
Benefits Based on Play (but not Tier)—this includes basic slot club cashback, comps and free play, special event invitations, room offers and discounts—almost anything sent through the mail. It’s important to realize that this type of benefit should not be tied to a tier but remain based on play over more recent periods of time—and in the case of direct mail offers, should not be completely spelled out.
When you guarantee too much direct mail cash or comped rooms or special events you are at best creating a player entitlement (completely destroying the surprise gift element of the benefit) and at worst inviting abuse. These benefits should be referenced in the club brochure but not overly emphasized as the reason to obtain a tier. Each one should have the appropriate “based on play” asterisk.
Puff! This includes benefits that no one understands (exclusive items in the casino’s annual gift catalog) or non-benefits benefits that no one understands (exclusive items in the casino’s annual gift catalog) or non-benefits (small discounts on the overpriced items sold in the gift shop, or free admission to the spa where anything else costs money). Too much puff can cheapen a good program and there should be no benefit listed that a first-month booth worker can’t explain.
Booth personnel should be trained to not only explain the benefits of the club and the benefits of each tier (yes, this is a tall order) but to convey the specialness of each tier. You are trying to sell a club and its tiers—not create a caste system.
