How To Increase Casino Revenue
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Gambling is good business, or at least a profitable one. According to the American Gaming Association, in 2012 the 464 commercial casinos in the U.S. served 76.1 million patrons and grossed $37.34 billion.
Each year gaming revenues in the U.S. yield more profits than the theatrical movie industry ($10.9 billion) and the recorded music industry ($7 billion) combined. Even the $22.5 billion combined revenue of the four major U.S. sports leagues is dwarfed by earnings from the commercial casinos industry.
Gambling is such good business that despite reported negative impacts — such as increased poverty and unemployment, higher crime rates, and decreased property value in nearby neighborhoods — the state of Illinois early this year passed a law to allow slot machines in all establishments that sell alcohol.
Gambling is not just common, it's also accepted. Despite the fact that for an estimated 4 percent of the population gambling represents a problematic and even pathological addiction, 85 percent of Americans feel that gambling is either perfectly acceptable for themselves or if not themselves for others in a country where more than 20 states now allow some form of commercial casino.
It's not too hard to see why casino lobbyists believe casinos make a positive contribution to the communities in which they operate.
It's far less easy to understand why so many Americans enjoy gambling even though it tends to result in the loss of money.
You lose, the casino wins
As a general rule, we tend to repeat behavior that produces desirable results and avoid behaviors that result in loss. We repeat jokes that people laughed at, choose jobs that we enjoy and that pay the most money, and avoid behaviors that produce fines. Following this logic, one would expect a gambler to only play as long as they are winning and then cut their losses when they begin to lose.
Yet gambling appears to operate differently; players play faster after losses and bet persistently regardless of the percentage of payback, magnitude of return, or the lack of winning entirely. So what encourages gambling behavior if losing occurs more frequently, and payouts do not exceed buy-ins?
One explanation is that gamblers poorly judge the actual probability of winning, even as their pile of tokens and coins dwindles before them.
Some examples of this phenomenon can easily be seen in the language of gamblers. 'My luck is going to turn,' 'A win is coming,' or 'I am on a hot streak,' are all statements that speak to an over-confidence in one's ability to predict functionally random events.
Gamblers will often say these things after an unusual series of outcomes, for example, ten straight losses on red at roulette. The gambler may then proceed to bet more on red, in the false hope that the next spin is more likely to come up red due to the overall probability of the game (50 percent chance of red).
This flawed logic is called 'The Gambler's Fallacy.' It stems from a misunderstanding of how probabilities are assessed; in fact the outcome of the previous spin of the roulette wheel has no influence on the outcome of the next spin. The probability of red remains stubbornly fixed at 50 percent.
Missed it by that much
Another example of how gamblers misjudge losing outcomes can be seen when individuals respond to losses that are similar in appearance to a win. Receiving two out of three symbols necessary to win on a slot machine is a loss but players often respond to this 'near miss' with excitement, increased betting and more persistent play.
Winning and almost winning are such similar events to many people that they respond in the same way to both. People pause, for example, for longer after a win than a loss. This is known as a 'post-reinforcement pause.' People often pause for longer after a near-miss.
It's no accident near misses are pretty common on slot machines.Mark/Flickr, CC BY-SA
Winning and almost winning are so alike in gamblers' brains that research on the dopamine-transmitting pathways of anticipation and reward show remarkably similar activation patterns for a near-miss and a win.
Near-miss effects are not limited to outcomes that look similar to win. Outcomes that are closer to a win in a more abstract sense also cause a similar response.
For instance, the near-miss effect has been demonstrated in games where 'nearly winning' might relate to scoring a number that is close to a winning number, such as in blackjack.
How To Increase Casino Revenue
Near-miss outcomes are not the only form of almost winning that contributes to the behavioral confusion faced by gamblers. Modern slot machines also present a myriad of features that are designed to confuse outcomes.
Slot confusion
One feature present in almost every modern slot machine is the partial win or 'loss disguised as a win.'
Since slot machines have gone from the traditional 3-reel 1-line slot machine to the modern 5-reel video slot, often with 25 or more winning lines, near-miss outcomes have become almost unidentifiable from other losing outcomes.
By encouraging individuals to play on more than one line, casinos have created a scenario where players are awarded a win on almost every spin.
Despite the increased frequency of winning, the proportion of money returned is often far less than the entire bet, such as winning 10 cents on a 50 cent bet. This 80 percent loss is accompanied by the same sounds on the machine as a real win and occupies the same area of the screen that wins are reported in.
Since noticing near-misses on modern slot machines is difficult, game makers have incorporated other game features such as free-spin symbols, mini-games, and progressive awards, which create new near miss situations while often not guaranteeing any increased value of a win themselves.
For example, special symbols might be placed on the reels that provide 10 free spins whenever three appear anywhere within the game screen. These symbols will often make a special sound, such as a loud thud when they land; and if two symbols land, many games will begin to play fast tempo music, display flashing lights around the remaining reels, and accelerate the rate of spin to enhance the saliency of the event.
When you win these sorts of outcomes you feel as though you have won a jackpot; after all, 10 free spins is 10 times the chances to win big money right? The reality is that those 10 free spins do not change the already small probability of winning on any given spin and are still likely to result in a loss of money. For many games, features such as this have entirely replaced standard jackpots.
These features share one important characteristic: they allow the casinos the ability to provide more outcomes that feel like a win while not increasing the actual payout. The effect of these features is so significant that in 1989 the Nevada Gaming Commission banned algorithms that purposefully increased the prevalence of near-miss outcomes. Of course, this only applied to the intentional increasing of near misses when a loss is already determined, i.e. artificially producing a near miss instead of what the reels would have normally landed on.
Unfortunately, these laws do not preclude the intentional design of reel layouts that, without additional manipulation, produce frequent near misses and losses disguised as wins. These laws also do not apply to the newer game features which either highlight the near miss, such as accelerating reels, or create entirely new topographies of outcomes, as is the case with free-spins or mini-games.
While the question of how to best manage artificial manipulations of near misses may be a topic of future regulatory discussion, the decision to play games with these illusions will ultimately fall upon the end user.
As long as you are willing to expose yourself to the game in the first place, the casino need only sit back and wait. And with increasing availability of casinos across the U.S., they won't need to wait long.
The authors do not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. They also have no relevant affiliations.
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“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” -Peter Drucker
The best and fastest way to increase your revenue is to focus on your customers. They already trust you and buy from you. So what you want to do is look for more ways to serve them! This will enable you to increase the average transaction size and/or increase the frequency of the purchases.
To be successful at getting your current customers to spend more with your company and to spend more often, you must increase the “perceived value” of what you offer. You must educate your customers so that they desire your products/services even more.
Here are 10 ways to increase the average purchase size and frequency of your sales, and in turn, increase your revenue.
Raise Your Prices
Educate your buyers on the superior advantages, benefits and results you provide them and explain “the reasons why” you need to raise prices – increasing manufacturing costs, customer-service enhancements, better guarantees, better ingredients, increased regulations, etc.
Up-Sell
If your client/customer can achieve better results and more satisfaction, educate them on buying a higher-end product/service. Do a better job of assessing their needs and matching to products/services that will give them their optimal buying experience and satisfaction. You will increase your profits and their fulfillment. For example, auto dealers are masters at getting customers to buy car models with the higher-end feature packages (i.e. leather interior, better stereos, etc.)
Cross-Sell
If you have multiple product lines or service lines, communicate and educate your customers/clients on the full spectrum of your solutions — services, products, and expertise. Continually ascertain their challenges/problems and match up with the other solutions you offer. For example, CPA firms cross-sell their audit clients on tax and consulting services. Banks cross-sell their checking customers on investments, mortgages, lines of credit, credit cards, etc.
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Bundle Better
Consider packaging complementary products/services together to increase your revenue. For example, if a customer is going to buy a gas grill, offer them a complete package of cooking utensils, mesquite wood chips, barbecue book, grill cover, and apron. By saving the customer time and helping them to buy a more “complete solution”, you can probably charge a premium for this “barbecue in the box” offering. At the very least, they will have bought more than they otherwise would have – you made buying easy for them.
Offer Volume or Frequent Buyer Discounts
If you can get your customers to buy more and buy more frequently, reward them with incentives, discounts, extra level of services, etc. Since you have maximized your cash flow, be willing to reward them with a few extra perks. For example, bookstores and airlines have “frequent buyer” programs. Coffee shops and barber shops give you a free service/product when you buy a certain number of times.
Offer Complementary Products or Services
Ask the question, “Who else sells something that goes before, after, or along with my customer’s purchase?” For example, if you sell computer products, consider selling “technical needs analysis” services on the front-end or installation and computer training services on the back-end. Be sure it makes economic sense to add such services to your business and that it does not detract from what you already offer.
Communicate Often
Communicate with your customers often and give them buying ideas/solutions via mail, phone, email, newsletters, in-store displays, etc. For example, if you are a hardware store, and as early fall approaches, use direct mail and in-store displays to communicate to your customers the need to fill cracks and seal their driveways. Sell them on the benefits of taking such action. Package all the supplies together (sealant, crack filler, broom, gloves, removal cleaner, “how to” booklet, etc.) and offer a single-solution price.
Have a Special Event
Conduct special events to educate your existing customers on your additional service/product offerings. Do this in an informative manner and in a way that has “their best interests” at heart. Hold a “sneak preview” for your new products, services, models, etc. Hold exclusive events for your best customers. For example, an upscale luxury auto dealer might hold a wine and cheese party with a musical quartet to unveil the newest car models.
Promote Others
Endorse other people’s products or services to your client list and get a cut of the action. For example, if you are an upscale jewelry store, consider offering elaborate vacation packages to your customers via an upscale travel agency. Mail offers to your customer database, endorse the travel agency and their offering, and receive a set percentage of any revenues generated. Instead of adding computer training to your computer store, form an alliance with a reputable training company and negotiate for a “cut of the action” for introducing/endorsing them to your customers via email, direct mail, telemarketing, etc. To maintain the goodwill of your customers, make sure you do your “due diligence” and introduce only high-trust, high-integrity, high-value organizations to your customer base.
How To Increase Casino Revenues
Say “No” to Bad Customers
Perhaps this sounds strange, but one of the basic methods to increase your revenues is Learning to Say “No” to bad opportunities, bad prospects, and even bad customers. This advice is aimed at those who sell primarily to businesses, not to walk-in, public customers. You need to devote more time and attention to your best opportunities and customers. You can’t optimize your business performance if you are constantly bombarded by unprofitable, ungrateful, disagreeable, ever-complaining, and energy-draining customers. So adopt a selectivity mindset!
As you can see from the above list, there are many ways to immediately increase your revenue. Pursuing some of these strategies is time well spent and the dividends can be huge!
Do you have any other tips on how you have increased your revenue? Sound off in the comments to share!