Sometimes it's just surgery

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Richard Swayze

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Sometimes It's Just Surgery


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With all deference to Bob Dylan, the economic times, they are a changing. What does today’s challenging economic climate mean to a casino operator? What needs to be done to not only survive, but thrive?

Some of the great managers of gaming properties have made their reputation as innovative marketers. Others as efficient property operators. Still others as surgeons, the skilled cost cutters who can obliterate marketing wastelands and turn sick properties into healthy one.

The most immediate target for cuts is marketing. The ax swings first at the three “P’s”: People, Programs, Promotions. These targets are easiest to spot on the efficiency radar simply because of inherent, need we even suggest, congenital waste, in the process of marketing a casino property. This is a powerful truth, hard for senior management to swallow, but there it is.

Marketing a casino property has always been the supreme act of an experienced juggler, balancing excess while making instinctive judgment calls, all too often with data of questionable value. The great ones, the aerialists of the casino business, can do their stuff and alight safely onto the foundation of strong operating margins. Why? Because they never cut before thinking of the customer.

Unfortunately, marketers are presented their slash and burn orders by individuals pressured by the damage inflicted on their business by competition, bankers or antsy investors. Orders of course are orders and what must be done must be done. But the later misfortune that follows in the wake of ill-advised cut backs comes back to haunt marketing.

Cost cutting is a one trick pony proposition. It all comes back to revenue generation eventually. What we are left with is an easily diagnosable disease - marketing cost overrun that is cured by cost cutting.

Here are a few thoughts on improving the situation:

Cut the small marginal programs first

Eliminate fringe media advertising, excessively elaborate special events invites, duplicative events too close on the calendar, all expiring billboard contracts not absolutely defensible in worse case scenarios. Cut all courtesy advertising in local or regional media maintaining what may well be valued relationships, but which can’t justify themselves. Review all postage costs for your direct mail. Determine if you are overspending on internal signage production, excessive changing of light-boxes etc. Walk the property; observe all activities that regularly consume printing and paper. After you take the easy hits, total up the score. You might have done much better than originally estimated. Better yet, with money saved you might actually be able to save a valuable program your property really needs.

Review every program from top to bottom

Review each program but never in the light of its current profitability. Many good programs aren’t mature enough to pay back yet, but worth saving because to reinstate them during better times would waste your investment to date and add to its eventual profit hurdle. The best candidates? Mature programs with diminishing returns. Often they can cover huge costs, but profitability is diluted by time and competition. Never cut programs with increasingly improving profit margins even if the cost of running them is increasing. So long as margins are strong and getting stronger, keep committing the dollars.

Build a basket of core programs

These are your bread and butter marketing engines, the ones which can be tweaked downward during periods of revenue slide – but only in financial consonance with the slide. Whether it’s the bus business, or a tight productive VIP program, your objective here should be to improve margins by perhaps giving up on revenues with the longer term criteria of maintaining relative profit contribution.

Don’t play around with the customer service package

If there is one sure way to dry up that flow of guest traffic, it’s by pulling the rug out on quality assuredness and service. The economy may be tight, but a customer is a customer and their expectations haven’t changed. They are coming to have a good time. Polite, friendly and courteous employees are still the hallmark by which most of your guests will judge you. If anything, pump a little gas into your employee appreciation programs. Reward those “service superstars” who day after day, shift after shift deliver exceptional service. Don’t cheat the guest experience by eliminating a hotel desk clerk or that extra valet parking runner during peak times. If you “go cheap” the customer will notice and they will take their visit and money elsewhere.

Step up the research

Step up the inclusiveness of your most valuable players by letting them know that their business and their opinions matter. Don’t skimp on the focus group research budget just to save a few bucks. Keep the “voice of the customer” alive. Hear them out. Seek their opinion. Remain their primary entertainment option no matter how tight their gaming budgets become. Your loyalty to them will be paid off via their long-term loyalty to you.

While knowing what to and what not to cut in order to get your operational budget in line with expenses and the reality of revenues, by taking and exercising the healthy small steps to prevent major “marketing surgery” remember to think first. Always keep the customer in mind and call me in the morning.

By Joe Witterschein