by Andrew Cardno
In the retail space, understanding the market basket is one of the core ways at looking at customer purchasing behavior. For example, nearly every time you purchase something online, you are prompted with suggested products that other customers also purchased. Other examples include online movie stores. Netflix, for example, ran the Netflix challenge to build market baskets. The opportunity in many resort properties is to undertake the same style of analysis in everything from baskets of gaming machines to association between different revenue streams.
Market basket analysis (MBA) is a technique used in retail to identify combinations of items frequently purchased together. In the context of your tribal casino gaming floor, this analysis could be used to identify which slot machines are frequently played together and to optimize the placement of those machines in order to maximize revenue. By identifying combinations of frequently played machines and optimizing their placement, your casino can improve the overall customer experience and increase players’ gaming spend; therefore, increasing your revenue.
Traditional retail stores spend a great deal of time studying the mix of products people buy and make critical product placement, merchandising, procurement, staffing, and marketing decisions strategically based on MBA. For example, consider the turkey promotions offered throughout U.S. grocery stores during the holiday month of November in which turkey can be sold at low-profit margins, or even at a loss; however, grocery retailers are able to more than make up for the loss in turkey sales by getting customers to fill their shopping carts with other traditional items placed in the same section or area such as cranberry sauce, wine, liquor, and desserts. The mix of products placed next to or nearby turkey in the grocery store illustrates a form of loss leader promotion in a traditional retail environment.
Applying MBA to Tribal Casino Gaming Floors
Despite that unlike a grocery store, a customer may choose the price in a casino, and the price has little effect on the quantity or quality of the product offered, applying traditional retail MBA techniques to the mix of your tribal casino’s product and service offerings will similarly benefit your organization. MBA has the potential to expose cross-selling opportunities, optimize game mix and placement, efficiently manage comps (e.g., how much should the hotel room rate be for a player with a certain ADT?), and create deeply personalized offers.
Utilizing Association Rules to Identify Purchasing Patterns
When you think about all the possible combinations of games and non-gaming items purchased during a visit to your casino, then add other dimensions such as price, quantity, and location, MBA becomes much more complex. In dealing with this complexity, statistical algorithms are utilized to detect patterns within the baskets. A common technique to find these purchasing patterns uses association rules wherein the analysis forms an “if a guest buys this, then that guest may buy X” result.
Considering there are 3,628,800 different ways to arrange a group of only 10 slot machines, thinking about all of the combinations that can be made across the entire casino floor can be overwhelming. Let’s say your slots department wants to optimize the revenue of your casino floor by moving 10 gaming machines that are underperforming due to low occupancy on each of those slots, and the goal is to find a better floor placement with the optimal game mix for each machine being moved. With complex analysis, or better yet, an advanced tool designed for the needs of slot operators to do MBA on slot machines, you can discover what other slots are played by players who like each of the machines being moved; therefore, telling you that those players who like to play game X, will likely play on games Y and Z.
When making machine moves, there is an aspect of intuition involved. Your analysis might indicate that the machine you want to move will perform best next to another machine that is already performing well with its current product mix or section. Of course, you don’t want to disrupt the success of the gaming mix in an attempt to improve a different basket, so you can adjust and interpret the results by applying your own industry experience to decide where the machine placement will be most advantageous for optimizing your overall floor.
Understanding What Motivates Your Customers
MBA can provide valuable insights into your customer behavior by analyzing their purchasing patterns, allowing your tribal casino to build player relationships and gain a better understanding of what motivates players to play certain games and make purchases. This information can be used to tailor marketing campaigns and promotions to individual customers, increasing the effectiveness of these efforts.
Furthermore, MBA can be used to identify potential cross-selling opportunities. For example, if a casino notices that customers who play a particular basket of slot machine also frequently purchase drinks from the bar, they may choose to offer promotions for drinks to customers who are playing those machines. By offering tailored promotions and incentives, casinos can encourage customers to spend more money and drive additional trips to increase overall revenue, all while providing a personalized touch that creates greater brand loyalty with the business from the player. Once your tribal casino is comfortable with the basics of MBA, you can start exploring the full extent of this mature data mining technique by including the non-gaming aspects of your casino in your analyses; therefore, allowing you to fine-tune your cross-selling opportunities to the specific players and segments that are driven by certain offers for all areas of your business.
The Benefits of MBA for Tribal Casinos
Market basket analysis is a powerful tool that can be used to optimize game mix and placement on your resort floor, improve customer experience and relationships, and increase revenue across the entirety of your resort business. By using MBA to analyze purchasing patterns and identify cross-selling opportunities, you can use your wealth of patron data to make well-informed decisions based on data science to maximize the performance of your gaming operations with meticulousness. Furthermore, MBA becomes a powerful tool to provide your customers with the experience they are looking.
Andrew Cardno is Co-Founder and Chief Technology Officer of Quick Custom Intelligence (QCI). He can be reached by calling (858) 299-5715 or email [email protected].