Friday, March 04, 2016

Three Tenets of Club Management

The past five years of the club industry in Australia has been marked by fierce competition among gambling providers and rising regulatory constraints. With industry revenue predicted to decline or stagnate over the next few years, navigating this business environment would be a challenge for any executive. With the right mindset, however, clubs are in a position to attend to initiatives that would ensure sound financial performance and prosperity.
Capitalizing on the turbulent macroenvironment will require strict adherence to three precepts across the organization: (1) fact-based decision making; (2) enlightened people management practices; and (3) providing a high-quality customer experience.



Fact-based decision making
Clubs are in an enviable position whereby their cash registers (EGMs and POS) also double up as powerful instruments of customer research. Yet, there is a tendency in far too many clubs to turn a blind eye toward the insights these data can provide, and make decisions on past experience, intuition, and managerial whim instead.
Data, when properly analyzed, can provide answers to almost every pain-point any club executive might face. From floor layout to player reinvestment, and optimum AEMP investments to diversification of services offered, insights from primary and secondary data should be the principal input for decision making.
While quite a few clubs do spend some of their resources on customer and competitor research, such research often lacks reliability and validity. Reliability refers to the degree to which a test is consistent and stable in measuring what it is intended to measure. Most simply put, a test is reliable if it is consistent within itself and across time. To understand the basics of test reliability, think of a bathroom scale that gave you drastically different readings every time you stepped on it even though your body mass has not changed. If such a scale existed, it would be considered not reliable. Validity refers to the degree to which the test actually measures what it claims to measure. For example, if the money a player drops into a machine is used as the sole measure to test whether that player is a problem gambler, it would be a poor test for gambling addiction. As a rule, all research should be tested for underlying reliability and validity before any credence can be based on its findings. Using invalid data for decision making can sometimes be a lot more dangerous than having no data at all.

Enlightened people management
Andrew Carnegie probably said it best, “Take away my people, but leave my factories, and soon grass will grow on the factory floors. Take away my factories, but leave my people, and soon we will have a new and better factory.”
Clubs are social institutions and employees constitute the public face of your club. A study by Mercer Consulting suggests that around 70 percent of your guests’ perception of their experience is determined by the attitude and behaviors of your employees. So, if there is one lever you can use to attract more customers and retain them, look no farther than the people you have working for you.
People management starts with organizational culture—the norms, beliefs and practices that signals to organizational members and others the “way things are done around here.” Peter Drucker, probably the greatest management guru who ever lived, always said that “Culture eats strategy for breakfast.” Great U.S. companies such as Southwest Airlines, Zappos, and Nordstrom (or Mecca Brands and Mindshare in Australia) work hard at developing and perpetuating a culture that is characterized by integrity, fun, and customer-centricity. In order to have a right culture in place, management should first assess the club’s existing culture. Then follows an arduous journey toward determining which aspects of current culture you need to keep, which ones to discard and which new elements to adopt and embed within the organization. Cultural assessment and change is a complex scientific process, and needs to be carried out and facilitated by experts in the area. For those organizations serious about putting an appropriate culture in place, the rewards are significant in scope and long-term in duration.
The two main goals of putting in place a solid organizational culture are (1) to create engaged employees; and (2) to provide employees unambiguous behavioral guidelines. However, culture alone does not bring about ongoing employee engagement.
An engaged employee is one who is “fully involved and enthusiastic about his or her work.” Gallup Organization reports that less than one in four employees in Australia are engaged in their workplace. Workplace engagement enhances productivity, reduces absenteeism and conflict, and has a strong positive influence on the customer experience. Club management can enhance employee engagement by (1) Consistently demonstrating that management values its employees; (2) Communicating a clear vision for the organization; and (3) Demonstrate to each employee how their inputs contribute to the success of the organization in a meaningful way.

Providing high quality customer experience
Numerous consumer surveys report that people are looking less to “things” and more to experiences to achieve satisfaction with their lives. Be it a gaming or a non-gaming customer, what she looks for when visiting your facility is an enjoyable experience. The customer experience occurs across several touchpoints or “moments of truth” whenever there is an interaction between the customer and the club. Not all touchpoints are equally important in determining the customer’s satisfaction (if not delight) with her experience. However, it is important to understand each touchpoint during the course of the entire customer journey and analyze the underlying elements that would make this touchpoint proceed as intended.
One effective and proven way to understand the customer experience is by designing a service blueprint to depict the customer journey for each segment of customers you serve. I have designed customer journeys for several large gaming operations and the results in terms of customer retention and revenue generation have been nothing short of phenomenal.
For each touchpoint in the blueprint, the following components are teased out: (1) The physical evidence of service quality witnessed by the customer; (2) the customer’s expected behaviors; (3) the contact employee’s expected behaviors that are visible to the customer (frontstage behaviors); (4) the contact employee’s behaviors that the customer does not get to see (backstage behaviors); and (5) the support systems and staff behaviors required for each touchpoint.
After designing the preliminary blueprint, the next step is to flag current fail points and offer suggestions for correcting these fail points so that the entire journey is more rewarding for the customer and more profitable for the club. Inputs for the various touchpoints are gathered by (1) Interviews with key staff personnel; (2) Participant/Observer activities by the Consultant; (3) Company records; (4) Customer feedback; and (5) Informal mystery shops.
The task of correcting fail points draws attention to several existing lacunae in the service delivery process which need attention. These shortcomings, inter alia, may be due to employee headcount, employee training and motivation, standard operating procedures, technological bottlenecks, or lack of understanding of customer needs and expectations. When failpoints are corrected and each touchpoint constantly monitored, service blueprints become living documents that can guide all major activities within the organization to deliver a truly fulfilling customer experience.

Conclusion
This article touched upon the three tenets of club management: fact-based decision making, enlightened people management, and providing a high quality customer experience. Volumes more can be written on each of these tenets. My main purpose here is to sensitize club management to each of each issues so that they become embedded in the DNA of management ethos.
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About the author: Sudhir Kalé, Ph.D., is Senior Consultant with Bullseye Services (www.bullseyeservices.com.au), a boutique firm that provides marketing consultancy and analytics services to the club industry. He has written over 100 papers on the marketing and management of gaming businesses . Sudhir has also consulted with clients on five continents on matters relating to service quality, organization culture, market research, customer service, and CRM. You can write to him at sudhir@bullseyeservices.com.au.

Wednesday, November 11, 2015

The Macau casino market has been taking severe blows for seventeen months now. I had raised this possibility in my interview with Macau Daily Times a few years ago, and not many people gave me credit or credence for speaking to this scenario. I had also mentioned that the only way to grapple with impending declining revenues is to develop a strong consumer franchise while the going is still good.

In the current situation, what I find illogical is how all operators in Macau are dealing with revenue declines. They have cut advertising expenditures, not renewed contracts of capable consultants and newly employed executives, and tightened the belt on player reinvestment. It appears that in the eyes of many executives, sales cause advertising and not the other way round. At a time when customers are worth their weight in gold, they are being driven away with the so-called austerity move which makes the executive decision makers look good and puts a brake, albeit not very effective, on the decline in market capitalization of their company. But austerity at a time when marketing should be fortified is at best a short-term fix. This myopic strategy will take a toll on customer loyalty in the short-term and on customer lifetime value over the long-term.

If I were running a casino in Macau  (and I don't envy my good friends who do), I would focus primarily on making the customer experience better. I would increase my spending on player reinvestment. I would use my analytics capabilities for mass customization of my offerings. Rather than paying lip-service to concepts such as customer-centricity and customer intimacy, I'd change the corporate culture whereby marketing becomes everyone's job, and customer service becomes a part of every job description. Without an organic and cataclysmic culture change, some casino operators may not be able to weather the storms created in Mainland China and felt all over the world. Your thoughts???

Wednesday, November 13, 2013

Packer's Sydney Casino

Much has already been written about James Packer's Crown Sydney project. I was interviewed by the Sydney Morning Herald for my views on the topic. You can find the article at http://www.smh.com.au/nsw/packer-casino-pokies-are-inevitable-say-experts-20131112-2xelq.html. I would love to hear your views on the matter. In the meanwhile, Tony Fung is acquiring Casino Canberra and the Reef Casino. Not much of a surprise there as both properties have been poorly managed for quite some time, and refused to make any investments in enhancing customer service. However, the price tag -- $214 million is quite a bargain. Personally, I feel we need more international brands, the likes of Caesars and Wynn or even Galaxy to operate in Australia. Right now, over 90% of all casino revenues accrue to two companies, Echo and Crown. Your thoughts???

Sunday, May 05, 2013

Are Gamblers Really That Bad


I don’t know about you, but as a casino scholar and industry consultant, I get a wee bit uncomfortable when casino owners and senior executives express disdain or disrespect for gambling and gamblers. Then there are others who openly voice their embarrassment regarding the unfortunate accident that they are working in casinos. In a recent press conference, casino mogul Steve Wynn said, “Slot machines and blackjack have no power at all,” “what we are not building is a box of slots. We’re building a beautiful hotel that just happens to have a gaming room at the back.” If this does not sound somewhat apologetic, I don’t know what does. Don’t get me wrong, I, like most casino professionals, admire Steve Wynn. But I have always been somewhat perplexed by his apparent lack of reverence for the industry that has made him so wealthy.

I have never understood the attitude of many casino owners and executives toward their business. They never stop talking about the wonderful “non-gaming amenities” that their facility offers. They wax eloquently about the iconic architecture of their hotels and about the numerous signature restaurants on their property. They pay millions of dollars to bring in top performers and performances from the world over. And yet, when it comes to gambling and gamblers, they seldom exude any enthusiasm or appreciation. Never mind that it is gambling that provides the financial underpinning of casino resorts around the world.
Would Steve Wynn have opened his resorts in Macau if there was no gambling in the facilities? Would Las Vegas Sands have invested over five billion in Singapore if it weren’t for the expectation of surfeit casino revenues? Would Adelson stake $35 billion in ten integrated resorts in Spain if they did not offer gambling? Clearly, gamblers—the customers, and gambling—the product are the key drivers of revenue and income for casinos, and they seldom get the respect they deserve from their beneficiaries.

Let’s get a bit more specific. For the first quarter of 2013, Wynn’s Las Vegas properties generated $8,519 per table per day, and $215 per slot per day. In comparison, his hotel rooms generated $258 a night with an occupancy rate of 83%. For Macau, the figures are even more striking: $25,550 in revenues per table per day and $809 in revenues per slot per day. And the average hotel room rate in Macau? $315 a night. In other words, a slot machine in Macau generates more than two and a half times what a hotel room generates. Would you, based on these numbers, conclude that “slot machines and blackjack (or baccarat) have no power at all?” And, if you visit the Wynn or the Encore in Macau, you will find that hotel guests generally get better treated than the customers on the main gaming floor. By the way, this observation will apply to many other casino properties around the world.

What accounts for the widespread derision among industry professionals toward gambling? Is it rooted in religion? Is it some ingrained guilt as to how one makes a living? Is it the realization that millions of people will lose all they have at the altar of these new temples of capitalism? Or is it simply the jadedness that comes with seeing punters lose obscene amounts of money, day in and day out? Maybe it's just plain political correctness.

I am never quite sure what to attribute this negative attitude to. What I do know is that it cannot be very healthy for the attitude bearer to come to work every day knowing that you are not enthused either by your core product or by your core customers. It is reminiscent of Ayn Rand’s novel, The Fountainhead. Gail Wynand, the powerful publisher of vulgar tabloids hires Howard Roark, the protagonist architect to build the Wynand Building. Of course, Mr. Wynand knows fully well that money for the project, “the fertiliser” as he calls it, comes from activities he holds in total contempt. Sadly, the same perceptions may be held by some casino owners and executives. Those who have read The Fountainhead already know what happens to Mr. Wynand in the end.

Wednesday, June 13, 2012

I would love your reactions to Echo. With Genting, Crown, Perpetual,a nd myriad other players vying for control, what do you think will eventually happen? Will Packer relinquish his equity in Macau in exchange for greater market power in Australia? Can Australia ever equal Macau's prospects to make this even a remote possibility? Will there be a second casino in the Sydney Basin? Looking forward to hearing from you.

Wednesday, June 06, 2012

Maximize Baccarat Earnings

Would you be interested in maximizing Baccarat revenues at you casino? My colleagues and I have developed just the product for that. Please contact me at skale@gameplanconsultants.com, and I can tell you more. Finally, a scientific proven way to manage Baccarat risks.

Poker Gambling Among Teenagers

Are you interested in adolescent gambling? I conducted a very elaborate study of 2,000 teenagers in Victoria to study their gambling habits and other comorbidities. Funded by the Government of Victoria, Department of Justice, you can access the full report at http://www.justice.vic.gov.au/resources/7/d/7d89478048d0c5c4bbbafb7b53436337/report_for_web_australian_teens_and_poker.pdf.

Let me know if you have any comments.

-Sudhir

G2E Asia 2012

I would love to have the reactions of people who attended G2E Asia in Macau last month. I thought the exhibits were okay but most of the sessions were pretty ordinary. What is your take?

Tuesday, October 13, 2009

Macau, Singapore, or U.S.?

Macau seems to have shrugged off recession blues, and has been posting impressive gains over the last three months. Genting and Marina Bay Sands keep coming up with up-beat statements about their prospects in Singapore. The U.S. market remains soft in the destination resort areas, particularly Vegas and Atlantic City.

How would you assess the attractiveness of these markets, both short-term and long-term? What are your thoughts on the recent gain in market share for MGM Grand in Macau? Do you think the commission cap agreed upon by casino operators in Macau will work? Would love to know your thoughts on these matters.

Don't forget to visit my Website, and do write to me, just to say, "hi!"

Cheers,

Sudhir