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Come On and Take a Free Ride

The current state of free play rewards

Come On and Take a Free Ride

The beauty of a hyper-competitive market is that it inevitably results in better products and better experiences for the end user—in the case of casinos, operators have spent decades devising grander, flashier rewards and loyalty programs, all with the end goal of attracting new players while retaining existing ones.

The rewards themselves have evolved from toasters and blankets to hotel deals and even cash itself for a brief period, but by and large, free play has separated itself as the industry’s most important marketing and acquisition tool.

Although loyalty rewards have become commonplace for most retail businesses, such as a free pizza here and a flight voucher there, optimal free play implementation for casinos requires some deep thinking and number crunching, because after all, retail businesses don’t have the option of winning back a latte or convincing travelers to stay in the airport and take more flights.

However, as the calendar turns to 2024, the evolution of free play has reached an interesting point—in one sense, the abundance of new markets and properties has created more opportunities than ever before, but the increased competition has also made the margin for error slimmer than ever.

Of course, that’s not to say that the opportunity or the appetite of players has diminished; if anything, it’s grown, meaning that operators must optimize their process as best they can to keep pace.

Lower Risk, Higher Upside

When analyzing the newest trends in free play, it helps to first go back and understand why it’s been such an effective tool for so long. In decades past, as slot gaming grew and casinos deployed various rewards strategies, they were confronted with two problems: consumer merchandise such as housewares and electronics required costly inventories and cash back often left the cage and walked right out of the casino altogether.

Free play, by contrast, emerged in the mid-to-late ’90s as the best of both worlds—its restraints on use and time ensured that players would use it at the casino itself, leading to more opportunities for operators to win the credit back and then some.

“Free play, in all its iterations, has certainly evolved since its introduction 20 years ago,” says Andrew Klebanow, co-founder of consultancy firm C3 Gaming. “It is now the primary tool that casinos use to foster loyalty and encourage repeat visitation. What makes free play so attractive is that it is the least expensive form of marketing incentive in the casino marketer’s toolkit.”

Andrew Klebanow

Andrew Klebanow

Klebanow explains that free play expenses do not show up on the income statement as marketing expenses. Instead, “it is deducted from gross slot revenue to yield net slot revenue,” which means that “depending on the state, this alone can have a profound impact” on a property’s overall tax bill.

Food comps, he says, are “paid from net slot revenue after gaming taxes, as are promotional items, gifts, and hotel offers,” and because of this, it ends up being cheaper to just give out cash, which comes with its own pitfalls, or free play.

By switching from cash to slot free play, operators have been able to get a much better sense of how much rewards players are actually spending on the machines, which in turn has improved processes overall.

Once casinos made the shift to unredeemable free play, as slot expert Buddy Frank of BF Slot Strategies explains, operators “were actually rewarding players with what they came into your casino for in the first place, and we kind of could guarantee or prove that they actually spent it in a slot machine. So it became a very, very valuable tool.”

Brian Wyman

Brian Wyman

Brian Wyman, partner and senior vice president of operations and data analytics at The Innovation Group, adds that free play also has a unique ability to encourage visitation, due mainly again to expirations and other constraints.

“The idea is that the expiration provides some sense of urgency,” Wyman says. “So it can help drive a trip where one wasn’t going to occur or drive a trip sooner than you otherwise might have made a trip.”

Additionally, Wyman notes that because competition is so high in most markets, “having that free play offer in-hand can create an incentive for them to visit you rather than a competitor—it’s potentially serving as a differentiator to make you the choice that the player makes rather than the competitor.”

Navigating Potential Pitfalls

Of course, nothing free could come without potential downsides, and there are plenty of considerations and factors that companies must account for when contemplating an optimal free play strategy.

Perhaps the most important factor is the market the casino operates in—aside from the tax considerations mentioned earlier, the business environment will have a huge impact on the success of free play offers.

“Is (free play) different in locals markets versus destination markets? Absolutely. The answer is yes,” Wyman argues. “What you’ll see is that Vegas Strip casinos will treat locals and non-locals differently because their motivators are really different. If you’re coming in from Cincinnati for the weekend and have a budget of $50, free play is going to be less of a driver than it is for a local who has to drive across town and has to pick whether he is going to go to Caesars Palace or MGM or Resorts World or Fontainebleau.”

For local-centric operators specifically, Wyman notes that extra attention must be paid to scheduling and layering offers correctly over the course of several days or weeks, because overextending rewards can put undue strain on operations—“that way, you can kind of spread your visitation out in order to manage demand across the whole month and not concentrate it just on one day or set of days.”

In some ways, locals casinos have no choice but to utilize as much free play as possible, due mainly to the lack of other available resources and amenities. This isn’t the worst thing in the world, but it is generally not optimal to be in the position of having to do something a certain way in order to maintain profitability.

“Local markets rely far more heavily on free play than destination markets,” Klebanow says. “Casinos in destination markets (Las Vegas, Atlantic City, Biloxi) may bundle together room offers, food coupons and free play to give the player ample incentive to hop on a plane or drive four hours and visit. Local casinos, particularly those with limited lodging and dining options, tend to use free play as their primary marketing tool, and perhaps add free gifts as an additional incentive, for the sake of variety.”

The other biggest factor that must be monitored with free play is the actual players themselves, as the savviest among them can do well to hop from offer to offer while staking little of their own cash.

Buddy Frank

Buddy Frank

Often, offers are mistakenly handed out with a set-it-and-forget-it philosophy, which can make it easy to take advantage of the system.

“Let’s say you came in and you were a terrific player, you gave me $10,000 in coin-in today,” Frank explains. “So I put you on my list, and I sent you $500 of free play every week. And due to my system, I sent it to you for six months and didn’t correct it or look at it. Well, maybe after that time I didn’t ever come in and spend any cash except my free play. That would be a tremendous abuse of the system, and guess what, a lot of bad actors have done exactly what I just described.”

The trick, then, is to try to identify the “ladder type of players,” ones who “spend additional cash in addition to their free play.” If operators can keep such mistakes to a minimum, Frank says, “then free play remains just a wonderful tool.”

Honing the Craft

Now that we’ve crossed the calendar over to 2024, the latest trends and best practices related to free play can all more or less be traced back to one word: analytics.

Improved analytical tools and programs such as those offered by Acres Manufacturing, Quick Custom Intelligence and have removed much of the old guesswork related to rewards programs—instead of hiring spotters or simply speculating at what is effective, operators can now plug each player into a database that is constantly becoming more sophisticated in its analysis and predictive abilities.

“Casinos have developed fairly sophisticated tools to better estimate the value of free play offers that they send to individual customers,” Klebanow says. “While at one time, casinos would rely on basic formulas to calculate the amount of free play sent to tiers of customers (say, 8 percent or 10 percent of monthly theoretical win), modern analytical software programs provide far greater granularity into individual customer behavior, allowing casinos to send the optimal amount of free play to yield the best performance by the customer.”

These programs aren’t exactly new, but the technology powering them has never been better, and the onset of artificial intelligence and machine learning are like bolting extra turbos on top of jet engines; not only that, but the longer these programs are in use, the more data they have to work with, which feeds the process and stokes the digital fire.

As Frank notes, the pent-up demand generated by the Covid pandemic made things a little easier for operators, and now that that excitement is gone, operators have gone in different directions with regard to philosophy. The winners, he asserts, will be those who invest in the best tools.

“We came out of the pandemic with just unbelievably good numbers,” Frank says. “And that might convince you that, ‘Hey, we don’t need to spend as much on marketing.’ The problem is I think things will slow down a little bit. Not a major amount, but a little bit, and sometimes when that slows down, other people think that’s the time to get aggressive with marketing. The big trend that is going on is a lot of people are just starting to do better analytics. If you’re not, you’re probably wasting money.”

He contends that today’s systems allow for more in-depth analysis than what was previously available. For example, new platforms can do a lot of things “in the background,” such as analyze historical data, set up specialized reports to track expenditures and more. As a result, these platforms can “really alert you to problems or opportunities.”

For Wyman, the analytics revolution in free play has demonstrated the need for individuality and customization. Instead of dividing players into segments or demographics, modern analytics can lower the magnifying glass down to each player, and when each player is getting the best offer for their preferences, the operator will inevitably start to see the benefits of repeat visitation.

“What’s happening is we’re getting better and better at identifying not just at a segment level, but at a player level what the appropriate incentive is,” he says. “We might have the same exact play behavior, but what drives me to the casino might be $20 in food credit and $20 in free play. You might not care about the food at all, so we need to give you $30 or $40 in free play to drive the same trip. And so it’s figuring out how to individually target these offers, and not just the amount of free play; it’s the whole basket of what we’re providing them.”

As the industry continues to expand, there are more potential players out there than ever before, and chances are, the vast majority of them would be inclined to take up a free play offer, if offered. The only question is, who has the goods (or perhaps the data) needed to produce the best possible offer at the best time? After all, even the allure of “free” only goes as far as our willingness to redeem.

Jess Marquez is the managing editor of Global Gaming Business. A lifelong Nevadan, Marquez has communications experience across multiple sectors, including local government. Prior to joining GGB, he was the communications and advertising director for a prominent personal injury law firm based in Las Vegas and Seattle. He also founded and hosted The Pair O’Dice Podcast, a weekly show that focused on sports betting news and predictions. He graduated magna cum laude from the University of Nevada, Reno in 2019 with a B.A. in journalism. Outside of work, Marquez is passionate about professional sports, classic literature and leatherworking.

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