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Stopping The Shrink

Smart initiatives for turbulent times

To start with the obvious, the gaming business is in a serious recession worldwide. From Leon to Las Vegas, Macau to Murcia, and New Orleans to Nova Gorica, every casino operator has, in recent months, seen its revenues shrink and its profits evaporate.

Stalwarts such as Las Vegas Sands and Wynn have witnessed their share prices topple from highs of $95 and $125 just 12 months ago to lows of under $3 and $30 respectively. During the first nine months of 2008, Las Vegas Sands and Harrah’s both lost money while the profit of MGM Mirage plunged. Competition for customers and capital seems unprecedented.

Tough times call for bold measures. Gone are the days when executives could impress the board of directors or investment analysts by minor tweaking of operations or through creative accounting.

Drastic steps need to be taken by following one of the two available options: cost reduction or productivity enhancement.

Most casino executives I know have chosen the path of cost curtailment. Employee travel has been severely restricted, training funds frozen, and employees laid off. MGM Mirage has already trimmed its workforce by 3,200 since October 2007, and sold its Treasure Island property.

Sales of other properties and non-core assets are expected.

The cost-cutting and trimming approach is similar to the operational strategies adopted by most airlines, which now expect customers to pay for their baggage, food, drinks, headsets and even pillows. Customer service is conspicuous by its absence in the increasingly unfriendly skies. Service standards have hit new lows, and the cadre of junior managers is being inculcated in the belief that survival demands the lowest possible investment in customer-centric initiatives.

But even within the cutthroat airline industry, there are exceptions. Singapore Airlines is one company that wants to succeed by flying against the current. At a time when the dominant logic dictates that flying is torture, SIA wants to hark back to the time when air travel was a glamorous experience. When every other airline has pricing as its focus, SIA looks at the passenger for panacea. When competition lives by yield management, SIA emphasizes staff training, equipment upgrades and customer service.

Casino executives daring to be different during these turbulent times could follow the edict of the late management sage Peter Drucker. “Business,” said Drucker, “has only two functions-marketing and innovation. Everything else is a cost.”

Casino companies could use these slow times to embark on a path of product innovation and consolidate their market positions through customer-centric marketing.

Jonathan Halkyard, the CFO at Harrah’s, was recently quoted as saying, “If you look at the slot machine, it’s basically the same as it was 75 years ago,” and went on to add, “There has been a shocking lack of innovation around our core product in this industry when compared to virtually any other consumer entertainment product over decades.” What better time could there be to allocate a company’s creative resources toward product innovation than during a recession?

Executives seeking to make a true long-term difference in their company’s future could emulate SIA during this difficult time. Instead of cutting corners and slashing players’ comps, they may want to use the lean times to offer their employees the very best customer service training that money can buy.         Instead of focusing on expense reduction (though quite a few expense items should be legitimately slashed), they may want to identify and capitalize on the plentiful opportunities for strengthening their customer relationships.

Instead of forcing cuts in employee numbers or wages, they may want to challenge their front-line people to provide each customer with a truly outstanding service experience. It is OK to postpone or drop construction projects; dropping customer service levels or server motivation at a time when customer loyalty is needed the most is sacrilegious.

Swimming against the tide takes courage and mental fortitude. And a recession need not eclipse executive careers. Tough times provide executives with ample opportunities to prove their mettle. Those who take up the mantle and make bold decisions toward customer-centric innovations and consolidating their customer relationships will not only weather the recession, they will be very advantageously placed to harvest the bounty of their efforts when the economy improves. Smart managers know that the best way to keep your customers loyal is to take care of them when things are bad.

So go ahead-use the economic lull to your advantage by strengthening your bond with your employees. Use the slack period to harness your creative juices and make your product line truly innovative. Take bold steps to impress your customers by making your company the gold standard in customer service. Use this time to take stock of your marketing strategy, and to make every employee a part of your customer service initiatives.

Above all, don’t be timid when it comes to smart investments in customer relationships. Now is the time when you can employ the best talent, draw in the best consultants, and harness the best trainers at very competitive prices to provide your company with a much-needed organizational and cultural facelift.

Remember, recessions are never everlasting, but the consequences of executive decisions during recessions endure for a long, long time.

Sudhir H. Kale is the founder and CEO of GamePlan Consultants, a company that provides marketing-related consultancy and training to the casino industry.

He also serves as a professor of marketing at Bond University. You can write to Kale at [email protected], or to access some of his writing, visit his website, www.gameplanconsultants.com.

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