The Marketing Audit

Traditional audits of casino marketing departments, performed by accounting firms, tend to focus on internal controls, cash handling procedures and how marketing expenditures are accounted for. Rarely are they performed by casino marketing professionals with experience in gaming operations. They often do not question why certain promotions are conducted, only how they are conducted. They also do not address how Marketing allocates its expenditures across advertising, promotions, direct mail, comps and other programs. Most important, traditional audits do not examine a casino's player reinvestment rate.

The Marketing Audit performed by GMA looks at four broad areas: the alignment of marketing strategies and tactics; the marketing process, marketing measurement and the human element.

Marketing Strategies and Tactics

Marketing theory teaches us that once a business establishes its goals and objectives, it then creates a strategy to achieve those goals. Once a strategy is established, a series of tactical plans are created that are derived from the strategy. Often in casinos, tactics deviate from strategy. An example might be when a casino employs a differentiation strategy but adopt a series of pricing tactics to compete in the marketplace.

GMA first examines the casino's marketing strategies to see that they are germane to the market. Then the tactical plans are examined to see if they are aligned to marketing strategy.

The Marketing Process

The task of marketing a casino's goods and services is a complex process that incorporates a variety of disciplines. The process includes products (slots, hotel rooms, food), services (personnel, host programs, player development) and benefits (points, comps, etc).

Once a program or specific offer is created, its effects must be forecast and summarized in the form of a proforma. It is then approved by the General Manager and the task of implementation begins. Offers must be communicated to not only the target market but to constituents within the gaming organization who will be tasked with delivering on the offer. This is in effect, a process that includes managers, supervisors and employees from a number of departments within the casino.

GMA examines the Marketing Process in order to identify any gaps. There may be gaps in communication between departments or employees; there may be gaps in fulfilling the offer; there may be gaps in how offers are redeemed. These gaps may go unrecognized by casino leadership but impact the effectiveness of the program. By interviewing employees and examining the Marketing Process, GMA attempts to identify those gaps and offer recommendations on filling them.

Marketing Measurement

It is generally understood that the sum of all marketing and advertising expenditures is the one of the largest expenses in. casinos. However, despite their impact on a property's profitability, it is difficult to easily identify all of the costs that make up Marketing and Advertising on a property's profit and loss ("P&L") statement and see their effects on both property revenue and cash flow performance. It is equally difficult for the marketing professional to quickly calculate the property's player reinvestment rate based on the data presented in the P&L.

Most casino P&L's do an excellent job of detailing each operating department's revenue and expenses. However, marketing and advertising expenses can be found on multiple pages of this report. For instance, system generated comps (those generated by the casino's player rewards program) normally appear as an expense to the Slot Club Department. In addition, comp expense can be found in Slots, Table Games, Hotel and on almost every revenue-generating department's monthly operating statement. Thus, answering the simple question, "what is the ratio of comp expense to property revenue?" becomes a time consuming task.

Other marketing and advertising expenses are just as difficult to identify. Direct mail is divided into a number of categories. The design and printing of mail pieces may be booked as an advertising expense under "Print Production." Postage may be booked to Casino Marketing while the actual value of the offers redeemed might be booked to the Slot Club. This in itself is ironic since no other marketing activity has a greater impact on property revenue than direct mail and yet it is difficult to answer simple questions as, "what is the relationship between direct mail expense and property revenue?" or "did direct mail have an impact on cash flow?"

GMA has developed tools to measure the effects of advertising and promotions in a report called the Marketing Analysis Report. Working with the casino's accounting team, GMA builds a series of monthly analyses that shows the effects of advertising, promotions, comps, direct mail, etc. on gaming revenue and cash flow and allows casino management to optimize their marketing expenditures.

Player Reinvestment Report

Player reinvestment is comprised of all marketing expenses that are used to foster loyalty and encourage repeat visitation among rated/carded casino patrons. The player reinvestment rate is a simple fraction with total player reinvestment expenses in the numerator and Carded/Tracked Win (win that is attributed to players who use their player reward cards) as the denominator. The resulting ratio is the player reinvestment rate.

The GMA Consulting Team works with the casino's accounting department to prepare monthly Player Reinvestment Reports and track the casino's player reinvestment rate.

The Human Element

The final area of examination is the Human Element. Casinos, like all business organizations, are comprised of not only bricks and mortar but people and personalities. How those individuals work with others within their departments and with people in other departments can have a profound effect on the efficacy of the Marketing Process.

Through a series of interviews along with an examination of the casino's organization chart, the Marketing Audit evaluates the Human Element in order to identify any possible conflicts that affect the Marketing Process.