Data capture, analytics and storage have been in the news a great deal recently thanks to the activities of hackers hitting mainly US enterprises. Big retailers have been the main victims, with customer data including credit card information stolen; even a movie studio took a beating. Looking after customer data has never been more important – but there are ways to manage that data and its acquisition that can mitigate such an attack and even improve customer relations on the way.
Adam Tanner, Fellow at the Institute of Quantitive Social Science, Harvard University, has written What Stays In Vegas, a book exploring data capture and how businesses use that information, using examples from Las Vegas, among them specifically Caesars. Adam spoke with Casino International about his excellent book, and how casinos can improve how they work with customers to improve retention while opting for transparency and giving customers choice.
Casino International: Adam, what is What Stays In Vegas about?
Adam Tanner: The book explores what I call the world of personal data: how businesses gather personal data, why they do it, who are the people behind the gathering, and the impact it has on consumers. The test case, the big narrative part of the story, is how Caesars has done it and grown to great success over the years. It follows the story of Gary Loveman, who is initially an outside consultant while at Harvard Business School as a junior professor, and eventually becomes Chief Operating Officer, then CEO. The path of success is as they gather more customer information. His big insight as a scholar on business and economics was the concept of lifetime value – that if you can capture the business of a customer for a lifetime it can be vastly more profitable and useful. For example, something as simple as going to a pizzeria, a single slice might be a dollar or two, but over the course of a lifetime that might be seven or eight thousand dollars; if you’re buying an automobile and you are buying over the course of a lifetime it might be worth hundreds of thousands of dollars to the company. So he applied the same concept to casinos, an industry where traditionally there is a lot of promiscuity, with people going to many different casinos. He wanted to make it more worthwhile for people to stay with his casino by giving substantial rewards and in order to get those rewards, people had to give out a lot of data. That’s the balanced equation I look at in the book and look broadly at other kinds of examples to give insights to how it all works.
CI: What inspired you to write the book?
AT: Many years ago I travelled a lot in Eastern Europe and the Soviet Union, and there was a single day in 1988 when I was in Dresden, East Germany, a year before the fall of the Berlin Wall. Ten Stasi guys followed me around over the course of the day, jotting down everything I did. It’s recorded in my Stasi file that I obtained years later after the reunification of Germany. They knew moment-by-moment what was going on, where I was. But even with the information about what I was doing and where I went, they didn’t have a lot of insights about me and what I was up to. What was I up to? I was researching a travel guide book on Eastern Europe.
Today, businesses have a lot more insights about customers and there are files collected on hundreds of millions of people. In the best-case scenario, that means companies get offers and products to customers that are interested. In the less-good scenario it can lead to annoying or even humiliating potential customers, if the data is used in inappropriate ways.
This background in seeing how data was used by the state long ago interested me, and how companies – which are the leading data gatherers today – make use of the data for both good and bad.
CI: Vegas is interesting – it has been said that many venues are using unencrypted, insecure wireless card transactions so data theft is actually very easy there. It’s convenient to pay at the table for dinner, but it makes you wonder what else is insecure in the gaming venues.
AT: This highlights the downside of personal data in a dramatic way. It’s very easy to create situations where customers are the victims of crime in this way. One of the reasons I chose to write a book called What Stays In Vegas, and to focus on Vegas with my test cases, is because the city is quite pioneering in terms of the capture of personal information. Public records are the basis for a lot of marketing materials, so in Las Vegas more people are married than anywhere else in the US. Those records, that information about people getting married, is public, so anyone can go into the files and use that information. All of these people that have been married over time in Las Vegas, from Elvis to people such as yourself, that information is recorded in two places. Casinos have wondered for some time, is there anything useful in that data for our marketing purposes? One thing Wynn was doing some years back was to buy the data. The licence gives you permission to marry, then there is the actual marriage, and they were collecting both pieces of information. Something like 97% of the people actually go through with it and marry but 3% get cold feet. Wynn was sending offers to people that had married to come back on their first anniversary to rekindle the warm memories they had. They program was discontinued after a while because it wasn’t as successful as they had hoped, but it’s an idea of how public data can be used in a way that the public might not be aware of.
CI: How should a business capturing or buying data behave in terms of transparency?
AT: Your readers are largely casino operators and people in the industry; the way to avoid negativity from consumers is to be open about what data you collect and what you do with that data – and to give the public a choice about it. That kind of transparency will serve all businesses well but perhaps especially the gaming industry, which already has a lot of suspicions from the public about what casinos are ‘really doing’, people thinking slots might be rigged or the odds are not what they say, there are all kinds of beliefs that things are not on the up-and-up, so people are already worried. If data is gathered and things are done with the information that people find disreputable, it will lead to difficulties in terms of reputation and long-term business. In the context of lifetime value, or having someone be loyal to your casino or online site, you have to be transparent about what you are doing it will build that trust and lessen the need for regulation from outside. Certain kinds of data are regulated in the US like health data, for hiring, financial data, but most data in the US is not regulated.
Another important thing is to be transparent with what you do with the data – whether you sell it on. For a lot of people it may be disadvantageous for them to have others know how much money they gamble, and to have that information sold beyond the casino. So in the case of Caesars, for example, they do not sell the data beyond, they keep it and it is their most prized asset. Many, many casino operators don’t sell their data. But some have loopholes in the fine print saying, if we go out of business or our assets are transferred or taken up by a third party, personal data held by our customers can be a transferred asset. That means if a data broker bought the online casino, they would own all the information and incorporate it into their files. That may cause concern amongst players and you would want to protect against that to build client trust.
CI: It seems such a potential legal minefield, and a lot of US retailer shave been hit – and had their reputations rightly damaged – by hacking scandals.
AT: The hacking scandals are a good example where lack of transparency, to some extent, caused a great backlash when a problem happened. People perhaps didn’t understand to the extent that their credit card data was stored over a longer period of time, so when you add hacking into a company like Target, it led to a massive backlash and anger, and a huge loss of business and related costs to the company.
I would anticipate the companies that are not open about how they collect and use data are going to suffer reputationally and business-wise when instances like that happen. You have the security issue, and the issue of how the data is used.
The solution to all of this is, if you operate a casino or an online business, give people a choice about how the data is shared, let them know in simple, easy to understand language what is happening and that will mitigate the risk of something terrible happening, because you have been open from the beginning.
CI: All customers want repeat business and much of the technological developments of recent years have been about customer retention. Yet so much marketing seems to be scattergun-style, optimistic rather than targeted – is there not a risk of alienating customers because of this?
AT: There are two possible reactions one can have to marketing – one is to be attracted to the offer and to take advantage of it, and the other is to be repulsed by it and perhaps irritated and less likely to take your business to that place because of the persistence of the marketing. That’s where giving a choice is very positive; if you’re running a retail store and you say, we’re having sales four times a year, can we put you on the friends and family list and you will get the first opportunity to buy at a discounted price, many people will sign up. If you don’t give that choice and then add them to a list surreptitiously, some people may come but others may not like that they are on the mailing list. When one arrives at McCarran airport in Las Vegas, someone might be unhappy in the disruption that the instant barrage of advertisements to their phone brings in the form of push notifications. If there was some choice, like, ‘this is my favourite casino, I’m happy if they let me know that my favourite entertainers are on tonight and there is an offer on tickets’, that might be something you are happy to receive. But the choice of the customer, to say ‘let me know about specials related to magic shows’ for example, is important. You might not want to know about the 1970s disco nights that are also on. You can offer these choices in ways that benefit both the business and the customer, and it’s less disruptive and annoying to the end user.
CI: Data is obviously valuable and while it might not be expensive to gather, there are expenses in analysing and doing something with it. These are justified by the potential for more targeted and therefore more effective marketing. Is it a fair return on value for the customer, as well as the venue? A casino might garner good feelings from a customer that feels they are being looked after because they were met on check-in, which was done for them, and a comp beer given to them as it was done. Very inexpensive for the casino to do – but is it a fair return for the customer?
AT: First, it should be pointed out that the customer has a choice as to whether they opt in to that Caesars model. If you want to gamble anonymously you can walk in and not sign up to the loyalty program, of course. No data gathering – but that’s a small percentage of players. More than 90% choose to join the loyalty program because of the free things that they get.
In my book, I follow over the course of a year or so a sample player from Los Angeles, he visits Vegas about once a month. He is single, enjoys gaming and plays cards in particular; he might gamble on a weekend a few thousand dollars, up or down a couple of thousand at the end of the weekend. In that year, he probably lost $5000, maybe a little more. But he estimated he got $5000 of free things, including rooms, meals, spa treatments and other benefits in exchange for his participation in the program. Most importantly, he got free chips on many occasions, as much as $1000 for gaming. In his mind, he did pretty well because he lost $5k but got that back in goods and services from the company. From the perspective of Caesars, they have also done well because the cost of providing him $5k of free things is less than $5000. It might be just a couple of thousand. This is an example of a relationship that works well – the customer has had a good time, he may not have won but he has lots of other free things in that time. The customer and casino are both happy, and though the customer will lose in the longer term – because of statistical odds – but they are made happy on other fronts.
CI: Transparency is something you have alluded to frequently; I don’t think players would mind if casinos said simply, ‘we are just going to keep and use this information for ourselves, to do things to give you a better experience with us’.
AT: Right – and if you explain and actually deliver benefits they appreciate, like tickets to a show they like, or a reminder of an upcoming event they might want to bet on… With a lot of these things it’s a delicate balance, if you solicit too often you might irritate people, so again choice is key. Send me offers about what I am interested in, don’t blanket market me. That’s how you alienate customers.