There Is Another Way to Speak ROI to Achieve Incremental Percentage Points …

Without trampling your marketing strategy

Why is ROI like Lucky Charms?

For most CFOs, it’s magically delicious.

The problem for marketers like you and me? Lucky Charms comes in a rainbow of fruit flavors: a rainbow of fruit flavors that can be horribly manipulated.

Sample the following flavors to match what you are measuring to what you’re trying to accomplish:

The Fully-Loaded ROI

Do you feel like you can’t make a move because marketing is bearing all costs for all departments? Transfer costs can be the bane of a marketer’s experience. The Hotel charges marketing rack rate instead of the cost to turn the room. Food & Beverage charges labor plus tip plus full retail for the VIP dinner. Convention Services charges weekend rates for a room midweek. One, two, three, four, this is not the time for a thumb war between departments.

When to use:

A fully-loaded ROI helps to compare like events or like options. If the outlets are operating at full capacity, the property needs to evaluate the opportunity cost of turning away business in order to make room for a casino marketing promotion.

If Hotel rooms are available, if the restaurant is sitting idle, if the convention space isn’t booked, then a fully-loaded ROI doesn’t make sense.

Unrealistic transfer costs are the product of measuring success of a department as a stand-alone entity. For example, the Hotel is measured by ADR, Average Daily Room Rates. A $25 transfer cost for a hotel night is a motivator for the Department Head to prefer selling a room to a walk-in over a casino guest. The better a property can move towards aligning revenue targets and connecting casino spend with outlet spend, the better.

The Perfect Redemption ROI

Points, Tiered Cards, Direct Mail, Comps, and Promotional Offers: add them all together and your CFO will faint upon first sight. In most cases, if all offers are redeemed in one day, the player wins before he even takes a dollar bill out of his wallet. We can’t punish a player for using our offers with too many disclaimers and restrictions. This is an important value to measure. Are we above 100% in any given trip based on what we’ve put out there?

When to use:

The Perfect Redemption ROI helps us to visualize how all our layered costs stack up. The next step in analysis is to see how many Trips a player needs to make in order to bring reinvestment down to sustainable levels. It is normal for reinvestment to take a heavier burden on profitability during the first, second, and third trips.

The Redemption ROI

This measure uses the numbers that actually hit the books. However, if redemption is low, this is not a green light to throw more reinvestment into the ring. Layered offers may win the weekend, but lose the battle for loyalty. As a marketer you have also failed if breakage is high – your offers aren’t compelling and the deployment of your offers isn’t interesting. Aim for full redemption. Be prepared for perfect. Be profitable with actual redemption.

When to use:

The Redemption ROI is good for use during the budget process. It is useful to predict how much actual marketing spend will go against revenue. What makes this calculation more interesting is if it is used for different segments of players. Do higher worth segments provide a higher ROI because their redemption is higher or lower? How do low and medium worth segments fare? Does distance from the casino or proximity to a neighbor change ROI?

The Sunk Cost ROI

CFOs like the Sunk Cost ROI. Everything and the kitchen sink are added as expenses against revenue. They can attach the cost of the carpet to your promotion. They can attach the cost of the taxes and tithes they pay to an activity.

When to use:

Ask yourself, does this cost exist if the promotion didn’t exist or the coupon wasn’t redeemed? Most often ROI needs to be used to evaluate when and if an additional activity should be deployed again. As a marketer, you should not have to fight to assess whether the lights should be turned on. Reposition the discussion to focus on incremental costs that drive incremental revenue. If incremental costs drive incremental revenue, a 99¢ tchotchke that drives $1 in revenue makes sense.

The last two are proactive means of using ROI.

Longitudinal ROI

Longitudinal ROI focuses on lift over a period of time during and after a promotion. Players tend to play less on days that they participate in a promotion. The hour spent at the concert robs time at device. However, did participation in the event drive more Trips in the month or more Total Monthly Theo?

When to use:

Drawings and other contests usually last for more than one day. Expand the time horizon of your calculation of ROI. Did you win marketshare? Did you win loyalty? Did you change behavior in the time period before the event as compared to a time period after the event?

ROI Engagement

Evaluates the count of participants and the behavior that follows. The above measure looks at Trips and Theo. This measure looks at Count. How much money did it take to create a buzz about your property? Connect a cost to the number of Likes on Facebook. Connect a return to number of New Card Sign-Ups associated with the sponsoring of a charity event.

When to use:

ROI expectations should change based upon the end goals of an activity. An Acquisition activity will have a smaller ROI than one that is exclusively set to retain VIPs. Return on Engagement gives us another opportunity to measure results that have a longer halo effect than what can be demonstrated by Actual Win/Loss returns for the day. Return on Engagement is solely meant as a comparative metric to evaluate like activities to determine what new endeavors are better suited to drive results. Not all results have to be based on Theo or Trips. Engagement shows us that the conversation has begun and can give us insight into whether we hit the mark and made a lasting impression with the customer.