Have you ever thought about why you choose to purchase particular goods and services in your personal life? When you go to a store and walk down the aisles, what makes you put some products in your cart and disregard others? Are you valuing products in relation to price point or effectiveness, or is there something else guiding your purchases? As gaming professionals, the psychology behind our product choices and how we effectively price them is a large part of our daily routine, even if we don’t actively think about the process itself.
Say you go to the store to purchase a product that cleans the sinks and counter tops in your home. There are literally 30 different cleaners on the shelf that you could choose, from old-school products like Ajax and Comet to new, environmentally safe, oxygen-infused cleaners that require nothing more than spraying some on a surface, as they will scrub and sanitize for you. With such disparity to choose from, we often select the manufactured goods our parents routinely purchased, because we have both knowledge and familiarity with the product and, therefore, an intrinsic comfort level with it.
Likewise, a percentage of the customers at your facility will never be comfortable playing anything other than 3-reel, 5-payline games—just as a similar percentage of your player base would find these games boring and unappealing. How we price our floor in relation to the expectations of our players and their individual preferences is often the difference between a successful gaming operation and a struggling one.
When it comes to psychological pricing, you must consider several elements of the players’ perception of your pricing strategy.
Positioning
If you want to be the low-cost leader, you must be priced lower than your competition. I know that sounds like a no-brainer, but we are all familiar with casinos that boast “lowest hold“ percentages that are clearly no lower than the competition. It takes savvy customers one visit to realize their time-on-device is no better at the “low-cost leader” than at the other facilities in the area—and that the casino has treated them like a fool. Once a customer believes you have lied to them, they will never come back.
If you want to indicate high quality, you should probably be priced higher than most of your competition. If you are going to use this approach, it is essential that your property’s amenities and service standards clearly differentiate you from the competition. People will pay more for quality, but they will expect excellence in return.
Popular Price Points
There are certain “price points” at which people become much more willing to buy a certain type of product. If you have ever had a limited conversion budget and declining slot titles, you have undoubtedly dropped the price point on a game to keep it on the floor as long as possible. A declining 20-line nickel game will gain a whole new group of followers when you drop the price point. Those patrons who felt their budget didn’t previously allow that product can now try it. Dropping your price point may lead to a lower win-per-player session, but it could create more than enough additional sessions to extend the life of the title.
Fair Pricing
Sometimes it simply doesn’t matter how amazing or exclusive the game is, even if you don’t have any direct competition. There is simply a limit to what our players perceive as “fair.” Market testing performed by the manufacturer or your own marketing team will help you determine the maximum price your players will perceive as fair. If you go to the expense of surveying your customer base or utilizing player focus groups in an effort to determine pricing, you must be prepared to act on those results—or risk offending the high-end players you surveyed. If you were a player, which scenario would upset you more, not being asked your opinion or having your opinion disregarded after having been asked? Your price point should never be lower than your costs or higher than what most players would consider fair. Ultimately, no matter what your costs are related to a game, your product is only worth what your customer base is willing to pay for it.
Market Penetration
I’m going to list off several products, and I want you to make a mental note about what pops in to your mind: Kleenex, Scotch tape, Softsoap, AstroTurf and Band-Aid. These product brands have become so recognized by consumers that they have become the generic description for a general class of products. I’m afraid that in the minds of a large number of our prospective players, slot machines have the same connotation. In order to get these prospective players to try our products, we need to price relative to the entertainment market around our facility. Market penetration is a strategic means of keeping prices relatively low in order to gain market share. A penetration strategy is key when one, or more, of the following situations apply:
• No product differentiation – This means that, to the player, there is little to set us apart from our competition. If a player sees no additional value in driving to your property, why would she?
• Support other products/services – Prices are set low to support the sale of the games on the floor (e.g., we offer low-cost, quality food at our restaurants to attract customers).
• Market presence – Highly competitive pricing tends to gain market share. Casinos looking to establish a presence in the market or a dominant position may opt for this strategy.
Target Return Pricing
Target return pricing relates to setting the price of your floor to realize a targeted return on investment (ROI). An example of this is lowering your hold percentage to increase players’ time-on-device, with the end goal of increasing the frequency of your customers’ visits to the property. Lowering your hold percentage will cost you projected revenue in the short run, so you need to clearly define the strategy and your expectations through the use of this measurement tool. The ROI should clearly show the beginning data and the expected projections. If your strategy is successful, you will be able to point out an increase in coin-in and payouts, which, in conjunction with additional visits by your players, should show additional revenue to the bottom line.
The Customer
As I prepared for this article, I spent some time discussing gaming choices related to pricing with casino patrons and general purchasing habits with non-gamers. In speaking to a non-gaming friend about the products she buys for her household and why she makes those choices, I found her solid reasoning is similar to that of our gaming patrons. She pointed out the following:
• I compare the televised marketing offers with the actual price at the point of purchase. If it doesn’t match, I don’t come back.
• There are products or services offered that I would purchase regardless of price point, as they have significant value-added qualities I cannot find elsewhere.
• There is a definite connection between what I like and my knowledge of the product. There are a range of products and services within my comfort zone, and I prefer to stay within that range even if it costs me more.
• Flashy marketing can attract me, but it must deliver what it promised if I am going to move away from the products or services I am comfortable utilizing.
• As a customer, I research not only the advertised product offerings, but also the prices of staple products in relation to where I normally purchase. It’s very easy to save a penny and lose a dollar.
In order for our industry to establish sustained growth over the long term, we need to do more than gain market share; we need to grow the market. Instead of waiting for the perfect product or strategy to come down the pike, we need to define who our competition is outside of gaming and how we can best attract their customers to our venues. Our future in gaming as an industry truly requires that we leave the comfort zone of the casino and the patrons we understand, reaching out to new audiences whose expectations will redefine not only the products we offer, but also the way that we offer them.
Kevin Parker has been in the gaming industry since 1995 and participated in the opening of five Native American properties on the West Coast. Previous positions include Director of Gaming, Director of Slot Services and Director of Casino Operations in two different facilities. Parker recently co-founded Lynx Gaming Solutions.
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