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Marketing Response and Optimization Model for Casinos

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this is a case study for a 5 casino property gaming firm. This is a marketing response modeling project where insights gained enabled this firm to accelerate growth in the following year and improve their marketing ROI via a more optimized marketing spending plan.

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Marketing Response and Optimization Model for Casinos

  1. 1. Marketing Response and Optimization Model for Alpha Casinos
  2. 2. What we will talk about today • The model architecture • Decomposition of marketing effects • Total Alpha • By Property • By Week • Marketing Variance Analysis and Drivers of Performance • Total Alpha • By Property • Marketing Spending Optimization • By Media • By Property
  3. 3. What we will talk about today • Special Issues and Topics • Impact of Fuel Prices on Alpha Casino • Promotion Effectiveness by Event • Television Effectiveness • Cable v. Broadcast • Media message effectiveness • TV & Radio media message optimization • In-State v. Out-of-Area media optimization • Marketing Synergies • Marketing Investment Matrix • Appendix: Model fit and validations
  4. 4. Model Architecture: Covers all marketing drivers plus hotel rates and region fuel prices Revenue Gas.Prices Print Media OOH Media Hotel Rates Loyalty Cards Promotion Direct Mktg TV MediaCable and Broadcast GRPs Newspaper & Magazine Spend Direct mail circulation & Optimization New issues Nine Events Outdoor spend Region avg. fuel prices Average weekly cash room rate price By Week & Property Paid Search, Display Ads & Optimization Online Media
  5. 5. Total Alpha Casinos: Decomposition of Annual Revenues. Direct is Dominant and Accounts for about 38% of Total Marketing Impact 52.1% 18.4% 3.2% 2.3% 4.6% 1.4% 7.4% 6.1% 4.4% 47.9% Base Direct Promo Loyalty ONLINE OOH Media Print Media TV Radio
  6. 6. Revenue Decomposition by Property: Significant Differences in Drivers 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 Property 1 Property 2 Property 3 Property 4 Property 5 Radio TV Print Media OOH Media ONLINE Loyalty Promo Direct Base Properties 2 and 3 more driven by media, while Property 1 and 4 & 5 more affected by Direct Marketing.
  7. 7. Decomposition of Alpha’s Revenues by Week: TV and Radio went Dark in Q1-08. -20,000,000 0 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000 Hotel.Rates Gas.Prices Radio TV Print Media OOH Media ONLINE Loyalty Promo Direct Base In Q1-08, TV, Radio and Print went dark or nearly dark There was a significant reduction in TV, radio and print in Q1 and this impacted overall performance. Weekly Revenue
  8. 8. Q1-08 v. YA Marketing Variance Drivers: Lack of TV, Radio and Print media in Q1 were major negatives driving -3.9% YOY Trend -10.5% -6.7% -5.3% -3.5% -2.1% -1.1% 1.3% 1.3% 4.6% 5.8% 12.3% -100,000,000 -80,000,000 -60,000,000 -40,000,000 -20,000,000 0 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 Marketing Variance Direct Promo ONLINE Loyalty OOH Media Gas.Prices Hotel.Rates Base Radio TV Print Media Direct and promotions were strong positive drivers, but the cumulative -23.5% impact from TV, radio and print, drove the negative YOY performance Weekly Revenue
  9. 9. Marketing Variance by Property: Property 2 holding its own, but Property 4 a major weakness, accounting for 75% of the -3.9% YOY decline. 1.1% -3.0% -1.1% +1.4% -0.21% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% Property 1 Property 2 Property 3 Property 4 Property 5 Base Direct Promo Loyalty ONLINE OOH Media Print Media TV Radio Gas Prices Hotel.Rates % Impact on HAC Total YOY Trend Q1-08
  10. 10. Incremental Revenue per $1K Spending: Print Magazines and Gaming, Entertainment media messages are the most productive media tactics $34 $41 $56 $111 $197 $256 $256 $257 $350 $968 $1,223 $1,588 $2,258 $0 $500 $1,000 $1,500 $2,000 $2,500 Incr.Rev. Per $1K Print Mag Radio Promotion/Gaming Message Radio Entertainment Message Radio Online Paid Search Cable TV Radio/TV Brand Message Promotion Print News Broadcast TV Online Display Ads Direct OOH Media
  11. 11. Marketing Optimization by Media Channel: Shifting spending away from Direct Marketing and more towards Mass Media & Promotion is expected to lift total revenues +11%. Marketing Contribution Current Spend Optimal Spend Print $197,919,585 $3,137,056 $4,730,312 Radio $119,205,549 $622,139 $3,430,736 TV $163,044,982 $5,990,834 $12,351,200 OOH $38,833,486 $5,084,962 $2,140,374 Online $124,430,739 $3,179,562 $6,637,395 PROMO $86,299,932 $1,941,516 $7,392,062 Direct $495,243,704 $83,630,050 $66,904,040 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Print Radio TV OOH Online PROMO Direct $103,586,119 $103,586,119
  12. 12. Marketing Contribution Current Spend Optimal Spend Property 5 $574,305,007 $33,533,049 $13,533,016 Property 4 $494,747,607 $23,193,519 $33,243,438 Property 3 $356,899,222 $19,877,122 $22,877,122 Property 2 $479,397,249 $22,641,594 $35,169,912 Property 1 $323,852,448 $24,217,958 $18,639,753 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Property 5 Property 4 Property 3 Property 2 Property 1 Total Marketing Spending Optimization by Property: Calls for shifting funds from properties 1 and 5 towards properties 2,3 and 4
  13. 13. Special Issues Fuel Prices Promotions Media message effectiveness In versus out-of-market spending Marketing synergies Tactical Investment Guide
  14. 14. -1.8% -1.9% -1.9% -1.7% -1.8% -$350,000 -$300,000 -$250,000 -$200,000 -$150,000 -$100,000 -$50,000 $0 Property 1 Property 2 Property 3 Property 4 Property 5 Revenue Impact Impact of Fuel Prices on Alpha’s Revenues: Every $1 increase in gas price, costs Alpha’s -1.8% in Revenue. Impact of $1 Increase in retail fuel prices Fuel prices had a -1.1% YOY impact for Q1-08
  15. 15. Alpha’s AC Promotions: $4M Sweepstakes was most successful 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 Diamond Acquisition $4M Sweeps Other MillionDollar Weekend Set Sall Gift Grab Vacation Cash 3X Cashback Hidden Jackpot Weekly Revenue Impact
  16. 16. Print, TV & Radio Optimal Spending by Messages: Calls for Increases in Entertainment, Gaming and Food/Beverasge, and relative reduction in Branded and Misc. messages 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Marketing Contribution Current Spend Optimal Spend Misc Food/Bev Entertainment Gaming Brand
  17. 17. Optimal Spending by Market: Calls for Increases in Markets 1, 3, 5 and National media, shifting funds out of Market 2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Marketing Contribution Current Spend Optimal Spend NATIONAL/REGIONAL Market 6 Market 5 Market 4 Market 3 Market 2 Market 1
  18. 18. Marketing Synergies: 45% of the total marketing impact is due to synergies or interactions between two or more marketing drivers. Direct marketing drives the highest overall synergy, while Online has the highest portion of total marketing effects due to marketing synergies. Online Direct Direct Direct Direct TV Print Direct 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Other Synergies Primary Synergy Primary Effect
  19. 19. The Marketing Investment Matrix • The next chart is a visual display of each marketing and media tactic and program along a spend v. returns matrix. • Programs in the upper right are high investment and high returns efforts. These are high stakes and critical ongoing investments in the future. • Programs in the upper left are low investment and high returns efforts. These represent significant upside opportunities for improving overall marketing productivity and should be expanded aggressively • Programs in the lower left are low priority initiatives. They are neither high investment nor high returns. These efforts are of marginal importance and can be reduced or even eliminated. • Programs in the lower right are high investment but low returns efforts. These are probably in the diminishing returns portion of their response curves and, although important, can probably be scaled back to some degree.
  20. 20. Marketing Investment Matrix Radio.Misc.Mkt3 Radio.Brand.Mkt4 Brdcast.Brand.TV.Mkt1 Misc. Print,News.Mkt3 CableTV.Brand.Mkt2 Radio.Brand.Market7 CableTV.Brand.Mkt1 Enter. Print.News.Mkt1 Radio.Gaming.Mkt3 Misc. Natonal.News Gaming National.Mag Radio.Brand.Mkt2 Enter. Print.News.Mkt4 Onlline Search Promotion CableTV.Brand.Mkt4 Brdcast.Brand.TV.Mkt2 ONLINE.DISPLAYBrdcast.Brand.TV.Mkt4 Enter. Print.News.Mkt2 OOH.Adv Direct.Mktg Enter & Gaming Regional.Mag Radio.Gaming.Mkt2 Radio.Entertainment.Market7 Misc. Mag.Mkt3 Radio.Entertainment.Market6 - 20 40 60 80 100 120 140 160 180 80 85 90 95 100 105 110 115 120 125 130 Index of Spending IndexofRevenueReturns High Stakes Maintain/IncreaseHigh Opportunity Expand Aggressively Dimishing Returns HarvestUnproductive Reduce Significantly
  21. 21. -10,000,000 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 Error Model Actual Model v. Actual Revenues: Overall Fit of Model Outstanding R2=98.6% Holdout R2=98.9% MAPE=+/- 0.7% Weekly Revenue
  22. 22. • Marketing Optimization Modeling (MMO) is not just a technical exercise! • Business Knowledge & Direct Industry Experience • You can not succeed by “plug & play” via a CPG approach • Bottomline Analytics (BLA) takes a “Consultative/Collaborative” Approach • BLA’s philosophy is “strategic, custom and issues focused”. • BLA believes and espouses that MMO is and should be an exercise yielding tangible benefits • You will know marketing productivity, ROMI and how to optimize your marketing budget, yielding a tangible dividend • BLA has some unique tools and methods • Social media measurement and sponsorship engagement • Focus on both Media Channels and Media Message • Marketing synergies • Marketing spending optimization • MMO is a Competitive Advantage and One of the Most Powerful Tools in Analytics. 22 The Way Forward
  23. 23. Michael Wolfe Bottom-Line Analytics LLC www.bottomlineanalytics.com mjw@bottomlineanalytics.com 770.485.0270 (o) 678.314.8446 (m) Thank You! 23

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