Gambling Science

WSJ writes about Harrah’s:

The company made $1 billion in revenue last year — one quarter of its total — from such “cross market” players, up from about $200,000 a decade earlier. Harrah’s can also trace 75.6% of its gambling revenue back to specific customers. Behind Harrah’s strategy is Chief Executive Gary Loveman, a Massachusetts Institute of Technology-trained economist and former Harvard Business School professor.

In September, Maribel Pea, a Harrah’s dispatcher aboard the East Chicago casino, sat in a small room furnished with metal desks and boxes of Mardi Gras beads. From this control booth, she electronically monitored every slot machine upstairs. If a gambler uses a “Total Rewards” frequent-gambler card, the slot machine begins to record his every move. If a machine malfunctions or a gambler hits a jackpot, Ms. Pea grabs a walkie-talkie and dispatches an attendant to check it out. The job can keep as many as four dispatchers busy.

Based on the data churned out by this system, Harrah’s redid the layout of the East Chicago casino’s slot machines, using lessons learned from drugstore chains such as Walgreens and CVS. For example, the casino moved popular slots such as Wheel of Fortune to hard-to-reach areas, betting customers would seek them out just as they find the pharmacist in the rear of a store. That created more space in well-trafficked areas for other games.

To generate excitement, Harrah’s placed a “party pit” with blackjack and roulette games in a central location and staffed it with dealers trained to break into song. Around the pit, the casino replaced nickel slots with $5 Double Diamond and Hot Pepper games previously cloistered on an upper deck for high rollers, hoping low rollers would turn from the tables and take a flier on their way out. “This is the candy bars by the cash register,” says David Patent, vice president of casino operations.

The theory worked. The average amount spent on a single bet on these machines soared to $10, compared with $2 in the casino overall, because new gamblers were drawn to high-denomination slots. Overall, the casino’s profit margins rose to 15% in the third quarter, compared with 12% in the busy first quarter when that casino usually expects to earn its highest margins, Mr. Patent says.

That suggests more people are losing more money. To keep them from noticing, Harrah’s has been researching ways to make people feel lucky even as they lose.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.