Questioning the current model of slot machines’ purchases

With his usual frankness, and based on his recognized knowledge and experience, our expert Francisco Vidal Caamaño equally advises operators and salespeople on new processes when making buying/selling decisions.

By Francisco Vidal Caamaño, Director at IQ Training and Management Services*

Email: franwy777@yahoo.com
Website: https://www.linkedin.com/in/francisco-vidal-734b0713/

The acquisition of slot machines is, arguably, one of the most important decisions that land-based casino operators have to make every year. Even though the possibility of renting them (and different schemes of participation) is pretty common, still, when the operator gets a successful product, buying slots is the best decision by far from a financial point of view. Sometimes, you can get paybacks of six months or even less. However, these days, that scenario is not very usual. Many times, the operator has extra banks of machines and doesn’t know what to do with them, feeling let down by the supplier. Another situation that often happens is the cannibalization of existing products. The operator invests hundreds of thousands of dollars in new machines only to find out that customers have just moved around the floor to try the novelties, but the operator doesn’t receive incremental revenue. So, what can we do about that?

SOME ADVICES FOR OPERATORS
Regarding operators, they should invest more resources (people, time, analytical capabilities) in trying to understand what makes a product successful, just looking at the slots, seeing if those products are being played or not. What happens if some slots just don’t work anymore? In this case, it’s essential to comprehend not the whats, but the whys. Instead of leaving the interpretation of reality to chance, a more scientific approach should be tried. That’s the only way to get the capacity to make well-grounded decisions, both in the present and the future. Traditionally, when selling machines, the sales person used to meet you (the operator), gave you some shiny brochures, did his/her speech about how great the machines were doing at the competition, and, if you were very, very lucky, offered you a brief explanation of the mathematical model. After that, from then on, you were on your own. That was the way business was done.

So here is my piece of advice for you, operator: before meeting the slot suppliers, make sure that you have an extensive comprehension of your gaming floor. The bare minimum for you is to know the main metrics of the product (coin in, win, average bet, number of games, etc.), but, apart from that, you should identify at least which are the main successful characteristics of the range of games you have for the different customer segments. You should especially define the features of the secondary games and bonuses, in terms of customer engagement. Just spinning the reels every 4/6 seconds and seeing what happens don’t add any entertainment value anymore. The different elements within a game and the mathematical models are what really excites and motivates players. Another variable to consider is the risk associated with some games. The maximum liability (the biggest prize that a machine can pay) should be known in advance. More than a few casino managers have suffered one of these individual jackpots that compromise the results of the whole month, so make sure that you do not have any nuclear bomb hidden somewhere in the middle of the floor.

NEW CHALLENGES FOR SELLING SLOTS
Regarding the slots salespeople, I do think that their lives will become much tougher in the near future. Long gone are those times in which you just popped up at the casino to sell your products, share stories and gossip about mutually known executives, and have a couple of drinks at the nearest pub. That strategy just won’t function anymore in current hyper analytical gambling environment. In the last couple of years, big data companies that squeeze every little piece of information coming from the machines and other markets have been increasing their influence, and sooner rather than later, casino operators will start to trust them. This reality will make the selling/buying conversation very different. It will become much more sophisticated, in the same way that the intuitive stock traders of the past were substituted by quants in the financial sector (and, nowadays, even those, by trading algorithms). In the near future, salespeople from the gaming sector that do not acquire the vocabulary and the tools of an amateur data scientist, those that do not really understand the drivers of land-based casino business, won’t be able to perform their jobs properly. In the years ahead, they will have to provide some additional value apart from their social skills and network of contacts. In simple terms, the sales team will need to be able to analyze the gaming floors of their customers and their competitors, find where the problems and opportunities are, and provide a bespoke solution. That is what creates real value for the operator.

In terms of the future, I foresee a partnership model in which suppliers, operators and big data external vendors will work in sync, sharing information and knowledge. This will nullify the possibility of making costly mistakes when allocating financial capital, when business models show signs of decadence (traditional land-based casino business is showing that in many jurisdictions). One of the ways to sustain profit margins is by avoiding waste and optimizing operations. In the case of casino operators, false pride won’t get you anywhere. Consider that it is very rarely to have all the necessary knowledge and skills within the walls of your organization. You should better redesign the whole process of how are you making decisions about the slot product. Not doing so will drive you to an unnecessary waste of time and resources.

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*Francisco Vidal Caamaño is Director at IQ Training and Management Services. He has an extensive professional career of more than 20 years in the industry. Vidal Caamaño served as casino manager or COO in the main global companies in the sector. He was in charge of the daily management of more than 40 business units in different countries of Europe and America.