Will these integration and product distribution solutions drive enough revenue to offset infrastructure development, increased delivery costs, and revenue sharing?
Regardless, operators realize that they can’t go it alone. There is a legitimate need for integration, evolution and innovation. The challenge becomes the navigation of suppliers and partners in the context of a rapidly evolving consumer demand for new gaming experiences. The cash cow that supports the coffers of provincial governments is dwindling: what can operators do in the face of dramatically evolving and challenging category dynamics?
Where to start?
Operators should focus on two key areas: cross-jurisdictional collaboration to offset supplier advances and portfolio improvements to engage consumers throughout their gaming lifecycle.
There are significant complimentary talents residing across the numerous gaming jurisdictions rarely shared to drive improvements, collectively. Operators need to appreciate that the real threat to their long term success is not the battle for incremental market share points but the long term viability of their category. Operators banding together to share, collaborate, innovate and drive efficiencies will lead to scale and scope economies to ensure category renewal and long term profitability.
Individual consumers may vary but high-level common interests, motivations and attitudes create alignment and a great opportunity for unified, go-to-market strategies. A collective effort must be tackled as an industry because a single operator does not have the capacity or capability to address the full scope of industry issues. To ensure the long term viability of their business model, operators need to align and collaborate on category penetration, innovation, vendor management, system management, IT investment and regulation and compliance.
Managing the consumer lifecycle by optimizing the portfolio
eGaming is currently being managed as an additional channel where traditional gaming products and experiences are being proposed, digitally. Broader distribution benefits platform and product suppliers, IT and consulting companies but offers relatively little short-term margin upside for the operators.
To truly benefit from eGaming, operators need to look at the broader opportunity this channel represents: a chance to borrow from digital disruptors and evolve the gaming experience to draw in a new set of customers. Today, eGaming satisfies existing customers but lays bare the incongruent nature of the younger generation’s primary channel and the gaming experience being proposed. Consumers are evolving. Gaming must evolve.
eGaming needs to be viewed as a step in the gaming adoption ladder that can draw new gaming consumers with new gaming experiences. This does not preclude satisfying existing customers` needs for convenience and mobility with traditional products. It calls for evolving the gaming experience with monetization schemes that are more familiar and acceptable to the 18-35 consumer demographic. There is an opportunity to take control of gaming as a category and challenge existing thinking and commercialization principles for the digital platforms.
Operators need to look at the life of the customer, from early trial to adoption to exit. Different lifecycle periods will require various product and channel strategies to ensure relevancy and adoption, increase penetration and ARPU (average revenue per unit), and drive brand loyalty.
The commercialization model needs to change with the evolving voice of the customer. There has been much debate on the growth of eGaming, social gaming’s impact on the traditional gambling space, electronic or hybrid tables to offset increasing labour costs and the slow death of lotteries and land-based casinos. And while hotly debated, there has been limited insight on how operators should adapt their operational model to deal with the evolving consumer. There has been enormous focus on the young consumer to renew a client base and generate revenue, but this attention may be slightly unbalanced.
Traditional casinos have a long and prosperous future. The challenge will be to target the land-based casino experience at the right consumer, with the right products, at the right moment: when the consumer`s psychological, social, economic, and demographic conditions are right. eGaming can play a role in preparing the ground work for category and brand adoption while a commitment to innovation can prepare the land-based assets for future demographic waves.
On-line and social gaming offers a cost effective way to reach a younger demographic while enabling physical asset improvement for an older demographic. As we look at the consumer lifecycle, various lines of business could play different but supporting roles in engaging the consumer. It is important to understand the consumer shopping journey and motivations to ensure that the value chain consistently and effectively delivers against the evolving voice of the consumer.
Understand and integrate
Gaming delivers against needs for intensity, socialization, transformation, escapism, and pleasure. These consumer needs are greatly influenced by socio-demographic conditions and vary by consumer segment. Socio-economic conditions—which are highly correlated with demographics—will greatly influence gaming interaction and the type of gaming consumers adopt. Operators need to ensure that their portfolio caters to the various demographic subsets to guide the customer through the shopping and adoption journey.
The gaming consumer’s shopping experience can be summed up in four simple steps: visualizing, shopping and selecting, experiencing, and adopting. It is up to the operator to ensure their gaming portfolio communicates the right message to the right audience at the right time, keeping in mind the appropriate channels and touch points throughout the shopping and adoption journey. A strategic and systemic path must be created to deliver key messages and experiences that will drive customer renewal and strengthen the customer relationship ensuring long-term adoption and brand and operator loyalty.
Mapping out this consumer journey and clarifying portfolio roles would be an ideal collaboration exercise for Canadian operators. Understanding, focusing, and enhancing the roles of social gaming, eGaming, lotteries, casinos and bingos within the portfolio can serve every jurisdiction and is paramount for successful short term and long term EBITDA growth. An evolved eGaming proposition can act as the first rung in climbing the gaming adoption ladder.
Gerry Guitor, Director, is a leader in PwC Canada's National Gaming Practice, is a former senior executive at a provincial gaming operator where he was responsible for commercialising casinos and eGaming.