Analytical marketing is a numbers game, says casino king

23 Feb 2009

To survive the downturn, Irish firms must provide compelling customer experiences and use dynamic pricing tactics, a renowned customer intelligence expert who worked for one of the major Las Vegas casino giants recommends.

The vice-president for Profit Optimisation Systems at SAS Institute Steven Pinchuk was previously in charge of revenue management for Harrah’s Casinos and Hotels, which owns considerable casino real estate across the US, including Caesar’s Palace in Las Vegas. His strategies increased profits 99pc at the group within one year.

Pinchuk, who was in Dublin last week, said that up to 50pc of any business’ customer base will actively explore switching supplier as the recession takes hold over the next 12–18 months.

“What will your clients do if your competitors decide to lower pricing in order to maintain or even steal market share?” asked Pinchuk. “Companies that fear going out of business will do just about anything to maintain their hold.”

Pinchuk, who is responsible for the direction of SAS’s global solutions and systems that optimise profits, continued: “Many Irish companies are unprepared for the avalanche of customer desertions that inevitably occurs during a recession as greater numbers of customers question prices, value and service.

“Businesses must focus on customer retention and pricing as a priority because acquiring a new customer can cost 6–7 times more than retaining an existing customer.”

SAS maintains that, over the coming months, companies in every sector of the economy will be forced to redefine their customer strategies, and will need to deliver a more personalised service with prices based on knowledge of individual customer requirements and patterns of behaviour.

Pinchuk note that, as the four P’s of marketing – product, price, place and promotion – become increasingly tactical, more companies are embracing the  three I’s – customer insight, interaction and improvement – as the key to growing long-term, profitable customers.

This change in focus becomes critical during a downturn, as businesses who boost customer retention rates by as little as 5pc see increases in profits ranging from 5pc to a staggering 95pc.

“No matter how good a company feels their prices and personalised marketing approach are, there is always room for improvement. During the boom years, many companies became complacent and less customer-focused.

“These businesses must now take pre-emptive action to consolidate their product offering and invest in crafting more relevant prices and customer experiences to improve loyalty. To do that effectively, you need deploy predictive analytics to obtain information and insights about your customers – what they do, like, need etc – so you can, in effect, predict from their purchasing trends future needs and, of course, be there with that new offering.

“Companies are doing a good job gathering customer data, but are falling short at creating proprietary predictive insight from it. You cannot manage the customer experience if you don’t know what your customer is likely to buy next or if they are likely to switch to a competitor. Looking around the curve and predicting future outcomes is where the value of customer insight lies.”

According to Pinchuk, as part of any solution, Irish businesses must adopt more analytical approaches to pricing and marketing initiatives in order to help them understand customer behaviour, preferences and buying patterns.

This can only be done through automated and tailored marketing campaigns and pricing that enable businesses to provide enhanced customer focus to individual customers.

By John Kennedy

Pictured: Steven Pinchuk, vice-president for Profit Optimisation Systems at SAS Institute