Increasing bonus ROI

Online gamblers come in many shapes and forms. We categorise them into segments, based on value or behaviour. Well-known examples are ‘VIPs’ and ‘wiseguys’. In this article, I will simplify the segments to ‘good’ and ‘bad’ customers. The good ones are profitable, the bad ones are not.

When an operator spends money on a bonus, the goal is to get a return on investment on that bonus. Often this ROI is part of the KPIs of acquisition and retention marketing teams. It’s in everyone’s interest to maximise results.

There are different ways to achieve these results. One is to calculate the minimum amount you can get away with and offer that bonus to your customers. This is common in many industries, but tricky to do in online gambling. Results are often unreliable (unclear cause and effect) and customers might feel under-rewarded, even though their short-term behaviour doesn’t change. And what if the outcome of your research tells you to give a customer a £37 bonus for optimal ROI? It’s a strategy worth investing in, but it’s important to be extremely cautious when taking action based solely on this type of analysis.

Know your customer

Another well-known way of increasing ROI is to spend less on the ‘bad’ customers and more on the ‘good’ ones. Not giving bonuses to wiseguys or giving additional loyalty offers to VIPs are classic examples here.

In this article, I will argue that this way of thinking can be developed much further. Wiseguys and VIPs are the extremes of the spectrum. Customers show many different behaviours that can all be interpreted and acted upon. In my opinion, we are punishing too many good customers because of the behaviour of the bad ones.

Common examples

Imagine a typical casino welcome offer with a 30x wagering requirement. If you’re a smart customer you might wager it on NetEnt’s Bloodsuckers which has a return to player (RTP) of 98%. As a customer, after wagering, you expect to keep around 40% of the bonus amount offered (you lose 2% on each of 30 wagers of the 100% original bonus). If you were to wager on Starburst (96% RTP) you’d end up with a negative percentage.

To prevent customers from running away with 40% of their welcome offer, many operators restrict the slots you can wager your bonus on. You add an additional line in the Ts&Cs with a list of slots that don’t count towards bonus progression. This list would include games like Bloodsuckers.

By doing this, you might upset some ‘good’ customers but you also lose a crucial piece of information for identifying customer potential. If a customer wagers their welcome offer on Bloodsuckers, you assume their expected life time value (LTV) will be lower versus a customer who wagers on Starburst.

Table games are another example. Some of your customers might want to wager their bonus on blackjack while playing perfect strategy (99.2% RTP in the Evolution version). They would keep over 70% of the bonus amount. To avoid this, you add another line in the Ts&Cs which says ‘table games only contribute 10% to the wagering of a bonus’. In effect, turning the 30x into 300x. This is common in online gambling, but also very confusing to the unexperienced customer. It’s like going to a restaurant, ordering a £25 steak and getting charged £50 on the bill. The waiter explains that ‘all meat is charged 200% of what is advertised on the menu, didn’t you read the Ts&Cs?’.

Ten percent wagering contribution for table games comes across exactly like that to many of your customers. It would be more transparent to write that you have to wager the bonus 300x in live casino. But no customer would want to do that, right?
And what about roulette? This game has an RTP of 97.3%, which is lower than many slots. Yet customers have to wager their bonus 300x with many operators if they want to play roulette.

Ten percent table games contribution will annoy some VIPs and it’s another piece of information you miss out on. How many operators are tracking their customer’s blackjack strategy and adapting their retention bonuses to this information? A customer who stands on 16 when the dealer shows a 10 should have a higher LTV than the customer who hits.

A different approach

In each of the examples above, we feel like we have been mistreated by our customers so we took measures to avoid this from happening again. By doing this, we don’t just discourage the bad customers, we also punish the good ones. The main issue is that we see the customer as ‘bad’ by default. This is reflected in all these measures. What would it take if we decided to turn things upside down?

A new customer would be defined as ‘good’. You would require the customer to wager their welcome offer 30x on anything in casino. This would make your wagering conditions transparent and simple (imagine how you would stand out versus your competitors and what marketing opportunities it would bring).

You now monitor every transaction and take learnings from what the customer is doing. As soon as a customer displays sufficient behaviour to define them as ‘bad’, you simply stop them from getting any bonuses.

This would require a complex analytical model that takes all customer transactions into account in real time. If the customer wagers a bonus on a high RTP slot or plays perfect strategy blackjack, their ‘risk score’ goes up. Once a certain score is reached, the customer gets excluded from all future bonuses.

Smart customers

Keep in mind that winning or losing is completely irrelevant to your smartest customers. It should be for you too. Most operators have a cap on how much bonus they want to spend on each individual customer. This amount is often expressed in a percentage of their gross revenue. Some niche casino operators have this at 30%+ while others have it 10% or even less. Once a customer surpasses your set percentage for the last X days, you exclude them from getting any more bonuses.

One of the side effects of this strategy is that any customer who gets lucky in their first experience on your website will be excluded from future bonus campaigns. How’s that for an early life experience? The smart customer who deposits the max amount, gets max bonus, bets it all on red and loses, could be tagged as a potential VIP and receive extra bonuses.

Theory versus reality

If you are getting all excited about this different way of thinking and you want to try it out, there are a couple of things to keep in mind. First of all, this will only work in markets with a favourable good/bad customers ratio. You need to have a solid brand reputation. If you are a niche operator that gets in most customers through aggressive bonuses on affiliate websites, it won’t work. You have to attract mainstream (good) customers.

Your analytical model to spot and tag the ‘bad’ customers needs to be reliable. You will always have false positives, so keep in mind that you might lose out on some new VIPs. By being really good at spotting ‘bad’ customer behaviour, you can decrease spend on those customers. This money can be spent on ‘good’ customers who will help you achieve a much higher ROI on your investments. If your goal is to increase ROI on bonuses, this is a good way to achieve that. Customers will show more loyalty, which will increase their LTV.

Wagering conditions and long Ts&Cs have caused a trust issue within our industry. Offers look ‘too good to be true’, and they usually are. As a marketer, your job is to establish and maintain your customer’s trust. Transparent and honest Ts&Cs are a way to achieve this. We’ve been spending a lot of time trying to explain something complicated in a simple way to our customers. Why not just make it simpler in the first place?

Ward de Bock started his career at 18, dealing cards in Belgian casinos. In 2011, he moved to London to work for one of the biggest online operators. He recently started a gambling consulting business.