Acquiring customers first is key in online gambling

What New Jersey Can Tell Us About The Loyalty Of Online Poker Players

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Every year, Rutgers University releases an online gambling report that helps shed some light on player behaviors and responsible gaming policies in New Jersey.

Within the last research report — The Prevalence of Online and Land‐Based Gambling in New Jersey, by Nower, L., Caler, K. & Peters, E. (2017) — there was some interesting data that shed some light on brand loyalty among recreational and high-volume players.

Most players are very loyal

According to the report, in 2014 and 2015, the overwhelming majority of NJ online casino users registered a single account.

Despite having more than a dozen sites to choose from (a number that has since risen),  69 percent of customers were registered at a single online casino in 2014. The percentage increased to 72 percent in 2015.

An additional 14 percent of players were registered at just two sites.

That means 86 percent of online gamblers in New Jersey are registered at two or less online gaming sites, with the vast majority registered at just one site.

There’s also a very fickle customer

Customers with a single account are the norm, but there are exceptions.

There is a group with multiple accounts, and that group is increasing in size. According to the Rutgers’ research, the number of people with four or more accounts rose from six percent in 2014 to eight percent in 2015.

By itself this doesn’t tell us too much. However, the research also notes that those identified as the “Top Ten Percent” of online gamblers (by activity and total amount wagered) average four accounts.

Essentially, most of the players with three or more accounts (13.8 percent of all New Jersey online gamblers) fall into the “Top Ten Percent” category.

As the Rutgers’ researchers note, “This suggests that a majority of players are choosing a preferred site, while a small minority are gambling across multiple platforms.” And from the looks of it, the group gambling across multiple platforms are the regs, not the recs.

So what’s going on here?

Based on the data, NJ online gamblers fit into one of three main groups:

  • Loyalists (one account)
  • Discerning customers (two to three accounts)
  • Mercanaries (four-plus accounts)

The preponderance of single account registration is extremely interesting. It’s unlikely an Atlantic City visitor hasn’t stepped foot in multiple casinos, but most do have a preferred property where they enjoy a higher reward level or simply like the atmosphere.

With online and land-based rewards linked it’s not surprising that existing customers would choose to play at the online casino of their preferred terrestrial casino.

But since most online gamblers are online specific players — players we’re told are more discerning — something else is afoot.

Just a few reasons a person might stay loyal to the first site they register at are:

  • Content with their current site.
  • Have a history with or fond memories of the site.
  • Don’t want to go through the invasive sign-up process at another site.

Similarly, there are plenty of reasons someone might create a second or third account, most having little to do with a lack of loyalty:

  • A bad experience at the first site, which could range from a run of bad luck, to a bad product, to a bad interaction at the affiliated land-based casino.
  • A new entity joining the market.
  • Lured by an offer from another known entity. Unless it’s an incredible offer, it’s unlikely a player would jump at one offer from an unknown and not jump at offers from other online gaming providers.

On the other hand, the reasons a person would have four, five, or even eight accounts point to a lack of loyalty:

  • A value seeker constantly looking for the best deals.
  • Someone trialing the different sites.
  • A serious online poker player who plays tournaments and cash game tables across multiple sites.
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What does this mean?

US online gaming operators would be wise to take notice of this phenomenon.

The data seems to indicate that getting to players first is incredibly important. Roughly 70 percent of all New Jersey online gamblers register at a specific site and stick with it. Another 20 percent of customers will try two or three sites (perhaps unhappy with the first in some way, taking advantage of a one-time offer, or wanting to try a new brand that just entered the market).

Additionally, finding a way to keep the “Top Ten Percent” loyal is just as critical.

Back of the envelope math (using Rutgers wagering averages for the “Top 10 Percent” and the other 90 percent) indicates that the 2,700 online gamblers who make up the “Top 10 Percent” wagered about $1.4 billion in 2015. The other 70,000 online gamblers wagered around $1.6 billion.

At first blush, that seems to indicate each group should be treated equally. But considering the lack of loyalty amongst the Top 10 Percent, it’s likely they are plied with far more offers than the typical online gambler who’s wagering less than a twentieth of what the highest volume players are wagering on an annual basis.

So, while the $3 billion in wagers works out to a hold percentage of about five percent (NJ online casinos generated around $150 million in revenue in 2015) it’s more likely that the “Top 10 Percent” had a much lower hold percentage than the other 90 percent.

Additionally, because they don’t have the same level of loyalty, the Top 10 Percent likely require more marketing spend too.

This is a good explanation why online poker sites are slashing benefits to the upper tier of players, and placing more value on recreational players. Yes, they wager far less, but they’re far more loyal and have higher margins.

Assuming both groups wager $1.5 billion and the site’s margin is five percent, if the top ten percent of players are receiving 30 percent rakeback, and the bottom 90 percent of players are receiving ten percent rakeback, the 90 percent group has more value: $67.5 million compared to $52.5 million.

If the high-volume group was receiving 50 percent in rakeback and rewards they’d be worth just $37.5 million, making the recreational player group almost twice as valuable.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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