Service Quality, Segmentation and Casino Player Retention. Abstract. Introduction. Casino service quality, customer satisfaction and retention

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1 Service Quality, Segmentation and Casino Player Retention Abstract Competition is intense between casinos within the Asia-Pacific region and this creates pressure for casinos to implement strategies which can build competitive advantage. Building and maintaining service quality is one means of retaining and thus establishing competitive advantage. To achieve an appropriate balance between using resources efficiently and maximising customer profitability, some casinos have established a system of segmenting players by tier. Conducted in Asia, the current study investigated the relationship between casino service quality, player segments and customer retention using tiered segmentation. The results provide insights into how the various tiers of casino player perceive the key dimensions of service quality and how such perceptions affect future purchase intentions. A number of significant implications are identified for casino managers. Introduction Numerous casinos have been established in Asia in recent years, and competition has intensified. Casino marketers have become aware that retaining loyal is more profitable than acquiring new players. A positive relationship between player retention and casino profitability has been reported by researchers (e.g. Kale Klugsberger, 2007; Watson Kale, 2003). Customer retention is the central aim of relationship marketing and is closely related to company profitability (e.g. Heskett Schlesinger, 1994; Rust Zahorik, 1993). Service quality has been argued as an antecedent of player loyalty and retention, but this relationship is rarely cited in the gaming literature. Noting this limitation, the present study segments casino players into differing tiers on the basis of Customer Pyramid theory (see Zeithaml, Rust Lemon, 2001), and employs a qualitative approach to gain insights into the relationship between casino player perceptions of service quality and their intention to return. Casino service quality, customer satisfaction and retention Service quality is commonly acknowledged as an antecedent of customer retention, Zeithaml, Berry and Parasuraman (1996) reported that improving service quality increases favourable behavioural intentions and decreases unfavourable intentions. Given recognition of this relationship, are not served equally since they are not equally profitable to the firm. Zeithaml, Rust and Lemon (2001) have suggested that firms should use the Customer Pyramid as a tool to rank into different tiers based on the level of profitability that they generate and to manage discrete tiers of differently with a view to increasing profitability. Most organisations have deployed the Customer Pyramid approach to segmentation on the basis of the profitability associated with particular. Though this is applicable to casinos, it is particularly challenging to pinpoint player profitability in the casino context. Where casinos do adopt the Customer Pyramid tool for segmentation into different tiers, they do so according to visitation during a given year, average betting volume and time spent gaming per visit. This tiered approach to segmentation is represented by gaming card systems such as Platinum Card, Gold Card, Silver Card and Green Card. The various services provided by the casino are adjusted for each player according to the type of card that is held. Although every player may have an expectation of receiving optimal services from the casino, Zeithaml et al. (2001) indicated that vary widely in their behaviours, expectations and responsiveness to marketing on the basis of their tiering. For 1

2 example, casino high rollers often demand the best of everything from six star amenities to the most generous discounts and commissions (MacDonald, 2001). Greed Card holders may be content to receive discounted casino accommodation. Different customer expectations are likely to affect perceptions of service quality. On this basis, the following proposition is made: Proposition 1: Different tiers of casino players have differing perceptions of casino service quality Dimensions of service quality and player retention Service quality is a widely discussed and debated construct. Most researchers agree that service quality is not a uni-dimensional construct. In their earlier exploratory study, Parasuraman, Zethaml and Berry (1988) developed a SERVQUAL scale based on the criteria used by in assessing service quality. The scale is composed of 5 dimensions with 22 items, namely tangibles, reliability, responsiveness, assurance and empathy. Most of these dimensions involve an element of human interaction through the delivery of services. In the case of services characterised by a high degree of person-to-person interaction and by the absence of an exchange of tangible goods, (e.g. casino gaming), customer perceptions of service quality are comprised primarily of personal interactions between frontline employees and in each service encounter (Chandon, Leo Philippe, 1997). Such personal interactions often involve negotiation and communication processes which may affect subsequent customer attitudes, intentions and behaviours. In the casino context, service encounters include interactions between players and hotel receptionists, croupiers and casino hosts, and will vary according to the tiering category. In the case of the VIP gaming rooms, the primary points of contact for high-end players, apart from croupiers are casino hosts. In sharp contrast, casino hosts are barely visible and not readily available in the low-end general gaming areas. Inevitably, because of the distinct service encounters that occur, different tiers of player will have different perceptions of casino services. In the mind of the customer the levels of personal interaction with casino service representatives will affect the importance attached to dimensions of service quality. Dimensions of service quality play different roles in determining the attitudes of towards the casino and will affect their intentions and behaviours. On this basis, the following proposition is presented: Proposition 2: dimensions of service quality have differing effects on the patronage and retention of players on the basis of their tiering category Methodology This study was conducted in Asia and the results have particular relevance for the Asia Pacific region. Data were collected from regular gamblers who patronise the casino at Genting in Malaysia. The study involved a series of semi-structured interviews. A qualitative approach was employed because of the exploratory nature of the research. This method was believed to be better suited for obtaining a deeper understanding of gambler perceptions of casino service quality and their intentions to return. Survey respondents were recruited from various tiers of casino player. The casino uses a tiered card system and segments gamblers on the basis of their average betting volume, hands per hour and frequency of visit. The system involves five types of card - Thematic Card, Green Card, Silver Card, Gold and Platinum card. The Thematic Card is a non-gaming card, and is designed for any casino visitor. It can be used at all points of sale, including hotels, restaurants, shows, and theme parks. The Green 2

3 Card is the minimum level of gaming card recognition and can be used in the General Gaming Area. The Silver Card, one class above the Green Card, is used in the International Room. The next level is the Gold Card, used in the VIP gaming room. The Platinum Card occupies the highest level, and Platinum Card holders are normally high-end players (also known as high rollers), who play at the VIP room and two specially designed high-end gaming areas. Following advice provided by the Vice President of casino marketing, the researchers classifies Gold and Platinum Card holders into a single category and are referred to as VIP players. The researchers spent a few weeks in the casino and interviewed 10 players from each segment (40 in total). Prospective respondents were drawn from the casino s CRM system, based on the segmentation criteria used by the casino and on the basis of place of residence, including acknowledgment of accessibility to the Singapore casinos. This selection was undertaken to minimise the compounding effect of extraneous variables such as interviewee place of residence on the research objective player retention is determined by service quality of the casino not convenient location. Interviews were undertaken during non-playing periods in the designated guest room where patrons can rest and have drinks. To test the first proposition, the 22 performance-based SERVQUAL items were used to investigate interviewee perceptions. The dimensions and items of SERVQUAL represent core evaluation criteria that transcend specific companies and industries. These items were subsequently reworded to suit the casino context and the characteristics of the gaming experience. The researchers used a discussion guide to ensure consistency with the interviews. Player perceptions of casino service quality were addressed using SERVQUAL, including their intention to return and willingness to refer. Interviewees were also encouraged to articulate the reasons for their patronage and intention to re-patronise. Data collected was transcribed, translated, and analysed by pooling all of the relevant information. Analyses and results The interview results provide a number of useful insights. In general, interviewees holding a Silver Card were more proactive in contributing their opinions. This group of respondents was particularly interested in having their concerns addressed and would want their voices to be attended by casino management. Players from different segments have distinct views about the effects of each service quality dimension on their patronage and retention. Their responses revealed that gamblers have different interpretations of service quality from clients of other businesses. The specific responses are discussed below. Proposition 1: Different tiers of casino players have differing perceptions of casino service quality. This proposition was supported based on interviews findings. In summary, Thematic Card and Silver Card holders had positive perceptions of casino tangibles, whereas Green Card holders were negative, and VIP players were indifferent. Only Silver Card and VIP players perceived casino intangibles positively. The results from the interviewees are summarised in Table 1. The terms positive, indifferent and negative are used to describe their perceptions of the five dimensions of service quality. Table 1 Service Quality Perceptions of Casino Players at Different Tiers SERVPERF dimensions Thematic Card Green Card Silver Card VIP Tangibles positive negative positive indifferent 3

4 Reliability negative negative positive positive Responsiveness negative negative negative negative Assurance indifferent negative positive positive Empathy negative negative negative positive Proposition 2: service quality dimensions have differing effects on the patronage and retention of players on the basis of their tiering category. This proposition was supported. The interview findings indicate that tangibles and responsiveness are the primary factors in determining the prospects of future patronage from Thematic Card holders, particularly in the case of hotel facilities and the promptness of service; whereas for Green Card holders it is only tangibles which are influential. The intention amongst Silver Card holders to return can be attributed to the physical facilities of the casino, to employee dependability and to the degree of attention provided by employees. Surprisingly VIP players paid a great deal of attention to reliability and assurance. They indicated that the reason for their repeat patronage is the dependability and trustworthiness of casino employees. However, when they were asked to rank the relative importance of the five dimensions of service quality for their future repeat patronage, interesting results were obtained (see Table 2). Table 2 Effects of Service Quality on the Patronage and Retention of Different Tiers of Casino Players SERVPERF dimensions Thematic Card Green Card Silver Card VIP Tangibles Reliability Responsiveness Assurance Empathy The results indicate that Thematic Card and Green Card apply similar rankings. Silver Card value individual attention paid by casino employees, whereas VIP seek security and dependence from the casino. Discussion and implications for future research This paper has provided insights into the relationship between the various dimensions of service quality, customer segments and retention through interviewing casino players at 4

5 different tiers based on the card segmentation system. The interview findings indicate that players at different segments have distinct perceptions of service quality. Operationalising service quality into five dimensions, this study has shown that various dimensions of service quality have differing effects on customer retention for players at different tiers. The findings have the following implications: Firstly, it is insufficient to view service quality as the customer s judgement about an entity s overall excellence or superiority as has been defined in the services literature. Differing perceptions and attitudes arise as a result of the variety of service encounters that a customer experiences. The overall assessment of service quality is made up of a combination of perceptions formed from each service encounter between the customer and service provider. To obtain positive customer perceptions towards the organisation s service quality, it is advisable to manage each service encounter closely. Since the various dimensions of service quality affect player retention differentially for at different tiers, casino management should focus on those aspects that concern the specific tier of player loyalty and retention, in order to be cost effective and maximise the use of casino resources. For example, it has been claimed that the majority of casino revenues are derived from high rollers or VIP players. Casinos will do almost everything to cater to the fancies and superstitions of their high-end. (Kale, posted 24 Feb, 2005 at Bright Idea, Urbino). However, the present research has revealed that the casino s luxurious tangible offerings have little effect on the loyalty and retention of these players. They are not fascinated by luxurious hotel suites or by vintage French wines; nor are they excited about pop concerts or imported Las Vegas magic shows and appear to take such offerings for granted. Their intention to return is primarily concerned with their interactions with casino frontline employees. In this context, it is essential to build rapport between the employees and the casino guests, since this will enhance customer loyalty and retention (Gremler Gwinner, 2000). Providing relevant training for player contact employees is imperative. On the other hand, although VIP players expressed indifference towards tangible offerings, complaints would be received if they were not provided; or they would be lured to competitors. It is important that casino management resolve this dilemma and ensure the efficient use of casino resources to maximise revenues. Although the tiered player system was created largely to support the efficient use of casino resources; the practice should not be allowed to imply any prejudice or discrimination against lower tier. Such an implication can influence customer perceptions of service quality and judgement. Defined as overall judgement of an entity s overall service excellence, service quality may also be viewed as a comparison of services that expect from the provider with the service performance that they perceive. Casino players at different tiers logically expect differential levels of services, although it is possible to optimise their expectations. It is important for casinos to manage player expectations and make appropriate adjustments based on the level of their relationship with the casino. The interviews have revealed that casino hosts are inadequately empowered in their capacity as first contact point for players. This is reflected in the slow response by hosts to player requests, when they are required to refer matters to their supervisors and/or more senior management. This hierarchical process is time consuming and may be intolerable for gamblers who are seeking an immediate response so that they can regain their anticipated turnaround luck. To minimise player complaints and the possibility of switching to competitors, casino management should attend to the issues raised by empowering frontline employees. Some limitations of the research should be challenged. Firstly, the study was originally designed to include both qualitative and quantitative methods. However, despite the offer of attractive incentives to participate, few responses were received for the 5

6 quantitative survey. The low-response rate might be attributable to the sensitivity of gambling and reluctance on the part of prospective respondents to describe their gambling activities. It also indicates the difficulty of large-scale random sampling on gamblers in the casino industry context. Second, the gathering of survey results from a single location may limit the generalisation of the findings. Future research should endeavour to overcome the obstacles encountered in concluding the present study. References Bitner, M. J., Hubbert, A. R. (1994). Encounter satisfaction versus overall satisfaction versus quality. Service quality: New directions in theory and practice, Chandon, J. L., Leo, P. Y., Philippe, J. (1997). Service encounter dimensions-a dyadic perspective: Measuring the dimensions of service encounters as perceived by and personnel. International Journal of Service Industry Management, 8(1), Cronin, J. J., Taylor, S. A. (1992). Measuring service quality: a reexamination and extension. Journal of Marketing, 56(3), Ennew, C. T., Binks, M. R. (1996). The Impact of Service Quality and Service Characteristics on Customer Retention: Small Businesses and their Banks in the UK1. British Journal of Management, 7(3), Gremler, D. D., Gwinner, K. P. (2000). Customer-employee rapport in service relationships. Journal of Service Research, 3(1), 82. Hallowell, R. (1996). The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study. International Journal of Service Industry Management, 7(4), Heskett, J. L., Schlesinger, L. (1994). Putting the service-profit chain to work. Harvard Business Review, 72(2), Heskett, J. L., Jones, T. O., Loveman, G. W., Sasser, W., Schlesinger, L. A. (1994). Putting the service-pro t chain to work. Harvard Business Review, 72(2), Kale, S.H. (2005). Optimally managing casino high-end market. Bright Ideas, Kale, S. H., Klugsberger, P. (2007). Reaping rewards [Electronic Version]. Marketing Management, 16(4), Klebanow, A.M. (2002). Developing the casino marketing plan. UNLA Gaming Research and Review Journal. 6(2), Liljander, V., Strandvik, T. (1995). The nature of customer relationships in services. Advances in services marketing and management, 4, MacDonald, A. Dealing with high-rollers. urbino. net/articles. cfm. 6

7 Oliver, R. L. (1993). Cognitive, affective, and attribute bases of the satisfaction response. The Journal of Consumer Research, 20(3), Parasuraman, A., Zeithaml, V. A., Berry, L. L. (1988). SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality., Journal of Retailing (Vol. 64, pp. 5): Elsevier Science Publishing Company, Inc. Parasuraman, A., Zeithaml, V. A., Berry, L. L. (1994). Reassessment of expectations as a comparison standard in measuring service quality: Implications. Journal of Marketing (Vol. 58, pp. 111): American Marketing Association Rust, R. T., Zaborik, A. J. (1993). Customer Satisfaction, Customer Retention, and Market Share., Journal of Retailing (Vol. 69, pp. 193): Elsevier Science Publishing Company, Inc. Storbacka, K., Strandvik, T., Grönroos, C. (1994). Managing customer relationships for profit: the dynamics of relationship quality. International Journal of Service Industry Management, 5(5), Watson, L., Kale, S. H. (2001). Know when to hold them: Applying the customer lifetime value concept to casino table gaming. International Gambling Studies, 3(1), Woodside, A. G., Frey, L. L., Daly, R. T. (1989). Linking service quality, customer satisfaction, and behavioral intention. Journal of Health Care Marketing, 9(4), 5 Zeithaml, V. A., Berry, L. L., Parasuraman, A. (1996). The behavioral consequences of service quality. the Journal of Marketing, 60(2), Zeithaml, V. A., Rust, R. T., Lemon, K. N. (2001). The customer pyramid: creating and serving profitable. California Management Review, 43(4),

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Swinburne Research Bank

Powered by TCPDF (www.tcpdf.org) Swinburne Research Bank http://researchbank.swinburne.edu.au Author: Prentice, Catherine Title: Attitudinal and behavioural loyalty amongst casino players in Macau Year: