VIPs: Using the RFM method

We all love VIPs. We enjoy that James Bond feeling, thinking that if we can treat our top players like in the movies, we might get a free meal during our next trip to Vegas—because, you know, karma and such. At this point, you probably know by yourself that in reality, the karma phrase ends differently (yes, ***ch). Going back to your top segment, if that’s the case, then why even bother with them annoying, block-capital using, bonus-nagging players, who can’t seem to spell even the word “a” correctly?

Let’s go about a hundred years back, to the “how the hell they can eat so much and stay slim” country of Italy. One statistician was looking into the taxes distribution across the country, because you know—it’s Italy, and hair grease wasn’t invented yet, so I guess it was a common pastime activity. Anyway, he found out that 20% of the people were owning 80% of the property. That’s funny, he thought—80 and 20 makes 100; how cool! So he started reviewing other databases, and what do you know—same phenomena. Nearly everywhere, 20% of the list was in charge over 80% of the impact.  

Before ditching my moral values (along with any hopes to ever have a healthy liver again) and working in this lovely industry of ours, I used to be a logistical consultant (yes, it was indeed so much more sexy, thank you for asking). Hear me out: in all warehouses, a very small group of items are considered the “fast movers,” and they amount to be the vast majority of all transactions within a given period of time.  

This Italian dude was Pareto, and to date this type of segmentation he figured out, is called the “Pareto Rule.” Now that you know this fact, and so much closer to your doctorate in discrete mathematics than before, let’s look at other types of segmentation. The most common is called RFM:

• Recency: based on what portion of the activity happened in the very near past

• Frequency: based on how repetitive were the occurrences of the encouraged activity  

• Monetary value: based on the size of the activity; e.g. purchases, profit or any income type  

  
  

How would that work in practice for online casinos?  

Recency segmentation would look into players not only according to their lifetime contribution, but how much of it happened in the past day/week/month/running XX days; so you have a 15K EUR LTV player, but he hasn’t played in 4 months? VIPs never die, so he’s probably playing with the competition. Yes, they do have a stronger platform and better employee benefits, so you can go feel sorry for yourself.  

In terms of Frequency, you could better evaluate a player who’s not too impressive when it comes to transactional value per average visit or set period, but this one is super loyal and keeps returning, or maybe we have here a case of a known regular in certain events—such as tournaments’ die-hards, raffles’ freaks (well, yeah, if you enjoy raffles you are bound to be a freak), etc. These guys can reach quite a significant LTV, but it will take them more time by comparison to the supernova stars. Think these guys are overrated? Don’t roll your eyes in disgust—it’s not like as a child you have developed much faster than the other kids, so let’s skip this discussion.  

Obviously, most of the attention is given to how much they deposit/lose in terms of Monetary Value. And rightfully so—this is what we care about eventually, and anybody who thinks otherwise, is either a regulator, or working for PAF. But going back to analyzing your DB, you will always look first of all at the top players and sort them according to financial results.  

Up to now I have managed to use quite a lot of buzzwords, so you are probably thinking: “that’s nice and all, and this guy seems to be muscular, yet with the ability to always make any party go wild, but is there anything here that I can’t find on Wikipedia?”. Let’s see how we can combine the above and make some sensible tips you can start using at the office:

How about you don’t just look at the guys who made the most deposits ever, but instead look at the players who had the highest NGR (Net Gaming Revenue; basically the money the players leave on the table by the end of the day, minus all gaming costs such as bonuses, jackpot contribution, etc.), within a certain period? Since clearly these are your money makers, you can also monitor your VIP team efforts by comparing how many of them are retained between the periods. Classy.

Benefits: you will end up with the guys that actually fulfill the RFM concept to the dot—they have a Recent activity, you aim to retain them (so here’s your Frequency), and we are talking about NGR as the leading KPI, so we have got the M covered too.

Another interesting insight: your largest players, for some reason, prefer your product/graphics/offering better than the others; since you don’t want to see them leaving, all you need is to ensure that nothing harms their experience. Again, they already enjoy the activity (you had them at hello, so to speak), so there’s no need to be pushy or salesy—simply by keeping them engaged, you are in fact granting yourself the volumes they bring with them, as when these guys play, it’s noticeable on any given report.

As mentioned before, this way you also present your VIP team with a clear goal, shifting their focus on retention, rather than income and you align the company success with your top players’ satisfaction. Unlike the activities you conduct during your weekend visits to the nearby dungeon club, in this case, when they are happy—then instead of being in pain, you are also happy.

To conclude: an optimized segmentation and a correct allocation of your resources means that you invest the right amount of attention to the very few who impact your business so much. And with the insane amounts of money our industry is making, that’s pure gold. So start digging!