New Research Finds Casino Jackpots May be Leaving More Money on the Table Than Managers Anticipate

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New Research Finds Casino Jackpots May be Leaving More Money on the Table Than Managers Anticipate

INFORMS Journal Marketing Science New Study Key Takeaways:

  • Hitting the jackpot at a casino only benefits the casino half of the time and rarely brings in extra money for the casino from subsequent advertising efforts.
  • Hitting the jackpot increases gambling and frequency of plays by jackpot winners. Jackpot winners increase their bet amount by about $39 per play and their play increases by 33% in the two hours after hitting the jackpot.
  • Friends of jackpot winners increase their play by 21% in the same period.
  • The effects of a jackpot win on a bystander are weak and dissipate after about an hour.

 

BALTIMORE, MD, April 28, 2022 – The thrill and excitement of hitting the jackpot at a casino isn’t just felt by the winner. Casinos try to leverage that win to increase play by friends of the winner and bystanders. New research in the INFORMS journal Marketing Science finds that this effort may have limited impact on the bottom line of the casino.

“Most jackpot events are not profitable for the casino and the advertising impact of jackpots on people nearby is weak and transient,” says Hee Mok Park of the University of Manitoba and one of the study’s authors. “Jackpots on slot machines make loud and exciting sounds and flashing lights. However, how people react to it did not seem obvious to me. Some people might feel lucky and bet more (hot-hand myth) while others might bet less thinking that luck is in the past (gambler’s fallacy). We find that return on investments for jackpot events are only profitable for the casino 49% of the time.”

The study, “Social and Spatiotemporal Impacts of Casino Jackpot Events,” conducted by Park and Joseph Pancras of the University of Connecticut, finds that using jackpot events as an advertising tool isn’t effective and needs to be refined. 

The authors looked at data from several casino locations on user slot machine jackpots and subsequent behavior of winners, their friends or partners and bystanders.

“We find that jackpot events increase slot machine gambling and frequency of plays by jackpot winners. The average impact on the jackpot winner is a 33% increase in the number of plays and a $39 increase in bet amount per play for two hours after they win. Play by their peers increases 21% in the same period,” says Pancras, a professor in the UConn School of Business. “We find that rather than taking risks only from winnings (the house money effect), belief in continued success (the hot-hand effect) seems to be driving betting behavior of players once they win a jackpot,” adds Pancras.

The authors say these findings can be mimicked in advertising strategies that deal with a very short lag time of minutes and hours rather than days, weeks and months.

“Casino managers need to look closely at the profitability of jackpots. They need to examine alternative mechanisms if they want jackpots to influence bystanders in a tangible and somewhat sustained manner,” concludes Park, a professor in the Asper School of Business at the University of Manitoba.

  

Link to full study.

  

About INFORMS and Marketing Science

Marketing Science is a premier peer-reviewed scholarly marketing journal focused on research using quantitative approaches to study all aspects of the interface between consumers and firms. It is published by INFORMS, the leading international association for the decision and data sciences. More information is available at www.informs.org or @informs.

 

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Contact:

Ashley Smith

443-757-3578

asmith@informs.org