HOW CASINOS HOOK YOU

By S.C. GWYNNE/ST. LOUIS

Sharon Willman was what the folks who run the local riverboat casino called a good customer. She played often, and she bet big. She lost many thousands of dollars. So when she stopped cruising on the Station Casino riverboat off St. Charles, Mo., the folks were naturally concerned. They sent her lots of nice invitations to parties and get-togethers to try to get her back. They kept at it. They even sent her a personal invitation to an exclusive "cocktail party" at the casino, where she and other "big winners'" would "become part of the action" in the shooting of a TV commercial. "The cameras will be looking for your big smile," the letter chirped, "and listening as you tell them why you play at the casino."

That may seem like an innocent enough come-on. But the unfortunate fact is that Willman, 53, is a compulsive gambler who lost so much money at Station Casino that to protect herself, she arranged to be legally barred from entering the riverboat and taken off its mailing lists. In spite of these efforts, the casino continues to send her a steady stream of solicitations--even though it is now exhorting her to commit an act of criminal trespass. "The mailings just keep on coming," she says. She was told by the management of Station Casino that its computerized database would not, for some unfathomable reason, allow her name to be deleted. Call it compulsive marketing.

Willman's plight is more than just a bit of local promotion gone haywire. It is a direct result of the gambling industry's frenzied competition for players at a time when saturated markets are putting sharp downward pressure on gaming companies' earnings. In overbuilt markets like Atlantic City, N.J., Tunica, Miss., and St. Louis, Mo., the ability to win now the real, revenue-generating gamblers from the $50-a-day dilettantes has become nothing less than a matter of survival.

So casinos are, as never before, making it their business to know who their customers are, building vast databases and utilizing the techniques of direct-mail marketing to zero in on specific consumers. As the gaming industry cranks up these sophisticated new techniques to seek out new customers, it's coming under scrutiny for targeting--knowingly or not--pathological gamblers like Willman. Indeed, a federal commission will soon start hearings into just such marketing practices.

The best example of the casinos' brave new marketing style is Harrah's Entertainment Inc. of Memphis, Tenn., which this fall launched a campaign to use a single frequent-gambler card to link the 10 million-plus people already in its databases with Harrah's 16 casinos across the country. The concept of the ATM-size card, which is inserted into the back of a slot machine to record the player's wins and losses, has been around since the early 1990s. Most casinos now offer one as part of membership in a "slot club." (By gambling, players accumulate points, like frequent-flyer miles, and can then redeem them for casino freebies such as rooms, meals and even cash.) But Harrah's is the first gambling company to link all 6 million of its slot-card holders together in a single computerized database so that they can accumulate points as they gamble and redeem them at Harrah's casinos from Reno, Nev., to Joliet, Ill., and Atlantic City. The Total Gold card is nothing less than a bold attempt to create the first national gambling "brand." "There is no question in my mind that we have the biggest database in the industry," says Harrah's president and CEO, Phil Satre. "It allows customization on a mass basis. I want the customers to feel that we recognize them and reward them."

To bolster its new brand, this week Harrah's introduced its own Visa card that funnels points, as a percent of purchases, directly into a member's Total Gold account. By using the cards, of course, you are providing the casino with a detailed record of your gambling and purchasing preferences, thereby enabling it to solicit you in ever more sophisticated ways.

That represents a real change in the way casinos sell themselves. Large gambling houses have always known who their best customers were, doling out comps like free shows and free rooms to their highest rollers. But it was not until recently that they began to track the less extravagant gamblers, who form the bulk of their clientele. Now casinos are building databases at a record rate, not just by recording their customers' gaming habits but also by culling customers from other direct-marketing lists that are widely available. Harrah's says it is adding 1 million new names a year.

"The databases are very important," says stock analyst John Rohs, managing director of Schroder & Co. "In a mature market you need a good database, basically to steal the customer from the guy next door. To steal him, you need to know a lot about him. What he plays, what he eats and so forth." Mirage Resorts is at work on a system at its Golden Nugget casino to allow hotel clerks instantaneous access to a client's gambling history to determine what sort of room or comps to offer.

By purchasing lists from credit-card companies, the casinos know what you buy, and then they can track census data to approximate your home value and income. Then there are the direct-mail lists. One such list from the early 1990s was baldly called the "Compulsive Gamblers Special" and promised to deliver 200,000 names of people with "unquenchable appetites for all forms of gambling." Another list features "some 250,000 hard-core gamblers." Yet another purveys the names of 80,000 people who responded to a vacation-sweepstakes-telemarketing pitch. Such lists allow the gaming companies to tailor their direct pitches to individuals and, by cross-indexing with their own information, spot whether a customer is "underbetting," based on his income and net worth.

Which raises the question of whether the casinos knowingly go after problem gamblers. But to answer the question there must be some agreed-upon definition of what constitutes a "problem" gambler, and here the industry and its critics are far apart. "Twenty percent of the customers account for 80% of the gambling industry's earnings," says Henry Lesieur, president of the Institute for Problem Gambling in Pawtucket, R.I. "We know that 5% to 6% of the total population are problem gamblers, and those 5% are spending 30% to 40% of the money." Critics charge that because the industry is so dependent on this small group, it appeals deliberately and relentlessly to them. "It's not so much a privacy concern as an addiction concern," says Bernie Horn, an official with the National Coalition Against Legalized Gambling, "because slot clubs have a high percentage of addicts among their membership."

The gambling industry sharply disagrees. "No, we do not try to target compulsive gamblers so we can take all their money," says Frank J. Fahrenkopf Jr., president of the American Gaming Association. "We are in a very competitive business. The entertainment dollar is highly contested. But if someone joins a slot club who happens to be a compulsive, does that mean we can't advertise?" He also asserts that "95% of the people in the country have no problem at all with gambling."

But foes--principally the Rev. Thomas Grey's National Coalition Against Legalized Gambling--believe that marketing to addicts may be the industry's Achilles' heel. "I think we'll find memos similar to what they found at the tobacco companies," says Horn. Grey concurs. "This is a turning point in the battle. The majority of their profits comes from people who have trouble stopping. Marketing is an absolutely key factor in that."

The industry's insistence that it's a wholesome entertainment business sometimes gets it in trouble with the public. When the Hilton Flamingo Casino participated in a job fair in March at a Kansas City, Mo., grade school, the sight of children wearing casino T shirts and singing the riverboat's theme song received critical coverage in a local newspaper. Then there was the woman who tried to have her dead husband's name removed from the mailing lists of the Station Casino, which Sharon Willman is having trouble with. She was told that the only way to have his name deleted was to appear in person with a copy of his death certificate. The lesson being, perhaps, that in the fight for the gambler's dollar, dying may not be enough to get one's name out of the database.