It’s time to talk about something more practical – new customer offers. For the purposes of this blog, that’s any promotion up to and including the first deposit. Strap yourselves in for a cliff-hanger because it’s a two-parter!
I’ll start by talking about the worst offenders from a responsible gambling perspective. That is any offer that gives a customer money just for signing up. It is a dirty little trick, and it needs to stop. NHS Chief Claire Murdoch agrees.
In my blog about Psychology’s Best Answer I explained how we have an in-built mechanism that protects us from gambling – it’s called Loss Aversion.
To recap, thousands of years of human existence has taught us that maintaining ownership of our scarce resources increases our chances of survival. The majority of our ancestors that thought otherwise died before they could pass on their risky genes.
To use a business analogy, it’s like the old wisdom that it costs more to acquire a new customer than to keep an existing one. Companies that have low churn don’t go out of business very easily. It’s the same with humans that don’t squander their money.
The problem with free money offers is that they bypass our Loss Aversion instinct. By giving someone money to play with, they don’t feel like they are risking their own precious resources. This means they are exposed to the rush of gambling without facing the resulting pain.
By the time the free money runs out, the customer wants more of the dopamine thrill and goes on to make a deposit. Gambling operators hope that the excitement of gambling now outweighs the discomfort of losing, and the behaviour becomes habitual. And it must be working or they wouldn’t be doing it.
You might recognise this playbook from drug dealers that stand outside school playgrounds. Get the customer hooked with a free sample, then make the original investment back as they continue to chase the high. Classy strategy, right?
I first stumbled across this bypassing effect in my own dissertation experiments for a Psychology MSc. All of my participants were offered a chance to accept a risk-free £1 or £2 (there were two conditions), or proceed with a gamble worth £3. A basic Loss Aversion prediction would say that many people will take the guaranteed cash (even though it is lower sum) – but that’s not what happened.
All but 5% of my participants decided they wanted to play for the prize money. The majority would explain, unsolicited, that they may as well take the risk because it wasn’t their money; even though they could see, hold and walk away with the pound coin(s). They never considered the money to be theirs and so the Loss Aversion instinct went out of the window.
There’s much more to the story of my dissertation, and I’m excited to bore you with it another time. I may even be able to spin it out into a thrilling trilogy! For now though, back on topic…
To be fair, free-money-for-signing-up isn’t the most despicable tactic. There is a more brazen and deceptive variant in which the gambling company offers FREE SPINS! This somehow manages to be worse in at least three ways:
- It is more alluring because the potential upside is greater.
- The value proposition is completely opaque.
- The product in question is the most addictive and harmful.
When the government finally publish their new gambling proposals later this year, I sincerely hope this sort of practice is banned. Unfortunately, with the number of MPs that act as paid ‘special advisers’ to gambling firms, it seems highly unlikely.
There is a second, admittedly less potent, mechanism by which these no-deposit offers work, and it’s also underpinned by an evolutionary explanation – reciprocity.
As humans we don’t have many physical attributes to help us fend off predators. We have our wits to help us outsmart our threats and opposable thumbs that enable climbing, throwing and bashing. No hard shells, flimsy claws, no venom, and while some excel at Hide & Seek, our natural camouflage is rubbish.
Our key weapon throughout all this time has been cooperation. Working in little groups we’ve risen to a position of dominance all across the planet. Reciprocity is simultaneously the glue that has held us together and the lube that keeps the social machine running.
There is a golden rule for reciprocity. When someone does something for you, you must return the favour, and the repayment must be of equivalent or greater value. If it is not, then you are (to some extent) freeloading, and bad will is created. This causes cooperation to break down.
By offering a free thing, gambling operators are creating an obligation. On some deep, sub-conscious level, there is a desire in the customer to repay the favour.
I don’t believe this mechanism affects everyone, because some will determine that signing up was the first favour and thus the free money is the repayment. Others will rationalise that companies can afford the cost and morally excuse themselves, like a shoplifter or insurance fraudster without the illegality.
But some, inevitably, will feel like they should give something back and make a deposit. That is the first step onto a slippery slope that makes this (ostensibly generous) promotional format a profitable one. Don’t be tempted.
I’ll finish this part with a look back at a malicious new customer offer from my past – the old PokerStars $600 first deposit bonus. An excellent example of a terrible promotion.
The premise, at least, was simple. If you used a special code, we would match your initial deposit with a pending ‘bonus’. To earn the amount in full, you would have to deposit $600 then pay around $3000 in rake. So it was actually a rebate, and not, as it was cruelly branded, a bonus.
To make things worse, none of the reward was paid up-front and for many years it had to be earned in full before being released. Almost nobody earned a penny of it. Later, it was changed to pay out in smaller chunks, and still hardly anyone cleared any of it. The customers who should have been given the most help and the best experience were getting a promotional slap in the face.
Looking back, it was a hideous new customer experience and I cringe to think I presided over promoting it. There is room for this type of limited-time rebate format in gambling, but it should only ever be directly targeted to high volume (non-problem) customers.
Next time I’ll discuss more responsible offers, the most controversial (and successful) first deposit offer I ever ran at PokerStars, and one I always wanted to run but never got around to.
Please come back, it won’t be as long, promise.
I’m following the World Snooker Championship from afar, and I think I’m going to have to put a tenner on just for tradition’s sake. That goes against what I usually preach, but at least I’m open about it. I’ll probably pick the most in form player that isn’t Trump, Selby or Robertson, who look like weak value.