CRM Targeting With Loss Aversion: Evidence From The Casino Industry
Loss aversion, a fundamental aspect of consumer behavior and marketing, has traditionally been regarded as a constant and relatively stable trait across individuals. However, recent research utilizing field surveys has demonstrated the heterogeneous nature of loss aversion. Our study advances this growing field by exploring loss aversion at the individual and segment level using rich, individual level CRM data from a large US casino, surpassing the conventional lab-based choice tasks and field-based survey methodologies. We employ a hierarchical Bayesian and latent class modeling approach to analyze a unique panel dataset of over 12,000 slot machine players encompassing their playing activities and outcomes, revealing heterogeneity in loss aversion and the impact of previous gaming results on subsequent actions. Our flexible model accounts for various forms of reference construction (i.e., based on actual or theoretical outcomes), demonstrating that gamblers construct references distinctively, and different constructions yield varying degrees of loss aversion. Additionally, we reveal that loss aversion can interact with marketing strategies and shape subsequent behaviors. From a managerial perspective, our findings indicate that incorporating heterogeneous loss aversion into a casino's CRM strategy (even at a segment level) can increase targeting efficiency by up to 120% compared to current industry practices.
casino, customer relationship management, loss aversion
SMU Cox: Marketing (Topic)