Before the details
Casino games are games of chance with a built-in house edge. No strategy, system, pattern or timing changes the odds in the player’s favor over time, and most players lose money over time. Nobody should gamble money they cannot afford to lose. Loyalty rewards are a marketing feature and do not alter this. This article describes how they generally work without referring to any operator.
How loyalty rewards work
A loyalty program awards points, credits or other rewards in proportion to how much a customer plays. The points are usually earned by wagering, sometimes by depositing, and they can often be exchanged for credit, free play, gifts or other perks. In land-based venues, points are commonly recorded on a card inserted in a machine or presented at a table. Online, they are tracked in the account.
The basic form is an earning rate: for example, a certain number of points for each unit of currency wagered. A second rate sets what the points are worth when redeemed. Both rates are set by the operator, may differ by game, and can be changed. The conversion is where the value of the program is decided.
Rewards as a retention tool
From the operator’s side, a reward program is about keeping customers. Information about play helps the operator understand who the regular customers are and what they like. Points give a reason to prefer one venue over another, and a balance that is growing gives a reason to return. Unredeemed points can act like a small stored investment that the player does not want to abandon.
This links to the general business model described in the discussion of casino revenue. Rewards are a cost to the operator, but they are paid for by the extra wagering they produce. They are therefore designed to be profitable overall, not generous.
Comparing value returned with the amount wagered
The simplest way to judge a program is to compare what it returns with the amount wagered to earn it. All numbers here are hypothetical.
Suppose a program gives 1 point for every $20 wagered, and each point can be redeemed for $0.01.
- Return rate: $0.01 ÷ $20 = 0.0005, or 0.05% of the amount wagered.
- A player wagers $10,000. Points earned: $10,000 ÷ $20 = 500. Value of points: 500 × $0.01 = $5.
Now compare that with the expected loss. On games with a 4% house edge, $10,000 of wagering has an expected loss of $10,000 × 0.04 = $400. The points returned $5, which is about 1.25% of the expected loss ($5 ÷ $400). The rest of the expected loss remains.
The numbers are only illustrations, and real programs vary. Some return more, some less, and some games earn points at different rates. But the general pattern holds: because the return rate is a small percentage of wagering, and the house edge is usually larger, rewards offset only a modest portion of the expected loss. They do not turn play into a break-even activity.
It also matters that the reward is a percentage of how much is wagered, not of how much is lost. A player who bets quickly can wager much more per hour than the amount they deposit, because winnings are bet again. The reward grows with wagering, and so does the expected loss.
Ways rewards can encourage extra play
Several well-known tendencies explain why rewards may increase play. How strong they are for any individual is not something this article can measure.
- Progress and goals. Seeing a point balance approach a threshold, such as enough for a reward or the next level, can create a push to keep playing.
- Loss of accumulated points. Points that expire after a period of inactivity give a reason to return.
- Rewards that feel free. Credit gained from points can be treated more loosely than deposited money, as the house money effect suggests.
- Offsetting guilt. A reward after a loss can make the session feel less like a loss, though the overall figures are unchanged.
- Unpredictable extras. Occasional surprise rewards work like variable rewards and can be more engaging than predictable ones.
Retention is the intended result, and programs that fail to bring players back are usually changed.
Reading the fine print
Before treating points as worth earning, it helps to know:
- How many points per unit wagered, and does the rate differ by game?
- What is each point worth when redeemed?
- Do points expire, and how soon?
- Are rewards subject to wagering requirements or other bonus terms?
- Can the program’s rules be changed without notice?
- Does the program require activity at a certain level to keep a status?
A sensible way to think about it
Points are a small rebate on play that has already happened. They are not a reason to play. If someone would play anyway, the rebate slightly reduces the cost. If the program leads to additional sessions, or to staying longer to reach a milestone, the extra wagering likely costs more than the reward returns.
Treating gambling as an entertainment cost, with a set budget decided in advance, keeps rewards in proportion. Anyone who notices they are playing mainly to earn points can speak to a local support service, and leaving a program is almost always an option.