Actual loss rewarding is quite a controversial topic. Some casinos and cultures consider it normal and necessary while others disagree. In any case you should use it very carefully (if at all) since it is not only prone to technology errors and player cheating but it is also problematic by mathematical definition. Let me show you an example calculation to see why is that.
We have two players that represent the average Joe in your casino. Together they play thousands of games on an 95% RTP table. Each plays 5,000 games with a bet of 10 € each game. In total that is 100,000 € of bet and expected loss for both together is:
100,000 € (bet) x 5% (house edge) = 5,000 €
Together the two players loose exactly this money but we can take a look at two examples how they performed individually. For the examples I will take that you are awarding 10% of actual loss to these two players.
Example 1
For example let's say that one wins 5,000 € in total while the other looses 10,000 € (for a combined loss of 5,000 € of the two players). In the casino you award 10% of the actual loss which is 10,000 € (loss) x 10%=1,000 € for the loosing player and 0 € for the winning player. After the award both players leave your casino so you have a total revenue:
5,000 € (house edge) - 1,000 € (award) = 4,000 € (revenue)
This is 20% less than what you would have without the award. The 10% of award on actual loss reduces your revenue by 20%!
Example 2
A different example would be that one player wins 25,000 € while the other looses 30,000 €. The combined loss is still 5,000 € but the 10% award is now 30,000 € (loss) x 10% = 3,000 € for the loosing player and 0 € for the winning player. This gives you the total revenue of:
5,000 € (house edge) - 3,000 € (awards) = 2,000 € (revenue)
The 10% of award on actual loss reduces your revenue by 60% in this case!
Example 3
The extreme example is that one player looses 50,000 € (all the bets) while the other wins 45,000 €. The combined loss is still 5,000 € as per the mathematical house edge. but the 10% award is now 50,000 € (loss) x 10% = 5,000 € for the loosing player and 0 € for the winning player. This gives you the total revenue of:
5,000 € (house edge) - 5,000 € (awards) = 0 € (revenue)
The 10% of award on actual loss takes away all the house edge and leaves you with no revenue!
Conclusion
If the award percentages are not set correctly such awarding can reduce your revenue a lot. You could even end up in loss instead of revenue!
Of course much depends also on:
- game RTP (return to the player) and game volatility
- other rewarding programs
- other costs
In any case you should be very careful when choosing such awards! As shown above, the percentage of revenue reduction can be substantially higher than percentage of the actual loss award. And do not forget about some errors that may enable players to cheat the casino.
What do you think? Reply in the comments below and let me know what are you doing in your casino and how do you feel about this topic.
- Log in to post comments