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Monday, January 19, 2009

Fraser Rawlinson: Part II on Racing

Part two in a series by Fraser Rawlinson

The customer is always wrong; an address to track management

Empty wallets, empty grandstands

This is segment two of a series of articles by a "core customer." It is constructive criticism of the racing racing industry. The plan is to supply you with some examples of the "travels and travails" of this racing handicapper as a possible perspective from which industry execs might see if my complaints fit their track and then hopefully makesome adjustments. Additionally I want to talk about some examples of serious mistakes I see the racing industry making, and also great opportunities I see them fail to take advantage of every time the opportunity presents itself.

I promise I will get to those very shortly but first... Where's Yogi Berra when I need him?

Wasn't it "The Yog" who said, "It looks like deja vu all over again?" A scant week or so ago, movers and shakers in the racing got together in Orlando. The conference gave birth to the fledgling North American Standardbred Owners and Breeders Alliance. I hope the handicappers attending got cigars, as it appears likely to be a while before they get much else.

I wasn't there so I don't know what exactly was said. But these sorts of things often are launched by someone saying in effect, if not in fact, "We have a new name, a new look and a new attitude." Sometimes they substitute ‘purpose’ for ‘attitude.’ No matter the words, the net effect for handicappers remains the same.

Frenchmen have a saying that translates to "The more things change, the more they stay the same."

Handicappers want to believe the industry will change, but we've all been seduced by this siren song before. That's why we're handicappers: we go by past performances. Never bet a horse to do something this time he has failed to do many times before. Same goes for anagram organizations. Listen everyone, I wanna believe! But I can't. Not yet.

Missing in action
To a man, the executive panel of Alliance is impressive. They're all smart folks, committed and well meaning. They come from every sector of the industry. Well almost every sector. Guess who's missing? Those responding "the customer!" all get an A. Did I miss something? Is there a bad echo in here or what? Where the hell are the customers? Ostensibly that will be one of the first mysteries to be solved by Alliance. Currently it must stand for "Not A Single Obligatory Bettor Aboard."

In the first installment of this series I mentioned the NTRA. They're the T-bred counterpart to Alliance. I sent a copy of the original article to a person I consider a good friend. I have the utmost respect for her judgment. She is Moira Sullivan Fanning, director of publicity and event operations for the Hambletonian Society/Breeders Crown. Moira told me I was too harsh on NTRA and my statement that they didn't have a customer on their board was no longer true. I thanked her very much and changed part of the article. As you probably know, their early ad campaign bombed, big time. That's not what they're saying, but it is the truth. Maybe adding a handicapper or customer to the NTRA board was what led to them dropping the ad campaign.

So while the NTRA has made the mistake already, and it was very costly, why didn't anyone at Alliance say, "Guys, we're getting into a situation here." The whole point of learning from history is to learn from some else's history, not re-invent the wheel. Given that these committees usually have most of their meetings via conference calls, maybe I should give them my phone number. I don't want a full vote, just to get to offer input.

Glimpses
The third segment in this series will be about racing customer surveys and market research. I'll be talking about the major reason most tracks should throw out their customer-satisfaction surveys and comment cards. It's called construct validity, and while I don't want to ruin the suspense of the next issue, I will give you a brief definition now, because it bears directly on what we've just been talking about.

Your "construct" is the "reality" or perception you have constructed about a particular subject, or even a person. It's sort of like rose-colored glasses. Your construct "colors" how you view certain objects or subjects. Racing and t-bred racing both suffer from decisions being made by people with an invalid construct. So the next part of this series will have examples taken from existing research.

As this point it may be appropriate to tell you what the final segment will be about. I will make a case, convincing I hope, that racing racing needs to do what many other industries do, and that is to "model" a successful racetrack. Mathematical modeling has made enormous strides, in virtual lock-step with the enormous strides made in the speed, power and capacity of personal computers. Over the next few parts in this series we will build a case slowly with each issue, showing how this could be done. There will be virtually no math for you the reader, other than perhaps the odd example of daily handle divided by attendance or other basic racing industry benchmarks.

The theory behind modeling and applying it to a mythical racing track will hopefully be interesting and thought provoking. (Word provoking too, if you would care to email me here at this magazine; I promise to answer all questions put to me. If you want your question answered publicly, I'll do that too.)

As mentioned previously the following is meant to result in constructive action being taken by the industry to offer the customers redress for being so long-suffering. This is not meant to point fingers or about assigning blame. It is meant to show tracks that they don't understand their customers as well as they should, or could. If put into effect, I am very confident we might be able to slow and then reverse the current downward trend of the on-track handle and attendance at live racing events.

Tracking business
Let's name our mythical track this issue. Because I want it to be successful in saving this game and sport we all love so much, consider this as the ground-breaking ceremony and I'm christening the new track NASOBA Downs (after the Alliance). NASOBA's crack management team is totally devoted to achieving the following: Salvaging,developing and upgrading the per-capita handle of the current players comes first. By far the cheapest customer maintenance costs are for existing customers. An example follows.

The data is very real. The two days are back to back. Saturday is a normal race day. The weather was OK. It had rained between 6 and 8 a.m... Cloudy, coolish for the 16th of June, but not bad. The following day, Sunday, the weather was slightly warmer and no rain. Sunday was also the third annual "Wallet Day."

For $3.50 admission the first 15,000 fans would be given a cheap, tacky, nylon wallet with a poorly silk-screened track logo. Inside were vouchers for cash prizes of varying size. The jackpot was a $10,000 voucher. The total vouchers amounted to $12,500.

Here's the analysis: Management paid a fortune to run what amounts to a $ 3.50 a ticket Scratch & Win Ticket. The only motivation you have to have is the desire for an almost free $10,000. I went early to observe people arriving. A very substantial number paid the admission, checked the inside of the wallet then turned right around and left immediately. Hundreds were so thrilled with the wallet they dropped it on the ground!

Brilliantly the track management didn't open the Early Bird tote windows until two hours after the gates opened. There was simulcasting upstairs but a newcomer would never know that, or how to get there if he did? And the unionized program sellers didn't show up 'til about 90 minutes before the first race.

The lineups were horrible for food and coffee, and unbelievable for the women's washrooms in the grandstand. The few newcomers who do bet, do so at such a slow rate (while they ask innumerable questions, i.e. what's a quinella,etc.) that they contribute to significantly lower handle. Regulars are shut out far more frequently than normal, or they are forced to bet far more early than they might like. The earlier I was forced to bet, the less I'd bet because the less relevance the current odds might have to the closing odds. I talked to regulars who were leaving around the fourth race because they were just fed-up.

....On-Track....|.Off-Track.|.Attend.|.Net On-Track.|.Per Capita
.......Handle....|....Handle.|..........|.........Handle.|.....Handle

Sun..$1,535,545...$273,012......10966......$1,262,533......$115.13
Sat..$1,212,041....$252,767.......4572......$ 960,274........$210.03
Diff..$ 323,504.....$ 20,336........6394......$ 303,480........$ 47.27

The Saturday on-track handle is normal so the Wallet Day folks therefore wagered the difference, on-track between the two days. This is $302,259. The per capita bet of the wallet-wanters is $47.27. That frankly is pathetic. These are the folks we are trying to get to attend regularly??? The normal (Saturday) customer bet $210.03, the lottery players on wallet day, $47.27. Our regular customer is worth $ 210.03 / $ 47.27 = 4.44 times as much as the walletday customer. Plus he would have come anyway, wallets and vouchers notwithstanding.

Track managers with good records or skills in other industries flop at managing a racetrack. It's not like selling shoes or selling cars, it's gambling.

Gambling is not an industry… it’s is a psychological process.
Gambling is not a conventional business… it’s a state of mind.

Racetrack managers like to say they've got "X" years of experience. Horseplayers would say and the results strongly suggest that putting in time doing something doesn't necessarily equal experience.

Having talked to dozens of track managers and executives at assorted industry conferences leads me to believe track managements want to make tracks more successful. But I don’t see them taking risks. They all try slightly new variations of very old ideas that didn’t work well or even work at all. Not even when the ideas were fresh.

Racing needs to act on the following fundamental truth:

1. The quality of life in the racing industry in the future, if it even survives, depends ENTIRELY on the quality of it's thinking now.

2. What happens to an organism (organization) that evolves characteristics that make further evolution impossible? This is my assessment of where the industry is now. It has no momentum, no internal, self- contained force. The industry does have lots of energy, but it's my sense that it doesn't know where to apply it.

3. While the destination matters, what matters a lot more is deciding on the very next step that needs to be taken.

4. Can we afford to rely upon the evolution through drift and crisis management or through the use of general "compass" directions? It's the opinion of several respected industry voices that this rudderless, drift course is how the industry evolved (?) to it's current stage.

5. What is urgent has always taken precedence over what is important. More important than anything else, is the final point: NASOBA needs to be specific about providing mechanisms for change and they need to be designed in now!

Next part, as an added bonus, I'll throw in my own personal choice for a way tracks can show gratitude to their best customers, and use the customers own money to pay them compound interest. Undoubtedly you're tired of hearing all this stuff about customers, but believe me, the customer is always wrong in this sport. It's incredible that an industry over 125 years old doesn't know who it's customers are, what it is that they need, how to find that out, or how to deliver it to them.

So the next part of this series may well be the most interesting for many people. I'll take a look at how to avoid the customers you can't afford, and get the ones we all deserve.

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