It’s the end of the quarter, and you’re sitting with your executive team in the boardroom. Alex, your head of VIP, is walking everyone through the latest figures. VIP engagement is up, and rewards are being claimed at record rates.
On paper, everything looks great. Sarah from finance is nodding in approval at the numbers, and Megan from operations is busy noting down the increasing engagement levels.
But despite the optimism in the room, something doesn’t feel right. You’ve been investing heavily in VIP rewards, yet profitability remains stagnant—or even worse, it’s beginning to decline. The more you give, the less it seems to yield. So, what’s going wrong?
Let’s take a closer look at what Daniel Kahneman, Nobel Prize winner in Economic Sciences, would say is the root of your problem
The Sunk Cost Fallacy: Holding onto the Past
Let’s start with the obvious: the Sunk Cost Fallacy. As Amos Tversky and Nobel Winner Daniel Kahneman famously researched, we’re wired to keep investing in something if we’ve already put significant time or resources into it—even when the strategy is clearly no longer working.
In VIP management, this bias manifests when you keep pouring resources into players who were once profitable but no longer deliver value. Alex, for instance, has been showering one of your long-time VIPs, Jeff, with rewards based on his performance from 6 months ago.
But here’s the problem—Jeff’s betting has dropped off considerably, and the data shows her profitability has plummeted. Yet, Alex continues to invest in him, feeling tied to the time and effort spent cultivating that relationship.
Research Insight: A 2023 study by Eilers & Krejcik Gaming found that 18% of VIP player engagement rose across major sportsbooks, yet profitability from VIPs dropped by 7%. Why? Reward systems were not updated to reflect real-time player value, a classic case of the Sunk Cost Fallacy in action.
Loss Aversion Bias: Fear of Changing Course
Loss Aversion is another powerful bias in play. Nobel Prize Winner Daniel Kahneman’s research on loss aversion shows that people fear losing what they already have more than they value potential gains. In VIP management, this fear often leads to decision-makers sticking with a failing strategy because they’re afraid of what will happen if they cut back on rewards or change their approach.
Megan, your operations director, is a classic case. She’s worried that if you stop offering premium rewards to lower-tier VIPs, you’ll lose them entirely. But the data shows that these players are not profitable, and continuing to reward them generously is eroding your margins.
Research Insight: A 2021 study from the Journal of Behavioral Finance found that loss aversion is a key factor in businesses’ reluctance to scale down ineffective VIP strategies, leading to a 15% decrease in profitability in affected programs.
The Bandwagon Effect: Following the Crowd
Your VIP strategy may also be falling prey to the Bandwagon Effect. Megan mentions that other sportsbooks in the industry are running similar VIP programs, offering the same rewards and engagement tactics. So, your team believes you must be on the right track if everyone else is doing it.
But the problem with the Bandwagon Effect is that it ignores your own unique player base. Just because other sportsbooks are offering certain rewards or incentives doesn’t mean it will work for you. Your data might show that your VIPs have different preferences or require a different approach, but if you’re too focused on copying competitors, you’ll miss those insights.
Actionable Tip: Use your own behavioral analytics to drive decisions rather than mimicking what competitors are doing. A 2022 YouGov study found that 45% of VIP players disengaged from loyalty programs because they felt rewards were generic and unoriginal.
1. Segment Within Segments
Sub-segmentation is key to understanding the true value of your VIP players. Going beyond broad metrics, you can identify which VIPs are worth your investment and which are draining your resources.
Case Study: A UK-based sportsbook increased VIP profitability by 12% in 2023 by shifting resources to the top 10% of VIPs and cutting back on rewards for less profitable players.
2. Personalize, Don’t Generalize
It’s easy to fall into the trap of offering the same rewards to all VIPs, but this won’t resonate with today’s players. Use behavioral analytics to tailor offers based on real-time data. By understanding each player’s preferences, you can offer rewards that feel personal and meaningful.
Insight: The 2021 Global iGaming Study by Statista revealed that 63% of VIPs preferred personalized offers, and those programs saw higher engagement and retention rates.
3. Implement Independent Review
Sometimes, the best way to see through your own biases is to bring in an outsider. An independent review can highlight blind spots and provide an objective analysis of your VIP strategy.
Research Insight: A 2021 study from the Journal of Behavioral Finance found that businesses using external reviews for their VIP programs saw a 13% improvement in performance.
Conclusion: Adapt and Thrive
Many iGaming business leaders we’ve worked with have previously assumed, or been led to believe, that all these strategies are already in place. However, if your VIP performance isn’t where it should be, the data suggests otherwise.
If you’ve identified any of these issues in your business, whether through reflection or research, it’s likely that simply having the knowledge isn’t enough to create real change.
This is often due to the “knowledge-action gap bias,” a common challenge where teams have the necessary information but fail to act on it. This gap can arise from inertia, fear of change, or being overwhelmed by the complexity of implementation
That’s why many forward-thinking, data-driven companies in the iGaming industry are turning to Bet Data Consultants. We understand that having the right strategy is only half the battle—what truly counts is execution.
As the only iGaming consultancy that combines cutting-edge strategies grounded in world-class behavioral science with over 15 years of industry expertise, we specialize in bridging the gap between knowledge and action.
We transform insights into profitable results, ensuring your business not only makes informed decisions but also implements them effectively for long-term success.
Contact us on Linkdin or at: info@betdataconsultants.com
Sources:
- Eilers & Krejcik Gaming, 2023 VIP Market Report
- H2 Gambling Capital, “VIP Strategy Trends in Sportsbook Operations,” 2022
- Statista, Global iGaming Study, 2021
- YouGov, “The State of iGaming Loyalty Programs,” 2022
- Journal of Behavioral Finance, 2021 Study on Decision-Making Biases in Corporate Strategy
