The Sunk Cost Fallacy at Work at the Casino

Like any industry in a capitalist society, casinos are in business to make money. They rake in billions each year for the companies, investors, and Native American tribes that own them. And state and local governments reap the benefits in the form of taxes and fees. But it’s not just about chance, because the house always wins. Every game has mathematically determined odds that guarantee the casino a gross profit over the player. This advantage is referred to as the house edge.

To keep patrons gambling for as long as possible, casinos create stimulating atmospheres with flashing lights, blaring music, and opulent décor. They also focus on customer service by providing a variety of perks, such as free drinks and snacks while gambling and discounted travel and hotel rooms. But these inducements are just a small part of the bigger strategy that focuses on attracting and keeping big bettors.

When one player hits that elusive big win on a slot machine, cheers erupt. This helps to create a false sense of possibility that encourages others to continue pressing their luck. But as the adage goes, don’t let a good start fool you into thinking you can continue winning. This is a perfect example of the sunk cost fallacy at work.

To market your casino effectively, you need to know who your audience is and understand what motivates them to visit. Demographics are helpful, but they’re not enough. It’s important to know why they are visiting and what their pain points are. For instance, they may be in town for a conference or celebrating a wedding. In that case, it’s a good idea to target them with ads that promote your amenities and unique offerings, rather than just your gaming floor.