Applying the Service Profit Chain to the Casino Premium Player Sector. Abstract. Introduction

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1 Applying the Service Profit Chain to the Casino Premium Player Sector Abstract This research draws upon the concept of service profit chain and the theory of relationship marketing, and applies a model of internal service quality to the casino premium player segment. Specifically the research analyses the relationship between the Five Factor Model (FFM) of personality, emotional intelligence, adaptability and the service performance of hosts involved with the casino industry's premium player segment. The FFM of personality and emotional intelligence are shown to be significant predictors of adaptability, and there is evidence of a positive correlation between adaptability and host service performance. Implications for the recruitment and training of casino employees are proposed. Introduction It is commonly acknowledged that the premium player segment accounts for a disproportionately large share of casino revenues and profits. The magnitude and importance of this segment has been highlighted by various authors in the casino industry, and it has been found to be well in excess of the 80:20 rule (or Pareto effect) mooted to exist in many industries (see Hannum and Kale, 2004; High Roller s Vegas, 1998; Kale, 2003). This sector has attracted increasing interest because of recent development and expansion of numerous mega casinos in the Asia Pacific region. Marketing to the casino premium-play sector commonly involves three components: casino amenities, the value of incentives offered to players and the casino hosts with most direct contact with premium players (Kilby, Fox and Lucas, 2005). The first two components have been shown as insufficient to guarantee competitive advantage (Johnson, 2002; Klein, 2000). Casino hosts are critical as the primary service providers to the premium player segment, serving as a vital communication channel between management and the client. Throughout the service encounter their behaviours and performance play a crucial role in shaping player perceptions of casino service quality and satisfaction (Bove and Johnson, 2002). This, in turn, leads to player retention and casino profitability (Kale, 2005; Kale and Klugsberger, 2007). Consistent with the concept of the service profit chain and the theory of relationship marketing, host service performance is likely to have implications for casino profitability. In order to understand the factors that influence perceptions of host service performance, this study examines a number of individual characteristics that relates to casino host performance, namely; adaptability, emotional intelligence and personality, as shown in Figure 1. Selection of these constructs is consistent with the nature of gambling and the characteristics of service encounters between casino hosts and premium gamblers. Research in this field, whilst specialised, does have the ability to inform other areas where service staff are employed in dealing with demanding customer sin pressured situations. The following section reviews the relevant literature and presents a series of propositions. Figure 1: The Relationship between Personality, Emotional Intelligence, Adaptability and the Service Performance of Casino Hosts Personality Adaptability Service performance of casino host 1

2 Emotional intelligence Adaptability and service performance of casino hosts The concept of adaptability has been widely discussed in the marketing literature, and is commonly recognised as an effective predictor of selling effectiveness and sales performance (e.g., Anglin, Stoltman and Gentry, 1990; Park and Holloway, 2003; Weitz, Sujan, and Sujan, 1986). Previous studies have revealed a gap in the relationship between adaptability and performance in the service context. Although little research has examined service management in the casino specific context, the nature of gamblers and gambling motives may help to explain the possible effects of employee adaptability on casino player perceptions of service performance. For instance, volatility and instability may be evident amongst gamblers during interactions with casino hosts, and may demand the adaptability on the part of hosts. Being adaptive involves tailoring behaviours to the customer; making rapid adjustments based on customer various reactions to such behaviours (Weitz, Sujan, and Sujan, 1986). Employee adaptability may be effective in dealing with casino players during service encounters, and may affect employee performance and its evaluation. The following hypothesis is proposed for application to the premium player segment: hosts Hypothesis 1: Adaptability is positively related to the service performance of casino To date, the research that has been conducted on the antecedents of adaptability has been limited. The practice of adaptation during service encounters requires capacity to recognize that service encounters entail a range of different skills, and the ability to alter the selling approach during interactions (Spiro and Weitz, 1990; Weitz et al., 1986). These abilities vary from one individual to another and may be partially attributable to employee personality traits. A small number of studies have examined the influence of certain individual characteristics such as cognitive style and employee motivation on employee adaptability (McIntyre et al., 1990; Roman and Iacobucci, 2010). Drawing upon the findings of these studies, the present research incorporates two psychological constructs (the FFM of personality and emotional intelligence), to examine their relationships with casino host adaptability. The FFM of personality and casino host adaptability Although a number of competing personality theories have been widely employed in past literature, the FFM of personality has been the most extensively discussed over the past two decades. The five factors are respectively: Extraversion, Neuroticism, Agreeableness, Conscientiousness, and Openness to experience (McCrae and Costa, 1995). The FFM has been used to analyse employee behaviours and performance in a variety of settings. The degree of predictability is affected by the relevant criterion variables and work settings (see Barrick and Mount, 1991; Tett, Jackson and Rothstein, 1991). Although discrepancy in relation to the predictive validity of the five factors is cited in the relevant literature, Extraversion is generally accepted as a valid predictor of performance in the case of jobs requiring interpersonal interactions (e.g., Mount, Barrick and Stewart, 1998). Conscientiousness, Agreeableness and Neuroticism were found to be associated with service orientation (Hogan, Hogan and Busch, 1984). A meta-analysis conducted by Mount, Barrick 2

3 and Stewart (1998) reported that three factors (Conscientiousness, Agreeableness and Neuroticism) were significantly related to jobs involving interpersonal interactions, particularly in service settings, whereas small correlations were found for Extraversion and Openness to Experience (0.14 and 0.17 respectively). As discussed previously, adaptability in service settings is described as the ability of service employees to adjust their behaviour to the interpersonal demands of the service encounter, and is reflected through their performance during customer interactions. Guided by this past research, the FFM of personality is likely to provide a valid predictor of service employee adaptability in the context of casino premium player sector; thereby the following hypothesis is formed: Hypothesis 2: The FFM of personality is related to casino host adaptability Emotional intelligence and casino host adaptability Emotional intelligence (EI) is defined as a capacity or ability to perceive and manipulate emotional information without necessarily understanding it, and to understand and manage emotions without necessarily perceiving feelings well or fully experiencing them (Mayer and Salovey, 1997). Since emotions are prevalent in the work place, particularly in the context of service encounters between frontline employees and customers, employee emotional abilities may impact on their behaviours and performance during interactions with fellow employees and clients. More emotionally intelligent people are said to succeed at communicating their ideas, goals and intentions in more convincing ways (Goleman, 1998). Since the adoption of an adaptive approach demands relational communication skills, emotional intelligence may provide for some of the variance in adaptability of frontline employees during customer interactions (see Boorom, Goolsby and Ramsey, 1998). On this basis, the following proposition may be applied to the casino premium play segment: Hypothesis 3: Emotional intelligence is related to casino host adaptability Methods Participants The study setting was one of the largest casino and entertainment operations within the Asia Pacific region. The respondent sample was drawn from all casino hosts working within the premium player gaming areas of the casino and engaged in direct interactions with premium players. From a total of 250 surveys distributed to prospective respondents, 152 usable responses were returned (61 percent). Of the total usable sample, 65 were male, and 87 were female. The age of the participants ranged from 18 to 55, and 90 percent were in the 18 to 35 age group. Almost a quarter (37 or 24.3 percent) had completed their studies at secondary school level, with the rest possessing a diploma or university degree. Measures Adaptability The researchers used the modified ADAPTS scale for the assessment of adaptability. The original 16-item ADAPTS measure was developed to measure adaptive selling by Sprio and Weitz (1990). Hartline and Ferrell (1996) modified the original scale by dropping 6 selling-related items and rewording others. The final 10-item scale used in the current investigation involves an assessment of the ability of casino hosts to adapt their approach towards premium players during service encounters. Participants were asked to indicate their level of agreement with each item, using a five-point Likert scale ranging from strongly disagree to strongly agree. Higher scores are reflective of stronger adaptability. The applicable factor analyses and Cronbach alpha coefficients are reported in the next section. 3

4 The FFM of Personality The present study drew upon John, Donahue, and Kentle s (1991) 44-item Big Five Inventory (BFI) which provides personality measurement. The BFI uses short phrases based on trait adjectives that reflect the lexical tradition of Goleberg, Norman, Digman, and others. These involve prototypical markers of the Five Factor Model of personality factors (John, 1990). The Cronbach alpha values for the five factors of personality in the current study were: Agreeableness.80, Conscientiousness.73, Extraversion.72, Neuroticism.62, Openness.72. Although Neuroticism showed an internal consistency value of less than.70, the inter-item correlation for the items fell within the optimal range between.20 and.40 as recommended by Briggs and Cheek (1986). Emotional intelligence The self-report EI test (SREIT) designed by Schutte, et al. (1998) was used to measure emotional intelligence. This test is based on the ability model developed by Salovey and Mayer (1990). The scale exhibited good internal consistency and test retest reliability, predictive validity, and discriminant validity with strong results for each analysis (Schutte et al., 1998). Data were collected on a five-point Likert scale, with 1 representing strongly disagree and 5 representing strongly agree. Higher total scores are reflective of greater self-report emotional intelligence. The Cronbach alpha coefficient reported for this scale was.91 Performance The performance measure used in the present study was consistent with the approach to staff performance appraisal used by the relevant casino. The approach involves measuring the service performance of employees and their contributions against the requirements and standards applicable to the relevant job and against their peers. The study relied on respondent self-reporting, an approach which has been common in previous research on performance measurement (e.g. Brown et al. 2002; Busch and Bush, 1978; Sujan et al., 1994). In their meta-analysis, Churchill et al. (1985) concluded that self-reporting does not generally lead to biased outcomes or inflated assessments. Each item was assessed using a five-point scale, ranging from 1 (lowest) to 5 (highest). The Cronbach alpha coefficient for this scale was A self-report questionnaire was administered through a paper-based survey. Respondents were assured of anonymity in the instructions which accompanied each of the documents. Detailed instructions were provided to guide respondent participation. The questionnaire was distributed to prospective respondents during their work shift, and could be completed at home or at off-peak times during their weekday work shift. Responses were required, via a provided return envelope, within two months of receipt. Analysis and Results The measure of adaptability was factor-analysed in line with Marks, Vorhies and Badovick s (1996) suggestion using Principal Component Analysis. Consistent with Marks et al. s finding, two factors were identified from the analysis. These were interpreted as Adaptive Behaviour and Adaptive Belief respectively. The Cronbach alpha coefficients for the two factors were.75 and.64. For Hypothesis 1, the two sub-dimensions of the adaptability scale were entered as predicting variables, and the service performance scale was entered as a criterion variable in the multiple regression equation. The results indicate that the total adaptability score accounted for 41 percent service performance variance, F (2, 149) = 51.52, p < However, adaptability behaviour was the only dimension which made a statistically significant contribution to the dependent variable. The beta weight for this 4

5 dimension was.61 (t = 8.29, p <.001). Belief in adaptability explained only a minor variance in the performance evaluation, (beta =.06, t = 0.88, ns). Hypothesis 2 examined the relationship between the FFM of personality and adaptability. In this analysis, uni-dimensional adaptability was used as the criterion variable. The results from multiple regression analysis show that as the predictor variables personality factors accounted for 35 percent of the variance in adaptability measure (R 2 =.35, F (5, 146) = 15.52, p <.0005). Examination of the coefficients table reveals that only Openness to experience and Extraversion made statistically significant contributions to the prediction of adaptability. The beta coefficient for Openness was.19, t = 2.37, p <.05, for Extraversion was.19, t = 2.09, p <.05. Conscientiousness and Agreeableness only had a minor influence on the criterion variable. Hypothesis 3 examined the relationship between emotional intelligence and adaptability. As suggested by Petrides and Furnham (2000), The SREIT was factor analysed using PCA, and a four-factor structure was identifiedconsistent with Petrides and Furnham s (2000) study, the four factors were interpreted as; Mood Regulation, Appraisal of Emotions Social Skills and Utilisation of Emotions. The respective Cronbach alpha coefficients were.88,.72,.71, and.63. The four factors were entered in the multiple regression equation, with adaptability measure as the criterion variable. The regression results indicate that the model explained 48 percent of the variance in adaptability, F (4, 147) = 33.47, p < Among the four factors, only Mood Regulation (Beta =.51, t = 5.83, p <.001) and Appraisal of Emotions (Beta = 0.27, t = 3.28, p <.001) made statistically significant contributions to the adaptability measure. Discussion The study confirmed that adaptability has a significant influence on the service performance of casino hosts, with Adaptive Behaviour being the only dimension to make a substantial contribution. This finding was consistent with the work of Marks et al. (2001) and Park and Holloway (2003), and confirmed Marks et al s observation that the original ADAPTS scale is not uni-dimensional the adaptive behaviour dimension predicts the performance evaluation. The results from the multiple regression analyses show that both the FFM of personality and emotional intelligence made statistically significant contributions to casino host adaptability. Openness to Experience had a strong and significant relationship with adaptability for the FFM of personality. The traits associated with Openness to Experience include imagination, being cultured, curiosity, originality, broad-mindedness, intelligence, artistic sensitivity, and the need for variety as previously suggested in the personality literature. Adaptability requires casino hosts to be able to identify player needs, and assess interactions based on the perceived information in order to find the most appropriate strategy to satisfy customers. Such abilities require intelligence, imagination and broad-mindedness on the part of casino hosts. Extraversion has also been found to have a statistically significant relationship with adaptability. As characterised by Extraversion (Hogan, 1986), the sociability and initiative of staff affect encounter behaviours and how they adjust to meet player needs and demands. Although emotional intelligence was found to relate significantly to employee adaptability, only Mood Regulation (managing emotions) and Appraisal of Emotions made substantial contributions to the criterion variable. This is plausible, because casino hosts occupy organisational boundary spanning roles, and must deal with gambler emotions which are evident during winning and losing. Hartel, Barker and Barker (1999) have also noted that employee emotional management skills can affect a customer s formation of emotions and appraisal process, which in turn influences customer attitudes and behaviours. A positive 5

6 attitude and strong behavioural intention reflects employee encounter behaviours and performance. To be able to manage emotions, one has to understand or appraise emotions effectively. The two concepts have a logical connection. On the other hand, adaptability requires frontline employees to adjust their behaviours to the interpersonal demands of service encounters based on perceived information. The perception process implies appraisal of customer emotions on the part employees to facilitate encounter behaviour adjustments. Implications and future research The findings of the current study have the following implications. First, it would appear to be useful to ensure that personality and emotional intelligence are incorporated into personnel recruitment and selection where adaptability is needed, particularly in the casino context. Secondly, as suggested by researchers such as Park and Holloway (2003), training is required to build the capacity for adaptability. Emotional intelligence may be integrated within training programs to facilitate casino employee adaptability in adjusting their behaviours during interactions with casino players, for the purposes of enhancing player loyalty and casino profitability. For future investigation, researchers may endeavour to access casinos in different locations in order to generalise the findings across the sector. Incorporation of player perceptions towards casino hosts from a service quality and performance perspective may also be worth exploring as a way of validating self-reported data and avoiding common method bias. In a broader context, many other services rely on the sort of intense, highly adaptive service style found to be effective in the premium player casino environment. The examination of the impact of emotional intelligence and adaptability in service contexts such as medicine, personal services like hairdressing and heavily customised services like haute couture might yield similar results. References Anglin K.A., Stolman, J.J., and Gentry, J.W. (1990). The congruence of manager perception of salesperson performance and knowledge-based measures of adaptive selling. Journal of Personal Selling and Sales Management, 10, Barrick, M.R., and Mount, M.K. (1991). The Big Five personality dimensions and job performance: A Meta-Analysis. Personnel Psychology 41, Boorom, M.L., Goolsby, J.R., and Ramsey, R.P. (1998). Relational communication traits and their effect on adaptability and sales performance. Journal of the Academy of Marketing Science Bove, L. L. and Johnson, L. W. (2006) "Customer loyalty to one service worker: should it be discouraged?" International Journal of Research in Marketing, 23 (1), Brown, T.J., Mowen, J.C., Donovan, D.T., and Licata, J.W. (2002). The customer orientation of service workers: Personality Trait Effectson Self-and Supervisor Performance Ratings. Journal of Marketing Research, 39(1), Busch, P., and Bush, R.F. (1978). Women contrasted to men in the industrial salesforce: Job satisfaction, values, role clarity, performance and propensity to leave. Journal of Marketing Research 15 (August), Churchill, G. A., Ford, N. M., Hartley, S. W., and Walker, O. C. (1985). The determinants of salesperson performance: A meta-analysis. Journal of Marketing Research, 22(2), Costa, P.T. Jr., and McCrae, R.R. (1985), The NEO Personality Inventory Manual. Odessa, FL: Psychological Assessment Resources. 6

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