Tourism Management 25 (2004) 801–805

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doi:10.1016/j.tou

Research note

Segmentation of early casino markets: an exploratory study

Sung-kwon Honga, Hochan Jangb,*aDepartment of Horticultural Science, College of Life and Environment Sciences, Konkuk University, 1 Hwayang-Dong Gwangjin-Gu, Seoul 143-701,

South KoreabSchool of Tourism and Hospitality Management, Woosong University, 17-2 Jayang-Dong, Dong-Gu, Daejon 300-718, South Korea

Abstract

This research was conducted to identify variables that can be used to describe the characteristics of innovators, early adopters,

and those who are not interested in a newly established casino in South Korea. A total of 220 respondents were segmented into three

groups: visited group, intention group, and non-interest group. Based on the discriminant analysis, the research found that attitude,

subjective norm, cognitive biases, impulsivity and education level appeared to play important roles in distinguishing among the three

groups. The hit ratio was 70 percent. In particular, the classification accuracy of intention group was 85.7 percent and this group had

the most favorable attitude toward gambling in a casino. Marketing Implications of the results are discussed.

r 2003 Elsevier Ltd. All rights reserved.

Keywords: Casino; Market segmentation; Discriminant analysis; South Korea

1. Introduction

Casino gambling was legally banned in South Korea(S. Korea) until 1995 when the government enacted theAbandoned Mine Development Support Act with theaim of revitalizing the local economy of abandonedmining communities. Under this Act, KangwonlandHotel with its Small Casino was opened in October2000, in Jeongseon County, Kangwon province. Giventhat the Small Casino is the only casino open toresidents of S. Korea, its operation has been verysuccessful, and it has stimulated other local governmentsto push for a permit to establish casinos in their regions.

Given the possibility that additional casinos may bebuilt in S. Korea, it is crucial that the operatorsunderstand their markets and tailor their serviceprovisions to the needs and wants of their target marketin order to satisfy their customers. Market segmentationhas been widely used as a tool to enhance our under-standing of target markets. Unfortunately, most of themarket segmentation research has only providedinformation about active user groups. Knowledge ofnon-users or potential users is virtually non-existent(Hudson, 1999). Even though obtaining information

ng author. Tel.: +82-42-630-9762; fax: +82-42-630-

sses: skhong@konkuk.ac.kr (S.-K. Hong),

osong.ac.kr (H. Jang).

front matter r 2003 Elsevier Ltd. All rights reserved.

rman.2003.09.002

about non-users or potential users is a difficult task, itcould be extremely important for new products, such asthe Small Casino. This is because such informationcontributes to a better understanding of the wholemarket and permits more appropriate marketing strate-gies to be formulated.

The effectiveness of a marketing strategy varies by theproduct life cycle (Mill & Morrison, 1998). According tothe product life cycle concept, innovators and earlyadopters play a central role in disseminating informa-tion about the first casino introduced to the market.Understanding the characteristics of innovators andearly adopters is a prerequisite to developing promo-tional strategies and pricing policies (Assael, 1984).Nevertheless, existing casino market research hasneglected the importance of innovators and earlyadopters, who play important roles in the early stagesof market development and expansion. Furthermore,most of the previous research on the casino industry hasbeen conducted for well-established casinos such asthose in Las Vegas and Atlantic City in the US (Long,1995). Little research has been conducted on casinosthat are newly introduced into the market.

The purpose of this research, therefore, was toidentify variables that can be used to describe thecharacteristics of innovators, early adopters, and thosewho are not interested in the newly established casinoindustry. The Small Casino in S. Korea is somewherebetween the exploration and the involvement stage of

ARTICLE IN PRESSS.-K. Hong, H. Jang / Tourism Management 25 (2004) 801–805802

the product life cycle in the sense that approximately 2years have passed since it was introduced to the market.Therefore, the group that has visited the casino (VG)can be characterized as innovators. The group with theintention to visit (IG) has the potential to become earlyadopters. On the other hand, those who have not visitedthe casino and have no intention to visit in the futurewere classified as the non-interest group (NG). Identi-fication of key determinants of the different groups willprovide a better understanding of the different consumersegments of the casino industry from the product lifecycle perspective, and will thus enable casino managersto develop effective marketing strategies for the newlyintroduced casino industry in S. Korea.

2. Method

Based on existing research, those variables expected toaffect behavior and the intention to visit a casino wereselected. Behavior-related variables, such as cognitivebiases, sensation seeking and impulsiveness, are knownfrom previous studies to have significant influence on anindividual’s decisions to participate or to continue toparticipate in gambling (Raylu & Oei, 2002; Sharpe,2002). Cognitive biases are formed at the early stage ofgambling and they cause people to focus more onpositive results (winning) than on negative ones (losing).With cognitive biases, people tend to overestimate theirwinning chances both in the short and long terms.Sensation seeking represents an individual’s tendency topursue arousal (Zuckerman, Eysenck, & Eysenck, 1978)and is related to gambling behavior in the sense that itweakens personal control over the desire to gamble.Casino gamblers tend to perceive gambling as a goodway to increase their arousal level. Coping strategiesaffect an individual’s decisions regarding whether he/sheneeds to act on the urges to gamble, i.e., whether or notone can successfully manage those urges. Withoutcoping strategies, individuals find it difficult to resistthe urge to gamble and, thus, are more likely to engagein gambling. Impulsiveness, or an individual’s tendencyto act without considering the consequences of acting, isan example of a poor coping strategy.

Three determinants suggested by the theory ofplanned behavior (TPB) were used as an intention-related variable: attitude toward the behavior (Attitude),subjective norm (SN), and perceived behavioral control(PBC). According to TPB, Attitude, SN and PBC havedirect effects on behavioral intention (Ajzen & Fishbein,1980). Behavioral intention, together with PBC, can beused to predict behavioral achievement. AlthoughAttitude can also affect behavior directly, the signifi-cance and intensity of the influence seem to varydepending on the type of behaviors being investigated.Currently, the S. Korean government strictly prohibits

gambling by its people at any other venues in thecountry except for some officially designated gamblingfacilities such as the Small Casino, horse racing, andbicycle racing. Furthermore, gambling has long beenassociated with negative outcomes, and, as a result, astrong negative social norm has been formed aroundgambling activity in S. Korea. Because of these socialaspects, SN can have a strong effect on the intention tovisit casinos and to participate in gambling, especially inthe S. Korean social context.

Sensation seeking and impulsiveness were measuredby 40-items of Zuckerman’s Sensation SeekingScale-V (SSS) (Zuckerman et al., 1978) and 30-itemsof the Barratt Impulsiveness Scale-11 (BIS) (Patton,Standford, & Barratt, 1995), respectively. Cognitivebiases (CB) were measured by two items based on theexisting research findings: ‘Since I am a good gambler, Iwill win the money’ and ‘I will eventually get lucky if Igamble in a casino.’ Regarding attitude toward gam-bling in casinos, the Gambling Attitude Scale-Casino(GAS-Casino), suggested by Kassinove (1998), wasmodified to suit the S. Korean situation. In the survey,9 items with a 6-point Likert scale were included. ForSN and PBC, items were drawn from existing research,including domestic and international studies (Beck &Ajzen, 1991; Hong, 1998). With slight modifications,3 items with a 7-point scale were used to measure SN.These items asked respondents to specify if their significantreferents (i.e., family, relatives, and friends) would approveor disapprove of gambling in a casino. In order to measurePBC, 3 items with a 7-point scale were used: ‘I can gogambling at a casino whenever I want to,’ ‘How muchcontrol do you have over your behavior to go gambling,’and ‘For me, to go gambling in a casino would be easy.’

Sampling and data collection were conducted by apolling agency through face-to-face interviews, targetingcitizens in Donghae, Kangwon province, between July 5and July 31, 2002. The main reason for utilizing this cityas a study area was to include as many visitors to thecasino as possible in the sample. Kangwon province hadthe highest ratio of casino visitors to its population andDonghae city is located nearby the Small Casino. Thisallowed the authors to anticipate selecting more respon-dents who visited the casino by a probability samplingmethod. Considering the sampling costs and statisticsshowing that those in their 20s to 50s accounted for 97percent of the total casino visitors, respondents’ ageswere limited to 19–59. Two hundred and twentyrespondents were selected by cluster sampling.

3. Results

Respondents were classified into one of the three seg-ments, VG, IG and NG, based on their past experienceand intention to visit the Small Casino. SSS, BIS, CB,

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Table 1

Classification results

Actual group Predicted group membership No. of cases

Visited group Intention group No intention group

Visited group (VG) 8 (66.7%) 2 (16.7%) 2 (16.7%) 12

Intention group (IG) 2 (14.3%) 12 (85.7%) 0 (0.0%) 14

Non-interested group (NG) 36 (18.6%) 24 (12.4%) 134 (69.1%) 194

Percent of ‘‘grouped’’ cases correctly classified: 70.0%

Table 2

Discriminant function loadings

Function 1 Function 2

Gas-Casinoa 0.87928 �0.38714

CBb �0.37573 0.34663

SNc0.36914 0.02593

Educational attainment 0.19418 0.70221

BISd �0.12565 0.69912

aAttitude.bCognitive bias.cSubjective norm.d Impulsiveness.

Table 3

Centroids of discriminant functions

Group Function 1 Function 2

Visited group (VG) 0.73886 0.54215

Intention group (IG) 1.62081 �0.34986

Non-interested group (NG) �0.16267 �0.00829

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GAS-Casino, SN and PBC were used as discriminantvariables to categorize these three groups. The Cron-bach’s a scores for the six variables were 0.82, 0.76, 0.73,0.87, 0.96, 0.69, respectively, indicating an acceptablelevel of reliability. Demographic variables such as age,education and income levels were also added asdiscriminant variables. Results of a discriminant analy-sis indicated that GAS-Casino, CB, SN, BIS, andeducation level were significant discriminators basedon their Wilks’ Lambda (p ¼ 0:000). The hit ratio forthe analysis was 70 percent. Particularly, IG’s classifica-tion accuracy was 85.7 percent, higher than that of theother groups (Table 1). A varimax rotation wasperformed to interpret the loadings of discriminantfunctions (Table 2). The first function, in which 2determinants in TPB (GAS-Casino and SN) and CBwere significant, explained 90.5 percent of the totalvariance in the groups. The mean discriminant functionscore of the IG was the highest, followed by VG and theNG (Table 3). It seems that PBC, one of the TPB’sdeterminants, was excluded from the function becausethe intention to visit casinos was formed undervolitional control. Ajzen and Fishbein (1980) providedsome evidence supporting the relative importance ofattitude being higher for competitive than for coopera-tive behavior. It could explain why the coefficient ofGas-Casino was greater than that of SN in the casinocontext. CB also affected group classification. That is,while IG had the most favorable attitude towardgambling in a casino and a less negative stance onvisiting casinos, this group had the lowest cognitivebiases toward gambling. The NG had the oppositecharacteristics to those of IG, and VG and standsbetween NG and IG. This indicates that despite IG’shigh intention to visit casinos, the link between intentionand behavior is not clear. The marketing issue is toidentify the ‘‘trigger’’ that turns intention into behavior.

Significant variables in the second discriminantfunction were educational attainment and impulsivity.The mean discriminant function score of the VG washigher than that of the other two groups, so that thesecond function is interpreted as a function distinguish-ing visitors and non-visitors to the Small Casino. Theinfluence of impulsivity on VG turned out to be higherthan for the other groups, which is expected to weaken

the willingness to develop coping strategies to resist theurge for gambling. The education level was alsosignificant. This finding can be interpreted to suggestthat the higher the education level, the stronger theinformation searching capabilities, and the higher themedia access, then the more likely the more educatedgroup is to visit a casino, since it has more information.Interestingly, sensation seeking, which was hypothesizedas an important variable in determining intention tovisit casinos, was not significant in distinguishing thethree groups.

The demographic characteristics of the VG weredifferent from those of the IG and the NG. This grouphad a higher proportion of those in their 20s and 40s,male, single, well educated, and with higher income($20,000–29,999) than the other two groups. The IGgroup can be characterized with an even distribution ofall ages except for those in their 50s, a higher proportionof people with income between $10,000–19,999, and ofthose running their own businesses in comparison withthe other groups. The NG had a higher proportion ofthose in their 50s, female, married and with aneducation level below middle school completion.

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4. Discussion

The following implications can be made based uponthe results of this study. Firstly, the VG group seems toplay a leading role in the S. Korean casino market.Previous research by Cho and Han (1998) that focusedattention on S. Korean visitors to casinos in foreigncountries indicated that a large proportion of casinovisitors was willing to visit casinos again even thoughthey are located in foreign countries. Using this lineof reasoning, repeated visitation for the Small Casino inS. Korea is expected to be high as well, and it can beinferred that the VG group will occupy a largeproportion of visitors for the burgeoning casino.

Secondly, impulsiveness appears to play an importantrole in the decision to participate and continue toparticipate in gambling. This result seems to indicatethat those who are driven mainly by impulsiveness toparticipate in gambling have the potential to bepathological gamblers. The pathological gambling ratein the United States was reported to range from 0.1percent to 2.3 percent (Volberg, 1994), and a similarrange was reported more recently in Spain (Echebur "ua,Fern"adez-Montalvo, & B"aez, 2000). No research hasbeen conducted to find out the prevalence of patholo-gical gambling in S. Korea. However, appropriate socialconcern should be given to the gamblers who are alreadyaddicted or vulnerable to becoming addicted, sincepathological gambling is often associated with negativeoutcomes. It might be desirable that the gamblers whoare addicted or can become addicted should restrict theirvisits to the casino or at least should be provided withgambling treatment services at a gambling addictiontreatment center. Related law should be established tothis end.

Thirdly, the results indicated that the IG group isassociated with higher intention to visit a casino and lowcognitive biases. This implies that casinos are recog-nized, at least for IG members, as places whereindividuals can enjoy their leisure. One of the manypractices that can be used to further develop the notionof casinos as venues for leisure activity is to lower themaximum bet for the games. Currently, the SmallCasino has set the highest betting level at $410 for tablegames. Given the situation that VG and IG members arecomposed mainly of low ($10,000–$19,999) and middle($20,000–$29,999) income earners, this current max-imum bet are comparatively high. Furthermore, coinmachines (cost $0.08 per play) account for only 17percent of the total machines. In a bid for casino gamesto take hold as a sound leisure activity, stakes for casinogambling should be recognized as a crucial issue to bemanaged.

The Small Casino was built to rejuvenate the localeconomy. An increase of 61 percent in the local taxrevenue of Jeongseon County from 1999 to 2001 seems

to indicate the success and the potential of the business.However, increase in the local tax revenue cannot bedirectly interpreted as the revitalization of the localeconomy. One issue that needs to be addressed is thelack of involvement of local residents. To increase localresidents’ involvement is crucial not only for generatingdirect economic benefits to the local economy butalso for creating local residents’ support for thecasino industry. For example, if local residents canoperate commercial facilities, including restaurants,cafe lounges, bars, and cheap accommodations withgovernment subsidies, then this may contribute toincreasing local residents’ revenues directly. It will alsolead them to have more favorable attitudes towardcasino operations.

A further implication of the study was that sensationseeking turned out to have no influence over participa-tion in casino gambling. This was an unexpected resultsince sensation seeking has been known to have apositive correlation to gambling (Powell, Hardoon,Derenensky, & Gupta, 1999). It can be interpreted thatsensation seeking is not a main reason for involvementin casino gambling, at least for Koreans in general, sinceit is relatively new for them, even if it could increasetheir arousal level and evoke curiosity. But further in-depth research is required into this issue.

The findings of this study may not be generalizable toother countries because this study focused only on thesituation in S. Korea. The small sample size and lowsub-sample set also limit generalization. Despite theselimitations, this study demonstrates a meaningfulapproach that identifies discriminant variables todistinguish innovators and early adopters from non-interest groups within the context of the casino industry.Understanding the differences between innovators, earlyadopters, and non-interest groups in the casino marketenables us to develop appropriate marketing strategiesthat aim to stabilize the market and minimize thenegative social outcomes, if any, of the casino industry.

Acknowledgements

This paper is supported by the Korea Research Foun-dation Grant (KRF-2002-076-A00030). The authorswould like to thank the Kangwonland Casino for itsassistance in carrying out this research.

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