Service Marketing Aspects Associated with the Allure of E-Gambling

21 Pages·2005·0.13 MB·English

Service Marketing Aspects
Associated with the Allure
of E-Gambling
Alan D. Smith
William T. Rupp
ABSTRACT.Arecentoutletforgamblingthathasevolvedwiththead-
ventofe-commerceisInternetgambling.Internetgamblinghasbecomea
verypopularoutletforbettingonallsportsorplayingonlinecasinogames.
Withtheeaseofuseandincreasingaccessibility,agamblerdoesnoteven
needtoleavetheirhometoplacebetsorplaythecasinogames,oftenwith
financially devastating results. Other important questions concerning the
service marketing of this type of interactive entertainment exists as well.
Whatarethemoralimplicationsofoperatingthesegamblingwebsites,and
whattypeofgamblerarethesewebsitestargeting?Intermsofservicemar-
keting,theonlineindustryexcelsincustomerservicebyofferingmanyof
the interactive entertainment industries’ finest technologies and promo-
tionalcampaignsthroughofferingoutstandinginterfaces,varietyofgames
and online chat with other players. However, with Internet gambling, di-
lemmas to the following exist at the individual, firm, and society levels.
Thesedilemmasalsoaffectthefutureofthegamblingindustryasawhole,
and Internet gambling in particular. These quandaries include regulatory
questionsforgovernment,howuseofcreditcardfundsforgamblingpur-
poses has effected the banking/finance industry, and enticement of gam-
blingtothepotentialgamblingaddict.Modelsoftheseeffectsareincluded.
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Alan D. Smith is affiliated with the Department of Management and Marketing,
Robert Morris University, Pittsburgh, PA 15219-3099.
William T. Rupp is affiliated with Stephens College of Business, University of
Montevallo,Montevallo, AL 35115.
Services Marketing Quarterly, Vol. 26(3) 2005
http://www.haworthpress.com/web/SMQ
© 2005 by The Haworth Press, Inc. All rights reserved.
Digital Object Identifier: 10.1300/J396v26n03_06 83
84 SERVICES MARKETING QUARTERLY
KEYWORDS.Customerservice,e-commerce,e-gambling,interactive
entertainment industry, Internet gambling, service marketing, online
gambling
INTRODUCTION
Nature of Gambling as an E-commerce Business
Theprimarybenefitofonlineshoppingcustomerconvenienceisbe-
ing directly undermined by a lack of real-time purchase assistance for
buyers.Infact,thegrowthofe-commerceactivityhasnotbeenpropor-
tionately associated with potential sales. Many firms cite that online
purchasesareafractionoftheitemsleftinvideoshoppingcarts,result-
inginhugerevenueslosttoe-commercecompanies.E-commercecom-
panieswillhavetosupplycustomerserviceequivalenttothatprovided
bytraditionalretailersinordertogainmarketshareandincreaseprofits.
Thecaseinpointisthee-gamblingindustry.Gamblinghasbeenaround
sincethebeginningofcivilization.Asaresultofthisdesiretogamble,
manyvarietiesofgamblingandoutletsforgamblinghaveevolvedover
the years. In general, gamblers have more choice then ever in
offline/online casinos. A recent outlet for gambling that has evolved
with the advent of the Internet is online gambling. For example, gam-
blerscanengageintax-freewageringintheirhomeand/orofficewith-
outthehassleofcurrencyexchangeproblems.Somemayarguethatthe
online gambling industries make it to easy for customers to engage in
such activities. However, as an industry, it is noted for offering out-
standing service in order to entice potential customers into online
casinos.
Popularity of Online Gambling
Online gambling is becoming a very popular outlet for betting on all
sportsorplayingonlinecasinogames,sinceitisbasedontheincreasing
familiarityassociatedwithe-commerceandcomputergames.Withnew
cyber-casinosjustamouse-clickaway,Internetgamblingsitesaregain-
ingpopularityandareincreasinglyfoundontheInternetandoffercasino
gamessuchasvideopoker,videoslotmachines,backgammon,androu-
lette.SomefeelthatonlinegamblingmaybetheInternetgamblingisthe
next step in the emergent interactive entertainment industry. For exam-
ple,onlinegambling(http://www.online--gambling.org/)haslistedtheir
Alan D. Smith and William T. Rupp 85
recommended online gambling casinos by software, which casinos that
offerthebestselectionofgames,highestpayoutpercentageandbestcus-
tomer support. The listings of software titles are numerous and include:
Boss Media, Cryptologic, Microgaming, OddsOn, Playtech, and Real-
timeGaming.Asaservice-marketingcasestudy,e-gamblingisanexcel-
lent example of promoting customer service in an online industry.
Internet gambling sites also offer a large variety of betting services for
collegeandprofessionalsports,horseracing,autoracing,andrelatedser-
vices.Inaddition,onlinegamblingcasinostypicallyoffercashbonusesto
enticenewplayersbyallowingthemtothecasinowithlessriskoflosing
money. The gambling bonus is real cash added to their accounts and is
availableafterasetnumberofplays.Manye-commerceenterprisescould
learnafewlessonsofservicemarketingtechniquesfromtheonlinegam-
blingindustry.
In general, the general population sees the e-gambling industry in
muchdarkerterms.Onlinegamblingistrulyseenasaglobalproblem.
Theindustrymakesitaninterestingtargetforscholarlystudy,sinceitis
characterizedbythetwoextremesofsuperiorInternet-basedcustomer
service and a moral hazard. For example, visits by Australian Internet
users to online gambling sites remained consistent throughout 2001
(based on a study for the Australian Casino Association) and this oc-
curred despite the introduction in June 2001 of the Australian federal
government’sInteractiveGamblingAct2001.Thispoliticallycharged
piece of legislation, which was designed to ban casino-type gambling
ontheInternet,simplyhaveforcedAustraliangamblerstooffshoreca-
sino websites (Creed, 2002). Interestingly, the Interactive Gambling
Act 2001 directly prohibits the provision of casino-type gambling to
AustraliansfromAustralia-basedonlinecasinos,althoughonlinehorse
racingandlotterywageringsitesareexempted.Inaddition,Australian
casinos are allowed to provide Internet gambling to overseas Internet
users. Specifically in the U.S., a Congressional panel voted to update
the Wire Act of 1961 that bans interstate wagering to include online
gambling(“Congressionalpanelvotes...”2002).Infact,theHouseJu-
diciary subcommittee voted unanimously on the proposal to make the
ActalsoapplytotheInternetandothermoderncommunicationsaswell
as telephone lines. More significantly, these amendments to the bill
wouldalsoallowU.S.federalagentstoobtainacourtorderrequiringa
credit card company to cut off transactions with a gambling website
based outside of the U.S.
86 SERVICES MARKETING QUARTERLY
Internet Gambling Dilemmas
However,withInternetgamblingfollowsanumberofinterestingdi-
lemmas that directly impact individuals, companies, and society as a
whole.Thesedilemmasmightalsoaffectthefutureofthegamblingin-
dustry as a commerce endeavor and Internet gambling in particular.
These dilemmas include the following:
1. Thefederalandsomestategovernmentsaretryingtofindwaysto
acquirethelosttaxrevenuesfromtheInternetsitesbyattempting
to enact appropriate laws. Since most of these Internet gambling
sitesoperateoutsideoftheU.S.,theseInternetgamblingwebsites
andtheirassociatedcompaniesdonotcurrentlypaytaxdollarsto
theirfederalandlocal/stategovernments.However,muchoftheir
customerbaseislocatedintheU.S.Althoughthereisasignificant
rise in global gambling networks, the associated gambling debts
thatthesecustomersarelosing,bothdomesticallyandabroad,are
causingsignificantlossofpotentialtaxrevenues.Itisarguedthat
the loss of those tax revenues hurts the ability of many govern-
mental agencies from fulfilling their obligations to their citizens.
2. Many creditcardcompaniesareattemptingtocurtailrecentsub-
stantiallosses by banningtheiruse on Internetgamblingsites. A
significant number of Internet gamblers use their credit cards
fundsasgamblingfundsasaconveniencetocovertheirgambling
debt.Unfortunately,thespeedofsuchdevicesasvideogambling
hasbeenmadeimmenselyquickerandmoreconveniencethanin
thepast.Frequentlyisthecasewhensomeofthesegamblersrun
up major debts on their cards from the use of Internet gambling
sites,andarethenunabletopaybackthedebtanddefaultonthe
creditcard.Thesecreditcardcompaniesmusteithergotocourtto
try to gain back some or all of their lost funds, or simply lose all
thegambledfunds.Thesemeasuresbythecreditcardcompanies
cost considerablemoneyand effort, and theselost funds seemto
beontheincrease,notonthedecline.Thisincreasestheborrow-
ingratesforthesecardsandeventuallyhurtsallthoseindividuals
that use credit in a responsible manner.
3. Thetollonsocietythatonlinegamblinghastakenmaybestagger-
inginseveralaspects.Manycustomershaveentrenchedtheirlives
aroundthesewebsitesandhaveignoredwhatandwastednumerous
resources and time on these at least partially addictive websites.
Manyadultshavelostalloftheirsavings,endangeredpersonalre-
Alan D. Smith and William T. Rupp 87
lationships, and lost employment in order to gamble on these
websites. Also, many children and young adults have become ad-
dicted to these websites due to their easy access and video
game-likesetup.Gamblingisaseriousaddictionthathaslong-term
consequencesonnotonlythelifeofthegambler,butalsothelives
ofthosearoundthem.Unfortunately,onlinegamblingdeliverysys-
temsmayamplifythesenegativeaspectsofthisaddiction.
In recent months, Internet gambling has been receiving widespread
coverageinthepopularpress.Thereisgrowingconcernthatthistypeof
gambling is luring a new gambler (particularly a younger and more
naïveindividual).Governmentsatalllevelsshouldbetryingtodecide
the legality of this type of gambling in at least a cost/benefit analysis
fashion to their societies. As previously mentioned, some credit card
distributors are attempting to ban the use of their cards for these
websites.Thesetopicsandtheircontinueddiscussionwilldeterminethe
futureoftheInternetgamblingindustryandthepotentialusersandtheir
associatebuyerbehaviorpatterns.Table1summarizessomeofthema-
jor themes in this fairly heated discussion concerning the negative as-
pects of online gambling.
Future E-commerce Implications Associated with E-gambling
DoestheInternetgamblingindustryhaveastrongfuture,oristhisa
passing fad? Many casinos, corporations, and independent entrepre-
neurshavebillionsofdollarsinvestedinthisindustryandbelievethatit
isthenextgreatwaytogeneraterevenue.Thecustomerservicepromo-
TABLE 1. Exploring the Negative Effects on a Number of Levels in Society
EFFECTS OF/ON INTERNET GAMBLING
INDIVIDUALS Lose all savings/overspend limits of budget, no longer have
interest in family/friends, ignore school/work, commit crime to
subsidize habit--stability of social and family structures.
COMPANIES Lose millions of dollars from gamblers who default on debts,
lawsuits against delinquent gamblers, funds to protect industry from
gambling websites.
GOVERNMENT Funds to battle websites through courts and legislation for reasons
of tax dodging, fraud, and lack of control by government agencies.
DILEMMAS Should government, business, and society accept this industry as it
stands, alter the industry, or ban it from existence?
88 SERVICES MARKETING QUARTERLY
tions and service marketing campaigns are often quite extensive and
wellplanned.Also,manygamblersusethesewebsitesonadailybasis
and truly enjoy the availabilityand accessibilitythe Internet offers–an
addictive form of interactive entertainment. Of course, in order to ac-
cessthesewebsitesfromtheresidence,potentialcustomersneedonlya
workingPCandInternetaccess;perhapsarestrictionthatmodernbusi-
nesses may overcome for some potential users by providing free
Internet access. Unfortunately, addictive behaviors may be drawn to
andthriveinthispersonalenvironment,sinceitisveryeasytogamble
withoutdistraction.Withtheeaseofuseandincreasingaccessibility,a
gamblerdoesnotevenneedtoleavetheirhometoplacebetsorplaythe
casino games, often with financially devastating results.
Moral Hazard Questions
Other important questions concerning the service marketing of this
typeofinteractiveentertainmentexistsaswell.Whatarethemoralim-
plicationsofoperatingthesegamblingwebsites,andwhattypeofgam-
blerarethesewebsitestargeting?Muchofthecurrentgamblingpublic
hasusedthe“triedandtrue”methodsofthepast.Usingbookies(illegal
bet takers), legal betting establishments (such as Ladbrokes for horse-
racing), casinos, and telephone-betting services are common methods
for placing wagers that have been in existence for many years. How-
ever,theseoutletsforwageringhavenotnecessarilyattractedtheyoun-
gerorhomeboundgambler.TheInternetgamblingsitesareattractiveto
the younger, Internet savvy user since the websites look and play like
computergamesthathavelittleornoconsequencesfortheirexperimen-
tation.However,Internetgamblingcoststheplayermoneytoplayeach
and every time and can become addictive.
Other interesting moral hazard questions include: should the gam-
blingindustry(Internetgamblingwebsitesinparticular)beheldrespon-
sible for the addicts they cause from their product, much like the
tobacco industry is experiencing in the court systems today? Should
those business owners who are profiting from these websites also aid
gamblerstoconqueringtheiraddictionscausedbythesewebsites?The
U.S.governmenthasheldthetobaccoindustryaccountableforthead-
dictioncausedbythetobaccoindustry’sproduct.Thetobaccoindustry
is paying essentially billions for healthcare and addiction education to
the public due to damage caused by tobacco. Should the gambling in-
dustry could be held accountable for the addiction they encourage in
gamblers and be sanctioned for their actions? Internet gambling sites
Alan D. Smith and William T. Rupp 89
areverycontroversialandhaveinherentproblemsandmirrorthemyr-
iadofproblemsthathaveplaguetheInternetsinceitsinceptiondueto
itsnewnessandlackoflegalcontrols.But,theyarealsofinanciallyvery
successfulandgrowing,aswellashallmarkedbyofferingoutstanding
customer service. Looking at some of the corporate issues might give
e-commerceresearchersaninsightintothefutureimplicationsoftheir
continued growth, as demonstrated in Figure 1.
Figure1illustratesthetypicalrouteavailabletotheInternetgambler
toreachanonlinegamblingwebsite.Therouteisverydirect,onlyneed-
ing a computer with Internet access to visit gambling websites. How-
ever, there are several legaland financialobstaclesthatare attempting
tosloworstopthateasyaccess.Theseobstaclestypicallyinclude,with
veryquestionablesuccess:Governmentalregulations,creditcardcom-
panyregulationsregardinguseofcardsforgamblingpurposes,andthe
stigma of gambling in society. Hence, gambling has potentially very
negativeeffectsthatnotonlyincludegovernmentandbusinessimpacts
intermsoflosttaxes,increasefinancialburdenontaxpayers,andother
sourcesofrevenue,butsocietyasawhole.Measurestostemthenega-
tiveeffectsofInternetgamblingtraditionallyhasbeenenactedbygov-
ernment, since government has the most direct power to slow or stop
this form of gambling. By enacting strong laws, government agencies
maymonitorandcloseInternetgamblingsitesbeforetheycausefurther
damagetotheindividualgambler,otherlegitimatebusinesses,andsoci-
ety/family structures. Unfortunately, as previously suggested by the
Australianexamplecitedearlier,governmentbodiesmayhavevarying
degrees of success. The service marketing aspects associated with
Internet gambling also has a number of parallels to increase e-com-
merce business traffic.
FIGURE1.AnOverviewoftheSocialForcesFacingtheRelationshipBetween
the Gambler and the Gambling Industry
Social
Regulators
Concerns
GAMBLERS Gambling
Companies
CreditCard
Companies
90 SERVICES MARKETING QUARTERLY
EXAMINATION OF THE COMPLEX FORCES OPERATING
IN AN ONLINE GAMBLING ENVIRONMENT
Regulatory Conflicts
Ingeneral,governmentsatalllevelsareinaquandaryabouthowto
handleInternetgambling.Globally,governmentssuchasChinaand,in
particular,theMuslimcountrieshaveoutlawedgamblingofanyform,
while governmentslikeAustraliaand the U.S. have singled out online
gamblingactivitieswithintheirboundaries.Punishmentsforgambling
may be very severe in some of these countries and sometimes involve
literatelyinvolvelossoflimborlife.OthergovernmentssuchasHong
Kong, Australia, the United Kingdom, France, and Italy have taken
stepstorestrictactivitiesofunauthorizedoffshoregamblingoperations.
However,intheU.S.,therearemanydifferentopinionsandpositionsof
howInternetgamblingmaybehandled.Forexample,in2000,$2.2bil-
lionin revenues was earnedworldwide from Internetgambling(Ham-
mer,2001).Thisisagiantindustrythatisgrowingyearlyandcannotbe
shut down easily. Although many federal, state and international gov-
ernmentshaveplacedrestrictionsonInternetgambling,ithasverylim-
itedsuccessandmayonlycausedtheoperationstomoveunderground
intherealmofillegalactivities–whichmayevenincreaseitsappealand
allure to the younger and/or less experienced crowd. However, many
othercountriesarenotonlyallowingInternetgamblingtobelegal,but
are encouraging the site owners to set up their operations from these
countries (please see Figure 2). Figure 2 illustrates a force field ap-
FIGURE 2. A Force Field Approach to Model the Forces Moving For and
Against Online Gambling Opportunities Both Domestically and Globally
Figure2
Gambler
MaySoon
LNeegvaaldIan FeSdtaetrealLLaawwss WireAct InBTehLeeUga.Sl.
InternationalLawsLawWaived
Unmonitored InSome
States
InternetGamblingSite
Alan D. Smith and William T. Rupp 91
proachtomodeltheforcesmovingforandagainstonlinegamblingop-
portunities.
AsdemonstratedinFigure2,thereareanumberofforcesmovingthe
acceptability of e-gambling as an n e-commerce venture in several di-
rections. Many of these countries currently only require a business li-
censeandabackgroundcheck(Beauprez,2002).Also,intheU.S.,the
state of Nevada still allows Internet gambling to be legal, while many
otherstatesaresimplynotmonitoringInternetgamblingand/orthelaw
is waived. Even as the federal government attempts to curb or ban
Internetgambling,thereisstillachancethatthegovernmentwillmake
gambling legal, although recent actions have made that prospect un-
likelyfortheshortterm(“Congressionalpanelvotes...”2002).Ifthe
U.S.governmentmayfindlegitimatemethodstogaintaxdollarsfrom
Internet gambling, some feel they might decide to remove their initial
objectionsandlegalizethisformofgambling.Thebattlebetweengov-
ernmentpartiesabouthowtoregulateInternetgamblinghasslowedthe
legalprocess.Untilthesepartiesmaycometoadecisionaboutregula-
tion processes, these websites will continue to operate in the U.S. out-
side the legal arena. Figure 2 illustrates some ways that the Internet
gambler may avoid roadblocks to the Internet gambling sites even
though roadblocks to use of the websites by government are in place.
Legal Efforts in the Online Gambling Field
Thereareanumberoffederal,state,andinternationallawsinplaceto
deteroperationofthesewebsites.Anotherlegalmethodofdeterrenceto
useofthesewebsitesistheWireAct,aspreviouslydiscussed.However,
Internet gambling site owners are still able to circumvent these road-
blocks since some states (including Nevada) are either allowing these
websitestooperatelegallyorhavedecidednottopursuelegalactionof
those websites operating in their states. The federal government is still
decidingaboutwaystoeitherfighttheoperationofthesewebsitesinthe
U.S.orlegalizethemforpurposesofrevenuecollection.Forexample,the
U.S. Justice Department is attempting to prohibit states from allowing
Internetgambling.“Assetforthinpriorcongressionaltestimony,theDe-
partmentofJusticebelievesthatfederallawprohibitsgamblingoverthe
Internet,includingcasino-stylegambling,”assuggestedbyAssistantAt-
torneyGeneralMichaelChertoff(Simpson,2002).Historically,in1961,
theU.S.CongresspassedtheWireAct.TheWireActprohibitsindividu-
als from utilizing telephone facilities to receive bets. The Wire Act
criminalizestheuseofawirecommunicationfacilityforthetransmission
92 SERVICES MARKETING QUARTERLY
ininterstateorforeigncommerceofbetsorwagersorinformationassist-
ing in the placing of bets or wagers on any sporting event or contest
(Hammer, 2001). Enforcement of this act has used for prosecution of
Internetgamblingsiteownerswhohandlebetsfromacrossstate(orinter-
national) lines (Vuong, 2002). This bill is perhaps the strongest tool the
federal government has in its arsenal for prosecuting Internet gambling
site owners and has been recently upheld to include all forms of online
gambling.
However,severaljudgesseemtobeinclinedtogiverelativelylighter
sentencestothoseconvictedunderthelaw,sincethereisacurrentsoci-
etaldebateontheabilityofthegovernmenttoenforceandtheethicsas-
sociated with such legislation of moral behavior. There are other
reasonsthatthelegalsystemmayfeelthisisaninsignificantcrimeand
arenotwillingtogivestiffsentences,duetothenewnessofthetechnol-
ogyandthelackoflegalprecedents.Forexample,therecentbanonthe
callingoftelemarketersintheU.S.(over50millionhavesignedupon
the www.donotcall.gov website) underscores the constitutionality of
suchlaws.Anotherreasonmaybethatthelaw(WireAct)wasenacted
beforetheadventofInternetgamblingandmanydonotnecessarilyfeel
that this law directly pertains to Internet gambling (Hammer, 2001).
Specific bans against Internet gambling at the federal level have not
beenpasseduntilrecently.Oneopponentofthepassingofthisspecific
lawisHouseMajorityWhipTomDeLay,RepublicanfromTexas.Rep-
resentative Bob Goodlatte, a Republican from Virginia, suggested,
Congressman DeLay wanted to ensure that all interested parties work
together on a ban that would not infringe on state rights (Batt, 2002).
Embracing Online Gambling
Even as the federal government is attempting to ban Internet gam-
bling, other states, as well as countries, are in favor of such websites.
England and Costa Rica are embracing such websites (Vuong, 2002)
andtheincometheybring.SincetheU.S.istryingtobanInternetgam-
bling,manycompaniesoperatetheirgamblingwebsitesoutoftheU.S.
While$2.2billioninrevenuesisderivedfromInternetgambling,most
websitesaresetupoutoftheU.S.Thismeansmostofthetaxrevenue
fromInternetgamblingisalsosent“offshore.”U.S.lawmakersappear
tobestrugglingwiththisdecision,butregardlessofthelegalramifica-
tions,Internetgamblingwillcontinuetobeagrowingproblemifother
moral and rule of reason educational attempts are ignored in the U.S.
Manybusinesses,aswellasweb-enabledcustomers,feelthattheU.S.