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I have talked to many iGaming companies. Each one calculates Bonus Rate its own way, and almost nobody connects it to margin. That leads to two typical mistakes: too few bonuses, and players leave for competitors; too many, and the margin melts away. Let us find the balance with simple numbers.
What Bonus Rate is
GGR is what the casino keeps from bets after player winnings. Bonus Rate shows what share of GGR you give back to players as bonuses.
An example on $100 of bets
Out of every $100 in bets, $94.70 goes back to players as winnings. On average the casino keeps $5.30: that is GGR, a gross margin of 5.3%.
Give players 15% of GGR as bonuses, that is $0.80. What is left is $4.50: a net margin of 4.5%.
What gross margin you need
The main question is not how many bonuses to give. It is what gross margin you need so that the right net margin is left after bonuses.
| Target net | Bonus Rate | Gross needed |
|---|---|---|
| 4.5% | 15% | 5.3% |
| 3.5% | 15% | 4.1% |
| 4.5% | 25% | 6.0% |
If 3.5% net is enough for the business, 4.1% gross is enough at a 15% Bonus Rate. Everything above that is profit.
Why the limit is usually around 15%
The limit works backwards: maximum Bonus Rate = 1 minus net margin / gross margin.
With 5.3% gross and a 4.5% net target, the limit is exactly 15%. With 5% gross it drops to 10%, and with 6% it rises to 25%. So 15% is not a universal rule, it follows from your margin.
What happens if you give more
Same gross margin, 5.3%. Everything above the 15% limit eats into net:
| Bonus Rate | Net margin |
|---|---|
| 15% | 4.50% |
| 20% | 4.24% |
| 25% | 3.98% |
| 30% | 3.71% |
What it means in money
On $1,000,000 of monthly turnover, a 15% Bonus Rate leaves $45,050, while 30% leaves only $37,100. That is $7,950 less every month.
How to find your limit in a minute
- Take your gross margin for the month: GGR / turnover.
- Decide what net margin you want to see.
- Bonus Rate limit = 1 minus net / gross.
- Compare it with your actual Bonus Rate: bonuses / GGR. Above the limit, bonuses eat your margin. Far below it, players may lack bonuses and leave for competitors.
The bottom line: Bonus Rate and margin work as a pair. If you decide to give more bonuses, gross margin has to grow, or net margin drops. Calculate it in advance, not at the end of the month.
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