A Marketing-Driven Casino Operational

Business Plan

Gary Greens customer relationship management strategies for casino growth strategy, property EBITDA, and overall performance.

R.O.I. in a 21st century casino

 2002-2003 Copyright 2002-2003 Gary Green No portion of this booklet may be reproduced in any manner, print, not electronic, without the express written consent of the author and publisher(s) of the material herein.

Additional information may be obtained at: www.VerdeVegas.com or www.garygreen.com

Published in cooperation with Saul Weinstein Agency and e-shortcut.com 67 Wall Street, Suite 2411 New York, NY 10005

Table of Contents
Tremendous opportunity available in the casino industry. ............ 5 An Executive Summary Overview.............................................. 13 What is the formula for the gaming industry? ............................. 17 Why these formulas work. ......................................................... 18 Formula One: Management....................................................... 20 CASE STUDY: Mandalay Resort Groups' Value Creation .......... 20 CASE STUDY: Inside Harrah's Relationship Marketing ............. 26 CASE STUDY: Mandalay Resort Group's Customer Focus ....... 29 CASE STUDY: Harrah's Tierd Player Cards .............................. 31 Formula Two: The Marketing Plan ............................................. 34 CASE STUDY: Harrah's 49% Increase ...................................... 36 The complexity and simplicity of formula-based marketing. ........ 41 CASE STUDY:Mandalay's Luxor Mistake .................................. 57 Fine-tuning more traditional casino marketing tools. .................. 58 Formula Three: The Technology Marriage ................................. 63 CASE STUDY:Gary Green's Mandalay Presentation ................. 73 Vision, Summary and Conclusions. ........................................... 76 Management Bio. ...................................................................... 79 Appendix One: The Wall Street Journal's Review of Harrah's .... 87 Index......................................................................................... 91 EndNotes .................................................................................. 94

NONDISCLOSURE NOTICE: This is a proprietary document that contains both patent-pending methodologies and copyrighted material.
By continuing in this booklet you acknowledge that you are being provided certain proprietary data ("Confidential Information") relating to the business affairs, operations, and methodologies created by or amalgamated by Gary Green. By continuing, you acknowledged that the information provided here is confidential; and you agree not to disclose it and not to disclose that any discussions or contracts with Gary Green have occurred or are intended, other than as provided for in the following paragraph. You acknowledged that information to be furnished is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use may cause serious harm or damage to Gary Green, as its creator. Therefore, you agree that you will not use the information furnished for any purpose other than as stated above, and that you will not either directly or indirectly by agent, employee, or representative, disclose this information, either in whole or in part, to any third party; provided, however that (a) information furnished may be disclosed only to your directors, officers and employees or representatives who need such information for the purpose of evaluating any possible employment, transaction, investment, etc. with Gary Green and (b) any disclosure of information may be made to which Gary Green consents in writing.

Gary Green can be reached at: th 3960 Howard Hughes Parkway, 5 Floor Las Vegas, NV 89109 (702) 990-3920 or (561) 865-9609 gary@garygreen.com

Introduction.

A tremendous opportunity is available at this moment in the evolution of the casino gaming industry.
Almost 80% of the population of the U.S. lives within a two-hour drive of a casino. According to a July 2002 survey commissioned by Harrahs1, more than 53-million adults visited casinos in 2001-2002: that is more than 27% of the adult population of the country2. Those 53-million people visited an average of 5.7 times per year (for a total of 303-million casino visits)3. And countering some industry whines of market saturation, casinos visits were up 27% over the previous year4. Despite somewhat dubious origins (at best) and entry into the legitimate business world through Howard Hughes controlled madness and Michael Milkens 1980s junk bonds, there is no denying that casino gaming has become a valid sector of the American economy. While we have not made it into the thirty Dow Jones Industrials, three publiclytraded gaming companies do rank in the Fortune 500 list5; two more rank in the Fortune 10006; and several major universities (yes, outside of Nevada) teach Casino Management in their business schools7.

Nonetheless, casino gaming as a business is a relatively new industry. Even Nevada did not legalize corporate ownership of casinos until 1967; Atlantic City didnt legalize gambling until 1979; Indian casinos did not become legal until the Indian Gaming Regulatory Act became law in 1988; the first Mississippi casino opened in 1992 and a myriad of riverboat and state-by-state laws have followed (and are still being debated into law in local jurisdictions). Through its corporate infancy, the gaming industry has continued to find its way into standard accounting practices, traditional business patterns, organized marketing plans, and EBITDA-focused management models. But like any start-up industry, the most-revolutionary advancements internally are often archaic to the rest of the business world. Twenty-five years ago, one casinos discovery of Standard Accounting Practices & Procedures may have been incestuously revolutionary amongst other casinos, but for the rest of the business world it would be hard to understand how a business existed without them. The exact same situation is true today as the gaming industry enters its adolescence. Basic business procedures are, at long last, firmly in place and there is no question about the legitimacy of policies, procedures, and management technique. However, when it comes to some other tenets basic to most industries, casinos are frighteningly behind the times. These deficiencies include (but are not limited to): CRM (customer relationship management) and other advanced marketing practices fine-tuned by the cataloging and direct marketing worlds;

 prudent use of technologies that were just not available at the beginning of the casino industry business era; and implementation of some widely-proven formulas for streamlining forecasting, decision support, and general business operations. Just one example of these stark deficiencies becomes evident when we look at the way customer data is managed in the gaming industry. In 2002 (for the second time) Harrahs won a bevy of national awards for their datawarehouse project. With co-winners including such powerhouses as Office Depot, Tufts University, Charles Schwab & Co., Dell Computers and Pfizer, Harrahs was the winner for advancements in their specific industry niche: gaming. Their CRM data-mining project is, without a doubt, revolutionary for the casino industry and given what they had to work with. However, when examined side-by-side with the technologies of their co-winners, it is painfully clear that the casino industry is measured from a different standard than the rest of the business world. A leading technologist for one of the Nevada slot machine manufactures recently wrote to me:
Everyday I see how caveman gaming is now. The simplest things like using real TCP/IP STANDARD networking, NICs, CAT5 cable, routers and hubs you can buy at radio shack. NO they all have to invent their own bad systems of communication.

It is indeed noteworthy, revolutionary, and a giant leap forward to have the best horse in the race at the county fair; but when everyone else is running Formula One race cars, that award-winning horse looks more and more like an old nag. Harrahs data-mining and marketing example is indeed THE best horse in the race. Unfortunately, this is a highperformance auto race in business and not a horse race. 7

In another example, a recent employment advertisement posted by giant MGM/Mirage warned potential marketing candidates:
Must have ability to learn and master THREE DIFFERENT Computer operating systems (hotel, slots, and casino).

And this was for a Marketing Manager not for a computer technician! Yet no one stopped to ask, Why? Bizarrely, in the casino industry this kind of nonsense is routine and doesnt raise a single eyebrow. In any other industry it would be laughable. Personally, I cant decide if I should laugh or cry. With the exception of adherence to some basic business rules and decisions, the entire casino industry is saddled with these kinds of out-of-date methodologiesand not just in technology. In fact, technology is only one small part of the equation. The issue is really about marketing techniques, management methodologies, and then the technology. After all, technology is really nothing more than a tool for marketers and managers (at least that is all it SHOULD be). Even more alarming is the state of the smaller casinos ... those operators not supported by large public corporations like Harrahs, Park Place Entertainment, MGM/Mirage, Mandalay Resorts Group, Trump Casinos, etc. The smaller operators (second and third tier) are working in the 19th century compared to the rest of the business world and a good decade or two behind even the rest of the casino industry. This would not be so bad if it were not for the size of the existing consumer market. 300+ million casino visits a year is a very serious number. 8

These deficiencies in practices are not a reflection on the management of the casinosor of the Operatorsso much as they reflect the development stages of the gaming business itself. It takes time for an industry to grow, and as we have discussed, this is a very young industry. Therefore, there is a tremendous opportunity available at this moment in the evolution of the casino gaming industry. The opportunitycrying out for attentionis the creation and implementation of step-by-step formulas for measurable results for growth strategy, property EBITDA, and overall performance. More specifically, the opportunity exists to focus management on the techniques, methods, and values that already drive successful companies in other sectors: sales and service. These are not hollow buzz-words, but are, in fact, a genuine opportunity to build real business from an industry that already has more customers in a year than the automotive industry (for example). The industry-wide anemia is very similar to the situation in the Motion Picture industry when video tapes were first introduced. The movie business fought tooth and nail against allowing consumer VCRs (and BetaMax) into the United States; they were certain their profits would go down the tubes. They were already a profitable industry and didnt need some johnny-come-lately fad technology telling them how to do things. Then one day it dawned on them: we can make even more money if we produce videos. Today, 20 years later, video and DVD sales usually surpass box office revenue.

Businesses must grow with the changing expectations of the consumer market. New rules and methodologies must be integrated into the old. Again, this is clearly not a call to across-the-board replace management nor even to replace the tried-and-true marketing methods using match plays, nonnegotiable chips, spree, rebates, comp programs, hosts management, bus programs, and other effective programs. Rather this is an outline and business operational plan for exploiting that opportunity; for taking any one casino or group (and the industry as a whole) to the next level of growth and for a phenomenal R.O.I. using the existing infrastructure and adding to it the proven techniques from business, from direct marketing, and from technology. The methods I am proposing began with my appearance at the World Gaming Congress in Las Vegas in October of 2000 at which I laid the ground work for my widelydistributed white paper Casino Executives Meet 21st Century Technology. That paper became one of the driving factors for many casino operators move toward more advanced (and more profitable) player-tracking and decision-support systems. It also sparked my subsequent direct and indirect consulting for a half-dozen of the major Las Vegas strip operators8. Since that trade show seminar I have been able to work with or talk to a number of operators as well as gaming manufactures and technology providers about these issues and possible solutions. I have reviewed the marketing methodologies, CRM strategies, and customer-building techniques of more than a dozen Las Vegas operators, university Casino Management courses, and insider seminars. 10

I have studied, evaluated, and even map-plotted the management strategies of the largest national operators, a select group of Las Vegas locals operators, and two holding companies. Taking what I learned from them as well as my own more than twenty-five years on the periphery of the gaming, entertainment and hospitality industries combined with a pioneering role in the technology revolution of the 1990s and executive positions in the catalog (direct mail) marketing industry I have focused on: research; gaming; technology; marketing; and management. Using specific case studies and formulaic methods, this incredible opportunity in casino operations and marketing becomes crystal clear. This is a call to seize this prime opportunity and apply proven cross-industry expertise to develop a casino property and its profitability. This is a business plan focusing on operations, marketing, and technology to take an existing infrastructure to the next level. This is a strategic plan. It is a management philosophy. It is a marketing plan. It is an operational road map. But above all, this is a call to action and a call for that investment.

Gary Green

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12

An Executive Summary Overview.

A Proven 40% Increase In Operator Revenue.

Using just a fraction of Gary Greens Patent-Pending solution.

Be fore

Afte r

As we noted earlier, most casinos today are overlooking a major source of tangible and measurable quarterly revenues as well as an ability to attract new customers, to increase loyalty amongst existing customers, to increase time-in-play, and to increase the betting handles of existing loyal customers. The business rules and methodologies created by Gary Green were responsible for more than $3.2-billion in sales in 20029. This methodology is no johnny-come-lately fad; rather it is the application of specific formulas (long-proven in other business disciplines) to the gaming industry. 13

One publicly-traded casino operator using their own version of just a fraction of the Gary Green operational outline was able to increase casino revenue by up to 40% in one year of using it10. With this method, the traditional and decades-proven casino management programs absolutely remain in place (for the most part), just as do traditional marketing programs (those earlier mentioned match plays, nonnegotiable chips, spree, rebates, comp programs, hosts management, bus programs, etc.). These are proven and effective techniques. When the Nordstrom brothers grew their business from a Seattle shoe store to the premier upscale Department Store retailer, they did not scrap the methods developed by Macy, Sears, and Federated. Instead, they added a new element of customer service to the already solid foundation laid by the earlier pioneers11. And in doing so they created a valuation that Macys wishes they could duplicate. Likewise, in an existing casino, the tried-and-true models now can be melded into a highly formula-based balance between this new operational marketing management and some special technologies (that were not even available before the technology boom of the late 1990s). The synthesis of these worlds (operations, marketing, and technology) can be all brought together through focus on three factors:
Growth Strategy; Property EBITDA (with investment-grade credit rating); and Actual Performance.

With these three targets in mind, a new kind of management is created: a management that is driven by sales and service: a management philosophy that has long been 14

present in most consumer-focused industries but is somewhat revolutionary to gaming. Beyond simply applying Customer Relationship Management marketingand beyond simple datamining applicationsthis is an entirely new Business management Marketing Overview philosophy that finds R.O.I. as a constant balance between new marketing strategies and a healthy general business overview. It is a balance between the best of the business world and the best of the marketing worldwoven together by technology.

R.O.I.

The entrance of corporate America into the gaming world did, indeed, open the door for some advanced business thinking to be applied to casino operations. And despite the 1980s-era junk bonds used to create some of the public-corporation gaming empires, operational focus was shifted to that Return On Investment. Casinos became businesses. That was, without a doubt, the first step in creating modern business entities in the gaming world. Both in Las Vegas and in the hinterlands where riverboat and Native American gaming have grown roots, serious businessmen and serious business practices are at the helm of some of the better run gamming entities. A number of non-Vegas gaming companies like Isle of Capri have very sound business management at their leadership and are on the road toward the evolution of the industry. 15

But like Macys before Nordstrom or Paramount Pictures before video tape recorders, this very young industry has not evolved to that next level of assured profitability. Now it is time to take THAT vision and add a closer look at implementing operational procedures to support it.
R.O.I.

New customers; Brand loyalty from returning customers; from r Increased betting handles from all customers.
The gaming industry has only recently discovered a basic business and marketing law that other industries learned long ago:
This is a formulaic business. It is consistently predictable, and financial results can be projected with a high degree of accuracy and reliability.
Renowned direct marketing consultant Don Libey talking about customer contact

mers;

Knowing and properly implementing the formulas is the hallmark of the experienced practitioner of any business discipline. Applying the formulas (along with adequate levels of capital) to create above average margin is the hallmark of the master practitioner and the above average casino. Decades of casino operational experience and even an unlimited marketing budget are useless without the basic formulas being known and understood, and applied. 16

What is the formula for the gaming industry?

Many formulas exist for the modern casino to focus on our three (previously defined) targets of revenue growth. Finance uses a set of these every single day. Good marketers use a different set in measuring responses. Slot managers use another set to determine machine placement as well as such factors as volatility. Existing high-level management extracts are nothing more than overviews of another set of formulas. In short, then, a formula for success is little more than a step-by-step 1-2-3 approach to any given problem, issue, or even procedure. We are talking, here, about procedures to reach our three goals; those are our formulas. Depending on the goal, these formulas (or steps to accomplish the goal) change (based on numerous variables and externalities). But the wonderful thing about proven methods about proven relationships about proven formulas is that only the percentages change. Only the relationships change from situation to situation. The relativities and the unities are preserved in a mathematical formula. 17

ns ry Gree Ga the las for formu ing ino gam cas y industr

Why these formulas work.

THAT is what makes it possible to apply cross-industry formulas to a specific set of circumstances. That is why Generally Accepted Accounting Practices work regardless of the business in which one is involved. That is why company valuation, P/E ratios, Market Cap, etc. are computed the same way for a Hotel/Casino as they are for an automobile manufacturer. And most importantly, THAT is why Customer Relationship Management has the same procedures regardless of for what the customers are spending their money. Understanding the relationships and how to manage and exploit them is what makes THIS plan different from anything among operators today. But, more importantly, 18

understanding the relativities and the unities is the key to creating margin in this complex business. The formulas I apply for these successes fall into three concentrations:
1. Management/Operations; 2. Marketing; 3. and Technology.

This is almost a which comes first the chicken or the egg kind of issue. In order for management to make operational decisions, they need a solid understanding of the marketing strategy. In order for marketing to develop an effective strategy, they need a handle on the technology to support a modern campaign. And technologists need the guidance from marketing and approval of management. Thus part of the complexity of the gaming situation has been an inability to marry the three into one philosophy. This is not because anyone has failed to do anything, but rather because it is so rare to find a philosophical marriage between marketing and technology in senior executives. For too long, these functions have been separate. In todays competitive landscape, that is a mistake that can no longer be afforded. It is time to focus and train executives on and in the tools of the 21st century. Lets first look at what senior management should be doing to apply the formulas of this edge-of-marketing science and the edge-of-technology to secure increased bottom line for the casino and to increase: A base of new customers; Betting handles and amount of play time of existing customers; and brand loyalty from occasional or first-time customers. 19

Formula One: Management

A new forecasting focus for management decision support

Very specifically, I propose a 20-point management operational plan for melding technology with marketing to increase the casino bottom line; a program that can be adopted and implemented by almost any management operational structure:
1. Begin by consolidating authority over the all of company's operating vice presidents (and over all casino/hotel properties in multi-property cases) with technology-driven marketing becoming the new driving force. At a minimum, establish an EVP level position to manage this program. This highest level signal is essential to instill the new vision and direction at every level in the company and it lays the groundwork for the growth that comes from these steps. While some of these functions will, at first glance, look like micro-managing, in fact they merely reflect a different kind of focus from what top management has had before now. 2. Develop revenue enhancement programs that add value in the propertys achievement of data-driven operating plans. Top management focus on this issue is essential for success. (see marketing section later in this discussion) 3. Incorporate technology, direct mail, and teleservices into one unit as part of marketing. 4. Set focus group trials (with current visitors) examining what gets people to gamble more and what incentives work best (based on data tracking

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their previous behavior in casinos) so that top management can understand exactly who it is that provides the revenue. 5. Establish mathematical models to score gamblers on how profitable they can be to casino...per visit and lifetime value (since profits....revenuesales are ALL that drives this business).

Lets pause here for a minute to look at these concepts of value creation, lifetime value, and revenue enhancement programs:

CASE STUDY:
From Mandalay Resort Group Management Review Presentation

Mandalay Resort Group views value creation in terms of what they call the New Model vs. the Old Model of management and marketing. Their new model revolves around EBITDA Margin driven by linking together all customer information to target the largest segments of visitors and positing the Mandalay properties as must see destinations. Focusing on revenue management rather than unit growth, they developed loyalty programs to identify the long-term value of those targeted groups of customers. (Technology and modeling methodology limitations hold them back and force them to examine only the largest GROUPS of targeted customers rather than ALL customers.)

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CASE STUDY:
From Mandalay Resort Group Management Review Presentation

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CASE STUDY:
From Mandalay Resort Group Management Review Presentation

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CASE STUDY:
From Mandalay Resort Group Management Review Presentation

With Mandalays excellent recognition of new metrics as a case study, lets continuing this 20-point management formula program emphasizing that these items are, in fact, management issues (rather than some other internal discipline, like marketing only). New management is going to HAVE to be focused on growth, sales, and what Mandalay calls the new metrics. In short, the NEW casino executive is sales focused to such a degree that some issues 24

typically examined only by lower management venues are now essential to the new executive overview.
6. Create Skinnerian behavior modification projections (including intervention programs) into existing gambling behavior to increase loyalty, time, and betting handle. Make it truly PAINFUL for a loyal customer to change brands or to stop coming. 7. Set budgets and calendars for gamblers, calculating their "predicted lifetime value as a decision-support tool for management projections. 8. Train outbound telemarketers, casino hosts, and even cocktail waitresses in recognizing key behavioral words so as to follow specialized scripts that match those word-histories. (Create a Nordstrom-esque customer service focus at EVERY leveland driven by very top management.) 9. Identify the target market, based on data of who the typical good customer is and the largest numbers in these groups. But do not exclude one-on-one relationship marketing from customer contact strategies (like Host programs). 10. Institute (and modify current) loyalty" marketing and technology programs; using psychographics rating players and potential players according to characteristics such as their careers, eating habits, social activities, show interests, etc

Lets take a look at how these seemingly marketing VP functions are really part of an executive management strategy of focusing on tangible operational issues, again, as a tool for decision support and specifically for management projections.

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CASE STUDY:
From Harrahs Investors Presentation

When Harrahs adopted data modeling around the issue of loyalty programs, they discovered dramatic increases in customer retention. So much so that they developed what they believed to be a sophisticated set of marketing tools to promote trial visits, incentive programs for rewarding loyalty, and most importantly turn that loyalty into better profitability. All of this was driven by what they called their 9 parts of relationship marketing to drive loyalty and lower costs. These nine interrelated areas are identified as: 1. Player Card Program & 5. Yield Management Data Collection 6. Internet Functionality 2. Data Mining 7. Slot Management 3. Direct Mail 8. E-commerce 4. Telemarketing 9. And Labor efficiency

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My 20-point executive management plan further focuses on the issue of creating that unique value proposition through implementation of additional knowledge of customer programs essential for making any reasonable projections. Every modern casino executive should be able to tell you exactly who the source of his revenue is. Suddenly, following these decision-support points, projections becomes a science rather than an art. Once upon a time in old Las Vegas, revenue came from whales (old Vegas slang for high rollers who gamble large amounts of money on each visit). In fact, in those days, slot machines were little more than decoration kept around to amuse wives and girlfriends while the high-rolling men spent the real money. Then along came the marketing strategies of Bill Bennett, Mel Larson, and others who transformed the target market from a known-by-first-name handful into an unlimited mass-appeal audience. By the 21st century, that transformation has seriously changed gaming. That 2002 Harrahs survey 12 revealed that those 53-million casino visitors widely prefer slot machines and video poker machines to table games: 74 percent preferring slots with only 14 percent opting for table games (and 8 percent expressing no preference). And casino profits reflect that focus as well. Hence knowing the customer is not only importantit is ESSENTIALto top management. Continuing, then, my 20-points for re-adjusting top managements focus:
11. Evaluate the favorite games of players by age and gender and focus a pro-active outbound customerservice track around that information.

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12. Evaluate which neighborhoods around the country (or in the targeted geo-area) produce the most lucrative customers and have Marketing focus direct mail and telemarketing on that data-driven targeting. 13. Incorporation of an RFM (tracking of Recency, Frequency, and Monetary Value) program into the mix of data (see marketing section). And make available REAL TIME demand forecasts so as to optimize (on-the-fly) corresponding yielding determinations. The addition of the RFM formulas is, within itself an essential stepand revolutionary to most casinosthat makes forecasting absolutely and totally formulaic PREDICTABLE and ACCURATE. (See marketing section later.) This one vital addition to management philosophy is strong enough within itself to build a business. It is the cornerstone of the cataloging (direct marketing) industry and a requirement for any effective direct mail or outbound telemarketing campaign. 14. Determine what percentage of every wagering dollar of a customer is being spent in this casino (as opposed to others) and analyze loyalty base. 15. Add to slot ratings such data as how fast players pull the lever (or hit the button). While this traditionally helps slot managers determine the right location on the floor for the right game for the right price for the right customers, its purpose here is, (once again) to provide a full behavior picture of the customer base so that realistic projections are scientific and not best guesses.

Again, while many of these functions are to be delegated to existing casino management (from slot manager to marketing VP to data analysts, etc.) the RESULTS are of paramount importance to the casino executive. 28

CASE STUDY:
From Mandalay Resort Group Management Review Presentation

Mandalay Resort Group focuses on creating a unique value proposition and obtaining a larger share of the customers budget by focusing the customer on their multiple brands. They do this through customer knowledge / information sharing across their properties (and exploiting their Masterplan Mile in Las Vegas). But more importantly, they take a portion of the customer data listed above as of this writing they are not yet sophisticated enough to analyze the full range described here) and very effectively and professionally posit the results within the track record of the industry in general and then specifically on its impact on their own cash flow and EBITDA. Having very similar data needs and very similar limitations to the Harrahs situation, Mandalay Resort Group differs in that their focus is always on sustainable long term corporate returns from their various revenue streams while the Harrahs data focus is almost exclusively on relationship marketing.

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CASE STUDY:
From Mandalay Resort Group Management Review Presentation

This new management focus is (1) a synthesis of those two focuses and more importantly (2) the addition of methodologies to enhance decision support for projections to build the overall value proposition with this outlined formulaic growth strategy, predictable performance, and EBITDA. If we drill down further into the executive, management/operational role, we see that attention to such traditionally marketing-only matters as frequent-player-cards suddenly has direct impact on EBITDA:
16. Change slot payout13 to be less based on volatility; to pay out smaller jackpots but more frequently (since with the exception of the whale card rooms,

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up to 85% of revenue is generated from slots and from repeat brand customers). 17. Modify player (frequent-gambler) cards to match airline systems of silver, gold and platinum and clearly identify for players the thresholds, which offer escalating rewards for gambling more (see details in marketing).

CASE STUDY:
From Harrahs Investors Presentation

When Harrahs instituted the first-ever nationwide tiered card system, they saw dramatic increases in customer annual revenueup to three times what they had seen before.

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CASE STUDY:
From Harrahs Investors Presentation

18. Make frequent player awards data available realtime to players via the Internet along with real-time yield-management reservation system (at a property where rooms are involved) that will realtime interface with casino marketing. All of this, of course, is in exchange for additional data. 19. Focus on and exploit the fact that in our industry 12% of the players provide for 55% of our revenue; and these are the multi-market, avid, experienced players. 20. And finally, create high-level management understanding of the value of marketing and technology as a decision-support tool for strategic planning, forecasting, overall budget management and operational efficiencies.

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These are the beginning steps of creating sustainable growth and an entirely new philosophy of managing a modern day casino. These are the cutting edge steps for a management overview. They, in fact, DO include some disciplines that heretofore were exclusively the venue of department managers and not of direct concern to the top executives. Once again, attention to some of these issues could at a glance, be construed as some sort of micro-management of less-than-important functions that might best be handled by a lower level manager. However, in careful examination, these issues are the essential ingredients for accurate forecasting at the highest management levels. In short, these management steps represent THE cutting edge for this business.

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Formula Two: The Marketing Plan

Navigating the search for market share.

Many traditional casino marketing executives (despite having learned some of the right buzz-words (like CRM and RFM for new marketing techniques), in general continue to apply old-world gaming-experience marketing methodology to a more sophisticated targeteven in the age of super-casinos, luxury parlors, and Disney-sized grind joints. They continue to see market share drop but can only use the scapegoat excuse of competitive saturation for so long until something has to give. And while IT (Information Technology) professionals can devise a myriad of ways to grab data, they have no idea what to do with it, which data is germane, and how to generate revenue from that data without some guidance from Marketing. Hotel/hospitality industry marketing methodologies are ok for filling rooms and even driving some traffic to the casino (the Harrahs survey numbers prove that)but are pale and hollow when comparing to trackable results along side of a highly-targeted modern gaming-marketing program. In Vegas, specifically, there is so much traffic available that it would SEEM to be hard for a marketer to fail. Yet it happens everyday. In July of 2000 I pleaded with Jack Sommer to examine the Harrahs model and my enhancements to it before he opened the now ill-fated Aladdin Hotel and Casino on Las 34

Vegas strip (in the middle of Park Place Entertainments block of properties). I forewarned the pitfall of creating a new casino project without the new management focus (the very focus that I described in the previous section). More importantly, I proposed a data-mining and technologymarketing program that not only would build revenuebut would be NECESSARY to survive in such a highly competitive situation. In this case my outlinemy pleafell on deaf ears. I was blown off like any salesman off the street. Fourteen months later they were filing for bankruptcy and as of this writing KPMG, on behalf of the bankruptcy trustees, is desperately trying to sell the distressed property rather than even considering a reorganization plan. Hindsight is always 20/20, and the Aladdin had a number of poorly-executed operational flaws. However, there is no doubt that a marketing-focused executive management and an effective marketing plan would have had a major impact on the bottom line: that much is proven from case studies. Add to that, the abysmal situation of buying new but technologically outdated hardware and software, and the raptor-like claws of industry double-talkers posing as consultants, and it is no wonder that millionsperhaps billionsof revenue dollars are lost every year, left laying on the ground rotting when they could have easily been scooped upnot just by Aladdin but by most operators. It is a somewhat bleak picture that becomes even more cloudy when you pour into the mix the territorial up-manship many casinos suffer between the departmental fiefdoms that often make slots, pits, marketing, hotel, and technology adversarial rather than united. Market-focused top management can end that nonsense willy-nilly. 35

As the Aladdin plowed forward into the mire, other operators (like Mandalay Resort Group) were frantically working (and meeting with me) to find ways to bridge the gaps between all of these issues and create a coherent marketing solution. Meanwhile horse-race leader Harrahs was still setting the pace in Marketing as well as in management. A year earlier Harrahs had hired a Harvard marketing professor (with no gaming industry experience) as COO14. It paid off for them big time (See Appendix One for the Wall Street Journals take on the Harrahs methodology): CASE STUDY:
Most operators do not even use the most fundamental of the new marketing modeling and tools. When Harrahs became the first to apply a standard marketing mathematical modeling from their data, they were able to increase response to their direct mail pieces from 3% to 8% (according to the May 4, 2000 Wall Street Journal). And much more importantly, annual earning and the P/E ratio have a direct correlation to this new kind of marketing. And, by their own internal numbers their test of a direct mail program increased customer visits by 49% (see their chart on the following page). In 2000, Harrahs was named by InformationWeek to be number one among the top 100 U.S. corporations that use information technology to build customer relationships and in July of that same year they were given the Best Practices in Data Warehousing Award form The Data Warehousing Institute. The criteria for the latter were development of a practice that can be followed by others, its innovation, and impact on the success of the business. But despite the fact that this is revolutionary in the GAMING INDUSTRYand despite Wall Street gaming analysts seeing this as cutting-edgefrom the viewpoint of the architects of the technology world and from the proven list-based direct marketing world, this methodology of casino data-mining is at best kludge and at 15 worstarchaic .

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CASE STUDY:

From Harrahs Investors Presentation

Even the InformationWeek award has to be qualified as among the best to use technology to build customer relationship FROM WHAT 16 THEY HAD AVAILABLE TO WORK WITH . There is SO much more available; so much fruit is being left on the ground rotting rather than contributing to casino bottom line. Still, Harrahs work does represent an incredible advancement and hardcore proven results that the methodology does work. The industry had to learn to crawl before it could walkand certainly before it could run. The leading-edge Harrahs methodology for customer contact and offers is based on the limited psychographic profile drawn from the data mining that they do (again, rudimentary for the direct marketing industry; revolutionary for the gaming industry see the section following on technology solutions for marketing data mining). In terms of the tenets of presenting offers, prospecting for customers, and creating customer retention that the catalog industry does so well, the performance of Harrahs campaigns is totally

37

CASE STUDY:
unacceptable. In any OTHER industry than gaming, rather than award the company, I would fire the marketing manager. But in gaming, he deserves elevation to the highest honors! The interesting thing is that neither Harrahs nor their competitors seem to be fully aware of just how limited their leading-edge solution really is. In fact, because it is SO successful compared to anything ELSE being done in the industry, it is constantly copied. Mandalay has been testing CRM software packages to compensate for their own poor prospecting and retention response rates. Park Place has consolidated player cards in hopes of building brand loyalty. And at least two other operators have asked me directly if I could produce for them a copy of what Harrahs has, without getting sued by them. One major operator in Las Vegas wrote to me, I am interested in having something similar to Harrahs. If I can get one and if it is as you have stated, I can contact three or four more friends of mine who have casinosI have a lot of friends there (at Harrahs) and would hate to lose them because of coping something that they have done.

The marketing methods are a whole new world for traditional casino marketersand a new set of formulas for even the theoretical MBAs. Even the incredibly complex (and proprietary top secret) Harrahs algorithms devised by their Harvard professor are void of many of the day-today factors for complex direct marketers. There are, for example, 14 standard variables to optimize results in test prospecting for retention campaigns; elements commonly known amongst catalog mailers. An effective testing process alone can take up to 25% of each one million mail pieces dropped. Those elements must be combined with a second half to these formulaic methodologies: the proper implementation 38

of a customer contact program using the data. The combined elements of Recency, Frequency, and Monetary value (RFM) of a customer have driven traditional paper-catalog direct marketing for years. Using that data has allowed the testing of new products, new pricing, and targeting specific offers to match specific types of customers. It also has allowed highly accurate analyses and projections of profits. Add this modeling to other standard direct marketing methodologies (still foreign to most of our gaming world) and we open an entire new world of customer response and revenuefar surpassing the revolutionary and at same time archaic Harrahs methodologies. The increase in response rate using similar elements (with the existing Harrahs limitations in data modeling) has already proven highly effective for a number of operators. Add to the mix the elements of full data modeling and CRM testing capabilities the predictability becomes precise. The addition of these elements to a casinos direct marketing program moves customer drop projections from educated guesses to percentage-specific formulas of certainty. The concept of definitive and predictable consumer spending certainty is still unheard of in MOST gaming circles. To fully understand the value that the previous twenty executive management operational steps bring to the corporate bottom line, lets look at just one of dozens of examples: expanding the data used and formulating customer relationship marketing (CRM) based on that data: This one example is the behavioral modification method called suggestive selling.

39

Jupiter Communications, a leading New York-based analytical service, has found that: suggestive selling should be able to contribute as much as 39 percent of transaction revenues and increase the number of acquired customers by 28 percent in the first 12 months of deployment. Application of this model of data collection and mining, and its attachment to some fundamental assessments of more traditional casino marketing, makes the core of my methodology for marketing. As I noted, traditional direct marketing data (like RFM measurements) are almost never matched with existing casino geographic data, basic census data, demographic data, and basic gambling behavior data for those groupsand especially when using casinos existing LSI (or other player tracking system) data. In order to get even an overview of the dramatic marketing improvements I am projecting here, we need to take a 30,000-foot overview of what adding basic RFM formulas to can do for casino marketing.

40

The complexity and simplicity of formulabased marketing.

To understand how to manipulate more gambling and to harness this awesome power of forecasting and revenue predictability, lets consider what each of these three RFM elements represents, and how to use them together.
Recency. This is when a player last gambled in our casino. The knowledge of how recently a player gambled with us gives us the beginning ability to project the value that customer has (to us or to other casinos, if we chose to sell that customers name). It does not reveal, however, if this is a repeat player; an important factor in venues where tourism, foot traffic and convention traffic are in play. Frequency. This is how many times a player bets at our casino. We should be able to measure the frequency of players as either one-time players or as repeat players. This equation should also factor in hands-per-hour at tables or (more likely) handle-pulls (or button pushes) per quarterhour of play. However, this does not identify the last time this person played at our casino. They may have played 5 times last year; or once a month for five months; these different behavioral patterns are VERY important for creating a marketing offer that will attract additional betting from different types of players. These two measures, together, give us two of the axis we need to plot a customers value. If we consider the left (or Y) axis to be Recency, then we should be able to begin a chart of repeat customer activity:

41

Played Today Played Within A Week Played Within 30 days Played this Quarter Played within a year

If we consider the top (or X) axis to be Frequency, then we should be able to put together a full graphical analysis of two dimensions of our customers. (For the purpose of this basic illustration, we will exclude the plays-per-hour portion of the Frequency plottingthough in real application of this technique it is an essential element for an accurate projection.
Played 5 times or more Played Today Played Within A Week Played Within 30 days Played this Quarter Played within a year Played 4 times Played 3 times Played twice Played once

42

Now, lets identify each of the positions where we should be able to enter data to plot the behavior. In each block we should be able to insert the number of (or the names of) customers who match the criteria for that block. To visualize that plotting for this example, we will identify each block with a letter of the alphabet.
Played 5 times or more Played Today Played Within A Week Played Within 30 days Played this Quarter Played within a year Played 4 times Played 3 times Played twice Played once

A F K P U

B G L Q V

C H M R W

D I N S X

E J O T Y

Customers in block A played 5 times and played one of those times today. Customers in Block F played 5 times and one of those times was this week. Customers in Block Y played once last year. Customers in block U played 5 times, but not in the past yearand so on. This example-charting allows us to examine the behavior of our best customerseither by number or by name. This 43

within itself is a powerful tool because it allows us immediately to tailor different offers to different players, based on this little bit of data. For the purpose of simplification in understanding the process here, lets merge some of these blocks into quadrants so that we can easily see our best customers, our worst customers, and our borderline customers. Even though we are using simple charts here, remember that in reality a computer is keeping track of all of this data for us and sorting the players into our categories. In reality, these seemingly time-consuming and expensive models are instant and virtually cost free.
Played 5 times or more Played Today Played Within A Week Played Within 30 days Played this Quarter Played within a year Played 4 times Played 3 times Played twice Played once

A, B, F, G, K, L

C H M R W

D, E, I, J, N, O

P, Q, U, V

S, T, X, Y

Customers in grid ABFGKL are our very best customers; while customers in grid STXY are our worst customers. The other grids have varying values to us as good or bad customers. 44

Now if we also modify our axis to match our grids, we get a chart that looks like this:
Played 4 times or more Played Today to 30 days ago Played 3 times Played once or twice

A, B, F, G, K, L

C H M R

D, E, I, J, N, O

Played this Quarter to one year ago

P, Q, U, V

S, T, X, Y

This over-simplification very easily shows us how we conceptually should be able to rank customers based on R and F dataand how easy it is to start targeting specific offers to customers based on their behavior (and therefore to what they are most like to respond). This model holds true, unless we consider the possibility that each of the customers in grid ABFGKL played 5 slots the customers in grid STXY each played $5 slots then suddenly our two dimensional graph is seriously skewed if we plan to use it to measure good customers. Fortunately the Greek philosopher and mathematician Euclid taught us that the world is not two-dimensional. And fortunately neither is the understanding of customer history. The third dimension for us is Monetary Value.
Monetary Value. Pure and simple, this is how much

money a player gambles; his or her handle. Generally, for analytical purposes, this figure is the average handle for a 45

repeat customer. This measure can be as simple as betting handle or as complex as actual drop. Lets first consider the monetary value of players as a standalone chart. We will chart average bets placed in three per-session categories: $1 to $100, $101 to $500, and $501 to $1000. This will be our Y-axis. The X-axis, then, is a little more complex. If we rate each of the values as big spender, average, and worse, then we want to see what steps we must take in each category to increase a lower player to become a bigger spender. The Xaxis then is the category of play.
Big Spender $501$1000 $101-$500 $1-$100 Average Spender Worse Spender

A B C

In the A block, all the players are already spending in our top (over simplified) segment, so no movement is necessaryonly retention. (And retention IS a major issue.) In the B block, players must be retained AND move one level to become our best spending players. And in the C block they must be retained and move two levels to become bestand move one level to even become average. The Big Spender category, then, should receive the most attention in attempting to retain them, to get them to play more times and more often. The ones who spend almost nothing should have fewer resources dedicated to moving them toward spending more often and more times. This is 46

one of many possible basic marketing strategies that most good marketers already deal with on a daily basis. If we superimpose this model onto our R and F chart from above, we should be able to quickly see that a player who spends the most AND has recently played and plays often is our very best customer. Likewise the player who spends the least, has only played once, and has not played in the past yearthis is the worst customer. Everyone else falls somewhere between in a (vastly over simplified) three-dimensional graph of this RFM data.

Played 4 times or more Played Today to 30 days ago A, B, F, G, K, L

Played 3 times C H M R

Played once or twice D, E, I, J, N, O

Played this Quarter to one year ago

P, Q, U, V

S, T, X, Y

Among the magical formulas that direct-marketing gurus talk about are rating formulas for customersusing the RFM history that we keep for each player. Without taking the time here to teach RFM rating systems (and thereby lose the focus of this high-level overview marketing plan summary), let us assume that we have developed a rating system that 47

gives us 10 different categories of players, ranking from 0 to 9. For this simplified example: Category 9 players are those very best customers who play often, gambled recently, and spend a lot of money; Category 0 casino visitors played twice, havent played in more than a year, and their average handlevalue was a mere $2; Categories 1-8 all fall mathematically between those two extreme poles. With this data, we now have a powerful personalization tool to add to our existing arsenal of explicit user ratings, observed behavior, purchase history, and demographic/psychographic information: we can create an OFFER based on this RFM table. For example, if I am a player who ranks in category 9, I might warrant personalized attention from a host, some outbound telemarketing, and a series of incentives that match other players like me. My offer would point me to specific games and even days of the week to visit (all based on my history as well as on my behavioral data). It would push up-sells and cross-sells to me based on casino activity issues and cross-sell histories. It would provide me with a personalized experience for my next visit based on my history and predicted behavior (measured against others in category 9). Creating offer or even visit personalization and all the bells and whistles associated with suggestive selling is a complex process but, as Jupiter noted, it is a process well worth the effort. But most existing casino marketing personalization efforts stop at that point. 48

In my research into the much-touted Harrahs targeting algorithms I found some of the most absurd mismatches of data imaginable. I visited Harrahs in Tahoe twice, Harrahs in Las Vegas five times, Harrahs Las Vegas Rio Casino property twice, and Harrahs New Orleans property once. In each case I deliberately played low-end 25 slots for a time-period of from one hour to up to three hours. My profile (which I filled out during my first Harrahs visit to get a Total Rewards card from them so they can rate me) clearly identified me as an executive with a six-figure annual income who lives in a zip-code geo/demographic that is among the 5% wealthiest in the United States. The next calendar quarter following these research visits, Harrahs mailed me ONE offer: a FREE BUFFET in New Orleans only if I return to play there. Where did their analysis came up with the supposition that I would (a) stand in line for a buffet anywhere, (b) visit New Orleans again (seeing as how 70% of my action was in Vegas), or (c) be enticed to fly from Florida to New Orleans for a free $7.95 meal? The where is actually clear: They used limited dimensional analysis. They compared only certain elements of my behavior and not the full gambit of information that SHOULD have been available to them to target me with a more suitable offer. This one direct mail piece offering the buffet instantly revealed to me the great failing and limitation of the Harrahs state-of-the-art system. It was truly frightening to me that their system is so far advanced beyond most other casinos. To test the Harrahs system against other large operators, I next tested Park Place Entertainments system. Over a three-month period I visited several of their Las Vegas 49

casinos to play $1 slots for two to four hours per session with eight sessions during each visit. Painfully to me as a marketer, I discovered that one PPE property did not recognize me as having ever played at a PPE casino because (as I was told) our computers do not talk to each other. Even among PPE brands I could not be identified as a rated player 17. I presented my Caesars Las Vegas players card to Caesars in Tahoe and was informed that I needed a different card to play in Lake Tahoe (even though the cards themselves listed all of the Caesars properties on them). Get this: the Tahoe plastic card actually had old-style computer punch-card holes in it so that it could be read without magnetic tape:

Do Not Bend, Fold, Spindle, or Mutilate?

The infamous and somewhat silly 1960s punch-card style Caesars Tahoe player tracking card (above) issued in 2001.

50

The other Caesars card required at Las Vegas Caesars. It took TWO cards to play in two Caesars casinoseven as a rated player!...and different cards to play at each of the other PPE properties. And look at the graphics on this card: the Emperors Card logo was haphazardly (and crooked) stuck on top of the background as if designed by a 7th grader. To make matters worse, even though I had (by relative slot standards) a pretty high handle, when I asked the Las Vegas Hilton to comp a room for me based on my play over several weeks at other PPE properties, they quoted me a per-night rate that was MORE THAN the rack rate I could get booking the room on the Internet or through Triple A. This is the way to retain good customers?18 Nonetheless, beginning the next quarter the Las Vegas Hilton did start (and continues to) mail to me almost every month a discounted room rate that is in fact a little less than rack. No wonder Harrahs system, flawed as it is, is heads and shoulders above the rest of the industry! 51

Even the most rudimentary suggestive selling methodologiesthe Harrahs package will indeed bring some more visitors to a casino, convert more of those visitors to players, increase the number of returning players or additional play by existing gamblers, and increase the average size of play. But this methodology alone falls far short of a full targeting strategy. Alone, this type of personalization, cool as it is, allows no means for analysis of the resultsand especially no accurate method to forecast revenue. Johnny Cash sang powerful lyrics: It is dark as a dungeon way down in a mine 19. That applies to the data mine as well. All of that data we are (or should be) collecting about players and their gambling behavior is pretty worthless if it is in a dark bottomless pit somewhere. Without analysis, the personalization of offers is little more than an attractive toy. It is for the analysis, projections, budget management, marketing examination, advertising decisions, and a host of other operational considerations that we create offers rather than just random advertisements. At a bare minimum an offer should analyze: Cost per Promotion (this is a complex calculation that we will examine further below when we look at fine-tuning the more traditional casino marketing tools); Actual number of sessions driven to the offer; Budgeted monetary handles; Budgeted number of plays; and many other factors. Far beyond merely running reports on these areas, an offer should be incredibly configurable so that each personalized 52

or suggested-sell has the availability of intense analysis and projection. Unfortunately, only a handful of casino marketers (even the ones with personalization and suggestive selling techniques) have yet learned how to calculate using these powerful formulasor, alas, for that matter, even that such formulas exist. At the base of the analytical process is the assignment of a unique tracking and analysis number a structured code for each Offer createda code that ultimately will allow statistical analysis of an offers variables. This source code, typically, should be a 16-digit alphanumeric code with the first eight digits identifying the offer itself, and the last eight identifying the use of that offer. The meaning of the distinction in these two terms will become apparent once we look at the structure of an offer itself. Typically an offer code should look like this:

53

In order to properly use these codes, each offer should be configurable uniquely with offer-specific components for each of our target groups. Among these many configurable components, we should create business systems and models that will allow us to configure and track: The purpose of the offer (increase handle, increase visits, increase loyalty, acquire new customers, create a list, etc.); How players will find out about the offer (direct mail; emails; advertisements; outbound telemarketing, junket affiliate networks; and so on); Time frame in which the offer will be available or repeated (including start date and stop dates of any particular offer); Price point of the offer (some offers may have higher prices than others; many offers will have NO price point); An offer should be able to specify which unit within our organization generated the offer and which division within any unit generated it as well as the department within the division; The offer should carry a description of the offer itself; An offer should be able to be tied to an analytical discount table based upon either gambled dollars or time played (or both). A discount can be either a Percentage or a Monetary amount; Each offer should allow us to set up automatic promotional chains of events that help provide the ability to obtain the Optimum Conversion Percentage. (The word Optimum is used because the largest conversion percentage may not be the most profitable to obtain. As we become able to define a 54

virtually unlimited number of automatic promotional sequences, a good marketer should be able to test how many efforts or the contents of efforts yield the most profitable conversion percentage); We should be able to specify which play-products are promoted for any specific offer. This is part of the mechanism which allows us to have different prices, advertising space, buy-ins, up-sell, minimum handles, match plays, etc. between different offers.); For analytical purposes, we should be able to specify (with data analysis tools) our expected revenue for each offer. This allows us to compare budget versus actual sales on an offer level; Up-sell (and cross-sell) should be able to tie to an offer as well as to player levels. All of these offer configurations are then track-able by those first eight digits of the 16-digit source code we discussed above. The remaining digits of the source code should be configured to track the USE of the offer. A use, for example, might be an RFM segment of the existing customer base, or it might be the location and run of a particular advertisement, or the time slot for a TV spot. Think of a use as the distribution of the offerwhat drove the customer to that offer.how did the offer get into that players hands. In order to allow proper statistical evaluation of each use, we need to be able to specify all of the vital elements of each use in the remaining eight digits of a structured source code. We will define, in the Use Code, at least the following elements: The advertising method that reached the player; 55

 A code for when the offer method was operative; Each use should be able to have a given date that it first appeared and an expiration date, as well as the date the first player appeared from that specific use; Additionally, the use code should be able to define the date of the initial budget or when it is to be established; How often the offer ran; In addition to RFM data, the use can allow additional segmentation clusters with criteria like average handles, games played, or even demographics; For analytical purposes, each use should have its own costs, depending on advertising or other methodology for driving the player (or potential player) to the offer; A use code also should track the date the last forecast was produced (as it relates to this usage). Another operation of the use code can be to measure the quantity of that use. A simple offer may be measured in player sessions generated from each one-thousand offers sent or viewed; or for advertising buys (and junket affinity programs) we might want to have the use code reflect total impressions that reach the targeted market; or any number of other CPM-type formulas. The combination of powerfully and flexibly configured offer and use codes together make a total source code that in turn can allow us to begin applying those magical formulas that this whole marketing section is all about. The next task before marketers, then, is to integrate these new methodologies with the existing proven tenets of casino marketing and then fine-tune that integration process. 56

CASE STUDY:
One widely told (and published) story is the Luxors tale of losing a $500-a-hand blackjack player because the cocktail waitress forgot his bottle of water (for which she was advance-tipped $100) while bring a pack of cigarettes to another player (for which she was tipped $1). The angry Luxor manager blamed the cocktail waitress. One industry analyst blamed poor management. But the fact of the matter is that the blame rested solely on the lack of an effective REAL TIME customer relationship management system that instantly tipped key staff to value, activities, and needs of customers. To compensate for their lack of knowing that such a methodology existed, smart managers at Mandalay hired a key manager of highrollers away from the Mirage group and had him set up an advanced casino hosting system for such players. Overall the strategy was smart and effective and took full advantage of the universe of knowledge available to them. Then again, a mule team does great hauling until one learns about tractor trailer trucks. From a cost-basis, the formulaic solutions far surpass anything based on instinct rather than data.

57

t; .R.; agemen old man agement & H ntrols; + H y; r man ial co + Labo ting & financ tion & securit dge tec ro + Bu lance, P Surveil + it; ons; + Cred ality operati issues; mbling) Hospit ons & Legal ohol, ga + ues (alc lati + Regu & Cultural Iss nction l fu + Socia et customer gaming laws rn + Inte ges in on-line n and cha

Fine-tuning more traditional casino marketing tools.

Lets look at some simple examples of the more traditional casino marketing tools that we can fine-tune with the new technologies and especially new uses of data: Traditional casino marketing, in many cases, has match play coupons and nonnegotiable chips handed out as pre-comps without truly calculating the cost to the casino and without using the full range of customer-tracking data to calculate those costs:
o How are these coupons distributed in relation to specific customer history and (equally importantly) to similar-customer history (using

58

o o o

the more powerful RFM modeling along with this data; How much in additional wager amounts are needed to recover the total cost of match play; How many hands will be required for the player to bet that needed wager amount; At (for example) 50 hands per hour, how many hours of playing time are needed to generate the requisite number of hands.

These are the kinds of issues that must now be matched against the wealth of player data from the data mines we create. Gamblers Spree programs are (usually) only evaluated in P/L terms, because most lose money (I painfully know this, because in the early 1980s I was an Atlantic City junket master.)
o Are these junket-master partners given standard packages, or packages based on tangible data, testing, and focus-groups; What is the profit/loss if only minimum requirements of a program are met by participants in any partners program; What minimum action is required for any given program to break even; Is it reasonable to expect play in excess of that break even? (and therefore is a profit assured); Are there justifications for such programs even if it is unlikely to receive the action necessary to even break even?

o o o

In attracting whales and semi-whales though common 10% - 25% loss rebate programs, many casinos fail to calculate the expected valueper-hand in conjunction with the now-available historical data on total number of hands played. In these failings the program will cost the casino (and the whales KNOW it): 59

o o o

Casino advantage decreases as the total hands decrease; Casino advantage decreases as the betting becomes more volatile; If the player bets banker side at baccarat, the rebate almost totally nullifies the casino advantage; Most importantly, these programs must be used in conjunction with comprehensive marketing data, not just as a function of a vendor-supplied rating system.

Casino hosts and remote sales reps who use a traditional tracking system for payer action criteria are likely to overlook quantifiable data that should create differentiated comp schedules rather than a flat one. Flat comp schedules were, indeed, a vast business improvement over the old pit pencil system, but are absurdly in adequate in apply universal standards to highly segmented groups of players. For example, though it is widely known that roulette players lose a lot more money per hour than blackjack players and therefore should have a different comp schedules, little or no attention is given to players who at times reach beyond their favored game and the intricacies of those games (handle-pulls-per-hour on slots, or even different slot payout schedules for example)all of which should impact that action criteria. Do the mathematics of chip warrants and dead chip commissions ever justify their costs? Though these programs are not as prevalent in Vegas as in some international casinos that have called me for advice (or tried to hire me), they still need to be evaluated in the context of customer 60

data. In fact, customer data should be the single overriding factor in making all marketing decisions. Over all, each of these examples and ALL of the casino marketing programs (from host management to telemarketing to bus programs to comps to rebates and everything in between) absolutely MUST be data-driven. Moreover, they cannot be driven by partial data (like Harrahs faux pas of inviting me to New Orleans for a buffet) or very limited data (like the PPE bone-headed tracking structure). The second and third tier operators (outside of the huge corporate support and influence) are actually blessed in that they dont have to revamp existing infrastructure to fine tune existing marketing programs: for most part their existing programs are so rudimentary that they actually can begin with the state-of-the-art. According to Harrahs public documents on file with the SEC, that corporation spent tens of millions of dollars to reinvent the wheel in many respects and apply their versions of these rules from scratch. But the fact is, using the latest technologies available and using the tenets of already-proven business models (such as the above-described RFM approach honed by the cataloging /direct-marketing industry), it is both possible and expected that such a system would cost thousands and not millionsor even tens of thousands of dollars. Truly, one does not have to start from scratch and reinvent the wheel. For example, the off-the-shelf $299 Microsoft Excel spreadsheet can do player analysis breakdowns faster (and obviously cheaper) than Harrahs NCR Tetradata solution 61

run remotely from their Memphis data processing center and returned overnight to Las Vegas. There are numerous other issues that have to be addressed in the overall marketing processes for modern casino operation. But they all MUST be understood from this starting pointfrom the beginning realmof data collection and data usage (data mining). That starting point requires, as we discussed earlier, a high-level management ordained marriage between marketing and technology with the focus heavily on bottomline performance. Just as the day of the pencil is over so must be over the days of customer retention programs that are based on the partial-data of rating system software and mathematical models that lack the full picture. Almost any internal analyst or competent manager can make computations for management of the daily hold, handle management, or drop predictions based on reports from the pits and the slot room. However to accurately predict behavior and modify it in advance is the new formulaic science of casino marketing. The marriage of marketing and technology, under one operational leadership, provides a proven formulaic pathway to that base of new customers; increased visits, play time and handles among existing customers; and increased brand loyalty from occasional or first time players. I have shown what management needs to do. I have outlined some of the tools needed by marketing. Lets now look at cleaning up the technology situation.

62

Formula Three: The Technology Marriage

The puzzling problems of getting data into the hands of marketers.

Casino technology today is, at best, a series of puzzles. Remember that MGM/Mirage ad for a marketing manager that required the poor guy to be fluent in three different computer systems? Unfortunately, that kind of absurdity is not only common place in the industry but is considered normal. In order for marketing executives to accomplish their goals and use the powerful tools we just outlined, the technology puzzles must be solved; technology itself must become a tool for marketers rather than an obstacle to deal with. The puzzles themselves can be summed as: 63

 Current data models are deployed in proprietary formats that differ for slots, pits, and analytical systems; Current data models are dependent on the software applications for each game tracking system rather than a universal standard; Current data models are dependent on the rules and parameters set up by the designers of each independent system and NOT on the casinos needs; Current data models are dependent on which type of computer system they are running on and they cannot share information from other systems even in the same casino. The time required to integrate models with other applications can be long and the process can be very expensive. Keep in mind that executive management cannot get accurate forecasting tools and marketing cannot get the most effective targeting tools until these issues are resolved. Fortunately, solving the technology puzzle is actually a much more simple issue than originally thought by many managers, marketers and technologist despite vastly different platforms and communications methodologies. To see why this is so, we need to understand a little about what we learned about technology from the Internet era. The trendand most solutionsfor these casino technology puzzle revolve around the buzz-word of clientserver computing. The industrys GSA (formerly GAMMA) c-link specs were all about this approach. 64

In that model, each slot machine or pit terminal would be (and in some newer cases IS) networked to a massive server that processes all the data and directs traffic between each client machine. In a true client-server model, the client computer (or slot or pit terminal) is always connected to the server. This was pitched as the Internet or Intranet model and it makes for a lovely story with good ways to spend a lot of IT dollars. But apparently this model was not designed by people who were actually instrumental in development of the Internet. Because despite the buzz, the Internet is NOT a client server model of computing. Once a web page has loaded, the client connection to the server has ended. The server can even be unplugged and the page will still be on the client machine.

Rather, the Internet is a TRANSACTION model. Both the connection and the data passed depend on a single oneway sending of informationtransactions, not two-way communications. If we do the same thing GAMMA did in citing Internet technology as a solutionbut apply the REAL Internet 65

model to an operators computer hardware we get a different picture.

Rather, the Internet is a TRANSACTION model:

It is probably important to note that the GSA (GAMMA) is dominated (if not controlled) by slot hardware and software manufacturer IGT. That fact may or may not have some impact on the solution suggested by that industry organization. A version of the real transaction model is what is typically found between a gaming device (or table) and its information processing server.

Using this true Internet model of transaction computing, rather than a client-server model, we are able to take data 66

from multiple sources, on different platforms, in different programming languages, with different data-base schemaand write a one-way communication to a central server from the customer point to and from that devices own processing server (i.e.. AS400) and from that server to an Applications Server.

Slots Tables

Any Point Of Sale Hotel Check-in Check-

In true Internet terms we called this the ASP model (Applications Service Provider model). It is a simple solution to a series of problems made overly complex by technologists who did not view the issues from the executive need or marketing need. This simple and inexpensive solution allows data to be presented to marketers and to executives from an information management structure called data marts. 67

Advertising Response Analysis (RFM)

Player Performance Analysis

Customer Lifetime RFM/Source Analysis

Other Data & Analyses As Needed

Using a combination of ATTs RFS model, Microsofts new dot-net initiative, and XML protocols, the Applications Server will house ODBC compliant data marts containing warehoused summarized data from the various sourcesconverted to one central relational repository. Again using the transaction methodology, once this amalgamated data from all sources is processed, an extract from it can be sent back (as a message file in the proper format) to the servers for each device. Because it is a non client-server transaction, this is done without interrupting the on-going relationship between the device and its own server. The magic technology key (and currently missing piece) is an API (Applications Program Interface) which easily can be created to communicate between each server and its proprietary software. This API will translate the data stored on the proprietary server to a standardized format on the ASP server. Additionally, the API will take the collected data from multiple sources and convert it to readable data in the format of each proprietary system. 68

Because this is the normal communications line between the client device (a slot in this case) and its server (an AS400 running CDS software in this example), there is no huge costs involved here either. While on the surface it appears that the connection between the proprietary server (the AS400 in our example) and the ASP server is a client-server connection (since there are two-way communications taking place), in fact, the ASP server can be down or even taken away without impacting the data flow between the device (slot in this example) and its server (CDS AS400 in this example)AND with the last ASP update intact on the server. There is no need and therefore no costs to update existing machines, software, nor communications. And THAT means there is no need to spend a fortune on all the new technology that many insist is the ONLY solution. Both marketers and executive management can have real-time access to decision support tools and at the same time these APIs can send real time data to any legacy accounting systems or other decision support systems. (Again, without spending additional money.) Communications between the various player tracking systems and vendor packages is SOLVED by this ASP Model of data warehousing and the transaction model of data exchange. The data is now available for MODERN marketing analysis. A second level of technology problems come to surface when we look at operators that have more than one property. Consider this really bad scenario and think about my travels between the PPE properties and the Harrahs properties:: 69

A good slot player staying at the hotel of Property One takes the indoor walkway over to Property Two. He is a rated slot player at Property One and has a substantial handle. When he sits down at a machine inside Property Two, no one knows him and there is no indication whatsoever that he is one of the best customers of the parent company over at their other property. His frequent-player card from Property One is not recognized by the even same model slot machine in Property Two. In fact, in this day of no-customer service, he is treated like anyone else off-the-street who just wandered in as foot traffic. Frustrated with the level of service (or lack thereof), he walks over to the upscale flagship Property Threewhere again he finds that he is just another one of the herd there too. He is not an idiot. He, of course, knows that all three properties are owned by the same Operator. And he is totally frustrated at the operators failure to recognize him or reward him for his play. Then on a recent business trip to another city he believed that the casino there, also controlled by the same operator, should have recognized him for his play at Property One. At least on a recent trip to New Orleans the kiosk at Harrahs recognized his players card from Las Vegas. He felt like Property Two in this case, next door to Property One should have done at LEAST that much. But of course it did not happen. And to amplify that marketing nightmare inside ONE PROPERTY, he left the slots and sat down at a blackjack table. The pit boss didnt EVEN know he was a rated player. Despite the pit staff diligently keeping notes and entering data, there is no real-time connection and recognition between the system in the pits and the slot tracking system.

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This absurd scene is played out every day in Las Vegas and other locationsincluding American Indian nations that have multiple casinos. And there is NO excuse for it! As of this writing, in Las Vegas, Park Place Entertainment, Mandalay, and Harrahs have all begun some limited versions of a one-card systemwith Mandalay being the most advanced and Harrahs philosophically understanding the importance. Outside of Vegas, Isle of Capri Casinos pioneered a standardization of marketing between all of their properties; a standardization that rivals even the most progressive of the big Vegas operators. Still, the industry as a wholeand especially the REAL TIME element is sadly lacking. The communications of systems between properties has (until now) required either special network lines being run between properties (a major issue if one property is in Las Vegas and the next is in Mississippi) or having a dedicated telephone line open to transfer data. The first method, though very fast in data transfer is prohibitively expensive. The phone line method has a data transfer rate that can take hours. Then along came the Internet. In the Internet world we have the option to transmit certain data over a Virtual Private Network in which no one can access or intercept data transmitted. The data transfer rate is as fast as a network connection can be and no special wiring has to be run. A Virtual Private Network (VPN) connects the components of one network over another network. VPNs accomplish this by allowing the user to tunnel through the Internet in a manner that provides the same security and features formerly available only in very expensive private networks. 71

Transit Internetwork

Virtual Private Network

Logical Equivalent

This VPN technology also allows a corporation to connect to branch offices or to other companies (over the Internet), while maintaining secure communications. The VPN connection across the Internet logically operates as a Wide Area Network (WAN) link between the sites. The secure connection across the inter-network appears to the user as a private network communicationdespite the fact that this communication occurs over a public internet hence the name Virtual Private Network. Communications between an operators various properties is SOLVED by the VPN solution serving as the transport mechanism for the communication between the ASP and legacy servers in the various locations at the various properties. The connection is open all the time and therefore the data can be updated REAL TIME, giving executives up-to-the-second forecasting tools.

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CASE STUDY:
In the year 2000 I presented the following outline to Mandalay. By late 2001 they had implemented a version of this architecture and begun a serious Customer Relationship Management marketing system using this data:

ASP Server
VPN VPN

VPN

VPN

VPN

AP I
tion onnectio manent C Pe r

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Since I first outlined this revolutionary technology model Harrahs has implemented a non-real-time batch-process version of this technology; Mandalay Resort Group has implemented a one-player-card-system and Park Place has integrated SOME of their frequent player programs. Progressive steps are being taken in the industry; but we still lack a comprehensive marketing-driven solution. Despite the progress, all of these new systems still lack either real-time CRM response or they lack an effective datamart mining structure. In short, they still lack the most modern tools to solve the problems. The real issue for technology, then, is still the support of marketing through creation of a data-mining process. In short, the problem is the need for coordinated, architected real time copying of data from various sources (both in house and externally) into an environment that is optimized for analytical and information processing. Data from one system must be matched with player data available from other systems in order to create a full customer history as well as a psycho-graphic profile of the player. This requires much more than mere presentation of data. It requires complex mathematical algorithms based on predictive-response modeling. To create similar mathematical models but ones that come no where near real-time Harrahs hired that $1.5million-dollar-a-year Harvard mathematician. And to their credit, as Harrahs moves into their next phases they are working toward that real time transfer. Their interest was apparently time-to-marketand they could afford a few 74

million dollars to invest in outdated technology to speed the process. But, of course, it CAN be done much cheaper using VPN and the technology methods I have outlined here. Understanding the mix between the technological needs, the formula creation, and the marketing needand then implementing action on that need is part of the role of the new management in the process. As for technology, it is not enough to collect data. The data must then be analyzed, sorted, and presented in accepted mathematical models according to the standards and practices of modern social science. Marketing policies and procedures must be in place to best take advantage of the available data and the analytical algorithms. Marketing management and staff must be trained to use this data and these new methodologies and technology staff must be trained to meet these needs.

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Vision, Summary and Conclusions.

Summary of the Gary Green Methodology:

R.O.I.
Business Overview 1. 2. Growth Strategy; Property EBITDA and investment grade credit rating; Performance. Marketing

1. 2.

Creating new customers; Building brandloyalty among returning customers; Increasing betting handles from all customers.

3.

3.

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The proposal presented herethe visionis to take one casino property, one organization, and build the next level of casino management and marketing. This vision is to take the evolution of this very young industry to the next step by incorporating into it the hardlearned but well-proven tenets of general business, of directmarketing, and of technology. This vision is to seize the tremendous opportunity to implement step-by-step formulas to create: A predictable, forecast-able growth strategy; a strong property operating and nonoperating profit (excluding depreciation and amortization and before interest and taxes); and a record-setting overall performance. This vision is to create the metrics to accurately measure these results, forecast the likelihood, and generate a betterthan-average return on investment. The vision here is to create a NEW kind of casino based on marketing, sales, and customer development. The vision is to run casino marketing, operations, finance, hospitality, F&B, entertainment, and all aspects of the casinodriven by the new model and never focused away from the relationship between CRM strategies and bottom line. Within the first year of operation we will be a highly visible company known as the best of breed in the gaming world. We will have developed and marketed the property to position it as a market share and industry leader. 77

We will enjoy sound forecasting and projection methodologies and will have established a track record based on our already-proven methods and history. Based on these projections and the outline in this document, we believe that this is in fact the basis of a sound business development and THE future of gaming. That is what this outline is all about. That is what this research has been all about. That is what I now present here.

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Management Bio. Gary Green is widely recognized as one of the worlds leading strategic marketers and authorities on creating new markets. A popular trade show speaker and award-winning writer, he is well-known for taking complex issues and quickly finding formulaic solutions to them. He has a broad cross-industry background that includes the periphery of the gaming industry as well executive and management positions in the cataloging (direct marketing) industry, software and technology industry, entertainment and hospitality, publishing, tourism, public relations, and journalism. A plethora of varied experiences, his mastery of business modeling and ability to quickly winnow revenue streams from operational chaff has given him an earned reputation for finding new ways to look at old businesses.
A colorful entrepreneurial and over-achiever background.

His colorful background includes the former coownership of a Russian circus and a slot machine gallery, as well as an award-winning career as a technologist (he was twice a finalist for the Best of COMDEX technology award in the late 1990s). More than 200 companies (including Microsoft Developers Network, Sony, and Nordstrom in the non-gaming world and including Mandalay Resort Group, and MGM Mirage in gaming) are currently using some portion of the business rules, methodologies, and technologies he created beginning in 1996. As of this writing, still more than $3.2-billion in annual sales can be directly attributed to his innovations in ecommerce (technologies created before the dot-com bubble 79

popped). Five-percent of all e-commerce on the planet is still processed using his backend innovations. A notorious over-achiever in whatever venture he enters, his early career was punctuated by an entrepreneurial alphabet soup of unrelated ventures and accomplishments:
He was twice-nominated for the Pulitzer Prize in Journalism from his days as newspaper reporter; As a touring musician, recording artist and singer/songwriter, he was inducted into the Smithsonian Institutes Permanent American Folklife collection for his three 1970s-era record albums; He ran a leading Washington, DC public relations firm handling Congressional, Senatorial, Gubernatorial, and U.S. Presidential campaigns in the 1980s. He is the former publisher of a 250,000 circulation tourism magazine; A veteran of the dot-com IPO frenzy; He marketed a start-up tourist attraction and entertainment venue (with tiny slot casino) and grew from zero to 12million-plus visitors a year; As a division president of a 21-year-old catalog company, he created a new marketing frontier through CRM development of more than eight-million active customers and targeting another 13-million annually. He created an e-business venture for a $1.055-Billion real estate developer, creating a business model, technology model, and marketing model; He established strategic alliance with Computer Associates, Compaq, Lucent, Hewlett Packard, and other technology partners; He created and was the primary marketer of a software middleware methodology of data exchange to more than 150 vendor companies order management systems (exactly like the major legacy casino player tracking systems on IBM AS400s); He mentored and guided a first-round start up that creates and manages "Interactive Information Response Systems"

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for vendors, publishers, and advertising agencies using the Internet, Wireless Communications, and Interactive Television; He co-founded a venture capital fund to explore digital opportunities in the real estate development sector; He helped obtain 26 patents on process of getting retail planograms to real time three-dimensional consumer interfaces deliverable via the internet; He is the creator and co-patent holder for the only multicatalog on-line shopping process; A former night club owner, bar owner, and movie theatre manager; He was one of the first Atlantic City casino junket operators; He owned one of the first non-Bar Association paralegal firms; and he was the architect of the single largest labor union organizing drive in American history.

A strong gaming background.

Gary Green was born into the gaming industry and has never really left it far behind. When his father was a 16-yearold boy he had run away from home to join a traveling carnival. While touring with the carnies he learned to be a blackjack and poker dealer, double-dealing to the pikers, punters, and local yokels. By the time Gary and his brothers could hold a deck of cards, their father had taught them how to magicians force a card to the top of a deck, how to deal seconds, how to spot a cheatand most importantly, never burn a face card. By age 12 Gary was thrown out of a bingo hall during a family vacation in tourist-Mecca Myrtle Beach, South Carolina for finding, collecting, and playing the hot cards all night, every night, for a week. The night after the expulsion his father returned with him, expecting to confront the 81

operator. Instead, the wise old carnie rushed out to shake the fathers hand and ask if he could hire the boy as a shill for the remainder of the summer. Though his mother vetoed it, this was Garys first formal introduction to the gaming industry. It was not until his mid-20s that he began to recognize gaming as a business. When Atlantic City legalized casino gaming in the early 1980s, he teamed up with former (Las Vegas) Tropicana junket master Willie Maizer to run highroller junkets from Baltimore/Washington to Atlantic City, Las Vegas, and The Bahamas. Operating with one leased Citation jet and two leased luxury coach buses, they targeted high-rollers for one day or weekend junket trips to Resorts International Casino (when it was owned by the Mary Carter Paint Company). For hourly slot pullers and the non high-roller crowd he was responsible for filling 136 buses DAILY from metropolitan Baltimore and Washington, DC to deliver players to casinos. From that business model of handling all marketing for daily grind-tour buses from Washington, Baltimore, and Philadelphia to Atlantic City casinos, he graduated to providing regulatory analysis for a Native American tribe in North Carolina investigating the gaming industry following the landmark 1986 Cabazon court case in California and the Pequot creation of Foxwoods in Connecticut. He had legislative involvement in S. 1303 (which became the Indian Gaming Regulatory Act). Following the death of Willie Maizer, he begain his first full P&L responsibility for a casino operation as he converted a nightclub to run gaming operations (tables, no slots) for AFL-CIO unions, churches, and fund raisers for 82

non-profit organizations. He ran food concessions and bars at both non-gaming location and at Maryland limited-license gaming locations. His next gaming/entertainment project was to become a partner in The EuroCircus (formerly elements of the famous Moscow Circus) where he had full P&L responsibility for the tourist attraction and entertainment destination as well as two restaurants, three gift shops, a bar/lounge, ticket sales, and most importantly a small slot-casino room (SC law limited size and number). It was there that he also became responsible for slot selection, placement, repair, and especially tracking systems. At the same time, he also wrote a best-selling tourism book. As he expanded his marketing career into technology and into cataloging, on a software sales trip to Las Vegas he had a meeting with Mirage Resorts technologists to discuss providing them with an ERP system to handle fulfillment of sales of their trinkets, gifts, etc. to consumers via the Internet and mail order. In the course of these discussions, he began discussing the resorts supply-side vendor issues, an on-line reservation system, as well as a myriad of ITrelated issues facing the casino. This was his first introduction to the technological nightmare of casino operations. From these talks, he began a brief consulting contract to outline a business model that would allow a transactional client-server interactivity between these various technology systems. (It was from these consultations that executives of Mirage began their initial interest in co-founding what became PurchasePro.com.) During the next few years almost every major operator on the strip either directly or indirectly (through vendors) 83

consulted with Gary Green concerning some portion of their CRM plans, their Internet strategy, their technology jumble, or their marketing mix. Finally in October of 2000, executives at Mandalay Resort Group encouraged him to appear at the World Gaming Congress in Las Vegas to discuss his analysis and recommendation. After stealing the show during an impromptu workshop lecture on disjointed management and technological naivet, he began writing what would become his widely-distributed landmark white paper, Casino Executives Meet 21st Century Technology. That paper became one of the driving factors for many casino operators move toward more advanced (and more profitable) player-tracking, revenue forecasting, customer relationship management, and decision-support systems. Often photocopied or emailed, that paper made its way through the rank and file marketing departments and IT departments of several small and medium size casino operations looking for a edge. Two years later Gary Green still receives new emails almost every week from a GM or AGM asking about particular aspects of the paper. Earlier in 2000, he had teamed with a 30-year-veteran Lucent Technologies (Western Electric) engineer and created LogicComps, a company that designed a methodology for solving those casino technology issues. Although nothing ever came of the LogicComps project, they did began addressing the issues of making the diverse tracking systems (Akers, IGT, etc.) communicate between properties of the same operators, and even between the pits and the slots. In the course of doing this, Gary Green began an intense analysis of the whole issue of player tracking and targeting, 84

and realized that the state of the science in the gaming world was light years behind the e-commerce world and especially the direct-marketing (catalog) industry. (The best the gaming industry had to offer was the award-winning data-mining project from Harrahs and THAT system was nothing more than a batch process conversion system that sent data overnight to a processing center in Memphis, Tennessee and converted it back in a batch process with a 12-18 hour delay). Being primarily a marketer, he was convinced that such a methodology (though revolutionary in gaming) was archaic and provided nowhere near the tools that were actually needed to provide the MOST useful data for targeting players. From that subsequent meetings with operators, he developed his first methodology to fine-tune what our industry already does in marketing and add to it revolutionary (for gaming) new models. Expanding the points in the earlier white paper, he outlined that modeling in a four-color glossy 53-page spiralbound booklet distributed to 75 gaming executives, operators, and industry friends. As a result, he was able to work with or talk to a number of Operators as well as gaming manufactures and technology providers to develop these issues and possible solutions. He was called for consulting issues, independent of each other, by six Strip operators in Las Vegas, one African casino, one Central American operator, and one vendor hoping to sell to casinos. He was also asked by a gaming software company to monitor regulatory, technical, and business issues concerning on-line gaming, from his unique 85

vantage point as an Internet insider and one of the original developers of e-commerce. It is this conglomerate of his work, this broad crossindustry background in executive management and seniorlevel marketing, this research, and this rich backdrop in the gaming industry that gave birth to the outline you are now reading. Realistically speaking, he is probably the singularly mostqualified person to lead such an aggressive and ambitious undertaking and to develop this new marketing and business modeling for the casino industry.

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Lucky Numbers: Casino Chain Mines Data on Its Gamblers, And Strikes Pay Dirt
--`Secret Recipe' Lets Harrah ' s Target Its LowRollers At the Individual Level --A Free-Meal `Intervention'
By Christina Binkley 05/04/2000 The Wall Street Journal Page A1
(Copyright (c) 2000, Dow Jones & Company, Inc.)

TUNICA, Miss. -- She doesn't know it, but Linda Maranees is the subject of a behavioral experiment that could change the odds of the gambling business. The Memphis, Tenn., retiree, her blouse bedecked with sequined cards and dice, has just received invitations to two nearby slot tournaments, along with vouchers for $200, all courtesy of Harrah ' s Entertainment Inc. " Harrah ' s is savvy," says Ms. Maranees, who admits that once in the casino door, she is bound to spend much more than what Harrah ' s has given her. That is exactly what the Las Vegas-based company is banking on. Over the past two years, Harrah ' s has quietly conducted thousands of clinical-style trials to determine what gets people to gamble more. Based on its findings, Harrah ' s has developed closely guarded marketing strategies tailored individually to the millions of low-rollers who make up its bread-and-butter business. The results are impressive enough that other casino companies are copying some of Harrah ' s more discernible methods. Wall Street analysts are also beginning to see Harrah ' s -- long a dowdy alsoran in the flashy casino business -- as gaining an edge on its rivals. Harrah ' s stock price has risen quickly in recent weeks as investors have received news of the marketing results. And the company's earnings have more than doubled in the past year. At the center of Harrah ' s strategy is a former Harvard professor named Gary Loveman and a vast mathematical model much like the ones that economists use to predict the gross national product or that airlines use to fill seats with the highestpaying fliers. But this one scores gamblers on how profitable they can be to Harrah ' s . Richard Mirman, the company senior vice president who refined the model, boasts that it is Harrah ' s "secret recipe" -- on a par with the famous unrevealed formula of Kentucky Fried Chicken.

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The model tells Harrah ' s marketers how to appeal to gamblers such as Ms. Maranees, based on data tracking their previous behavior in casinos. Spitting out "behavior modification reports," Harrah ' s computers suggest that Ms. Maranees -- an avid slottournament player -- will respond best to a cash offer, while Tina Montgomery, a realestate agent from nearby Oxford, Miss., is better motivated by a free hotel room. As Ms. Montgomery gambles downstairs, she explains, "my husband stays in the room." Drawing on data from electronic frequent-gambler cards that customers present before they play, the model sets budgets and calendars for gamblers, calculating their "predicted lifetime value" to Harrah ' s . When a gambler wagers less than usual -by skipping a monthly visit for instance -- Harrah ' s "intervenes" with a letter or a phone call offering a free meal, a show ticket or a cash voucher. Telemarketers are trained to get customers to talk about their earlier casino experiences, and then to listen for trigger phrases such as "hotel room" or "steak dinner" to come up with the most alluring offer. This "Pavlovian marketing," as Mr. Mirman calls it, is a far cry from the traditional methods gambling companies have used to attract customers. Casinos have long depended on the inherent sexiness of their product to reach the low-rolling public. Until Harrah ' s , they have eschewed the kind of quantitative analysis employed to great effect by other consumer-oriented industries such as airlines and banks. Instead, they have focused on high-rollers, doling out VIP perks such as free flights and fine champagne. The masses have been courted with gimmicky contests and, increasingly, with fantastical top-this-one resorts. This has cost the gambling industry. Over the past decade, the billions of dollars lavished on hotels, malls and marble bathrooms have cut casino investment returns in half. So Harrahs, with its solidly proletarian properties in places like Topeka, Kan. and Joliet, Ill., has had to think differently. The marketing push was born when Phil Satre, Harrah ' s chairman and chief executive, was struggling to recover from what appeared to be a gross strategic error in the early 1990s: After leading the way among casinos into new jurisdictions as legalized gambling spread across the country, Harrah ' s got creamed whenever competitors put up flashier properties next door. "We were fed up with running our business as a victim," says Colin Reed, Harrahs chief financial officer. The only way out was to squeeze more business from existing customers. But the first round of "loyalty" marketing and technology programs, with names such as Marketing Workbench and WINNET -- which generally relied on blanketing gamblers with freebies - not only failed to keep them coming, but also cut into the company's bottom line. In 1994, Harrah ' s hired a chief marketing officer, Brad Morgan, with experience at Visa and Procter & Gamble, to bring in some outside consumer-marketing savvy. Mr. Morgan spoke of sizing up gamblers "psychographically" -- rating them according to characteristics such as their careers. Mr. Morgan also identified a small group of Harrah ' s customers who produced most of the company's profits. He says he found that people who spent between $100 and $499 a trip accounted for about 30% of gamblers but 80% of revenue and, startlingly, nearly 100% of profits. Among themselves, Harrah ' s officials referred to these customers as "grazers" for their steady casino habits. Publicly, the company settled on another term for its core audience: "avid experienced players." "I felt like I'd discovered the Rosetta stone of casinos," Mr. Morgan says. "Avid experienced players" became Harrah ' s target customers.

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The company began collecting intimate details on these players when it launched its Total Gold frequent-gambler card in 1997. The electronic cards, inserted in slot machines or handed to casino supervisors, gathered minutiae on gamblers' habits in exchange for letting them know how to attain the free drinks, hotel rooms, show tickets and other "comps." The idea was that gamblers would bet more if they knew the exact threshold they needed to cross to get a freebie. But it didn't work out that way. Freebie levels differed from one Harrah ' s casino to the next, confusing customers. Casino managers balked at sharing the data with their colleagues at other properties. Getting them to cooperate "was like herding cats," says Mr. Morgan, who left Harrah ' s in 1997 and is now a business consultant in Boulder, Colo. Meanwhile, Harrah ' s executives were swimming in information they didn't know how to use. "I went through a period of frustration," says Mr. Satre. "I said, Why isn't any of this stuff working?' " Although he didn't fully grasp it at the time, the electronic card was generating some key intelligence for Mr. Satre. It told Harrah ' s how fast people pull a slot-machine lever and what their favorite games are. It told them a gambler's age and gender. It helped the company to identify which neighborhoods around the country produce the most lucrative customers. A few weeks before Christmas 1997, Mr. Satre made a pilgrimage to Atlanta to see Sergio Zyman, Coca-Cola Co.'s marketing guru at the time. In a two-hour conversation in an executive lounge at the airport, Mr. Zyman talked while Mr. Satre scribbled notes. Mr. Zyman recommended that Mr. Satre hire a chief operating officer with a marketing background. With authority over all of Harrah ' s properties -- which now number 21 -and over the company's operating vice presidents, the executive could make marketing the driving force at Harrah ' s . In what he calls a "Eureka moment," Mr. Satre thought of Mr. Loveman, the Harvard Business School professor, who had consulted for Harrah ' s about marketing and training. A year from becoming eligible for tenure at Harvard, the affable and rumpled Mr. Loveman says he was "dumbstruck" by the offer. Mr. Satre presented the hiring to his board as a fait accompli because, as he puts it, "if I said I was looking for permission, they'd have said I was crazy." Approaching his $1.3 million-a-year job as one of Harvard's classic case studies, Mr. Loveman decided that a lack of customer loyalty was Harrah ' s biggest weakness. Noting that clients spent only 36 cents of every wagering dollar at Harrah ' s , he realized that if the company could raise that by a penny, annual earnings would jump by more than $1 a share. "I'm in the business of fostering customer monogamy," Mr. Loveman says, "like the Ladies' Temperance Movement." Mr. Loveman began his push by recruiting outside help. That's a rarity in the insular gambling industry, which tends to promote from within. One of his early hires was Mr. Mirman, a former University of Chicago math whiz who favors conservative blue suits over the kind of wide ties and pinky rings often found in casino executive suites. When he left his management-consulting job at Booz Allen & Hamilton to join Harrah ' s in 1998, Mr. Mirman says, he shrugged off the reactions of colleagues, as when a senior partner asked if he was "comfortable with the morals of this." Mr. Loveman and Mr. Mirman grouped together the 16 million gamblers in Harrah ' s database according to characteristics such as age, how much money they are likely to lose

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and how frequently they gamble. Then Harrah ' s started testing hypotheses against control groups. One example: Harrah ' s chose two similar groups of frequent slot players from Jackson, Miss. Members of the control group were offered a typical casino-marketing package worth $125 -- a free room, two steak meals and $30 of free chips at the Tunica casino. Members of the test group were offered $60 in chips. The more modest offer generated far more gambling, suggesting that Harrah ' s had been wasting money giving customers free rooms. Thereafter, profits from the revamped promotion nearly doubled to $60 per person per trip. In another test, Harrah ' s focused on a group of monthly gamblers whom the company suspected could be induced to play more frequently because they lived nearby and displayed avid gambler traits such as hitting slot buttons quickly (playing at "high velocity" in Harrah ' s parlance). To entice them to make two back-to-back visits, Harrah ' s sent cash and food offers that expired in consecutive two-week periods. The group's average number of trips per month quickly rose to 1.4 from 1.1. Harrah ' s has dropped some old casino standards, such as giving customers bonus points that can be spent in Harrah ' s gift shops and restaurants. Research showed that most gamblers weren't motivated by the bonus points, which cost Harrah ' s $14 million a year. In its trials, the company is also studying the widely held belief that gamblers notice slight changes in slot-machine odds. If that's wrong, as Mr. Loveman suspects, casinos could slightly lower the odds of winning and reap even bigger profits. "I believe there's a lot of money to be made for the person who has the answer to that," says Mr. Loveman. This experimentation is helping Harrah ' s gain market share around the country. Here in Tunica, chosen as a key test site because of the "average" characteristics of its gamblers, Harrah ' s revenue has risen at nearly double the rate of nearby casinos since the new targeted marketing was introduced last June. Not only that, the higher volumes came cheap. Profits at the Tunica casino rose sharply, according to Harrah ' s executives. Rivals are trying to follow suit. " Harrah ' s has taken a different tack than everyone else, and they've been really smart about it," says Marc Grossman, head of investor relations for Hilton Hotels Corp., which spun its casinos off into Park Place Entertainment Corp. a little more than a year ago. The approach is also winning some fans among Harrah ' s old-timers. Tom Jenkins, who oversees Harrah ' s Las Vegas flagship, calls Mr. Loveman and his crew "propeller heads." But he says they've helped to more than double the rate at which people respond to offers that he mails to their homes -- to 8% from 3%. There are more pitches to come. Harrah ' s last month launched frequent-gambler cards with gold, platinum and diamond thresholds, which offer escalating rewards for gambling more. Ms. Maranees, the Memphis retiree, is a proud diamond echelon player. That means Harrah ' s expects she'll lose a minimum of $5,000 this year. Ms. Maranees says she's not put off by Harrah ' s "Pavlovian" marketing. "A gimmick to get me to spend more money?" she asks rhetorically. "Why of course it is."

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INDEX
Casino Executives Meet 21 Century Technology, 10, 84 Accounting Practices, 6, 18 Aladdin, 34, 35, 36 ASP, 67, 68, 69, 72 Atlantic City, 6, 59, 81, 82 behavior, 21, 25, 28, 40, 43, 45, 48, 49, 52, 62, 87 behavioral modification, 39 bingo, 81 blackjack, 57, 60, 70, 81 brand, 19, 31, 37, 62 budget management, 32 bus, 10, 14, 61 Caesars, 50, 51 Caesars, 50 cards, 30, 31, 37, 50, 51, 81, 87 CASE STUDY, 21, 26, 29, 31, 36, 57, 73 casino management, 14, 28, 77 Casino Management, 5, 10 catalog, 11, 37, 38, 39, 80, 81, 85, 94 chip warrants, 60 client, 64, 65, 66, 68, 69, 83 cocktail waitresses, 25 comp, 10, 14, 51, 60 comp schedules, 60 competitive saturation, 34 corporate ownership, 6 CRM, 6, 7, 10, 34, 37, 39, 74, 77, 80, 84, 94 cross-industry, 11, 18, 79, 86 Customer Relationship, 15, 18, 73
st

customer relationship management, 6, 57, 84 customers, 9, 13, 18, 19, 21, 28, 31, 37, 39, 40, 42, 43, 44, 45, 47, 48, 51, 54, 57, 62, 70, 80, 87 data, 7, 15, 20, 25, 26, 28, 29, 32, 34, 35, 36, 37, 39, 40, 43, 44, 45, 47, 48, 49, 52, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 80, 85, 87, 94 Data Mining, 26 data modeling, 39 Data Warehousing, 36 data-driven, 20, 28, 61 decision-support, 10, 25, 27, 32, 84 Direct Mail, 26 EBITDA, 6, 9, 14, 21, 29, 30 E-commerce, 26 forecasting, 7, 20, 28, 32, 33, 41, 64, 72, 78, 84 formula, 14, 17, 24, 41, 75, 87 formulaic methods, 11 Frequency, 28, 39, 41, 42 gamble, 20, 27, 87 gambling, 6, 25, 31, 40, 41, 52, 87 games, 27, 48, 56, 60, 87 gaming industry, 5, 6, 7, 9, 13, 16, 17, 36, 37, 79, 81, 82, 85, 86 GAMMA, 64, 65, 66 Gary Green, 11, 13, 14, 76, 79, 81, 84, 94 growth, 9, 10, 17, 20, 21, 24, 30, 33, 77 GSA, 64, 66 handle, 19, 25, 41, 45, 48, 51, 54, 60, 62, 70, 83 handles, 13, 19, 52, 55, 56, 62

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Harrahs, 5, 7, 8, 26, 27, 29, 31, 34, 36, 37, 38, 39, 49, 51, 52, 61, 69, 70, 71, 74, 85, 87, 94 Hilton, 51, 87 hosts, 10, 14, 25, 60 Hotel, 18, 34 IGT, 66, 84 Indian, 6, 71, 82 international casinos, 60 Internet, 26, 32, 51, 64, 65, 66, 67, 71, 72, 81, 83, 84, 86 Johnny Cash, 52 junk bonds, 5, 15 Jupiter Communications, 40 Las Vegas, 10, 11, 15, 27, 29, 35, 37, 49, 50, 51, 62, 70, 71, 82, 83, 84, 85, 87 lifetime value, 21, 25, 87 loss rebate programs, 59 Luxor, 57 management, 6, 8, 9, 10, 11, 14, 15, 17, 19, 20, 21, 24, 25, 27, 28, 30, 32, 33, 35, 36, 39, 52, 57, 61, 62, 64, 67, 69, 75, 79, 80, 84, 86, 87 Management/Operations, 19 Mandalay, 8, 21, 24, 29, 36, 37, 57, 71, 73, 74, 79, 84, 94 marketing, 6, 7, 8, 10, 11, 14, 15, 16, 19, 20, 21, 24, 25, 26, 27, 28, 29, 30, 31, 32, 34, 35, 36, 37, 38, 39, 40, 41, 47, 48, 52, 56, 58, 60, 61, 62, 63, 64, 67, 69, 70, 71, 73, 74, 75, 77, 79, 80, 82, 83, 84, 85, 86, 87, 94 Marketing, 8, 19, 28, 34, 36, 75, 87, 94 match plays, 10, 14, 55 methodologies, 8, 10, 13, 30, 34, 38, 39, 52, 56, 64, 75, 78, 79, 94

methodology, 13, 21, 34, 36, 37, 40, 52, 56, 57, 68, 80, 84, 85, 94 MGM/Mirage, 8, 63 Mississippi, 6, 71 models, 6, 14, 21, 44, 54, 61, 62, 64, 74, 75, 85 Monetary Value, 28, 45 Motion Picture industry, 9 Network, 72, 79 Nevada, 5, 6, 7, 94 New Orleans, 49, 61, 70 nonnegotiable chips, 10, 14, 58 Nordstrom, 14, 16, 25, 79 number of plays, 52 ODBC, 68 offer, 31, 41, 48, 49, 52, 53, 54, 55, 56, 85, 87 offers, 37, 39, 44, 45, 52, 54, 55, 56, 87 operations, 7, 11, 14, 15, 77, 82, 83, 84 operator, 14, 37, 66, 70, 72, 82, 83, 85 operators, 8, 10, 11, 18, 35, 36, 37, 39, 49, 61, 69, 71, 81, 84, 85 P/E, 18, 36 Park Place Entertainment, 35, 49, 71, 87, 94, See PPE Park Place Entertainments. See PPE percentages, 17 Performance, 14 pit, 52, 60, 65, 70 player, 10, 30, 31, 32, 37, 40, 41, 45, 46, 47, 48, 50, 51, 55, 56, 57, 59, 60, 61, 69, 70, 74, 80, 84, 87, 94 Player Card, 26

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players, 25, 27, 28, 31, 32, 41, 44, 46, 48, 50, 52, 54, 57, 60, 62, 70, 82, 85, 87 profile, 37, 49, 74 proposal, 77 psycho-graphic, 74 R.O.I, 10, 15 REAL TIME, 28, 57, 71, 72 Recency, 39, 41 Recentcy,, 28 Return On Investment. See ROI revenue, 9, 14, 17, 20, 21, 27, 29, 31, 32, 34, 35, 39, 41, 52, 55, 79, 84, 87 RFM, 28, 34, 39, 40, 41, 47, 48, 55, 56, 59, 61 roulette, 60 Russian circus, 79 second and third tier, 8, 61 senior management, 19 server, 64, 65, 66, 68, 69, 83 service, 9, 14, 25, 27, 40, 70 Skinnerian, 25 Slot, 17, 26 slot machine, 7, 65, 70, 79 slot managers, 28 slots, 8, 27, 31, 35, 45, 49, 50, 60, 64, 70, 82, 84 source code, 53, 55, 56 spree, 10, 14 Spree, 59 strategic planning, 32 strategy, 9, 19, 25, 30, 52, 57, 77, 84, 87, 94 Strategy, 14 suggestive selling, 39, 40, 48, 52, 53

table games, 27 Tahoe, 49, 50 technologies, 7, 14, 58, 61, 79, 94 technology, 8, 9, 10, 11, 14, 15, 19, 20, 25, 32, 35, 36, 37, 62, 63, 64, 65, 68, 69, 72, 74, 75, 77, 79, 80, 83, 84, 85, 87 Technology, 19, 21, 34, 63 telemarketers, 25 tested Park Place Entertainments, 49 the pencil, 62 tiered card, 31 Total Rewards, 49 TRANSACTION model, 65 Trump, 8, 94 use, 7, 17, 34, 36, 37, 41, 45, 53, 54, 55, 56, 60, 63, 75, 87 value creation, 21 Vegas. See Las Vegas Virtual Private Network, 71, 72 vision, 16, 20, 77 VPN. See Virtual Private Networks Wall Street, 36, 87 whales, 27, 59 World Gaming Congress, 10, 84 XML, 68 Yield Management, 26

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ENDNOTES
1

The survey, commissioned by Harrahs Entertainment, Inc. (NYSE: HET) and posted for the public on their website, is based on two nationwide studies: the Roper Reports, conducted by Roper ASW, and the U.S. Gaming Panel, conducted by NFO WorldGroup, Inc.

By contrast a little less than 41-million people bought new cars during the same year according to Reuters. At long last, it IS true: We ARE bigger than General Motors. Op cit, Harrahs. ibidem

3 4 5

Park Place Entertainment (PPE) at number 353; MGM Mirage (MGG) at 404; and Harrahs (HET) at number 440, according to the 2002 Fortune Magazine rankings. Op cit, Mandalay Resort Group (MBG) at position 590 and Trump Hotels and Casinos (DJT) at 984.

Widener University, Georgian, Purdue, Michigan State, Rutgers, Niagara, Villanova, University of Indianapolis, Arizona State, Pace, Johnson & Wales, State University of New York (SUNY), and a myriad of othersincluding the Nevada schools. Chronologically: Mirage Resorts (MGM Mirage) to outline their earliest on-line reservation system (through my association with a software vendor); Stations Casinos (through my association with a CRM provider) to discuss online CRM strategies and added values; Mandalay Resort Group to discuss methods of unifying player data from multiple properties and creation of a one-card system; Sahara Casino to outline a clone of the Harrahs data-mining methodology; Stratosphere Corporation to review their proposed customercontact CRM online strategy; and other proprietary talks.

More than 5% of all e-commerce on the planet and approximately 25% of all mail order catalog sales in the US are processed using Gary Greens methodologies, business rules, and technologies incorporated into the WebMacs/MACS/Ecometry direct marketing software. A sampling of companies using this solution includes: Microsoft (MSDN developers network), StarTrek.com,
StarWars.com, WWF.com (Suresource) American On Line (AOL) Products (AB&C Fulfillment), i-legions.com, ClickMail, LogicComps, Wave Marketing, 4-Dshopping.com, A-3 Services, A.M. Leonard Adams Headwear, Affinity Express, Alpha Memory, Alpine Trading Americas Hobby Center, American Supply, Antena 3 Directo, Aquascape Design Asset Marketing, Baileys, Ballard Design, Beren Shoes Best Uniforms, Baseball Express, Big Toe Sports, Bluewater Books & Charts Bravanta.com, Brookstone, Burden Sales, Bureau for at Risk Youth CRT Associates, Carlton Industries, Carnell, Case Logic Casual Male, Catalog Ventures, Century 21 Promotions, Chaparral Motorsports Childcraft Education, ClassroomDirect.com, ClubMac, Coach Coldwater Creek, Compactappliace.com, Cornerstone Brands, Corral West Ranchwear, Cosmetique, Country Home Products, Country Supply, Crestline Cyberguys, Outpost.com, Daniel Smith, Delias, Desantis Collection, Design Within Reach, Dexter Shoe Company, DiamondDepot.com, Direct Source, Direct To Home, ERB Industries,

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Earlychildhood.com, Easthill, Educational Experience, Ethel M. Chocolates, Fahrneys Pens, Fantastic Media, Fire Mountain Gems, Flaghouse, Footsmart Fruitful Yield, Gaim, Galls, Geiger, Gemplers, Genesis Direct, Girlfriends, LA, Beauty and the Best Global Video, Golf Warehouse, Golfventuresonline.com, Guideposts HCI Direct, Hallmark, Hallmark Flowers, Hamakor Judaica Hammacher Schlemmer, Heritage Collections, Hickory Farms, Home Trends HomeShowcase, Homeclick.com, Hot Topic, Humbolt Industries I/D/E/A, IMT Harrowbrook, Idea Art, Indiana Botanic Gardens Informal Education, Insect Lore, JC Penney Logistics, Jenson USA John Smith, Journal Education, Junonia, KBkids King Schools, Knight/Williams Corp., LFP, Inc., Lab Safety Supply Lego Systems, Leisure Time Entertainment, Levenger, Library Video Littlewoods Home Shopping, Logistix, Mailcome PCL, Make Up Art Cosmetics Malaco, Marketing Concepts, Marriot Desert Springs, MasterGrip McFeelys Square Drive, MvGlen Micro, Melitta, Meyer Distributing Miami Dolphins, Mile Post Four, Miles Kimball, MilesTex Misco Canada, Mitchells Newspaper, Model Expo, Monterey Bay Musicians Friend, Mustangs Unlimited, My Twinn, NVE Pharmaceuticals New Braunfels Smokehouse, New England Serum Co., Nine West, Nordstrom Norm Thomson, Northern Saftey Co., Old Glory, On Campus Marketing One StepAhead/ Chelsea, Open Enterprises, Overtons, PC Nation PCMall, Peachtree Business Products, Personal Creations, Pet Doors USA Pinch A Penny, Precision Response Corp., Price Point, Pro Sound & Stage Lighting Professional Uniforms, Programmers Paradise, Promotional Resources, Pure Encapsulations QVC Television, Quadratec, Quartermaster, Readers Digest Reading Etc., Red Envelope, Right Stuff, Rimmer Brothers Rocky Mountain Motorworks, Rodale Press, RossSimons, Rude de France Satisfusion, Savory Foods , Schneider Saddlery, Scully & Schully Seeds of Change, Sensational Beginnings, Shar Products, The Shopping Channel Sid Savage Auto Dealer, Siegel Display Products, Softmart, Sony Music Entertainment Sound City, Southern Tier Athletics, Specialty Pool Products, Standard Tools Staples, UK, Star Struck, Steeda Auto Sports, Steuben Glass Story House, Stumps, Sun Precautions, Sunbelt Sportswear MACMall, Swell.com, Tlavideo, Tafford Manufacturing Taylor Gifts, Teachers Discovery, That Fish Place, That Pet Place Kingshill Collection, Lakeside Collection, Pfaltzgraff Co., Republic of Tea Thor Tek, Tiger Direct, Time Customer Service, Time Life Customer Service Title Nine Sports, Tom Snyder Productions, Topix Innov. Gallery, USCO Distribution United Methodist Publishing, Ultimate Office, USI, Urban Outfitters ValentineOne, Valu-Bilt Parts, Victorian Paper Co., Vitacoast.com Western Athletic Supply, Wetmore & Company, What On Earth, Wine Country Gift Baskets Wine Enthusiast, Wine Watch, Winterthur, World Almanac Education Zale Corporation, Zomax, PCZone, e-shortcut.com PCWarehouse, MACWarehouse, MACZone,

10

Harrahs Entertainment Corporation (HET) independent of any association with Gary Green instituted elements contained in this methodology and achieved these results in 2000. I was in Dan Nordstroms office one time for a high-level meeting discussing the technology of their catalog business integrating with their ecommerce business. In the midst of this meeting a red light in the ceiling began to flash and Mr. Nordstrom excused himself to pick up the telephone. Good afternoon, Nordstroms. May I help you? he answered. He later explained that as part of their commitment to customer service, rather than allow any customer to remain on hold on the phone if all operators are busy, a red light flashed so that every employee was trained to answer a call. No customer, no matter how small, would be inconvenienced. Nordstrom serves customers; not the other way around the way many companies do business. THAT is customer service! Ibid Harrahs and http://investor.harrahs.com/news/20020718-85593.cfm Detailed attention to slot payouts does NOT reclassify a casino as a grind joint.

11

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See Appendix One for Wall Street Journal front page story detailing that process.
14 15

The Harrahs superior data management was to use out-dated NCR Teradata proprietary UNIX database parked at their data center in Memphis Tennessee and nightly accepting multi-hour uploads of comma-delimited data from each property around the country. Once all the data is loaded, there is an auto-merge routine that is run and then the data is downloaded back to the properties. Once the data returned to the properties it was imported back into the various systems for use at the sites. THIS was the 2000 cutting edge of casino data warehousing. The concept of real time communications never entered into the planning. ibid PPE has since gone to a one-card system for the majority of their properties.

16 17 18

Where PPE did do somewhat better was in their Casino Host system. Once I visited the slot host office and asked the clerk there to review my play, I was able to convince her that I should be transferred to a regular Casino Host. Once in the care of my assigned hostess I was able to get comp rooms, food, shows, etc. And it DID serve to instill some personal brand-loyalty in me. But how many players know to go through that ritual to CONVINCE the sales entitythe casinoto PLEASE make me loyal? Nonetheless, the hostess did a great job taking care of me! Actually a Merle Travis song, Cash had the most powerful delivery.

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