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Harrahs CRM Strategy

Harrahs made information the key aspect of the companys marketing efforts, and began investing in IT. Harrahs used IT in its CRM initiatives successfully. Do you think a successful CRM initiative at Harrahs went beyond implementing an information technology system? Elaborate. Successful CRM initiative at Harrahs went beyond implementing an information technology system. Its not just IT its what you do with it that counts. Indeed while technology is a powerful facilitator in the process of customer relationship management, thats all it is a facilitator. And the moment companies forget that, CRM will turn into a tool that, instead of building loyalty, does just the opposite.1 Harrahs success with CRM was the result of sound strategy, deftly implemented, monitored and constantly updated, to stay ahead of the competition and to get an ever increasing share of the customers entertainment budget. Harrahs idea behind CRM was to establish individual relationships with the customers and to treat different customers differently based on the information gathered on their preferences and how they liked to spend their money. Information technology systems were a means to achieve this. Getting an insight into their own business and deciding how to leverage the power of the group, as opposed to each individual casino, hotel or other property, to maximise profit was a key differentiation strategy that actually allowed CRM to be exploited successfully. Very early on in the process, Harrahs established that their customers were customers of the company, not of an individual property. When Satre (then CEO of Harrahs) hired Gary Loveman as COO, he said he wanted to change Harrahs from an operations-driven company, that viewed each casino as a stand-alone business, into a marketing-driven company that built customer loyalty to all Harrahs properties. The CRM initiatives that helped Harrahs succeed included: Vision Harrahs attempted to build a market position with well-defined value propositions, that utilised the power of the brand, and were well communicated throughout the organisation. Strategy Harrahs understood how the customer base could be turned into an asset through the delivery of a value proposition. Harrahs had well defined objectives, segments and customers and had a clear idea of how its resources will be used in interactions. Consistent valued-customer experience Harrahs went about creating propositions that had value to the customer (and to the company), and these were delivered consistently across all channels. Organisational collaboration - Harrahs successfully managed to transform its own culture, behaviour, and possibly structure, to ensure that the staff work together to deliver

Rigby et all (2002)

Harrahs CRM Strategy what was required (staff bonuses and incentives were based on the customer satisfaction index rather than on the financial success of any individual property). Processes Harrahs created and implemented robust processes to manage the customer life cycle relative to analysis, planning and knowledge management (this is in addition to the information technology systems in place to facilitate these processes). Sharing customer data across its multiple casinos and hotels to create a holistic view of its customers, and creating personalised rewards programmes are just two of the examples of the various ways in which Harrahs converted information into insight.

If IT were the primary driver for success, it should be logical to assume that similar use of IT will deliver similar results for all users (IT being sufficiently commonplace and ubiquitous now). This is clearly not the case here. Other casino groups didnt quite achieve the same results with CRM that Harrahs did. One of the major reasons for this gap is that a large number of loyalty programmes are designed to provide the same benefits across every individual spending band, without taking into account every customers desires and preferences. Harrahs on the other hand observes customer behaviour and tailors the rewards according to the insight that it obtains from that observation. What also distinguishes Harrahs approach is the complexity of its loyalty program. It is designed to appeal to both big-time spenders as well as the small but steady gamblers. Harrahs strategy concentrates on building loyalty and growth at all levels. Harrahs foresaw clearly the need to create marketing programs that would allow them to compete without continuing to pour additional capital into their properties. Also key to the success was the realisation that their core competency was in the relationships they created with their customers. IT systems were mere enabling tools that could expand that competency using automation.2 Harrahs has emerged as a leader in the gaming industry through a business strategy that focuses on knowing their customers well, giving them great service, and rewarding their loyalty. This keeps the customers coming back to one or the other Harrahs casinos. Apart from the use of information technology, the execution of this strategy has involved creative marketing and operational excellence to a very high degree. Throughout its history, Harrahs has focused on building relationships with customers. Advances in information technology gave Harrahs the opportunity to use data warehousing to implement a brand strategy. As Harrahs moved from a property to a brand-centric view of customers, there was a need for business change, not just technical changes. Strong senior executive support was key to the overall success. Harrahs was fortunate that in the beginning of its data warehousing initiative that the same person was both the CIO and Director of Strategic Marketing (clearly, this was not by chance). A successful CRM outcome depends more on the resources and attention devoted to strategy and people, not on the amount spent on technology. If Harrahs executives had not fully understood or appreciated the concept of lifetime value, technology would have been of little help in designing the retention strategies.
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Harrahs CRM Strategy As one of the experts at the Insight (2002) seminar concluded, Hunting dogs can be thrown off a scent by dragging a pungent fish across their path. Just as easily, companies trying to understand their customers better can head off in the wrong direction because they have been distracted by the powerful technological capabilities of customer relationship management systems3

UNLV Gaming Research and Review Journal Vol 7, Issue 2

Harrahs CRM Strategy

Analyze how decision science tools helped Harrahs to gain valuable insights into customers spending habits and preferences. What were the benefits gained by the company from using such tools? How decision science tools helped Harrahs to gain valuable insights into customers spending habits and preferences. Harrahs uses Decision Science Tools to carry out market segmentation. (COGNOS Impromtu was used to access and query the data warehouse). The primary purpose was to estimate customers worth over period of time. Additionally these are used to determine customer preferences, predict the services and rewards for customers, and customise offerings to its customers. Harrah's first used a segmented marketing approach in 1998. Using historical data, which showed the customers visiting frequency and amounts spent per visit, the underlying models helped to create basic segmentation based on various demographic trends. Using the more powerful decision science tools, Harrahs was able to accurately estimate each customers potential value. The company built models that predict frequency and worth into the future. Historical data reveals how often a customer visits Harrah's casinos but predictive models reveal which customers are likely to visit other casinos in the market as well. Once DST identifies these customers, Harrah's can target them for campaigns that will attempt to increase their loyalty to Harrah's casinos. DST also allows Harrah's to customise its predictions for each regional market (customer profile can vary considerably with region). The rewards are also then customised; for example, customers who live within driving distance of a casino receive different marketing promotions than customers who live farther away. Harrahs uses decision-science-based analytical tools (and database marketing) to ensure that operational and marketing decisions are based on fact rather than intuition. Then it uses this insight, to develop and implement service-delivery strategies that are finely tuned to individual customer needs. Harrahs sophisticated data mining and statistical analysis found that happier customers spend more money. If a customer has a very happy experience at Harrahs they increased their spending on gambling at Harrahs by 24 percent a year, report Phil Bligh and Doug Turk in their book CRM Unplugged: Releasing CRMs Strategic Value (John Wiley & Sons, 2004). In contrast, unhappy experiences led to 10 percent declines.4 Broadly, the steps involved in data mining at Harrahs include: 1. Acquire a rich repository of customer information.
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CRM: A Gamble No More, By Eric Krell; www.baylor.edu

Harrahs CRM Strategy 2. Slice and dice data finely to develop marketing strategies. 3. Identify core customers by predicting their lifetime value. 4. Gather increasingly specific information about customers preferencesthen appeal to those interests. Data-mining techniques using DST help Harrahs to reveal data patterns and relationships that are then used to develop strong models for predicting the potential value of each customer. Since retaining a customer is less costly than attracting a new one, building strong relationships with valued existing customers helps Harrahs to boost profits. (Harrah's discovered that the 30 percent of its customers who spent between $100 and $500 per visit accounted for 80 percent of company revenues and generated nearly 100 percent of profits). Decision science allows Harrahs to market to their customers based on their potential (as opposed to their history). This concept is fundamental to the success of Harrah's customer marketing efforts. Harrahs uses DST to answer such questions as - who are their customers; where do they come from; how often do they visit; what is the true value of their customer; what was the true effectiveness of their last mail campaign, and many other such intricate questions that help the company to gain increasing insights into their customer behaviour. Data from low-rollers, for example, convinced Harrahs to redesign its casino floors to include a higher percentage of lower denomination slot machines. David Norton, senior vice president at Harrahs said, By helping the company learn more about the types of players using each slot and the profitability of each machine and its location, this technology allows the company to determine the best combination of marketing, merchandising and positioning. 5 Some of the ways in which DST allow Harrahs to strengthen its customer relationships include: Coding customers i.e., grading customers according to their spending habits (high rollers, conservative etc.) Targeting specific customers with appropriate offers and promotions i.e. offers that will be of specific interest to them, or the ones they are likely to accept and convert. Sharing customer information across the various properties in the group, such that the status acquired by a customer due to his high spending at a particular casino (or hotel) in the group will get him the appropriate returns at any other casino or hotel within Harrahs. Routing customers when a customer calls one of Harrahs call centres, he/she will be attended according to the status acquired i.e. high spenders will be attended first if the call centres executives are busy.

As Gary Loveman explains, Decision-science-based analytic tools allow us to better understand our customers so that we can offer them the best reasons to visit and play at our properties. -------------------------------------------------------------------------------------------------------------------5

CRM Strategy: Make Every Customer More Profitable; www.eweek.com

Harrahs CRM Strategy Benefits gained by the company from using such tools Decision science tools help the company to estimate individual customers theoretical value. Harrahs can predict with accuracy the amount a customer will spend in a visit, during a year or even over the course of a lifetime based on few initial transactions. This further allows Harrahs to treat their millions of regular customers differently depending on their value to the company. Using the DSS tools effectively helped Harrahs improve productivity levels and customer retention thus increasing revenues and cutting costs. High customer retention led to savings in acquisition costs for customers who would otherwise have been lost to competitors. Appropriate segmentation, precise targeting and thorough understanding of customer lifetime value helped to achieve the high levels of customer retention. An increase in retention of just 1 percent is worth $ 2 million in net profit annually to Harrahs. The DSS tools also helped Harrahs in cost savings by helping to sort customers such that incentives and promotions are not wasted on customers who do not deserve them or will not use them. Because these tools can consistently identify which customers will be most valuable over the long term, data mining is also useful to the company for determining when to avoid offering incentives to customers who are not lucrative. Harrah's estimates that it has saved some $20 million by withdrawing incentives from customers who are not likely to return. Harrah's creative marketing, and operational excellence, using DST output, have resulted in many benefits, such as - a brand identity for Harrah's; consistent guest rewards and recognition across properties; a significant increase in the response rate to offers to customers; and great customer loyalty. Without DST Harrah's would have to send blanket marketing materials to everyone on its mailing list, which would lower the profitability of its campaigns significantly. Instead, the company can divide customers into more than 80 different segments for each marketing campaign and target only those who are most likely to respond. According to David Norton, nearly 50 percent of Harrah's revenue is driven by marketing, and the precision of DST helps to ensure the effectiveness of those efforts. Our profitability around marketing interventions is much higher because of the precision of understanding that SAS provides, he explains. On January 15, 1998, Harrahs stock traded at around $ 19.50. On January 15, 2003, it traded as high as $ 38.49, almost twice the price, at a time when the market value of the industry as a whole had declined by more than 25%. The creation of the Harrahs brand, Total Rewards, and cross marketing have resulted in a 72 percent internal rate of return on investments in information technology. Harrahs hotel occupancy rate exceeds 90 percent versus an industry average of 60 percent even in the ultra competitive Las Vegas market, where occupancy hovers around 80 percent (Harrahs strategy is to optimise the sum of gaming and room revenues).

Harrahs CRM Strategy Harrahs estimates its customers spent about 43 percent of their annual gambling budgets at Harrahs properties in 2002, up from 36 percent when the program began. In addition, Harrahs has been able to leverage the Total Rewards program to increase cross-market playthe amount of gambling revenue generated by customers outside their home marketsby 20 percent since 2001.6 (Though these statistics appear somewhat dated at this time, they do serve to indicate the profits made by Harrahs at some point in time after implementing its DST based CRM strategy) The difference is that most companies put money into the spectacle. Of the newest hotels on the Strip, Las Vegas Sandss Venetian Hotel cost $3 billion to build and MGMs Bellagio came in at $1.8 billion. Harrahs, on the other hand, chose to put most of its money into the winners information network (WINet), the industrys first national customer database.7 Harrah's marketing workbench analyses hundreds of customer attributes to determine likelihood to visit, predicted spending, opportunities for cross-selling, and much more. This means Harrah's can target promotions and mailings to individual customer preferences. DST has also enabled Harrah's to develop a complex and very special model for estimating a customer's lifetime value. This allows Harrah's to make sure that they treat there best customer very well and ensure that they keep coming back for entertainment throughout the entire brand of Harrah's locations.

CRM Strategy: Make Every Customer More Profitable; www.eweek.com

www.cio.com

Harrahs CRM Strategy

References 1. CRM Strategy: Make Every Customer More Profitable; www.eweek.com 2. CRM at Work: Eight Characteristics of CRM Winners; www.gartner.com 3. Harrahs N.I.F.T.Y Mobile CRM Initiative; www.niftymarketing.wordpress.com 4. Harrah's Entertainment - Jackpot! Using IT to Manage Customer Information; www.cio.com 5. UNLV Gaming Research and Review Journal Vol 7, Issue 2 6. Cashing In on Customer Loyalty, By Phil Bligh and Doug Turk, Posted in the June 2004 Issue; www.destinationcrm.com 7. Evening the odds: CRM systems are driving sophisticated loyalty programs at Las Vegas Casinos -- and not just for the high rollers; www.allbusiness.com 8. Data mining for hotel firms: use and limitations; www.entrepreneur.com 9. Using Data Mining on the Road to Successful BI; www.information-management.com 10. Harrah's hits customer loyalty jackpot; www.sas.com 11. CRM Empowers Harrahs to Look Backwards and Forwards When Developing Campaigns - Jeanette Slepian, President, BetterManagement.com;www.crm2day.com

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