Enlyten

Harrah’s initial strategy to focus on people more than anything else through rewards programs led to growth and high profits in the early 1990s. But new competition’s innovative, highly themed environments that offered lots of new customer experiences literally altered the casino industry landscape and essentially forced Harrah’s to reevaluate its people strategy if it was to remain relevant. While there was a great temptation to follow the competition’s lead to develop properties with attractions like fake erupting volcanoes or roller coasters, Harrah’s ultimately decided to concentrate on its customer loyalty competency. This included moving the organization from an operations-driven company that viewed each property as an autonomous business to one that implemented a corporate-level, customer-focused strategy communicated by the Chief Operation Officer down to all of Harrah’s properties.

The effort to envelop customers with reasons to be loyal to Harrah’s started with the new organizational structure where divisional presidents and their subordinates in brand operations, information technology, and marketing services all reported to the COO. The idea that each property encouraged its customers to gamble at other properties was not common practice. The new organizational structure changed this mentality by emphasizing that all of the properties’ customers belonged to Harrah’s. This tactic enabled Harrah’s to better understand its customers’ behaviors. In addition, it led the company to develop a centralized brand to convey a feeling of being “exuberantly alive.” Harrah’s also set up employee measurement, recognition, and incentive programs throughout its casinos to improve customer service across the board. Finally, the company implemented marketing tools and programs throughout, again, all of its properties to motivate customers to consolidate their play and to allow Harrah’s to execute direct marketing strategies that increase the effectiveness of marketing resources.

Each one of these three initiatives was guided by technology factors, primarily information and research about customers collected in Harrah’s national database through its rewards programs. For example, its research revealed that casino entertainment provided customers an escape from daily problems and pressures, and that the most profound emotion of gaming was feelings of anticipation and exuberance. As a result, Harrah’s $15-20 million annual advertising expenditures capitalized on such feelings. More importantly, under these technology factors marketing headed in a much more quantitative direction. For instance, Harrah’s customer relationship management (CRM), which consisted of database marketing (DBM) and the Total Gold program, became driven by quantitative models that accurately predict “customer worth,” the theoretical amount the house expects to win from the customer over the long term based on the level of play. This ability to predict play allowed Harrah’s to begin building relationships with customers based on their future worth, as opposed to their past behavior. Under the new centralized, organizational structure, the company can 1) utilize proactive marketing to develop accurate and detailed customer profiles and 2) conduct marketing experiments to help it discover the right marketing instrument, for the right behavior modification, for the right customer. By using DBM and other IT tools, Harrah’s developed a customer-centric direct marketing program to establish relationships with new customers (new business phase), strengthen relationships with existing customers (loyalty phase), and reinvigorate relationships with lost customers (retention phase).

Harrah’s Loyalty Program (Frequency Upside) was designed to offer incentives to specific customers to more time and therefore more money at its properties. The table below tracks the behavior of 953 customers before and after receiving incentive offers (typically cash and food based).

Period # of Guests Red % Theo Win Comp Amt. Comp % Avg. Incremental Cost per Offer Cost of Redeemed Offers # of Guests Redeeming Offer Incremental Profit

1 21 5% $7,770 $1,361 18% $7,770

2 28 11% $11,957 $2,434 20% $11,957

3 30 10% $6,596 $799 12% $6,596

4 40 18% $5,051 $845 17% $5,051

5 36 8% $9,000 $1,585 18% $9,000

6 953 22% $267,907 $42,514 16% $267,907

7 133 31% $74,275 $12,558 17% $40 $ 1,649 41 $72,626

8 146 44% $43,240 $8,987 21% $40 $ 2,570 64 $40,670

9 166 58% $70,824 $16,110 23% $40 $ 3,851 96 $66,973

10 152 53% $58,354 $12,300 21% $40 $ 3,222 81 $55,132

11 102 55% $29,095 $7,151 25% $40 $ 2,244 56 $26,851

12 83 41% $23,187 $4,304 19% $40 $ 1,361 34 $21,826

The offers sent to the 953 visitors in June were redeemable in Periods 7 (July), 8 (August), and 9 (September). As one can deduce, an average of 150 of these 953 customers returned to Harrah’s after the incentive program launched compared to only a 30 average in the five months prior (assuming there was no such program implemented during this period). Not only that, the redemption rates jumped as well. At about $40 per each redeemed offer, the program is definitely worth the costs given the huge increase