Harrah Question Response

Harrah’s Entertainment Inc Case Solutions Marketing 530 Team 2 Jan 23, 2016 Jack Nordholt Amina Saif Rashmi Tenneti Heather Jamison

1.What are the objectives of the various Database marketing programs and are they working? ● New Business Program was designed to improve the effectiveness at converting new Total Gold members into loyal customers. The program used predicted customer worth (theoretical wins) to make

Harrah’s Entertainment Inc

Team 2

MKT 530

more effective investment decisions at the customer level – thus allowing the particular offer to be more competitive with what the customer currently receiving from their existing scenario of choice. This resulted in a more effective and more proftable new business program. Based on Exhibit 2b, this program worked as customers returned to redeem their offers in months two and three. ● Loyalty Program – Frequency Upside was designed to identify customers that (Harrah’s predicted) were only giving Harrah’s a small share of their total spending in a particular market. Harrah’s capabilities enabled property marketers to develop programs that offered incentives for these customers to visit Harrah’s properties more frequently – i.e. switch a trip from a competitor to Harrah’s. Harrah’s calculated the proftability of these programs by comparing the incremental theoretical wins to the incremental cost of the program. This program certainly worked as seen in Exhibit 2c where 953 guests spent 6,496 hours at Harrah’s. ● Loyalty Program – Budget Upside was designed to identify customers with budget upside – customers who were only giving a small share of their gaming budget to Harrah’s on each trip. In most cases, a customer’s allocation of budget was directly related to the order in which they visited casinos on a particular trip – the frst stop received the largest share, the second received the second largest and so on. The objective of this program was to encourage the customer to visit Harrah’s frst and thereby capture the majority of the single casino trips. This program sort of worked according to Exhibit 2d. ● Retention Program was designed to reinvigorate customers who had broken their historical visitation pattern or had demonstrated other signs of attrition. Harrah’s tested a variety of offers with customer segments to determine how much to reinvest in retaining loyal guests. Harrah’s sent a direct mail offer to approximately 8,000 customers in January of 1999 that was redeemable in February, March and April. If these customers returned to Harrah’s, they were placed into the loyalty-marketing program. The program seemed to be working even though cost of the offer had gone up from $30 to $40. ● Total Rewards Program was designed to facilitate and encourage the cross-market visitation patterns of Harrah’s customers. Harrah’s realized that a signifcant share of business was lost when loyal customers visited destination markets but did not stay or play at Harrah’s during their visit. The Total Program was intended to capture this lost business by making it easier for customers to earn and redeem rewards seamlessly at any of

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Harrah’s Entertainment Inc

Team 2

MKT 530

Harrah’s properties across the country. This program certainly worked as customers were felt an emotional connection to Harrah’s. 2. Why is it important to use the “customer worth” in the Database Marketing efforts rather than the observed level of play? Historically casinos have determined customers worth based on only observed play, which included observing customer’s previous plays and tendencies. The new form of measuring customer worth developed by Harrah’s was determined by quantitative models which use formulas to estimate how much the house will win from customers over a certain period of time. By mixing these new quantitative customer worth models with database marketing techniques Harrah’s was able to identify thousands of additional optimal customers who may not have been spending most of their time/money at Harrah’s, but had been taking their money to the competition. A great example is a customer who may have visited Harrah’s only once before. In the past Harrah’s would determine that this person is not worth reaching out to and marketing to because of their low impact single visit. Based off of the new quantitative models however Harrah’s determined that this single visit customer may be the ideal customer who is spending most of their money with other casinos. By offering incentives to come play at Harrah’s the casino can predict additional estimated returns when bringing single visit customers back to the casino and giving them funds to begin playing. DBM began tracking customers the moment they visited Harrah’s for the frst time and all of the data that began to accumulate over time helped the casino offer more incentives to return when they KNEW they would be earning money off of every return based on their quantitative worth based models. Having all of this additional information on customers allowed them to extend the depth and breadth of their marketing efforts to keep people coming back for more.

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Harrah’s Entertainment Inc

Team 2

MKT 530

3. How does Harrah’s integrate the various elements of its marketing strategy to deliver more than the results of Database marketing? Part of Harrah’s marketing strategy was to focus on their customer relationship management. Harrah’s was able to integrate their customer centric approach by creating programs targeting the three phases of customer relationships: new business, loyalty and retention. By using the Database Marketing (DBM) they were able to predict the customer’s worth and tailor the programs to their ‘high worth’ and ‘high predicted worth’ customers. The new business program was focused on converting customers into loyal customers by using the DBM to make more effective investment decisions at the customer level. The goal of the loyalty program was to strengthen their relationship with customers by making Harrah’s their frst stop and ensure they continue to return by offering incentives based on the data. The retention program was designed to bring customers back who had shown signs of attrition by breaking their historical visitation pattern. Harrah’s also used their DBM to execute the Total Gold rewards program designed to cross market to all the Harrah’s locations. The Total Gold card tracked players betting patterns, where they ate, slept, how often they visited, how much and how long they played, which helped them to establish a sophisticated customer profle. In return, the customers could easily earn and redeem their rewards. The program eventually turned into a Total Rewards tiered customer loyalty program. In order to promote customers to sign up for the Total Rewards program they gave away cars, houses, cash, and vacations to cardholders.

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Harrah’s Entertainment Inc

Team 2

MKT 530

4. Can Harrah’s strategy be replicated? Harrah’s strategy cannot be replicated by its competitors because: ● Primary focus on CRM instead of investing in traditional casino infrastructure like Park Place Entertainment Corporation, Mirage Resorts and Circus Enterprises. While the competitors focus on being “must see” attraction and invest in presentation, infrastructure and grandeur. Harrah spent its resources on a distribution strategy that invites customers to their properties. ● While other companies utilized their resources on infrastructure , Harrah built the world’s largest database of Casino customers, this database can be used to harness CRM measures that solidify the dominant competitive advantage Harrah has because of being a frst mover. ● Harrah’s tiered loyalty program, Total Rewards, DBM and proprietary Predict Play can be trademarked and protected till they evolve with customer needs. ● Since Harrah’s strategy which focuses on CRM can be used in all their locations without depleting their resources in comparison to investing in infrastructure in each location, the strategy cannot be replicated by other companies,which have traditionally operated their units autonomously ● Yet Harrah can build further on the established CRM initiatives and evolve with the time as channel improve and integrate increasing touch points in terms of apps, web based programs and e-commerce. Harrah can reap the benefts of being a frst mover by revitalizing this system in the long run.

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