Harrah's Case Solution

Harrah’s Entertainment Inc Case Solution Q.1 Why is it important to use the "customer worth" in the DBM efforts rather than the observed level of play? Harrah’s Entertainment is one of the world’s biggest providers of branded Casino Entertainment. It has got about 50 casinos under several brand names. It has got lots of major companies competing against them. Thus they need to know their customers really well. Harrah used Customer Relationship Management (CRM) in order to face the increasing challenges. They collected information regarding the customer’s gaming preferences by implementing a program called Total Rewards. The information is collected through the customer ID cards which are inserted into the slot machines when they are playing. This process made it possible to do several marketing tests and track clients over a period of time. They have developed their own quantitative models in order to predict the customer worth accurately. Theoretical win or customer worth is the theoretical amount of money that the casino expects to earn from a customer’s play. Harrah’s can get potential high worth players if they give more emphasis on the customer worth rather than the observed level of play. The investment should not be concentrated on the frequent/active visitors. This would lead to narrowing down of the market, as the observed level of play does not include the amount of money that Harrah’s Inc. are losing to its competitors when their customers play at other casinos. The business of Harrah’s can achieve a whole new level if they can find and target the high worth customers in the low observed frequency market as there is very low competition in that section. Harrah’s uses IBM COGNOS data manager to access the data warehouse and to obtain queries and report. The quantitative model developed by the firm helps in exploiting more customers from the broader customer base and to improve the customer services. It was observed that the observed level of play indicated the customer’s past activities and it was less relevant to the future or current business of the firm. DBM changed the way by which Harrah’s invested in their customers. The incentives can be customized and provided to the customers based on their future value. The firm gets sustainable profits when its customers are satisfied. Thus we can say that customer worth is more important as it is more profitable for the company in the long run and it helps in satisfying the high worth customer’s needs. Q.2 How does Harrah's integrate the various elements of its marketing strategy to deliver more than the results of Database Marketing? The important factor which led to the above results is the changes made in the organization structure of Harrah’s. One of the important measures taken to improve Harrah’s position in the market was to bring in a COO who is a marketer, i.e. Gary Loveman who was on the faculty of Harvard Business School and had been working with Harrah’s for five. He was brought into the company in 1998. After the arrival of Loveman, he helped the company to migrate from an operations- driven company that viewed as property separately (stand-alone businesses) to a company which is driven through marketing with major focus on the customers and building its brand image. Here Harrah's division presidents and their subordinates in brand operations, information technology, and marketing services, started reporting to Loveman (COO) instead of to the CEO as shown in the . This was done to create a broader perspective in terms of the customers, earlier each property functioned as a separate entity whereas now they are changing that to create a bigger and wider experience for the customer. One of Loveman’s initiatives was to implement marketing tools and programs across all Harrah's properties. Loveman disbanded the existing marketing function and rebuilt it with people who preferred slide rules to mock-ups. Richard Mirman, a former University of Chicago math whiz, left Booz Allen & Hamilton to join the new team as Senior Vice President of Relationship Marketing. These led to the development of the Database management system and Total Gold program which later was updated to Total rewards program. Harrah’s customer - focused marketing strategy emphasized on three main aspects: building new business, customer retention and loyalty. In fact, the company had to use the results of Database marketing to implement three key packages: new business program, loyalty program and customer retention program. The new business program was aimed at improving the effectiveness in converting new Total Gold members into loyal customers, i.e. predicting customer worth and making more effective investment at the ground level(customer level). For example, as seen from exhibit 2b, Harrah’s provided customers with marvelous offers which resulted in regaining a lot of customers from other casinos. As seen from the figures mentioned in the source, each month resulted in bringing a new vintage of customers signing up. In the loyalty program, the main goal was to extend the firms relationship with its customers on a long term basis. Customers who were known for at least 6 months or three trips were more targeted. Incentives were offered to the customers to frequently visit its properties which in a way inspired them to switch on to Harrah’s from their competitors. Moreover as a visitor’s first stop, Harrah’s was able to seize the major chunk of customers spending (as seen from exhibit 2c). The objective of retention program was to regain the market from their lost customers. For that purpose, it had to test out the reducing support of some customers and then had to send direct mail offers to approximately 8000 customers (mainly coupon incentives) in-order to revitalize their relationship with their customers. For instance, when Harrah’s saw a decline in their frequency of visits in the latter half of 1998, they mailed incentive coupons in January 1999, which resulted in a big improvement in customer visits and sales. Another worthwhile factor was that customers who returned to Harrah’s were put into loyalty marketing program and were managed depending upon their upside potential. These three programs jointly played a major role in satisfying the customers and hence achieving their marketing goal. In

addition to this program, the Total Rewards program also managed to build a strong rapport between Harrah’s and their customers as the customers believed that their specific needs were taken care of by the firm. The program also did have a major impact on consolidation play based on the theoretical approach. Harrah’s also made the customers make feel that it patented itself with the “feeling of exuberance”. This had attracted a great deal of customers to come to the casino for the sole purpose of monetary escape. In addition to this, Harrah’s strong role in advertising and ensuring high customer and service quality also paved its way in building its strong brand image.