Harrahs Entertainment Inc. Case Analysis

Harrah's Database Marketing Programs (DBM)

Harrah's approach in investing in its customers changed drastically after the implementation of its database marketing program. It involved the use of science tools to establish customer worthiness in its casino business. The company applied Proactive marketing Opportunity-based Customer segmentation experiments to track play preferences, customer betting configurations, casino points they liked to eat from, their overnight stay, frequency of visitation, and the amount the spend in play as well as time they spend playing. The casino combined this information with the application card data; home address and date of birth to design a complex yet useful client profiles. Information revealed that Harrah's 26% of customers yielded 82% of its revenue creating a clear business target for the casino. Using the available information Harrah's was able to predict the playing behaviour of its customers allowing it to identify probable opportunity segments. Consequently, the company used customer tailored marketing approach to attain specific business objectives such as driving the incremental budget, frequency or both components. The customized marketing enhanced the firm’s ability to identify the right customer and matching behaviour modification approach. As a result Harrahs designed various programs including new business program, the loyalty program-frequency upside, the loyalty program-budget upside, retentions program and total rewards program.

New Business Program

The new business program focused on the new customers who accessed and used Harrah's brand or property. Through this program the casino aimed at converting new clients to repeat customers. To achieve this goal, the company sought to encourage the novel players or visitors to make a second and third visit to the business. The company used this program to convert new Total Gold customer base into loyal clients. The new business program utilized theoretical wins from “predicted customer worth” to identify highly effective decisions on investment at the client level. Through this investment decision, the customer would receive a specific offer which would be more competitive than what the player was currently receiving under the prevailing options of choice. This program led to a more profitable and highly effective business program. Despite some lows the number of repeat customers visiting the Harrah's properties increased each month. For instance in April 1^st 1999, the company had 1022 new sign ups. Due to the new business program, the first, second and third months recorded 12%, 10% and 8% respectively in return customers translating to an overall 33% increase. Revenue grew by 34%, 33% and 32% in first, second and third months respectively making a 98% growth. Therefore, the new business program is highly a highly effective strategy in Harrah's.

The Loyalty Program-Frequency Upside

The aim of this program was to promote continuous relationship with the casino customers that would motivate them to remain loyal to the company products. It was designed to establish the casino clients that according to the Harrah's prediction were just remitting to Harrah's a lesser share from what they spend in total at a given market segment. Equipped with extensive capability, the program allowed Harrah's property marketers to initiate programs that provided incentives to the customers to increase their frequency of visiting the Harrah's property. In this case customers would be encouraged to switch their trips from the business rivals to the Harrah's. This program’s profitability was performed through analysis of the incremental program cost and comparing the results with the “incremental theoretical wins.” This program was effective in that customers’ visitation to the company properties increased from 24% in January 1999 to 31% in December the same year. In addition, revenue generation from the sampled clients grew from $12, 745 in January to $728,410 in December 1999.

The Loyalty Program-Budget Upside

Just like the loyalty program-frequency upside, the loyalty program-budget upside focused on cultivating prolonged relationship between the firm and its customers such that they could remain loyal to its products. The loyalty program-budget upside was used to identify casino clients who were providing small share to Harrah's from their gaming budget per trip to the property. The company recognized the fact that a customer’s allotted gaming budget was directly proportional to the order in which a customer visited the casinos in a specific trip. That is, the casino visited first attained the largest portion of the budget, followed by the second stop, with the last receiving the smallest share. Thus the ultimate goal of the loyalty program-budget upside was to inspire customers in a way such that they would consider Harrah's as their first stop during any gaming trip. Apparently, this concept would ensure the company gets the majority of the many single casino visits. Although the company was uncertain on the effectiveness of this program, its revenue grew from $18, 011in June 1999 to $59, 028 in March 2000 from customers entering the Harrah's property as their first stop. Therefore, the program is effective strategy in the company’s business ventures.

Retention Program

Retention of customers is an important element in promoting incremental revenue in an organization. Through the retention program, Harrah's aimed at reinvigorating clients who had illustrated attrition signs or had changed their pattern of historical visitation. It was a significant venture to ensure customers frequency was maintained at the peak. The company used various offers on a variety of customer segments to identify how much investment was needed to retain loyal clients. Over a prolonged period of time, Harrah's guests visitation frequency had declined rapidly especially in the last half of 1998. The customers had decreased the rate of visits they made to the Harrah's casino. In January 1999, the casino send direct mails to 8,000 clients while tracking their behaviour. Although the company used the program at the central level, it devolved it to local properties after realizing it could be more effective if maintained by individual property managers. As such, the marketing responsibility was placed on the property managers who could access most recent database of their customers. The retention margin grew from 14% with revenue of $1, 691,024 in July 1998 to 20% and $ 15, 163, 367 in revenue indicating that the program was indeed effective in the company.

Total Rewards Program

The total rewards program utilized the Total Gold program designed to encourage and promote cross-market pattern on visitation of the Harrah's clients. The company realized the occurrence that it lost a significant business share once its loyal guests visited distant destination markets such as Las Vegas but failed to stay at Harrah's property or play at it during their visit. The company projected that over $100 million in lost revenue was being generated at Las Vegas by the Harrah's customers alone. Based on the information provided, the total rewards program was designed to recapture the lost business through making it easier for the Harrah's patrons to earn and eventually redeem rewards impeccably at any of the company’s properties across the nation. To implement the program, Harrah's set up a network of incorporated information technology that connected all its properties in a single program. This network allowed the sharing of customer level data such as client gaming theoretical worth in real time across all the casinos. Through a patent right the technology was protected against duplication by the Harrah's business rivals.

This program was effective in the company as it enhanced incremental revenue. As a result of the program, the cross-market company revenue increased rapidly. This increase has seen revenue grow considerably from 13% generated in 1997 to the 23% recorded in 2000. The Las Vegas Harrah's property has since the integration of the program been generating an estimated 50% of its total property revenue from the total gold program. In conclusion, the Harrah's database marketing program was highly effective and profitable to the company.