tarketing

Harrah's CRM Strategy

They (Harrah's) understand precisely what is going on with customers, hou to ntotiuate thcm and hnw to sell them motz-r Formcr

fu-hb

- *rgio

Zymon, Brw.ding Guru.

full

CRIII is thz vertebraz of everything we da. I funl tM mut rctailers take ad.vantage of whnt th4 alread.y know ohttt theb an&mers or use that hnouled,ge to modifu future behauinn2

- Gary Loveman, Presida.t and CEO, Estdt's E nt ertdinnent.

he late 1990s witnessed a rapid exparsln d casinos, especially in Las Vegas and Atlantic City, New Jer*y &e to relaxations in the US State and Federal gaming laws. Nerr laws bad legalized gaming on riverboats and Indian reservationd and '\ir led to intense rivalry between casino operators who started spending rrillbDs of dollars in opening new extravagant properties that featured Ebqeing nalls and hotels

in order to attract

customers. Hanah's Entcrtainment Incorporated

Daniel McGinn and Steve Friees, "Fmm Htryrd to lrs Yqaa," Newsweek, April 18,2005. Susan Rda, "Harrah's Hits the Jactlot ritb Cnf4' Srorss, June 2003. Indian reservations are lands reserved for Ameri:aa Indian tribes in the US and are governed by tribal govemments. There are more tian 300 Indian reservetions in the IlS.
@ 2005

The ICIAI Oenter for ManageEent Reeafth (ICMR),

AI

Rights Rocerved. For acceesiog aDd proc{dng the caee study, log on

to www.ecch.cranfield.ac.ul or www.icrnrindia.org

,Harah's)', an entertainment company which had business interests in casinos, food & beverages and hotel roorns, decided to follow a different .pp.ot"h as it realized that about 907o of its revenues came from its casino business arrd not from associated ventures'

Instead of opening lavish properties, Harrah's initiated a Custorner Relationship Mariagement (CRM) program that airned at developing longterm relationships with its customers that would enable the company to capturc a bigger market share in the gaming business' In 199?' Harrah's gaming buddiscovered that its customers spent only 367o of their annual realized that increasing customer spends would g* ut th" company It translate into significant increase in reYenues' At the heart of Harrah's CRM program was a loyalty program called Total Rewards (derived from the earlier Total Gold program) that rewarded Rewards *"io-""t with comps5 in order to stimulate loyatty The Totaland using information about customer's program \was aimed at gathering the company's marketing programs for each custorrer' it ti "rrstomir" HatraHs Senior Vice-President of Marketing explained' il"h*d Mir^urr, "We have an advantage in that we know who the customers are, what they're worth and we can touch them in ways that our competitors cn't even think about'"6 Instead of opening Customers who enrolled in the Total Rewards prola oish properties' gram were given an electronic card, which they inserted Hon'ah\ initioted' a into the machines they played on This card allowed arrd CEM progrann that Harrah's to keep track of its customers' preferences collect data about them. Harrah's T.9" "{""1t*.1: "^f oirned at deaeloping lT to aid the effective use of collected customer data A (BI) long-term relationships massive data warehouse ana susJes" IntelliSBnce uith its cu.tltonlers initiative was undertaken that enabled Harah's to collect and consolidate customer data Harah's then used decision science tools from SAS? and Cognoef on t'he collected data to better understand its clrstomers and gain ils CRM in.igt t ittto tit"i" g"-i"g preferences' Cornplimenting llarrah's ou of Global Svs;;;;*, cinaa .i Haltan, former senior vice-president an outstanding l"; *d Processes for DuPont commented, "Harrah's is of a company that is aggressively and smartly using technologl "tu-pf" to unilerstand the behavior of its customers'"o
Lae Vegag, Nevada headquartered

.;il;?;"

in the fiscai 2004. In Julv

""*r."'C.""-" the world's largest gaming company' maie Harrah'g

Comps refer

ftl"""rnment Inc for

s 's Entertainmeut Inc. Sedeaated rcveDues 2004, Harrah's reacbed aD -agreement to

$9 4

bn The completiou of the deal will

to complimentary olferings such as free meals and discount at hotels' I{ike Beirne, "DollAis in the Deserr'," BrandWeeh, April 01, 2002' provider of buainess analytics SAS Institute ig a Cary, North Carolina, US-based il;;";pan! reported revenues of $1 34 bn for the fiecal vear ended ;;;;;.
December 2003

Known as Quasar Systems prior to 1984, Coglos i6 an-Ontatio' Canada-based o"oJl". of int""p"i"" BI solutions. The company reported revenues of $683 1 mn
Investments," PR Neuswire Press Release, June 30, 2004'

ior the fiscsl year ended February 2004' Technology "Harrah'6 Wins National A'n'ard for Return on Infornation

Background Note
Harrah's history can be traced back to 1937 when Bill Harrah (Bill) set up his first bingo parlor in Reno, Nevada, in the Western part of the United States. He went on to buy 'The Mint Club' on North Virginia Street in downtown Reno. Bill ensured that his customers were very comfortable while they played bingo. He even had steam pipes installed at the club entran@ so that they need not walk on snow while coming to the club.

In the mid-1950s, Bill began acquiring and developing several clubs at Lake Tahoe in Stateline, Nevada. Harrah's had emerged as a leading name in the casino business by the late 1950s. In 1962, Bill went on to build a 400-room hotel tower in Reno. A 400-seat Headliner Room theatre-restaurant was opened in 1966. In 1971, public trading began in Harrah's shares as the company issued 450,000 over-the-counter shares.lo In 1972, Harrah's shares got listed on the American Stock Exchange (AMEX) and within a year it went on to become the first casino company to be listed on the New York Stock Exchange (NYSE). The year 1973 saw Harrah's opening a 250-room hotel tower at Lake Tahoe. Bill passed away

in

1978.

In the late

7990s,

Harroh's added many rnore ptoperties into its fold. and. d,eaeloped seueral existing ones

In February 1980, Holiday Inns Inc. bought Harrah's Hotel Casino Company. Holiday Inns also held a 407o stake in River Boat Casino Inc., a casino next to the Holiday Inn hotel on Las Vegas strip. The remaining 607o interest was acquired in January 1983 and brought under Harrah's management. In 1985, Holiday Inns changed its name to Holiday Corporation, which oversaw the running of several interests including Harrah's casinos, Holiday Inn hotels, Embassy Suite hotels, Homewood Suites and Hampton Inn hotels.

In January 1990, the Holitlay Inn hotel business was acquired by Bass PLC and the remaining brands under the Holiday Corporation umbrella-Harrah's, Embassy Suites, Hampton Inn and Homewood Suites were brought under the name 'The Promus Companies.' In June 1995, Promus spun off its hotel intrests into another company and brought the Harrah's brand, its assets and part of the Promus headquarters assets under a new name-Harrah's Entertainment Inc. Harrah's had added to its fold many new properties during the 1990s. The significant ones included a riverboat casino in Joilet, hotels/casinos in Shreveport, Vicksburg and Tunica and f}rs d!-Qhin casino near Phoenix, which was Harrah's first Indian gaming operation.

In the late 1990s, Harrah's added many more properties into its fold and developed several existing ones. A riverboat casino entertainment complex in Maryland Heights, Missouri was opened by the name Hanah's St. Louis Riverport. The Harrah's Las Vegas underwent a renovation that cost $200 mn. New properties were opened in North Carolina and
Shares not traded on ao exchange. OTC shares are usually traded over computer networks and telephones.

Kansas. In.1998, Harrah's acquired Showboat Inc., a Las Vegas-based company, which owned resort and riverboat casinos, for $1 bn. Rio Hotel & Casino Inc. merged with Harrah's in 1999, adding 1.3 million addi tional customers to Harrah's customer base.
By the late 1990s, Harrah's had emerged as the first nationwide casino business. Under Philip G Satre (Satre), the then Chief Erecutive Officer (CEO), Harrah's embarked upon a geographical expansion stratesr, ex-

panding Harrah's from 4 casinos in 2 states to over 26 casinos in 13 states. Howevet the most significant milestone in Harrah's business history was the introduction of an integrated national player rewards and recognition program that was designed for customers to frequently visit Harrah's properties. The objective of the program was to proyide customers good service and thus encourage them to be loyal to the Harrah's brand and was in tune with Bill Harrah's legacy of providing custourers with the 'Hanah's feel' while they played. This initiative aiso narked the beginning of the company's CRM program that went on to become one of the most successful CRM programs in the US.

The CRM Program

Harrah's competitorsrl were opening lavish properties that hrd +as, shop ping malls and extravagant hotel rooms, apa.rt from gambling, in order to lure customers. Harrah's, however, decided to pursue a ditrernt shatg/. The company knew that the majority of its revenues came from its casinos and not from hotels, stores and spas (Refer Table I for business seg-

ment revenues). Hanah's decided to make information the key aspect of ttre company's marketing efforts. Instead of investing in extnvagant properties, Ilarah's began investing in IT that allowed the company to track and analyze every individual customer's transactions. The database generatcd out of this effort was then used to design customer programs that would help deliver better customer service, which in turn would aid in keeping crrstomers loyal to Harrah's casinos.

Harrah's competiton included players like MGM Mirage, Mandalay Resort Group and Oaesars Enterteinment-

Case Folio

55

Enhancing customer loyalty and capturing a larger share of customers' gambling budgets was the main aim of Harrah's CRM stratery. The CRM program helped Harrah's understand the potential value of each customer and identify a suitable contact stratery that would bring him/ her back to Harrah's casino more frequently. Harrah's CRM strateg' focused on four key elements. The frrst and the most important was the Total GoltUTotal Rewards customer loyalty prograrn. The second element was decision science-based tools. The Hotel Revenue Management initiative constituted the third element; the final element was Personal Contact
Management.

Customer Loyalty Programs

The Total Gold program was based on a premise that the best way to improve business performance was not to attract new customers but instead to get the existing customers to spend more, Harrah's realized that capturing a higher percentage of its existing customers' gaming budget would significantly improve the company's profrts. This led Harrah's to shift its emphasis towartls building long-lasting relationships with its customers.

Enhancing custonter loyalty and, capturing a lafger share of

Customers who agreed to join the Total Gold program had to fill a membership form through which Harrah,s obtained data such as their name, address and

customers,sa,nbtins:i::',I""ff liTli;:;Il"-11"33fr "-il,".'ll?fJffi: that they played on. The card bad a magnetic strip that budgets was the main identifred each customer. Each tine orstomers used their aim of HArrah'S CRM

s*atee,,

had they used, what games had tiey played and what was the result of the games. This information was then in a centralized repository and then used to recognize potential stored customers with whom longJasting relations could be established. The information was also used to reward customers witl gmdies such as casino compliments, discounts on meals, hotel accommodation and invitations to special events, Commenting on the benefits of the program' Satre explained, "The Total Gold player reward and reognition program arrd our industry leading customer databases give Harah's important tools for enhancing relationships with our target customers and making them loyal to Harrah's where ever they chose to play."u
1998, Satre hired Gary Loveman (Inveman) as the Chief Operating Olficer of Harrah's. He was an MIT trained economist who had spent four years as Professor at Harvard Business School- l,oveman had spent a great deal of time at Harvard studying how businesses can identify their

iiil'Li,lil*'lil'i:,f;:*ff"J,ffiJ"J"'il,xtr1

In

most profitable customers and get them to shop more often. Alter joining Harrah's, Loveman immediately identified weaknesses in the Total Gold

d "Harrah's

Obtains Patent for 'Real TiBe' Data on Customer Casino Play

Technology", wwwhotel-online.com, November 06, 1998.

program. First,. there was nothing different about Harrah's tewards as cooipata to its competitors. Second, there was no consistency in the re*aris earned by the customers. They earned different rewards at differcnt properties. Finally, customers were not given adequate incentives to conLliate their play at Harrah's and aspire for higher levels of benefrts and services. Consolidation of pJ.ay would enable a customer to combine the who reward points earned at various properties For example' a customer property could combine ie*a"d" points by playing at a particular "r..r"d them with rewards points earned at another property'

that the Total Gold custornHarrah's' ers spent only 36%' of tleir total annual gaming budgets at saw an opportunity and decided upon a stratery Loveman irnmediately gamthat would focus on encouraging customers to spend more of their Harrah's ing budget at Harrah's. He clecided to customize the relationship ir.a *itft each of its customers so that the experience a customer had at Harrah's Harrah's was ofa higher quality in comparison to its competitors' their value began treating millions of customers differently depending upon This was made the key aspect of the tolhe company.
Research conducted by Loveman revealed

Total Rewards program, which was essentially a successor of the Total Gold program. The focus was now on a customer's worth over a period of time instead of his'&rer

Harrah's began treating millions of custoners worth during one visit. differently depending The Total Rewards program was a tiered approach to facet upon their ualue to the customer loyalty that promoted another important
of Loveman's sl,ratery-aspiration. Based on their value'
customers were divided

co'npany' This was made the key aspect of the and Diarnond. The customers earned points, called Reward Credits, every time they played and were allotted Total Reward's prograrn
i"to tt'."" ti"?Jl

l"ti,'i'i'"iti,'.

different tiers depending upon the number of credits they earned. The levels of service offered to customers progressively improved from Gold card holders to Diamo-nd lu.d holi"rs, -ho were offered the greatest levels of service' Deliberate customers efforts were made to highlight the difference in service levels to iofai"g Cofa cards so ihai they could aspire to achieve higher levels of Co--"nting on the aspiration program, Mirman' the then Chief ""*1""] Marketing Ofhcer at Harrah's said, "It's in customers'best interests to that stacontinue to play with us, not go to our competitor, and achieve your experience int,r". B""u,r"" orr"" you get that status, the quality of
creases dramaticallY."ls

Another important objective of the Total Rewards program was cona major solidation of play Harrah's found that customers considered luck go to another casino factor in deciding where to play. They decided to rewhen they were unlucky and started losing' Harrah's extended the just move to anothet *ard" p.Jgra* to all games so that customers could game This game wheiever they founcl they were not lucky in a particular ltopped customers from moving to a competitor's casino'

@ual
December 0?, 2002.

Symposium on Racing, wwwua-rtip org,

Cross-market playing at various properties of Harrah's was another

objective of the Total Rewards program. Cross-market play happened when

customers played at one of Harrah's properties other than their 'home' casino. Customers could visit any of Harah's properties in the US and use the same Total Rewards card. This gave Harrah's customers enough incentive to stick to the Hanah's brand wherever they went in the country. Harrah's strategr of encouraging sross-market plalng was supported by the company's branding stratery that focused on building the Harrah's

brand and not promoting any particular property of Harrah's. This enabled a consistent brand experience across a.ll touch points.ra

Decision Science Tools

The Total Rewards program enabled Harrah's to dwelop a huge database containing a record of customers' personal information and their transactions. Loveman felt that the use of decision sciencebased analytical tools on this database would enable him to gain valuable insights into customers' spending habits and preferences. Customized ofrers to each customer were then designed based on this information. Loveman explained, "We're going to ketp ofiering you things and asking you and talking with you--- [until] we get to the Reward.s point where we know what you want-"r5

The Total

Estimating a customer's worth over a period of time was the primary purpose of incorporating decision scihuge d.atabose ence tools into Harrah's CRM strateg/. The tools aleontaining a record of lowed Harrah's marketing anelj'stc to query the customer database and determine ach c'trstomer's prefercustomers' personal ences and predict the services and rewards each cusinforrnation and their tomer would prefer. Decision science tools made use of transactions data such as age, distance from cr<rno, different tlpes of games played, number of bets placed, average bet and total amount of rnoney depositcd in order to come out with a detailed gambling profrle which would theo be used to personalize a marketing program that would entice the crrstomer to revisit Harrah's. This data was used to estimate how much nonry tle company could earn from an individual customer over a period of time. These tools also helped Harrah's acquire important information like; 80% of its casino revenues came from customers who spent only between $100 and $500 per visit and that an'idea.l player' would be a woman,62 years of agp, who lived within 30 minutes of a casino. Such customers would have spare time, disposable
cash and easy access to a casino, Decision science tools also helped Harrah's in segmenting the entire customer base. Customers broadly fell under four categories-Prospect, Non-Loyal, Loyal and Attritor. The Prospect segment mainly consisted of

prograrn enabled Harroh's to d.euelop a

non-gamers or gamers who were loyal to another casino. Harrah's

A touch-point is a point of contact betweeo the orgaDization and the customer. Call centers and websites are examples of touch-pointsDaniel McGinn and Steve Friess, "From Harvard to Las Vegas", Newsweeh, April
18, 2005.

marketing treatment to this segment lowered their switching cost' thereby inciting tilem to come to Hanah's. The marketing treatnent for the Nonl-yut s'"gmettt encouraged customers to consolidate their play at Harah's' Attritor The Loyal segment v/as encouraged to maintain tofal{ an! the marketing treatment that would re-instil loyalty' *."-giuen a ""gmerri tli" diff"rerrtial ,rrarketing treatment meted out to each segment was ained at strcngthening customer loyalty.

to by analysts in Harrah's marketing department to-customize offerings to acHarrah's analysts used the COGNOS Impromptu'6 ii. "n.tl-"r..warehouse and run pre-defined reports and execute queries' cess the data fo" i""tu""", Harrah's could use the COGNOS tool to obtain a list of was the customers wio reside close to one of Harrah's properties' It to move COGNOS tool, which made Harrah's realize that customers liked property' This irorn ptop".ty to property instead of being loyal to a single play in ied Harrah's-to brin! in the element of encouraging cross-market ifr" tot"f Rewards progr.-. Using the tool, Hanah's was also able to link staff reports to sales receipts which helped in identifying its best staff. The compnny was also able to anticiiatJ sea"onal customer behavior. Commenting on the ienefrts of COGNOS, Tracy Austin, Vice-President of IT Harrah's tned SAS on its Development at Harrah's said, "Using COGNOS in our in order Total iewards card program, we can track each player's dnta warehouse gaming patterns and preferences across our 21 locations to segrnent its entite trends in the data, COGNOS i" tnJS. By uncovering customc,. fu* into BI allows us to determine the destination, dining, and 9O wments fud on gaming choices of our custoners' Using this insight, we "a." demogtaphics abl" to build complimentary arrd special offer programs that are customized to the individual crstomers'"'7

were used Decision science tools that acted upon the data warehouse

in carrying out rnarket segprofrling and predictive rnodeling' Harrah'smentation, entire gtlston-el used SAS ott it. d"iu warehouse in order to segnent its based on demographics' The tml also bel@ Ilarrah's tur" ittto SO "ugt"""ts profrle for each customer, based on tbe mming habio J"uutop a aitaited it", *friAi would allow it to studv how profrtable th9 o1{o-ner w.as to the proPredictive analysis was then carried out by SAS on these to respond "o]rrpurry. files'in lrder to itlentify those customers who were nost lihely spel" i"-"ftt ctmpaigns. Harrah's then targeted thee clrstomers withsteal to tailored to each individuai customet in order "in" "u*puigttt,frim/it"r at"ay lrom the competitor and increase his loyalty towards i.""ufr'". SA-S ailowed Harrah's to be more precise a:rd effective in its
SAS was instrumental

communicationwithcustomers,whichinturnincreaeedtheprofrtability Commenting on the benefits of SAS' David Norton oi it" prof"u-puign.. itlorton), denior Vice-President, Relationship Marketing said, "Our of the iiability around marketing interventions is much higher because
query and reporting tool by Cogtto. Inc., the ImPromPtu is a that di;tributes reports over the Web 17 "Harrah'g Entertainment Hits the Jackpot with Cogros Bueinegs Intelligence"'
News Releasee, www.cogroa com'

precision of understanding that SAS provides."l8 By using SAS, Harrah's was able to group data into clusters arrd seek trends.

Hotel Revenue Management

Harrah's Hotel Revenue Management System (HRIVIS) was aimed at offering customers rooms at attractive tariffs. Apart from achieving higher room occupancy rates, the revenue managenent initiative allowed Harrah's to maximize profit on each room. In order to achieve this, trade-offs were made between gaming revenues and room tariffs. The gaming revenue from a customer was tracked from the Iryalty program. For example, a customer who had a history of wagering 94,000 a night at Harrah's casinos, may be offered a complimentary room at one of the Harrah's properties but another customer unknown to Harrah's may be turned down, even if he/she was willing to spend $400 a night for that room. The aim was to optimize the sum of gaming and room FEvenues. Norton explained, "It's not about filling each room. It's about rnrvimizilg out the profit from each room."te
The Hotel Revenue Management S1'stem (HRlf,'S) deterrnined the availability and the room rats across Harrah's properties (Refer Exhibit I for a diagrarnmatic representation of HRMS). The system made use of current and historical demand in order to come out with a demand forecast for a particular time of the year. Customer profitability and competitive conditions were then taken into consideration by the system in order to work out the room rates.

The HRMS allowed Harrah's to ensure that rmms were made available to highly profitable customers at the rigbt price- This was in tune with Hanah's CRM stratery that aimed at ca!frrring a bigger pie of its

D E

"Harrah's Hits Customer Loyalty Jackpot", ww*-aas.com. John Goff, "Head Games", CFO Europe, October 2004.

profitable customers' gaming budget. Filling Harrah,s hotel properties with profrtable customers also helped in boosting hospitality revenues.

Tim Stanley, Chief Information Officer at Harrah,s commented, ,.Our goal is to never turn down a good customer but not leave the hotel empty."I

Personal Contact Management

After the analysis of its customer database, Harrah,s arrived at a conclusion that over 25Vo of its revenues came from just bVo of its customer base. The Personal Contact Managemeni (PCM) initiative allowetl Harrah's to

target its marketing efforts at these 'high value, customers. Harrah,s called this segment'YIP customers'and devised a strategy that ensured additional visits from these customers, which in turn, delivered additional rvenues. This initiative was an important element of Hanah,s CRM strategr as it focused on drawing more revenues from existing customers.

An important component of PCM initiative was a dedicated salesforce, called host, who served the \1P customerc. These customers were assigned personal hosts who were responsible for delivering a highly personalized experience to them. Hosts were expected to know a great deal about their guests and create a personal bond with them. A host, for example, was required The Personal Contact to know which room at a particular property was a \rlp Management (PCM) guest's favorite. The host would book the room and stock with items that suited the guest's tastes and preferences. initiotiae allowed

Harrah's to target its A host's ability to deliver highly personalized service to a VIP guest depended on the in-depth information he/ marketing efforts @t she had about the guest. A Player Contact System (pCS) 'high aalu.e' cuatorners was implemented to provide information such as guest preferences, visit histories, worth, relationships and contact information. Apart from providing hosts with a centralized source of customer information, the system also allowed Hanah's to prioritize hosts'tasks and track their performance.
In addition to the above, several other measures helped enhance the overall experience that a customer went through at Harrah,s. Friendly and quick services were identified as major facto$ that customers er_ pected from their hosts. Loveman decided to associate employee remuneration with these two factors. Employees were required to take counes that would enable thern to deliver higher levels of service. Customer satis. faction scores were instituted for each property and these scores were independent of its hnarrcial performance.

Using Information Technolos/ for CRM

The extensive use of Information Technolory GT) was central to the suc_ cess of Harrah's CRM initiatives. The company,s abitity to develop and nurture relationships with its customers was a result of its abilitv to

"Grand Prize", Baseline, June 2004.

Case Folio

capture information and use it to its ad|antage. With millions of customers visiting its casinos annualll'. a significant amount of information was generated. Harrah's ability to manage this information and act upon it with the help of IT gave the comparrl' a comperitile advantage. John Boushy, the CIO of Harrah's explained, "Our objecrir.e is to use information as a strategic offensive weapon and that starts rrith a clear understanding of who the customer is and what the]'$'ant --

A massive data warehouse and BI initiatile lormed the backbone of Harrah's CRM strategy. In 1994, Harrair': -.ta:-red developing a system called Winner Information Network t\1-I\e: \\-I\et rvas used to consolidate customer data and facilitate informaiior -.haring across Harrah's properties (Refer Exhibit II for WINet's arcii:a-:ire . WINet went on to drive the loyalty programs at Harrah s and re.pei rn ensuring consistency in customer experience across the compa::). : p.operties. Commenting on its benefits, Boushy said, "WINet is the e:::-::= ri Total Rewards. It is the database that allows us to deliver the inC';i:al]r iailored benefits that keep customers coming back to our prope::i- Harrah's gathered data about its custome.: ::=:::; a magrretic card, which had a unique player identification code ::: :: Code readers were present on all gaming tables, which when card. 'a-i= =-nd into them, identified customers. Gaming tables were. in tu= .-.:::nected to AS 400 transactional systems on each property. A L\L\ -...:e;. a"'..:: s.as then used

----.>ri

Kate Gerwig, "Harrah's Likes the Odds on \e'* Estranet-. Inre.r.-a lli'eA. August 28, 1998. "Harrah's Entertainment Executive \amed Technoloqi Leader bl ClO magazine," Business Wire, November 18, 2002. An interlace between AS 400 transactional slstem at each prope{}'and the central

Patron Database.

to coosolidat all customer data into a single repository, known as the kon llatabase (PDB). This database was then used as a source for the d*a rarehouse, called Marketing Workbench (MWB), where the analy4icel rork was carried out. Decision science tools were used on this data rarehous to study customer preferences and predict the services and rerards each customer would respond to.
The PDB was essentially a national customer database that recorded custouer activity across Harrah's various points of sale at its casinos, restaurants and hotels. It also acted as an operational data store that catered to queries, which were generated during day-to-day operations zuch as hotel check-ins. All custorner information gathered at various properties across the country were tested for validity and loaded into the PDB. The PDB allowed Harrah's to have a single view of each customer and get a more comprehensive picture. This view comprised of gaming habits at casinos and lifestyle preferences at hotels and restaurants. Employees across various properties could now get a consistent picture of
each customer and ensure

that the customer gets the same service wher-

ever he/she went.

On the other hand, MWB served as the data warehouse where analytical work such as customer segmentation, profrling and predictive analysis were carried out. The data warehouse stored daily data for three months, monthly information for two years and yearly information since 1994. Harrah's used decision science tools including COGNOS and SAS on this data warehouse in order to create customized marketing campaigns.

In June

2(N7, Harrah's

launched the eTotol Rcwards program that

allnued its custorners to ai.eus benefits and

conxplirnent@r! offers on the Intenwt

In order to further personalize its relationships with customers, Hanah's used Internet technologies. In June 2001, Harrah's launched eTotal Rewards program that

allowed Harrah's customers to view benefrts and complimentary offers on the Internet. Harrah's had to integrate its back-end CRM bfrastructurc with Intemet technologies in order to extract infornation from the ilatabase and make them available on its website for the customers to see. Customers could view offers personalized to them online. They could even

check for availability and rnake online reservatioos at Harrah's hotels and casinos. Commenting on the eTotal Rewards pmgram, Norton said, "We're seeing great return from eTotal Rewards. In addition to increased revenue and cost savings from customer self-service, the biggest difference is how the channel is working to strengthen our customer relationships. We can now provide customers a personalized experience on the Web, with deals targeted and tailored to their level of loyalty instead of generic offerings. By offering our customers a fully integrated Total Rewards program across multiple channels, we have taken customer service and our CRM capabilities to a new level."za

* "Harrah's Doesn't Gamble with Customer

wwvr.sapient.com,

Loyalty", Sapient Case in Point,

The Benefits
Harrah's CRM initiatives were the fust of its kind in the US gaming indusreaped by the company were impressive. When the Total Rewards program began in the year 2000, Harrah's was able to capture only 367a of its customers' gaming budget. By 2002, this figure rose to 4ts7o. The compaay witnessed a 137o jump in profits in the very first year of the Total Rewards initiative even after spending $251 mn as rewards. The loyalty card prog:rams had 12 million enrolments in 1997. By 2003, the enrolments went up to 26 million. Harrah's generated 757o of lts revenues from its loyalty card enrolments in 2003, up from 50Va when the loyalty program started. This data revealed the popularity of the loyalty programs.

try and the benefits

The CRM initiative also helped Harrah's to increase its same-store sales i.e., sales from stores that have been functioning for more than one year. Same store sales, an indication of customer loyalty, went up by 14% in 1999, an increase of $242 mr over 1998. Due to its CRM initiative, Harrah's was able to increase its same-store sales between 1999 and 2002 (Refer Exhibit I[ for quarter-wise same-stores revenue growth from 1998-2002).

Arother important benefrt of the CRM program was the increase in revenues through cross-market play. Revenues from cross-market play went up from 73Vo in 7997 to 229a in 1999. In 2002, Harrah's generated more than $1 bn in revenues from cross-market plays, which was up by 207. as compared to the 2001 figures. By 20O4, tbe revenues rose to $1.,14 bn. Harah's two properties in Las Vegas, considered a very competitive market, posted a combined EBITD.Ns of 377o, because of increased cross-market play

(inimn)
12001
6.3

5.r$

7'9%

,nool
g-

tge

56%

.,

,ra-l
13.2<h

l..r.l pl
.i
,.oo-l

t1.696

4Q

IQ

20

lQ
r99e

1Q

IQ

3A

lQ

IQ

2Q 2oo2

Ir998

2mo

2mt

fl

@terest,Taxes'DepIeciationandAmortization.EBITDAisanapproximatemeasuteofa
company's operating cash flow. This measure is of interest to creditors as for interest payments.

it is an indication of the

income a compaay has free

E\hibit lV: Harrah's

Operating Dala
Revenues

five Year Financial Summary

2004
4,548.30 791.10

,ln s millions except common slock data and financial percenla8es arld

2003 2002 2001

3,94A.90 1,747.90

2000

3,317.4

2,977.80

lncome lrom op,rations

lncome,4oss frorn

\et

lncome/Loss

678.80 708.70 52r.80 r88.20 261.10 282.20 173.80 (46.,10) 329 50 continuing operations 367.70 292.60 2)5.OO 209.00 2.10)

Common Stock Dala Earningvloss per shareiiluted lncome from continuing operations Net lnaome/Loss
Cash Dividends declaed pet share

2.92 2.36 3.26 2.65 1.26 0.60

2.48
2.O7

1.50 1.81

(o.,to)

(0.r0)

Financial Position
Total assets Long-terrn debt Stockholders' equity

8,585.60 6,578.80 6,350.00 6,128.60 5,166.10 5,151.10 1,671.90 3,763.10 3,719.40 2,835.80 2,035.20 1,73A.40 1471.OO 1,374.10 1,269.m

Financial Percentages/Ratios
Return on revenuegcontinuing Return on avera8e invested capital

7.2% 6.6"/. 8.2'1 8.09" 8.00/" 7.601.

17.5"i. 16.010 19.5.k 18.090 27 2.6
\nnjal
Re?an. 2001

7.5%

52% 7.5'h 7.3'to

12.9"k 15.5% 2.0

(1.6)%

Continuiog operations Net income,4oss

Return on average equity

8.9Yo

2.4%

6.9't
19.3% 16.1% 2.7

2.9"r
(3.2)",;

Continuing operations Net income/loss

Ratio of earnin8s to fixed charSes

(0.8)% 2.0

Sou.e: Harah :

The CRM initiative's impact on the or-erall earnings of Harrah's was significant, In 2002, Harrah's 26 casinos across 13 states generated revenues of $4.14 bn, which was I2Vc higher than the previous year. This was in the aftermath of September 11 terrorist attacks *'hen the LS entertainment industry was in doldrums. Harrah's total resenues grert from (Refer $2,97?.8 mn reported in fiscal 2000 to $4,548.3 mn in fiscal 2004 five year financial summarl'r'{: Exhibit IV for Harrah's

Joel Joseph, Former Research Associate,

The ICFAI Center for Management Research. Faculty Member, The ICFAI Center for Management Research.

'

Viueh Gupta,

Questions for Discussion 1. 2.

Examine the role of IT in enhancing a company's ability n deliuer higher leuels of customer service. llhat benefits can be deriued by consolid,ating and using custoner information? Etplain,

Criticqllv analyze the customer loylly programs of Hatah's and comnent on the elements thqt made them successful. Wich chctrqcteristics of Harrah's reward program can fu used by other industrizs and why? Explain. Harrah's had. used IT in its CRM initiatitcs successfully. Do you thinh a successful CRM initiatiue goes $ond implementing an information technology s$ten'L? Elqborate.

3.

References
1. Harrah's
Play
Obt@ins Patent
La

Te c hnolo gy, a

u. hot

fot "Real Time- I)oto on Customet j. l onl i ne. onr. -\o: : -: :-: - : i
-

Casino

-Q9

2. Cheryl Rosen, Harrah's 3. 4. 5. 6. 7. 8. 9.

Bets on

Lo!alt:

Program,

wuu.informationueek.com, Oclober 30, 200a. Christopher T Heun, Harrah's Bets on IT to L-ndentond lts Customers, Informationueeh.com, December 1 1, 2000. Meridi,th Leuinson, Jdchpot, ClO, Januar) 2. 2Lr :
.

Rich Whiting, CRM'I Realities Don't March 19,2001.

Anne Chen,

]Iatch fl-rpe

I:.rcrmationWeek,
I 2, 2001.

Harrah's Places lts CRM Bet. i --. - :- :; r :': . -\pri Paul Krill, ABet on Technology, Infoworld. -1.:::-::-:- 'i l00l.
Mihe Koller,

Harrah's Rewards C'ttmblers- In:e::::--i\';.- O.lober 8,2001

in Holel Rerenue Jlanagetuent, Journal of Revenue and Pricing Managerrj.er't. D.:.'.:-: - : - 2tal. 10. Mihe Beirne, Dollars in the Desert, Brand\\pEi -1:-:. - jirrf.
Ahmet H Kuyumcu, Gaming Twist

11. Jennifer Masselli, Businesses Find CRMlblue in Assortment of Applic.ttion

B,

Informationweek, April 22,2002.

12.

Dale L Goodhue, Barbo,ra, H \ilixom, Huglt J ll-c:. ':. Realizing CRM Ben' efits Through CEM, MIS Quarterll', J&n 2trJ.
October 07, 2002.

13. Carol Pogash, From Haraard. Yard to l'egas Strip, Farbes.cont,

11.

Gary Loueman, Diamond,s Mat 2003.

in the Datamine.

Harvard Business Review,

Rda,.Flarrah" trits tha Jaehpot uith CRM' Stntes' June 2003' 16. Darrell Dunn, Personal Touch for VIPs' uww,information@eek'co'tu,
15Susan

November 1O,2AO3

17-

Eanah\

A Big Payofffiom Loyaltt,

BusinessWeek, Nouember 24' 2003'

18- Margaret L Young, CRM Strategy: Mahe Evety Customer Mote Profit' able, uuw,eueek.com, December 30, 2003.

19. Mattheu Haaberle, Betting on Custorner

lnyalt!,

Retail Technologr Quar-

letly,January

04 utww infomationueek'co'n,

20. Ton! Kotutzer, Big Bet ort Customer Lo!@lt!,

February 09,2004.

21. 22.

Stephatue

Fitch, Staching thz Dech,Forbes, Julv 05,2004.

Kym Githooly, Getting PerEonal Agoiz, Computerworld, August 16' 20M'

Goff,

23. John

Hed

Gcmes, CFO Europe' October 2004'

McGinn and. Stet)e Friess, Frotn

2005.

Earvard to I'{tEvegas,

Newsweek,

April I&

25. Eaftah's 26,

/ditE Customer Loyaltrt

ilachpot, www.sas'com

www.hafiahs.com uuu,tetddata-i.coi1'

27,

Reference

14M-2005-1 1-05-02