Submitted To Miss. Sajida Mandokhel Prepared By Mehjabeen
Date: 23 August 2010
The case describes the Total Gold customer loyalty program and explains how it evolved into a Total Rewards program that helped Harrah's win the loyalty of its customers. a leading casino entertainment company in the US. The case describes the Total Gold customer loyalty program and explains how it evolved into a Total Rewards program that helped Harrah's win the loyalty of its customers. It explains the various elements of Harrah's CRM strategy and how each element contributed to the overall success of the strategy.
This case gives a detailed account of customer relationship management (CRM) initiatives pursued by Harrah's Entertainment Incorporated. a leading casino entertainment company in the US. The case also details the use of IT in CRM by Harrah's including data warehousing initiatives and the use of decision science tools that allowed the company gain insights into its customers' gaming behavior and provide them with personalized services. The case also details the use of IT in CRM by Harrah's including data warehousing initiatives and the use of decision science tools that allowed the company gain insights into its customers' gaming behavior and provide them with personalized services.Executive Summary
This case gives a detailed account of customer relationship management (CRM) initiatives pursued by Harrah's Entertainment Incorporated. It explains the various elements of Harrah's CRM strategy and how each element contributed to the overall success of the strategy.
Introduction to industry
Casino gambling is a fast-growing industry around the world.S. The American Gaming Association (2002) reports that 443 commercial casinos in 11 states generated more than $27 billion in gross gaming revenue in 2001. Research is needed to analyze the optimal combination of admission fees and wagering taxes
. it is clear that the rates of increase in casino tax revenue are rising and. gambling represents a growing source of revenue nationwide.32 billion in direct gaming taxes from this economic activity. Although tax revenue from direct gaming currently amounts to just one-third of one percent of total own-source revenues collected by state and local governments in the U.. consumer spending at casinos rose from $11. Such a division of revenue seems purely ad hoc. Over the period from 1993 to 2003.
This fast-growing sector has captured the attention of state and local governments that see the potential for added revenues from taxes and fees applied to casinos as they are legalized and that view casinos as engines for local economic growth. In practice. or about 16 percent of gross gaming revenue. the wagering tax revenue typically goes to the state. they still account for just one-third of one percent of total ownsource revenues collected by state and local governments in the U. To date there is no research on the determinants of wagering tax rates.S. Commercial casinos are taxed primarily with wagering taxes based on their adjusted gross receipts (AGR). while the admissions tax revenue goes to the casino host local government. Riverboat casinos are taxed with both wagering taxes and admissions taxes. While casino taxes are generating rapidly increasing revenues. in some states where the gambling industry has matured. Casino taxation by state and local government in the
United States is an increasingly important aspect of tax policy as the spread of casino gambling by commercial casinos has introduced the opportunity to generate additional revenue. State and local governments derived $4. Admissions taxes vary from a low of two dollars in Mississippi to a high of five dollars in Illinois and Iowa.Question # 1.2 billion to $27. leading many governments to believe that casinos are important potential sources of public revenue. these taxes are substantial revenue sources.02 billion in nominal terms. Despite that small share. The wagering tax rates applied vary fro m a low of four percent in Mississippi to a high of 70 percent in Illinois. The wide variation in wagering tax rates applied to AGR deserves further economic analysis.
Through taxes and license fees. and other programs. Additional research on this issue is needed in order to provide a clear picture of the net revenue implications of casinos.000. historic preservation. Additional research is needed to determine more precisely. however. Evidence on the incidence of casino taxes indicates that they are born primarily by the gamblers and are quite regressive. and the corresponding question of how the states may attempt to capture a certain portion of those economic rents. It seems clear that a good portion of the revenue generated by taxes on casinos is offset by reduced revenues from other sources. The research questions outlined above beg for attention as state and local governments are increasingly intent on
. Revenue interactions with other sources of state revenue are apparent from the economic studies conducted in casino states to date. and live entertainment. food. Research is needed in this area to determine both the appropriate mix of wagering tax and licensing fees for casinos and the appropriate mix of casino taxation and complementary good taxation (hotel rooms.). The most elaborate fee structure is that of Nevada. Uses of casino tax and fee revenue run the gamut from being directed into the state's general fund to being earmarked for specific programs such as education. Evidence on the fungibility of funds from lotteries indicates that earmarking for specific purposes is not likely to assure increased funding for those purposes. Hence. where fees are applied to slot machines. Casino taxation. how earmarked revenues affect expenditure levels in dedicated programs and how they may affect other tax rates such as state sales and excise tax rates. the degree of repressiveness may be reduced as more gamblers can afford both the time and out-of-pocket costs to engage in casino gambling. the states may be in a position to effectively extract a substantial portion of the economic rents conferred. live entertainment. but also a variety of new opportunities for public finance researchers. tourism promotion. That issue is the extent to which state regulations on the number and location of casinos confer economic rents for casino owners and operators. etc. however. in the case of casinos. gambling addiction. provides not only the prospect of additional revenues for state and local governments. table games. therefore. the net revenue effect of additional casino taxes is smaller than it first appears. New Jersey applies a slot machine license fee and also levies license fees of at least $200. An important issue related to the incidence of casino taxes has not been addressed in the literature. drinks.Beyond wagering and admissions taxes. primarily from sales and excise taxes.000 per casino plus annual renewal fees of at least $100. but there is not yet any substantial economic analysis of this potential. states also apply various licensing fees. With increasing casino access as gambling opportunities spread across the country.
By 2002. focused his initial strategy around people. By the mid 1990s.pursuing revenue opportunities and policy makers need more insightful analyses on which to base their enabling casino legislation. However. HET was at the crossroads in deciding if it wanted to imitate this approach or discover new ways of competing one thing was clear. something had to change. he needed to adopt a more radical new business system and at the same time discard the present functional approach that held the company and its people virtually captive in the past. In an attempt to avoid the enormous development costs. Harrahs decided against imitating its competitors approach and rather focus on becoming market leader in building and maintaining close customer relationships. this program was run independently and therefore took totally different forms at each property. However.
. The company has a comprehensive marketing and advertising code. Harrahs developed a rewards program based on tracking cards (akin to a frequent flyer program) at each of their properties. HET felt the competitive pressures and attributed sizeable losses in market share to the must-see properties. I am going to look closer at each of the critical areas that were essential in the transformation process from pursuing a follow-the-leader strategy to becoming an innovation leader in the gaming industry. Prepared by Peter Klugsberger for that matter. Industry Dominant trails
Harrah s is vigilant about protecting minor-age children from gaming actives. HET grew to be a major player in the gaming industry consisting of 26 casinos in 17 different cities. a 26-year-old entrepreneur.
Question no 2 Introduction of the organization
Harrahs was founded in May 1937 in Nevada by William Fisk Harrah. which governs all aspects of marketing and advertising. Phil Satre. who became CEO in 1984. Phil Satre understood that to succeed in his attempt to turn the company around. Under his reign.
Question no 3 Analysis of external environment
b. and completion of several parks and recreation projects. The casino industry is highly competitive. An example is Harrah s metropolis casino. It is difficult to place price on the product offered by the casino industry.Harrah s has incredibly strong focus on marketing.5$ million from riverboat casino taxes in 2000. Residents of communities where commercial casinos are located overwhelmingly support the gaming industry because the town received mo9re than 6. The commercial casino industry is one of the most heavily regulated industries in the United States. as well as expand municipal services.7 billion per year gaming company that operates 21 casinos in 17 markets. Harrah s Rio al suites hotel & casino in Las Vegas will be the first casino in the industry to offer players the opportunity to play raining diamonds slot machines. The city recently completed a capital improvement plan for the next 5 yeas that includes that projects such as constructions of a new water filtration plants. development of a new industrial parks. slot technology and linked jackpots and the internet.6. Both the state and federal government has actively worked to regulate and even ban inter gaming. there are billions of dollars at stake. More than 88% of the funds to fulfill the plan objectives are expected to come from riverboat casino. One potential source for intense gaming competition is the internet. its customer are purchasing a good time. Residents of communities where commercial casinos are located overwhelmingly support the gaming industry.
. This revenue has helped the small rural community upgrade its infrastructure and city utilities.7 % increase in revenue over 1998. Analyze the General (societal) environment faces company. Harrah s big achievement was 3. The major development affects the gaming industry: player cards. the town received more tan 6.5 million from casino taxes which help the rural community upgrade its infrastructure and city unities as well as expand municipal service. Harrah s became the first casino to be listed on the New York exchange. slightly below competitive pricing. In terms of room. Harrah s is competitive with and in some case. This industry has been very successful. Because Harrah s competes in the entertainment industry. Gaming industry became the international game technology by developing new types of slot-like games with such themes as wheel of fortune. food and amenity pricing. This was 12. In 1999 GGR for casino was $ 22.
The active in brining attention to problem
.S population y The median age of casino players is similar to that of US population y Casino players are slightly less educated y Casino players are more likely to be white collar workers. y Casino players have a household income that is 19 % higher than that of U. y 81 % of casino customers always or usually set a budget before visiting a casino One drawback is one potential source for intense gaming competition is the internet. The following factors seem to characterize the casino player market.According to the 2000 State of states: The AGA Survey of Casino entertainment the profile of the typical casino customer has remained consistent over the past several years. Both the state and federal governments have activity worked to regulate and even ban internet gaming Internet gaming is estimate to be a multibillion dollar per year industry however. there are four major concerns with this type of gaming y The potential for fraud over the internet y Children s access to gambling sites y State regulations that lock out commercial casinos from the internet gaming industry y The need to preserve state revenues generated from legally enforced and state-run gambling operations.
properties Adv. leaving Harrah·s behind in this regard The threat of copycat marketing looms.Harrah·s Entertainment Inc. possibly limiting the return on future investments in business intelligence
4 SWOT Analysis Strengths 100% growth in prior-year profits Customer loyalty initiatives ID·d as a core competency Org. campaign based on research Superior customer service Recognized by Casino Player Magazine
SWOT Analysis Strengths Models to predict future worth of players Clear plan for direct mail campaign
Situation Analysis Phil Satre was enjoying the 100% increase in stock price over the last year Marketing success in the low-roller segment helped achieve this result This success appears to stem from Harrah·s investment in info technology Key competitors have focused their investment in facilities
Problem Statement Satre must decide whether Harrah·s can continue to grow profits by investing in information technology and analysis Their competitors have heavily invested in facilities. ind. structure emphasizing company ownership of players vs.
given the possibility of copycat marketing by competitors
.Experimental/measurement-based approach to marketing Patented technology linking player performance data across properties Successful cross-marketing processes
SWOT Analysis Weaknesses Facilities. making across-the-board facility upgrades difficult & expensive
7 SWOT Analysis Opportunities Continued investment in business intelligence to create SCA·s via superior marketing programs Invest capital in business intelligence to distance the company from competitors Use a portion of the profits produced by the recent success to refurbish properties in key markets
8 SWOT Analysis Threats Competitors investing in superior/newer facilities Copycat marketing by competitors Decreasing the ROI on technology & analysis investments
Alternatives Status Quo Enjoying financial success Further investment in technology/analysis carries risk ROI is uncertain. as compared to competitors It is a 50-year-old company.
Alternatives Continue aggressive investment in information technology & analytics Difficult to rebuild a 50-year-old company. with respect to physical structures Business intelligence is the core competency of the company Corporate personnel hired to deliver SCA·s based on business intelligence. via their unique skill sets Loveman + Mirman & others
Alternatives Throttle back investment in business intelligence and divert funds to remodel properties in key markets Key threats and weaknesses are tied to the inferior physical structures (see SWOT analysis)
12 Solution Alternative #2 It has worked well thus far 100% YOY increase in profits and stock price Target is low-rollers Cash flow from low-rollers would not provide a sufficient ROI on extravagant properties As a result. Alternative #3 would not appear reasonable Key strengths support Alternative #2: Experimental/measurement-based techniques Data mining processes Existing information technology infrastructure
13 Solution Alternative #2 Status quo (Alt. #1) affords competition an opportunity to engage in copycat marketing
via their unique skill sets
. with respect to physical structures Business intelligence is the core competency of the company Corporate personnel hired to deliver SCA·s based on business intelligence.Difficult to rebuild a 50-year-old company.