Harrah's High Payoff from Customer Information

Harrah's High Payoff from Customer Information

Problem/Issue Statement:

When Bill Harrah started his gambling business in 1937 in a small bingo parlor in Reno, NV his main focus was on providing a comfortable, fair and entertaining game experience to his customers. As his business grew, his customer service focus remained the same. By the year 2000, Harrah’s had opened its 21^st location, making it one of the largest gaming companies with 40,000 employees, 36,635 slot machines and 1,075 table games,

11,521 hotel rooms and 92 restaurants serving 19 million customers.

These 21 locations throughout the US were run independently by individual casino managers. Decision making power remained with them and they ran their casinos as they deemed suitable according to their own focus. Each casino manager had his/her own marketing strategy. Some focused on advertisement campaigns while others strived for beating the completion. Along with its expansion, Harrah’s also experienced a major problem. The main focus on customer service that was the baseline this business was built on was lost over time. Harrah’s top management did not have a clear understanding of who their customers were, what did they expect from Harrah’s and what would win their loyalty and generate repeat business. Customer relationship management and business branding needed to be focused.

In order to combat this problem, Harrah’s needed to gather all customer related information from several different sources. This was a huge task and demanded substantial investment in IT since each of its locations ran independently and retained its own customer data. Data had to be collected from all sources, compiled in a uniform fashion, stored in a single database format and reports had to be generated based on aggregated data. This infrastructure would support operations, special discount offers, “Total Rewards” – a customer loyalty program and analytical applications. Spotlight was on “closed loop marketing” as it was the area of special attention.

Situation Assessment:

Harrah’s new business strategy focused on creating single brand image throughout all its locations, re-establishing relationships with old customers, attracting new customers and retaining these relationships. As the competition grew rapidly, Harrah’s had to react quickly to stay ahead of the game by investing in an IT system to combat the problem. This system would have to understand customers’ needs by gathering historical data, know their priorities by analyzing surveys, predict their habits by generating projection reports and to create a market plan targeted specifically for them.

List of Plausible Alternative Courses of Action:

To understand customers’ preferences, Harrah’s had to mine the data, run experiments using different marketing tools s such as special offers, and to learn what best met customers’ needs at the various casinos. These requirements gave birth to Harrah’s Winners Information Network (WINet) – creating a single customer view. WINet consists different components: Data and Source Systems; Patron Database (PDB); Marketing Workbench (MWB); Operational Applications; WINet Offers; and Total Rewards.

Data and Source Systems: Data is captured and collected from a variety of source systems such as hotel reception recording details of a customer’s stay. This information would include age, demographics, preference data, frequency of visits, etc. Another source of data would be the slot machines and gaming tables capturing customer’s playing habits, number of bets placed, high and low bets, etc. Some of the data is recorded automatically (i.e. slot machines) whereas some data is recorded manually such as the reception clerk entering customer information or the dealer recording the games played and bets made over a specific period of time.

Patron Database: At the end of the day, data collected from all sources is loaded into the Patron Database (PDB). Before the data is uploaded into PDB, however, it has to go through validity and sanity checks. If any abnormalities are noticed, data is send to a temporary holding area where it will be reviewed by the management manually. Once the final data is loaded into PDB, it becomes a searchable record based on customer name, casino, hotel, games played, events attended, etc.

Marketing Workbench: After the data is finalized in PDB, it is then sent to the Marketing Workbench (MWB) which is Harrah’s data warehouse. Daily, monthly and yearly data is held over an extended period of time for historical analysis and comparison reports.  Marketing analysts can analyze customer attributes to determine each customer’s preferences and predict what future services and rewards they will want.  A major use of MWB is to generate the lists of customers to send offers to.

Operational Applications: Operation applications are based on an employee’s observations. For example, the pit boss may offer $50 free chips to a frequent, valued customer or an additional night stay to an out-of-state customer.

WINet Offers: This is Harrah’s proprietary application to generate discount offers for valued customers. A marketing analyst enters target profile to generate a specific offer and PDB runs the report against all customers and returns the list of customers who match the search criteria.

WINet collected and combined data from all of the casinos recording detailed customer profiles including demographics, specific games played, the time and duration of their visits and their ages etc. The repository for this data used a patron database (PDB) that served as an operational data store. All of this information was fed into a custom data warehouse called “Marketing Workbench” (MWB) and further analyzed to generate different reports that were based on aggregated customers’ information data. At the time of WINet’s inception in 1994, PDB held 40GB data and MWB 80GB for 7 million customers. By 2002, PDB had grown to 300GB and MWB 360GB holding detailed records to 20 million customers.

WINet would gather all customer data from different sources, compile it together and process the end-of-day report after performing several sanity checks. If any abnormalities are noticed in the end-of-day reports or if they didn’t make logical sense, this data would be held in a suspended file to be reviewed manually. Once the reports are generated, management is enabled to identify customer requirements and generate prediction reports based on these reports. They would also be able to prepare marketing plans specific to different customer profiles, market areas and business goals. This allowed Harrah’s to reconnect with its customers by offering them customized offers that are prepared specifically to appeal to their tastes.

Total Gold program along with closed-loop marketing identified customers’ key interest areas. Harrah’s was now able to prepare specific marketing offers for these customers so that they would return to a Harrah’s casinos for their gaming pleasures.

Since changing its business strategy and adopting the new WINet system, Harrah’s had not only recovered its lost customers and won their loyalty back but also attracted many new ones. After a successful marketing campaign, Harrah’s recorded the following benefits:

• A doubling in the response rate of offers to customers;
• Consistent guest rewards and recognition across properties;
• A brand identity for Harrah’s casinos;
• An increase in customer retention worth several million dollars;
• A 72 percent increase in the number of customers who play at more than one Harrah’s property, increasing profitability by more than $50 million; and
• A 62 percent internal rate of return on the information technology investments.

Harrah’s is now ahead of its competition but to stay ahead it has to continue to make full use of WINet system. Other casinos are now following Harrah’s model and investing more in their IT system to generate similar report for targeting their customers. Harrah’s should continue expanding its WINet system.

Evaluation of Alternatives:

Harrah’s had a major task to come up with a solution to reconnect with its customers in order to do targeted, closed-loop marketing. It had to come up with a strategy to understand and manage relationships with their customers. They believed that strong customer service relationships cannot be built without extensive customer knowledge. Their decision to invest in IT and develop the WINet system proved to be very profitable. It was a great success as shown by the increase of customers and profits after the implementation of the new system. 72% Customers now play at more than one Harrah’s casinos and profitability has increased by more than $50 milltion.

Recommendation:

Although WINet system proved to be a great success, however, Harrah’s should not remain static with it. It is a model for other businesses and competitors are also trying to gain from Harrah’s strategy. Harrah’s should continue to expand WINet databases and run even more dynamic reports. It should also make use of social media, internet marketing and free vacation programs offered to its customers.

Presentation:

If I were presenting this case, I would explain the current situation to the audience, goal(s) to be achieved and cost of new system’s implementation. I would also show the measurable benefits to be gained from these changes. I would use MS PowerPoint to present case and would use MS Excel to calculate the before and after projected gains.