Case Study Harrahs Entertainment Inc.

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1. What are the objectives of the various Data Base Marketing (DBM) programs? Evaluate their
effectiveness. Why is it important to use the "customer worth" in the DBM efforts rather than the
observed level of play? [25 marks]

Database marketing programs are used for creating individual customer database. This data then
helps the business to create different marketing programs which can best cater to customer needs at
individual level. It is also a good tool for tracking potential/high value customers, to build
relationships and finally increase customer loyalty towards the brand.

Harrahs objective of using the DBM program was to track results from it by dividing the data base in
three programs to build customer relationship and increase loyalty:
New Business Program
Loyalty Program Frequency upside & Budget upside
Retention Program

The New Business Program was designed to create an offering which was more competitive with
what the customers were already receiving. These offerings were based on customer
worth/theoretical wins (discussed later) and were designed to improve the effectiveness in
converting Total gold members into loyal customers. Exhibit 2b shows that in April 1999 1022 new
customers came and each was given different offer out of which 125 visited again in May, 103 the
next month and 85 the month after. And the results show that the revenue generated from these
customers was almost constant with 34%, 33% and 32% respectively in each month.
Loyalty program Frequency Upside on the other hand was designed to incentivize customers who
were spending more on other casinos and giving a small share of their spending to Harrahs to make
them switch. Exhibit 2c tracks the behavior of 935 customers before and after. It shows that on the
number of visits from customers increased from 30 to 150 on average and it showed a profit which
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was calculated by doing a comparison of the incremental theoretical wins to the incremental cost of
the program.
Loyalty Program Budget upside was designed to encourage customers to visit Harrahs first in
order to capture majority of their gaming budget as in most cases Harrahs had found that a
customers allocation of budget was related to order they visited. The first stop received the largest
share.
Lastly, Retention program was designed for customers who had discontinued their visits (broke
historical visitation patterns). Hence market experiments were modified for these customers in order
to find out how much should be invested in order to retain the right customers. They sent direct mail
offer to 8000 customers each different according to customer worth. Even though the cost for the
program had gone up from $30 to $40 but it seemed to be working and the returned customers were
put in to loyalty-marketing program and managed accordingly.
Moreover, they used DBM to predict their customers behavior and their total worth (Customer
worth). This allowed them to build relationships with customers based on their future worth rather
than on their past play or experience. And how they predicted their worth was by collecting
important data and creating individual customer profiles. This data included customers playing
patterns, their visits to the casino, playing time, play preferences etc. Once this data had been
collected Harrahs could find customers who they predicted can bring them high value and eventually
tailored offers were sent to them.
The DBM program not only allowed Harrahs to forecast but also to track customers eventually. Their
quantitative approach allowed them to conduct some marketing experiments to find out which
promotion would best suite different customers and how would these transform their behaviors in
the best interest of Harrahs. For example, their experiment on the two similar groups of frequent
slot players suggested them that a less attractive promotion was more profitable one. Hence their
decision was to eliminate the practice of same day cash at most of its properties. The customer
database was centralized for all Harrahs properties.
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From this we can clearly conclude that Harrahs built its relationship with customers who not only
were regular visitors but focused on those who were potential customers who would bring high
value and profits to the business.
Earlier we talked about customer worth (theoretical win). This is the amount in dollars that the
casino expects or predicts to win from customers who play. The reason it is important for Harrahs to
focus on customer worth rather that observed is because the high observed customers are the ones
who get targeting by competition. The competition in this market naturally becomes tougher. What
most casinos dont look out for are the customers who have the potential to give high value. And
therefore it becomes easier to capture those customers and the worth is also there it is just that it is
not actual but is close to real as it comes from proper analysis of important database. As a result the
efforts to capture this market are less and more fruitful because most businesses take them for
granted.
Also, if we look at it in the long run, observed level can only specify a customers past activity, which
might not mean anything for the current or future business. Whereas, predicted customer worth can
offer the business potential gains in the long run. Also, customized offers can be made for them to see
how they change their patterns.

2. How does Harrah's integrate the various elements of its marketing strategy to deliver more than the
results of Data Base marketing?[20 marks]

Harrahs had developed a customer centric approach which as discussed earlier had three phases
which were: new business, loyalty and retention. Their CRM system consisted of two elements, DBM
and total gold program. The DBM system helped them collect relevant data about customer worth
(theoretical wins) to make comprehensive programs for the three different phases.
If we look at what experiments Harrahs did we can see how they managed to integrate the various
elements of their marketing strategy.
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For instance their experiment to give customers specific offers to bring them to Harrahs from other
casinos showed that after each signup almost 15% of these customers visited Harrahs again within
three months. The other experiment was the loyalty program in which customers were incentivized
to visit Harrahs properties more frequently and switch from other casinos. Also to get maximum
share of customers spending by encouraging them to visit Harrahs first. Last but not least, in the
retention program, Harrahs saw the declining visitation patterns of its customers and sent them
coupon incentives in order to increase its relationship and loyalty with customers so they start
visiting at their properties again. As we saw their move of incentivizing customers in January 1999
when they saw a decline in customers visits in 1998. This brought an increase in both customer visits
and spending. Those who came back were put under their loyalty program. Hence the three
programs ran simultaneously and were integrated with each other so maximum gains can be
achieved by maximizing customer satisfaction.
Looking at other things like winning the best service award and branding itself with the feeling of
exuberance attracted more people to visit. These steps played an important role in building the brand
name.
Efforts consisted in the Total gold program helped Harrahs collect valuable customer data such as
encouraging customer signups and play by giving away different packages. Collecting this data and
knowing their customers well also reflected on their customers when they started to feel close
connections with the brand because they now believed that Harrahs knew their needs and also rewarded
them on different occasions.

3. What is the sustainability of Harrahs actions and strategy? Can Harrahs strategy be replicated?
Given the position of Harrahs in accordance to their competitors they were lacking behind. They had to
come up with something different to gain competitive advantage and sustain it. Instead of making
expensively lavish and huge properties like its competitor they went with introducing a CRM system.
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Harrahs strategy was focusing on customers and only them. They kept on collecting data, making
customer profiles and coming up with offers for them. With time Harrahs started learning more and
more about their customers and had better ideas on how to make offerings for them. Harrahs actions
and strategies
allowed Harrahs to know which offer will customers respond to according to their profile. For instance,
they knew if a customer would not respond to offers like free stays at the Harrahs properties if he/she
lived nearby. A regular customer would love some sort of discounts on food and drinks he buys when he
visits. All this information of buying and visitation is saved for future use. Then they focused on customer
service as well. To keep customers happy at all times. Sometimes customers were dissatisfied with their
loss and so the service made sure that they could enjoy their time at the casino.




4. What are the privacy and ethical issues that Harrahs should be concerned about?

Understanding Harrahs nature of business, there are a number of business practices which may not be
entirely ethical and also a breach of customer privacy.
Some believe Harrahs tempts people to gamble and exploits gamblers with gambling addiction, if such a
claim is true then encouraging people with a gambling addiction to spend more is wrong and unethical.
The strategy used by Harrahs to lure customers is by building loyal relationships so they keep coming
back.
Apart from ethical issues Harrahs could be charged for invasion of privacy. They do it by gaining personal
information of its customers without their consent and use it as a tool to benefit their business. It is
argued that other websites also keep personal information of its users like social media sites. But it is with
the consent of the user whereas in Harrahs case customers are not aware that all their activities are
being monitored and recorded. Another privacy issue that is of concern is that by monitoring all the
activities of their customers Harrahs is aware of the customers playing patterns which helps them
identify the best personalized offers for different gamblers and in return benefits their business.
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Their offering may not always match specific customer liking or mood and might backfire and go against
Harrahs benefit, hence there is no evidence or method which indicates that by monitoring and providing
personalized offers Harrahs is able to gain and benefit from it.

5. What recommendations do you have regarding their future CRM strategy?















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