Management Information Systems

A Case Analysis Report on

HARRAHS ENTERTAINMENT INC.

Submitted By

Group 6 | Subgroup 2

17th March 2011

Harrahs Entertainment Inc.

1) Discuss the factors that drove Harrahs customer relationship strategy. Harrahs had decided to make customer loyalty as their core competency since they believed they could become the industry leader based on this skill. The initial focus was to trace the customers who were showing little loyalty to Harrahs and visiting their competitors, and try converting them to regular customers. For this, Customer Relationship Management (CRM) tools were implemented across all Harrahs properties. CRM at Harrahs consisted of two elements Database Marketing (DBM) and Total Gold program. The Total Gold program motivated customers to consolidate their play, and the data collected through the program allowed Harrahs to execute direct marketing strategies that increased the efficiency and effectiveness of their marketing dollars. This program was designed to facilitate and encourage the cross-market visitation patterns of Harrahs customers. The Total program was intended to capture the lost business to its competitors by making it easier for Harrahs customers to earn and redeem rewards. Harrahs ability to accurately predict play enabled them to build relationships with customers based on their future worth, rather than on their past behavior. They also adapted to proactive marketing, which was opportunity-based customer segmentation. Harrahs quantitative approach also made it possible to conduct marketing experiments and track customers over time. This helped Harrahs discover the right marketing instruments, for the right behavior modification, for the right customer. Harrahs developed a customer centric approach to direct marketing. There were three key phases to a customer relationship. These phases focused on establishing good relationship with customers, develop new relations with customers and bring down the rate of customer attrition. The New Business program was designed to improve the effectiveness at converting new total gold members into loyal customers. The Loyalty program was designed to identify customers who were giving major share to the competitors. The Retention program was designed to reinvigorate the customers who were visiting less to Harrahs. 2) What are the Key Performance Indicators of the gaming industry? What are the objectives of the various database marketing programs and how are they working? Key Performance indicators of the gaming industry: Sales Forecast Accuracy: This is required to predict the sales in future and take decisions on the future events of the company ii) Customer Retention: It is required to retain customers who bring good business to the company. iii) New Customers attracted: This indicates the growth of the business and penetration into new markets. Objectives of various database marketing programs: The main objective of the various database marketing programs was to track its customers and predict customer worth. Harrahs developed a customer centric approach to direct marketing. There were three key phases to a customer relationship. The first phase new business, aimed at encouraging customers to visit Harrahs more often, focused exclusively on customers new to the i)

brand or to the property. The second phase loyalty, aimed at extending continuity to the relationship, was focused on customers visiting Harrahs for at least six months or three trips. The final phase retention, aimed at attracting customers who had demonstrated signs of attrition, was focused on customers who had broken their regular visiting patterns. This way Harrahs developed opportunity-based customer segmentation to establish relationships with new customers, strengthen relationships with loyal customers, and reinvigorate relationships with customers who had shown signs of attrition. The results from these programs were as follows: New Business Program: The program resulted in making more effective investment decisions at the customer level, thus allowing the particular offer to be more competitive than the current scenario. This resulted in a more effective and more profitable new business program. Loyalty Program Frequency upside: This enabled property marketers to develop programs that offered incentives for these customers to visit Harrahs properties more frequently than to their competitors. Loyalty Program Budget upside: This program encouraged the customers, who were giving only a small share of their gambling budget to Harrahs on each trip, to visit Harrahs first and thereby capture the majority of the single casino trips. Retention program: This program helped Harrahs to track the customers who had demonstrated signs of attrition or had broken their historical visiting pattern and was successful in reinvigorating them. 3) Explain how the concept of customer worth/ customer lifetime value has been applied at Harrah casino in the Database marketing efforts to gain a competitive edge in the industry w.r.t key performance indicators Database Marketing enabled Harrahs ability to accurately predict play which helped them to build customer relationship based on respective customers worth, instead of his past gaming/gambling patterns. The past data was captured for each customer and quantitative analysis performed on the data helped take decisions. These decisions were made using the decision science tools to predict customer worth rather than relying on observed worth. This further helped in proactive marketing and opportunity based customer segmentation. Harrah with the insight into customers data was able to track and predict customer play preferences and this clubbed with customers basic profile details, helped Harrah to develop detailed customer profile. Using this detailed customer profile, Harrah predicted behavior and identified opportunities which resulted in customized marketing. It also resulted in conducting marketing research using sophisticated quantitative approach, this helped Harrah to develop specific marketing instruments. This helped in loyalty and retention on existing customers and to acquire new businesses. Because of its database marketing approach Harrah scored in key performance indicators as given below: Sales Forecast Accuracy: With its accurate quantitative models and decision tools, Harrah predicted the net worth of each customer and hence was able to predict and forecast the business turnover for the impending period of time. This helped Harrah to analyze and improve upon its business strategies and helped Harrah to develop a competitive strategy to deal with competitors

New Customer Acquisition: The analysis of existing customers and their gaming patterns helped Harrah anticipate potential customers behavior and gaming patterns, and devise strategies to effectively capture the unexplored customers base. Customer Retention: Customized marketing helped Harrah in achieving customers satisfaction; this helped in retaining the existing customers. The various Database marketing programs ensured that a privileged treatment was provided to the customers and hence helping Harrah retain its existing customer base. 4) Does Harrahs have a sustainable competitive advantage? Can other companies duplicate what Harrahs has done? Discuss. Harrah does not have a sustainable competitive advantage over other companies. Harrah used various decision tools and quantitative approaches to predict customer patterns and channelize their marketing and other customer retention techniques toward that area. This strategy would definitely yield results in the shorter period of time, but however this is prone to being duplicated by customers. These techniques can be easily copy able by competitors, thus devouring any competitive advantage from Harrah. This first mover advantage is not sustainable over a longer period of time as it is prone to being duplicated by competitors. 5) Discuss the privacy, ethical and security issues associated with what Harrahs is doing. Are there concerns and how can Harrahs address them? Harrah, in order to design a specialized marketing program, stored and analyzed lot of customers personal data and gaming patterns to increase its revenue in gaming and gambling business. The use of personal data to maximize gambling returns is definitely unethical and violated customers privacy. The risk of data leakage from database marketing would be highly detrimental to customer and might be used by other industries which might affect the customer adversely. Harrah should have a kind of advisory which should monitor customers normal spending patterns and should advise customers if they are exceeding their normal earnings limits. This would help Harrah to be ethical in their approach towards their customers in their gambling industry, helping them to maintain a healthy relationship with customers and sustainable profit from the retained customers.