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HARRAH'S HIGH PAYOFF FROM CUSTOMER INFORMATION

By Elsie Lewis,2014-07-08 11:11
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HARRAH'S HIGH PAYOFF FROM CUSTOMER INFORMATION. INTRODUCTION. HARRAH'S ENTERTAINMENT, INC. (OR SIMPLY HARRAH'S) IS ASSUMING A LEADERSHIP ROLE IN THE GAMING ...

    Harrah’s High Payoff from Customer Information

Introduction

    Harrah’s Entertainment, Inc. (or simply Harrah’s) is assuming a leadership role in the gaming industry through a business strategy that focuses on knowing their customers well, giving them great service, and rewarding their loyalty so that they seek out a Harrah’s casino whenever and wherever they play. The execution of this strategy has involved creative marketing, innovative uses of information technology, and operational excellence. These component parts first came together in 1997 and have resulted in many benefits, including:

    ; 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.

In the following sections, Bill Harrah’s entry into the gaming industry and the customer-

    oriented values that he held are discussed. These values continue today and are experienced by customers in the 21 Harrah’s properties across the country. Harrah’s business strategy is described, focusing on the branding of the Harrah’s name and customer relationship management. In order to execute their business strategy, substantial investments in information technology were required in order to integrate data from a variety of sources for use in Harrah’s patron database (an operational data store) and the marketing workbench (a data warehouse). This infrastructure supports operations, offers, Total Rewards (a customer loyalty program), and analytical applications. Special attention is given to the use of IT to support “closed loop marketing.” The impacts of Harrah’s initiatives are discussed, along with future directions and the lessons learned.

Company Background

    In October 1937, Bill Harrah opened a bingo parlor in Reno, Nevada. He focused on customer comfort, running fair games, and ensuring that customers had a good time. In 1946, Harrah purchased The Mint Club, which took him from the bingo parlor business to full-scale casinos. After renovating the club, it was reopened as Harrah’s Club and began the Harrah’s style of casino entertainment. Harrah’s was the “friendly casino,” where employees knew the customers’ names. In 1955, Harrah opened another renovated casino, this time on the south shores of Lake Tahoe. The gaming clubs at Harrah’s Reno and Lake Tahoe were prosperous throughout the 1960s and 70s as Harrah continued to expand and improve these properties. By 1971, Harrah recognized that the practice of going to local bankers or competing gamblers to borrow money for supporting growth

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    was limiting. He took his company public and became the first purely gaming company to be listed on the New York Stock Exchange.

    Bill Harrah’s vision for growth was continued by Philip Satre who led Harrah’s entry into the Atlantic City market and was named president in 1984. In 1993, legislation was passed that allowed gambling on Indian reservations and riverboats. Seizing the opportunity, Harrah’s quickly expanded into these new markets, through the building of

    new properties and the acquisition of Showboat casinos, the Rio All-Suite Casino, and Players International. Entering the new millennium, Harrah’s had 21 casinos, making it one of the world’s largest gaming companies. Harrah’s has sites in every major U.S.

    market where gambling is allowed. Figure 1 shows the various casino locations. These

    casinos and supporting hotels employ over 40,000 people, serve over 19 million customers, have 11,521 hotel rooms, 92 restaurants, 36,635 slot machines, 1,075 table games, and over 1 million square feet of gaming space.

Figure 1: Locations of Harrah’s 21 Casinos

Harrah’s Business Strategy

    The decision to expand into additional gaming markets was a critical part of Harrah’s business strategy. The growth of these markets was considered to be inevitable and helpful to Harrah’s and the industry. As management thought about how it could create the greatest value for its shareholders, it was decided that a brand approach should be taken. With this approach, the various casinos would operate in an integrated manner rather than as separate properties. This was a radical paradigm shift in the gaming industry where casino managers historically ran their properties as independent fiefdoms

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    and marketing was done on a property by property basis. With the new approach, there would be commonalties in the gambling experience for customers across the various casinos. Advertising and offers would promote the Harrah’s brand. There would be recognition and reward programs for customers who cross-played at more than one of Harrah’s properties. Harrah’s mission was to build lasting relationships with its customers.

    Also motivating the strategy were the experiences of some of the new Las Vegas hotels and casinos (i.e., Bellagio, Paris) that had invested vast sums of money in lavish hotels, shopping malls, and attractions such as a sinking pirate ship. While these malls and attractions have been highly popular, their great costs have cut investment returns in half. Harrah’s wanted to take a different, more cost-effective route to attract, maintain, and

    enhance customer relationships.

    Critical to their strategy was the need to understand and manage relationships with their customers. They believed that strong customer service relationships build on a foundation of customer knowledge. To build this foundation, Harrah’s had to learn about their customers’ behaviors and preferences. They had to understand where their customers gambled, how often they gambled, what games they played, how much they gambled, and what offers would entice them to visit a Harrah’s casino. Armed with this information, Harrah’s could better identify specific target customer segments, respond to customers’ preferences, and maximize profitability across the various casinos.

    A key addition to the Harrah’s management team was Gary Loveman who was named COO. This former Harvard professor had the understandings and skills needed to analyze customer behavior and preference data and to put programs in place to capitalize on this knowledge. He helped make Harrah’s customer relationship management strategy a reality.

    To generate the necessary data, Harrah’s had to make a substantial investment in information technology. It had to capture data from customer touch points, integrate it around the customer, and store it for later analysis. In order to understand customers’ preferences, Harrah’s had to mine the data, run experiments using different marketing interventions (i.e., special offerings), and learn what best met customers’ needs at the

    various casinos. From these requirements, Harrah’s Winners Information Network

    (WINet) emerged.

WINet: Creating a Single Customer View

In 1994, Harrah’s began work on WINet under the leadership of John Boushy who at the

    time served as Harrah’s CIO and Director of Strategic Marketing. The purpose of WINet was to collect customer data from various source systems, integrate the data around the customer, identify market segments and customer profiles, create appealing offers for customers to visit Harrah’s casinos, and make the data available for operational and other analytical purposes. The repository for this data uses a patron database (PDB) that served

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as an operational data store. It provided a cross property view of Harrah’s customers. In

    1997, Total Gold, a patented customer loyalty program was put in place, through which customers could earn points for their gambling activities (e.g., playing slot machines) and redeem their points for free retail products, rooms, food, and cash. The marketing workbench (MWB) was also implemented to serve as a data warehouse for analytical applications.

    The development of WINet was not without problems. For example, some complicated queries on MWB, originally an Informix database, took so long to run that they never finished within the computing window that was available. NCR, which had been providing bench marking services for Harrah’s, offered to run the queries on their Teradata database software and hardware. The performance improvement was so dramatic that NCR was brought in to redesign the system on NCR Teradata and NCR WorldMark 4700 UNIX System.

    By 1999, PDB had increased in size to 195 GB and stored data on over 15 million customers, while MWB stored 110 GB of data. At the same time that Harrah’s was

    considering moving to NCR, a decision was made to review the data access tools that marketing used. The outcome was a switch to Cognos Impromtu and SAS. Marketing analysts at the corporate and individual property levels use Impromtu to run predefined reports and queries and to execute ad hoc queries. Analysts use SAS for market segmentation analysis and customer profiling.

    Figure 2 shows the timeline for the development of WINet and Figure 3 presents its architecture. The component parts of WINet are described in the following sections.

Figure 2: Timeline for the Development of WINet

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Data Warehouse Evolution

    Implemented 1Q 1999:

    “Offers” Applications

    Data WarehouseInstall Plans for WINetGrowth/Issues Emerge:Marketing Workbench (MWB)

    Business CaseBusinessY/2000 Solutions;Increase Retention by 1%Growth/Acquisitions

    over 3 years, >$1 millionUser Demands/Changes

    ;Increase cross marketFront End Toolby 1%, >$2.5 millionDevelopment Impacts

    Implemented:EnhancingWINet

    Patron Database (PDB),Move to Teradata DBMSInformix on NCR 5100NCR Dual Node 4700 DW

    Total GoldMarketingWorkBench

    Full back-up

    development system

    195 GB, PDB300 GB40 GB, PDB14.4 Million Customers20 Million Customers7.0 Million Customers110 GB, MWB360 GB, MWB80GB, MWB

Figure 3: WINet Architecture

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    ?WINetTeleservices

    Workstation

     End User

    Query Tool

     Offers- Client

    NCR

    5250 or

    Rumba

    MWBDB UNIXNCR-TeradataAS400Top End/GatewayCentral ServerSource InformixDataCentral ServerSystemsSlot Warehouse ODSMachines