How Customer Information
Want a quick lesson on the power and profits to be gained from compiling and applying customer information? The Strip in Las Vegas is a fascinating teacher. Every quarter of an hour, tourists rush the erupting volcano outside of MGM's $750 million Mirage hotel and casino. And, if the Mirage is lucky, a handful of these visitors will stroll into the casino and spend a few thousand dollars in a few hours of gambling. In stark contrast, on the other side of the street stands Harrah's hotel and casino which looks downright dowdy and deprived. But like many things in Las Vegas, looks can be deceiving. The reality is that the financial performance of the company, with casinos throughout the U.S., is two to three times better than any of its competitors. For example, in 1999, Harrah's doubled revenue from two years earlier and saw same-store sales grow 14% from the year before.
Putting Information to Work
Harrah's secret? While most other casinos invested money in creating glitz, Harrah's took the road less traveled and built a winner's information network (WINet) that provided the backbone of the firm's Total Rewards Program. Harrah's coast-to-coast customer database is an industry first and enabled the company to have the first integrated, nationwide system that allows real-time communication between all of its properties. This means that Harrah's in Las Vegas can know a visitor from New Jersey's gambling, eating and spending preferences. This customer insight enables the company to tailor services to the visitor through customized comps such as free dinners, hotel rooms, show tickets and the like. Bottomline, when the New Jersey customer comes to Harrah's in Las Vegas, customized service can follow.
What's more, Harrah's can better target its marketing promotions so that customers are more likely to bite. For example, a customer receiving a mail promotion will call Harrah's call center for more information. The call prompts an array of customer information to pop-up on the computer screen of the Harrah's customer service representative. From knowing the customer's tier (platinum, gold, or diamond) to how much he's won or lost to even possibly an estimate of his financial worth, the rep is armed with key information to help turn the caller into a confirmed reservation.
Harrah's WINet system enables the company to leverage an important marketing principle --- profits are driven not simply by increasing share of market (which Harrah's has also accomplished) but by increasing share of customer. This WINet system's ability to retain and leverage even lower end players is garnering praise from industry observers. Says William Schnitt, executive director at the Canadian Imperial Bank of Commerce, "(Harrah's) has been able to retain those lower-end players by calling them up to ask about their trips. Retaining a customer is one-tenth the cost of getting a new customer."
Betting Against Industry Wisdom
But Harrah's customer relationship vision wasn't always so clear. Before WiNet's development, Harrah's operation philosophy assumed that customers were loyal to one particular location and therefore each Harrah's casino operated independently and, in effect, competed with one another. This meant each property had its own player card that was only useable at the casino that issued it, and therefore the information generated at each casino was not shared. But the company's customer research as far back as 1988 indicated that customers did indeed patronize a variety of Harrah's sites and that there was real customer value in extending its card player program so that customers could use their cards at any Harrah's casino.
Despite growing evidence that an integrated customer database and coast-to-coast network were needed, the company's IT improvements had to wait. The legalization of gambling on riverboats and Indian reservations spurred Harrah's into a rapid expansion period in the early 1990s, prompting the chain to triple it's casinos to 12 locations by 1997.
But by the mid 90's, with expansion slowing, Harrah's management finally turned its attention to ways to create marketing programs that would allow the firm to compete and grow revenues without pouring bricks-and-mortar capital into its properties. Harrah's went to work to consolidate all its far-flung IT systems and information silos across all its casinos. Major IT problems soon appeared, including how to make the company's mainframes compatible with its Unix systems. Says John Boushy, Harrah's senior vice president of brand operations and information technology, "There were times during this project when the single greatest challenge we faced was convincing the IT people we could do this."
To implement the information strategy, Harrah's senior management faced other challenges as well. Regional and site property managers were conditioned to think of each of the Harrah's properties as separate fiefdoms and they worried that promoting other Harrah's destinations would pull business away from their properties. But senior management, convinced they were on the right track, continually preached the merits of cross-market visits and eventually sold their managers on the new strategy.
Reaping the Rewards
The company hasn't looked back. Since Total Rewards was rolled out in 1997, the number of customers playing at multiple Harrah's properties has increased a whopping 72% while cross-market revenues have soared from $113 million to $250 million. Of the company's 1999 profits of $594 million, $50 million can be directly attributable to revenues from cross-marketing visits. And by a factor of two to one, more players today carry Harrah's player cards than any card in the industry.
The Harrah's lesson is a powerful one: It's not the glitz or the spectacle that ultimately wins customer loyalty. More simply, it's the relationship a company establishes and sustains with its customers that wins out. Harrah's bet against industry wisdom, moved away from the monolith dazzle and instead invested in a ground-breaking customer management strategy that brought real value to their relationship with their customers. In short, they stimulated demand by knowing their customers. That's a winning hand for any company.
Jill Griffin’s groundbreaking book, Customer Loyalty: How To Earn It, How To Keep It (Jossey-Bass 1997, Second Edition 2002), gained business best seller status in the late 90’s. She was among the first to point out that even customers who are satisfied will readily switch suppliers for greater convenience or lower costs and that companies must do more that merely satisfy customers – they must engender loyalty. In her early career, Ms. Griffin served as senior brand manager for RJR/Nabisco’s largest brand and distinguished herself as one of the youngest brand managers in the corporation’s history. From RJR/Nabisco, Ms. Griffin joined AmeriSuites Hotels where, as national director of sales and marketing, she was responsible for the chain’s nationwide launch. Today, Ms. Griffin is principal of the Griffin Group, Inc. in Austin Texas, specializing in customer loyalty training, research and consulting. Clients include Dell Computer, Wells Fargo, Cendant Hotel Group, Hewlett Packard, Sprint, Raytheon Aircraft, Ford and the U.S. Navy. Visit http://www.loyaltysolutions.com/ for additional information.
Many more articles in Customer Relationship Management in The CEO Refresher Archives