Group Assignment Harrah’s Entertainment Inc.

Q.1 What are the objectives of the various Data Base marketing programs and are they working? Results New Business Program It was designed to improve the effectiveness of converting new Total Gold members into loyal Harrah’s members. This would be done by predicting the customer’s worth thus making more competitive offers to the customer This program worked well for Harrah’s as it witnessed an increasing number of first time members visiting the Casino in the first, second and third month after first visit. Also, from April to Dec-99, the amount of revenue from these customers post the visit went up from 98% by 31% customers to 118% of the original spend from 50% customers. Loyalty Program- Frequency Upside This program was aimed at identifying customers who were giving only a small portion of their spending to Harrah and incentivizing them to visit its properties more frequently. Offers were sent to 953 customers in June. The number of customers visiting Harrah’s properties went up from 30 per month between Jan and May, it went up to 150 after customized offers were sent to the customers based on their different perceived worth. Profitability from these customers was calculated by comparing theoretical win to cost per customer by redemption. The theoretical win from the customers went up thus making the program effective. Loyalty Program- Budget Upside This was aimed at customers who were spending a small share of their budget per trip to Harrah’s. The objective was to make Harrah’s the first choice while visiting multiple casinos as it increased the amount spent in every trip. Customers were incentivized unconditionally on visiting the premises and also on playing to a certain level of theoretical win. These coupons were sent in October and January. The second mail offers less incentive on visiting and more on the conditional part. However, Harrah’s was unsure about the profitability of this program. Retention Program Harrah’s wanted to create a program to retain loyal guests based on their visiting patterns. For example if the customer had not visited in a particular month of expected visit, direct promotional mails were sent to them. Even though the cost of operating the program went up from $30 to $40, the program was working to retain the existing customers and bringing them back to Harrah’s post Jan 99 .

Q.2 Why is it important to use the “customer worth” in the DBM efforts rather than observed level of play? There might be cases where a customer would be an avid gambler, but not at Harrah’s In order to target and convert such customers, Database Marketing (DBM) becomes very useful “Customer worth” uses quantitative models that accurately predicts theoretical amount the house predicts to win, over the long term, from a customer based on his level of play Observed level of play is based on the past behaviour of the customer “Customer worth” helps us build relationships with customers based on their future worth, rather than on their past behaviour Hence , “customer worth” is a better approach than using observed level of play as it is in sync with the overall strategy of the company to move from operations driven company to marketing driven company with a clear focus on target customers

Q.3 How does integration of the various elements of its marketing strategy help Harrah’s? Implementation of Database Marketing with the help of patented Winner’s Information Network helped Harrah’s to define its opportunity-based customer segments (avid experienced players with spending in excess of $2000 annually) Introduction of Total Gold program backed by DBM led to forecast customer worth and proactive engagement of marketing activities to lock-in (and now distinguishable) high worth customers at different phases of customer relationship (New Business, Loyalty or Retention) Also marketing experiments allowed Harrah’s to refocus its marketing (promotion) expenditure on effective activities; e.g. offering more chips instead of expensive package by ramp back of same day cash (from 5% to zero); holding rooms for high worth customers (who show up on last moment) instead of giving early reservations to low worth customers Integrated IT enabled Harrah’s to do real time customized CRM activities (e.g. “luck fairy” for a new-comer who made loss in early period) that resulted in better service and gain loyalty of customers. Total Rewards data also helped in continuous monitoring and evaluation which were used to cut unnecessary expenses and increase revenue generation; e.g. rearrangement of slot machines into shorter boxy rows Offer emails sent to customers encouraged customers to increase overall expense and enroll as Total Gold member Incentivizing customers by giving free chips and enrollment perks for Total Reward cardholders helped customers to win, which in turn led to increase in risk taking tendency and hence increased revenue for Harrah’s

Q.4 Are Harrah’s actions and strategy sustainable in the long run? Harrah is mainly dependent on Customer Relationship Management for expansion of their business. Two main elements of CRM are database marketing and Total Gold Program. Both these elements can be imitated by the competitors. Trump Hotels & Casino Resorts, Inc. is already using a similar reward program through Trump card. Harrah’s new organisation structure is also not differentiated from the rest of the market. Harrah’s brand and service is one important factor as they have won the “best service” award for last 3 years. This strategy can help them in long run but they have to find some other strategy to complement the services as alone it is not sufficient.