Chandni

Shah
25722173 (S2)
What are the objectives of the various Database marketing (DBM) programs and
are they working? (Try using the numbers provided in the case and exhibits to examine
whether these programs are working).
Harrahs aim from various Database Marketing (DBM) programs was to increase
customer acquisition, customer loyalty, and customer retention. When other companies in
the industry were just trying to build bigger and better casinos, Harrahs was working
towards understanding what would set them apart from others in the competition. The
COO, Gary Loveman, put the Database Marketing Programs into place and the initiatives
were successful
New Business Program This program was designed to retain the Total Gold Members.
The program used predictive customers worth model to identify customers with high
predictive worth and then send them attractive promotions tailored according to their
preferences. Exhibit 2b illustrates the impact of the program. For example, if the
company signed 1022 members in the month of April then they were able to retain 12%
in the first month, 10% in the second, 8% in the third and 31% in the forth. A couple of
months into the program, however, these percentages increased for each of the
consecutive month. This shows that program was working.
Loyalty Program (Frequency Upside) Harrahs identified a list of potentially loyal
customers who could increase the number of trips that they made to Harrahs. From
Exhibit 2c, An offer was sent to a total of 953 customers in June, redeemable in July,
August, and September. While, on average, only 30 of these 953 customers were visiting
Harrahs between January and May, the number jumped to an average of 150 per month
during the subsequent months.
Loyalty Program (Budget Upside) Harrah's also identified customers with budget
upsidecustomers who were only giving a small share of their gaming budget to
Harrah's on each trip. In most cases, a customer's allocation of budget was directly related
to the order in which they visited casinos on a particular tripthe first stop received the
largest share, the second received the second largest and so on. For example, from
Exhibit 2d, a customer would receive $5 for visiting and $ 20 for playing to a $200 level

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of theoretical winds, $30 for playing to a $200 level of theoretical winds, $30 for playing
to a $300 level, and so forth.
Retention Program The program was devised to increase the number of customers
who had broken their historical pattern. Exhibit 2e shows the visitation patterns for a
group of customers whose patronage was declining in the second half of 1998. To
reinvigorate relationships with these customers, Harrahs sent a direct mail offer to
approximately 8,000 customers in January of 1999 that was redeemable in February,
March and April. The program seemed to be working even though the cost of the offer
had gone up from $30 to $40.

Why is it important to use the customer worth in the DBM efforts rather than the
observed level of play?
The house expects to win a specific amount when a customer plays at the casino. This
theoretical amount is called the Customer worth. Observed level of play on the other
hand, only indicates the past customer activity. This data is not of much worth for making
decisions in real-time or for future changes. It is important to focus efforts on Customer
worth rather than observed level of play to zero down on the high worth players.
Considering a non-competitive market, it is OK to concentrate on investing on highobserved frequency market because there are customers with high worth to work on. In a
highly competitive gambling market, however, striving for a limited number of customers
is difficult. With Harrahs developing its own quantitative model to predict customer
worth, the company can exploit more value from a broader customer base, and also
provide a better service for customers. Harrahs model of differentiating customers based
on their worth and subsequently offering tailored promotions was a good step. These
offers strive for customers future worth by converting competitors customers to
Harrahs customers, retaining current customers, increasing visit frequency and value, or
reinvigorating customers.

How does Harrahs integrate the various elements of its marketing strategy to
deliver more than the results of Database Marketing? (Think of all changes that

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25722173 (S2)
have been made that bring about an integrative effect).
The challenges that Harrahs faced after an initial solid growth was that the company
could not forecast any further growth without following the industry trend, which was
build and they will come. Harrahs decided to take a different route and decided to
invest on better marketing strategies based on decision science. Harrahs customer centric
marketing focused on three key phases: new business, loyalty, and retention.
Correspondingly, the company made use of the Data Base Marketing results to carry out
three programs: new business program, loyalty program, and retention program. The
three programs integrate with each other to satisfy customers and achieve sustainable
marketing goal. Harrahs advertising and emphasizing service quality strategy played
important roles in building the brand image. The move to Total Rewards program helped
Harrahs to establish an emotional connection with its customers by tailoring their
services to their specific needs. Thus, I believe, generating the data would not have been
enough if there were not good filters to get to the right ideas. Further, the right ideas
would not have generated results if there were not a strong marketing strategy in place.
Thus, Harrahs success not only constitutes of its move to decisions based on data but
right strategy to capture the market share.

What is the sustainability of Harrahs actions and strategy?

Harrahs realized early on that to drive the business towards sustainable growth, the
company needs to set themselves apart from the competition. Therefore, instead of
investing in making bigger and better properties, the company invested in achieving
excellent customer service and satisfaction. To drive the focus on customers, the
company did not just made radical decisions but used data for guidance. Instead of
deciding and then having the data support their decision, they looked at the data and
made the decisions accordingly.
Further, the company did not just depend on the numbers to drive the company but also
their intuition. Most customers, as mentioned in the case, lose money during gambling
and often feel shitty and disgruntled. Harrahs designed the customer service not only
to take care of the happy customers to make them feel better but also took care of such

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25722173 (S2)
disgruntled customers. Making such decisions shows the companys focus towards
growth through customer loyalty. This growth is sustainable because the company will
attract more and more customers through word of mouth. Also, the company is making
progress on retaining higher percentage of first time customers.
Also, Harrahs has patented its innovative processes and knowledge through proprietary
means. This will give its business the necessary edge without having to worry about
competition trying to reproduce its innovative processes. Moreover, Harrahs may move
into licensing its intellectual property to third parties and earn revenue from the
knowledge that it has accumulated.

What is the take-away from this case?

The key take-away from the case is that just gathering highly detailed data about what
your customers does not help. The company needs to have means to utilize that data for
hypothesis testing and predicting trends and preferences. Further, just predicting trends
and preferences does not help the company to gain competitive edge. The utilization of
that idea to create effective strategy that will capture value is what creates a powerful
competitive advantage. For example, loyalty reward programs pay off only if the value
created by customers exceeds the value delivered to them. Now, if the company gets the
data on its customers but does not convert the data into effective strategies to provide
excellent services to the customers, then the value of the effort is lost. Therefore,
managers need to make sure that they utilize data to make decisions and not make
decisions and utilize data to support them. Furthermore, when it comes to dealing with
human capital of the company, data does not always predict the right thing and a
managers intuition is what should take precedence. For example, if a worker is not a
good fit for the organization but is delivering on the goals, the data will support the
employee. It is now managers intuition to understand the misfit and take appropriate
actions.