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F
rom this we can clearly conclude that Harrah’s built its relationship with customers who not
only
were regular visitors but focused on those who were potential customers who would bring high
value and profits to the business.
Earlier we talked about “customer worth” (theoretical win). This is the amount in dollars that
the
casino expects or predicts to win from customers who play.
The reason it is important for Harrah’s to
focus on customer worth rather that observed is because the high observed customers are the
ones who get targeting by competition. The competition in this market naturally becomes
tougher. What
most casinos don’t look out for are the customers who have the potential to
give high value. And therefore it becomes easier to capture those customers and the worth is
also there it is just that it is not actual but is close to real as it comes from proper analysis of
important database. As a result the efforts to capture this market are less and more fruitful
because most businesses take them for granted. Also, if we look at it in the long run, observed
level can only specify a customer
’
s past activity, which might not mean anything for the current or future business. Whereas,
predicted customer worth can offer the business potential gains in the long run. Also,
customized offers can be made for them to see how they change their patterns.
2.

How does Harrah's integrate the various elements of its marketing strategy to deliver more than
the results of Data Base marketing?[20 marks]
Harrah’s had developed a customer centric approach which as discussed earlier had three
phases
which were: new business, loyalty and retention. Their CRM system consisted of two elements,
DBM and total gold program. The DBM system helped them collect relevant data about
customer worth (theoretical wins) to make comprehensive programs for the three different
phases.
If we look at what experiments Harrah’s did we can see how they managed to integrate the
various
elements of their marketing strategy.

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For instance their experiment to give customers specific offers to bring them to Harrah’s from
other
casinos showed that
after each signup almost 15% of these customers visited Harrah’s again within
three months. The other experiment was the loyalty program in which customers were
incentivized
to visit Harrah’s properties more frequently and switch from other casinos.
Also to get maximum share of customers spending by encouraging them to visit Harra
h’
s first. Last but not least, in the
retention program, Harrah’s saw the declining visitation patterns of its customers and sent them
coupon incentives in order to increase its relationship and loyalty with customers so they start
visiting at their properties again. As we saw their move of incentivizing customers in January
1999 when they saw a decline in customers visits in 1998. This brought an increase in both
customer visits and spending. Those who came back were put under their loyalty program.
Hence the three programs ran simultaneously and were integrated with each other so maximum
gains can be achieved by maximizing customer satisfaction.
Looking at other t
hings like winning the best service award and branding itself with the “feeling of exuberance”
attracted more people to visit. These steps played an important role in building the brand
name.
Efforts consisted in the Total gold program helped Harrah’s col
lect valuable customer data such as encouraging customer signups and play by giving away
different packages. Collecting this data and knowing their customers well also reflected on
their customers when they started to feel close connections
with the brand because they now believed that Harrah’s knew their needs and also rewarded
them on different occasions. 3.

What is the sustainability of Harrah’s actions and strategy? Can Harrah’s strategy be
replicated?
Given the position of Harrah’s in accordance to their competitors they were lacking behind.
They had to come up with something different to gain competitive advantage and sustain it.
Instead of making expensively lavish and huge properties like its competitor they went with
introducing a CRM system.

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Harrah’s strategy
was focusing on customers and only them. They kept on collecting data, making customer
profiles and coming
up with offers for them. With time Harrah’s started learning more and
more about their customers and had better ideas on how to make offerings for them.
Harrah’s actions
and strategies
allowed Harrah’s to
know which offer will customers respond to according to their profile. For instance, they knew
if a customer would not respond to offers
like free stays at the Harrah’s properties if he/she
lived nearby. A regular customer would love some sort of discounts on food and drinks he buys
when he visits. All this information of buying and visitation is saved for future use. Then they
focused on customer service as well. To keep customers happy at all times. Sometimes
customers were dissatisfied with their loss and so the service made sure that they could enjoy
their time at the casino. 4.

What are the privacy and ethical

issues that Harrah’s
should be concerned about? Understanding
Harrah’s
nature of business, there are a number of business practices which may not be entirely ethical
and also a breach of customer privacy. Some believe
Harrah’s
tempts people to gamble and exploits gamblers with gambling addiction, if such a claim is true
then encouraging people with a gambling addiction to spend more is wrong and unethical.
The strategy used by Harrah’s to lure customers is
by building loyal relationships so they keep coming back.
Apart from ethical issues Harrah’
s could be charged for invasion of privacy. They do it by gaining personal information of its
customers without their consent and use it as a tool to benefit their business. It is argued that
other websites also keep personal information of its users like social media sites. But it is with
the consent of the user
whereas in Harrah’s case
customers are not aware that all their activities are being monitored and recorded. Another
privacy issue that is of concern is that by monitoring all the activities of their customers
Harrah’s
is aware of the customers playing patterns which helps them identify the best personalized
offers for different gamblers and in return benefits their business.

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Their offering may not always match specific customer liking or mood and might backfire and
go against
Harrah’s
benefit, hence there is no evidence or method which indicates that by monitoring and providing
personalized offers Harrah’s is able
to gain and benefit from it. 5.

What recommendations do you have regarding their future CRM strategy

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?
Ans: The case identifies the following three metrics (KPIs) for the gaming industry:
1. Customer acquisition: The first phase, “new business”, is focused on customers new to the
brand or the property. The goal was to encourage customers to take a second and third trip after
making an initial visit.
2. Building customer loyalty: This was focused on customers known for at least six months or
three trips. The goal here was to continuously extend the relationship.
3. Customer retention: This was focused on customers who had broken their historical
visitation pattern. The goal was to reinvigorate customers who had demonstrated signs of
attrition.
The objective of the database marketing programs was to improve Harrah’s performance on
each of the above-mentioned KPIs. The company hired Gary Loveman from HBS to bring
quantitative muscle to its marketing strategy. What Loveman and his team did was
development of quantitative models to accurately predict customer worth—the theoretical
amount that the company expects to generate from a customer based on his past usage of
Harrah’s properties. This was a transformational move for Harrah’s. From a historical model
of operational CRM that focused on the customer’s past usage patterns, Loveman proposed an
analytical CRM model that was predictive and therefore, radically different from how the
company viewed profitable customers. Analytical CRM was implemented through the
following programs:
New Business Program:
The New Business Program was designed to improve the effectiveness at converting new Total
Gold members into loyal customers. The program used predicted customer worth (theoretical
wins) to make more effective investment decisions at the customer level—thus allowing the
particular offer to be more competitive with what the customer was currently receiving from
their existing scenario of choice.
Loyalty Program—Frequency Upside
This program was designed to identify customers that, Harrah's predicted, were only giving
Harrah's a small share of their total spending in a particular market. Harrah's capabilities
enabled it to develop programs that offered incentives for these customers to visit Harrah's
properties more frequently—i.e., switch a trip from a competitor to Harrah's. Harrah's
calculated the profitability of these programs by comparing the incremental theoretical wins to
the incremental cost of the program.
Loyalty Program—Budget Upside
Harrah's also identified customers with budget upside—customers 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 trip—the first stop received the largest share, the second received the second largest
and so on. Therefore, the objective of this program was to encourage the customer to visit
Harrah's first and thereby capture the majority of the single casino trips.
Retention Program
The objective of Harrah's Retention Program was to reinvigorate customers who had broken
their historical visitation pattern. Harrah's tested a variety of offers with customer segments to
determine how much to reinvest in retaining loyal guests. Harrah’s recognized that the full
potential of these ideas would be realized only if these capabilities could be used at the local
property level. Therefore, they made significant efforts in educating the local property
managers and their marketing teams about the potential and effective use of these Data Base
Marketing capabilities.
Q. Does Harrah’s have a sustainable competitive advantage? Can other companies
duplicate what Harrah’s has done? Discuss.
Ans. Harrah’s realized early on that sustained competitive advantage will only come from a
rigorous customer focus and nothing else. Any other tool could only be a facilitator of the
process. High operational efficiency and implementation of IT are but ways to ensure that the
customer keeps returning to Harrah’s properties. Harrah’s has had a successful history of
reaching the customer on a personal level by trying to learn as much as possible about them.
This knowledge in turn helps the company to serve its clients better and also significantly
improve its operational effectiveness. For example, if a customer lives close to the casino
he/she will rarely receive an offer for a free night at the hotel since the likelihood of that person
accepting the offer is slim. Conversely, if the customer is a regular in the casino’s restaurant,
the chances he will accept a free steak dinner invitation are relatively high.
Attention to customers at the service level also matters. Most customers, as mentioned in the
case, lose money during gambling and often feel “shitty”, and they are disgruntled. Good
customer service will take care of such disgruntled customers and ensure they have a good
time.
Apart from the above, Harrah’s has the option of protecting is 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. Further,
Harrah’s may license its intellectual property and earn revenue from its proprietary software

Q. Does Harrah’s have a sustainable competitive advantage? Can other companies

duplicate
what Harrah’s has done? Discuss.
Harrah does not have a sustainable competitive advantage over other companies. Harrah
usedvarious decision tools and quantitative approaches to predict customer patterns and
channelizetheir marketing and other customer retention techniques toward that area. This
strategy woulddefinitely yield results in the shorter period of time, but however this is prone to
being duplicated bycustomers. These techniques can be easily copy able by competitors, thus
devouring anycompetitive advantage from Harrah. This first mover advantage is not
sustainable over a longerperiod of time as it is prone to being duplicated by competitors