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Chapter 4: Managing Marketing Information To Gain Customer Insight Company Case Notes Harah’s Entertainment: Hitting the CRM Jackpot Introduction The late 1990s witnessed a rapid expansion of casinos, especially in Las Vegas and Atlantic City, New Jersey due to relaxations in the US State and Federal gaming laws New laws had legalised gaming on riverboats and Indian reservations and this led to intense rivalry between casino operators who started spending millions of dollars in opening new extravagant properties that featured shopping malls and hotels in order to attract customers Harrah's Entertainment Incorporated (Harrah's), an entertainment company which had business interests in casinos, food & beverages and hotel rooms, decided to follow a different approach as it realized that about 90 percent of its revenues came from its casino business and not from associated ventures Instead of opening lavish properties, Harrah's initiated a customer relationship management (CRM) program that aimed at developing long-term relationships with its customers that would enable the company to capture a bigger market share in the gaming business In 1997, Harrah's discovered that its customers spent only 36% of their annual gaming budget at the company It realized that increasing customer spends would translate into significant increase in revenues At the heart of Harrah's CRM program was a loyalty programme called Total Rewards (derived from the earlier Total Gold program) that rewarded customers with comps in order to stimulate loyalty The Total Rewards programme was aimed at gathering information about customers and using it to customize the company's marketing programs for each customer Richard Mirman, Harrah's Senior Vice-president of Marketing explained, "We have an advantage in that we know who the customers are, what they're worth and we can touch them in ways that our competitors can't even think about." Customers who enrolled in the Total Rewards program were given an electronic card, which they inserted into the machines they played on This card allowed Harrah's to keep track of its customers' preferences and collect data about them Harrah's made extensive use of IT to aid the effective use of collected customer data A massive data warehouse and business intelligence (BI) initiative was undertaken that enabled Harrah's to collect and consolidate customer data Harrah's then used decision science tools from SAS and Cognos2 on the collected data to better understand its customers and gain insight into their gaming preferences Complimenting Harrah's on its CRM program, Cinda A Hallman, Former Senior Vice-president of Global Systems and Processes for DuPont commented, "Harrah's is an outstanding example of a company that is aggressively and smartly using technology to understand the behaviour of its customers." Background Note Harrah's history can be traced back to 1937 when Bill Harrah (Bill) set up his first bingo parlour in Reno, Nevada, in the Western part of the United States He went on to buy 'The Mint Club' on North Virginia Street in downtown Reno Bill ensured that his customers were very comfortable while they played bingo He even had steam pipes installed at the club entrance so that they need not walk on snow while coming to the club In the mid-1950s, Bill began acquiring and developing several clubs at Lake Tahoe in Stateline, Nevada Harrah's had emerged as a leading name in the casino business by the late 1950s In 1962, Bill went on to build a 400-room hotel tower in Reno A 400-seat Headliner Room theatrerestaurant was opened in 1966 In 1971, public trading began in Harrah's shares as the company issued 450,000 over-the-counter shares The CRM Program Harrah's competitors were opening lavish properties that had spas, shopping malls and extravagant hotel rooms, apart from gambling, in order to lure customers Harrah's, however, decided to pursue a different strategy The company knew that the majority of its revenues came from its casinos and not from hotels, stores and spas (Refer Table I for business segment revenues) Customer Loyalty Programs The Total Gold program was based on a premise that the best way to improve business performance was not to attract new customers but instead to get the existing customers to spend more Harrah's realized that capturing a higher percentage of its existing customers' gaming budget would significantly improve the company's profits This led Harrah's to shift its emphasis towards building long-lasting relationships with its customers Customers who agreed to join the Total Gold program had to fill a membership form through which Harrah's obtained data such as their name, address and telephone number Using Information Technology for CRM The extensive use of information technology (IT) was central to the success of Harrah's CRM initiatives The company's ability to develop and nurture relationships with its customers was a result SAS Institute is a Cary, North Carolina, US based provider of business analytics software The company reported revenues of $1.34 billion for the fiscal year ended December 2003 Known as Quasar Systems prior to 1984, Cognos is an Ontario, Canada based provider of enterprise BI solutions The company reported revenues of $683.1 million for the fiscal year ended February 2004 of its ability to capture information and use it to its advantage With millions of customers visiting its casinos annually, a significant amount of information was generated The Benefits Harrah's CRM initiatives were the first of its kind in the US gaming industry and the benefits reaped by the company were impressive When the Total Rewards program began in the year 2000, Harrah's was able to capture only 36% of its customers' gaming budget By 2002, this figure rose to 43% The company witnessed a 13% jump in profits in the very first year of the Total Rewards initiative even after spending $251 million as rewards The loyalty card programs had 12 million enrolments in 1997 By 2003, the enrolments went up to 26 million Discussion Questions Briefly discuss Harrah’s marketing information system Describe the relationship between Harrah’s marketing information system and Harrah’s managers and employees Why does Harrah’s system work so well compared to MIS efforts by other companies? To what extent is Harrah’s in danger of a competitor copying its system?
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