Harrahs

Entertainment
Case
Customer Relationship
Management Assignment 1

Submitted by:
ZAINAB QASIM

A041

Q.1 Why is it important to use the "customer worth" in the

DBM efforts rather than the observed level of play?
Customer worth, or theoretical win, is the theoretical amount that the casino
expects to win from that particular customers play. Observed level of play does
not account for the money that Harrahs may be losing to competitors due to
customers playing at other casinos.
The disparity between the observed patterns of play and the predicted patterns
from DBM and this information can be used to identify opportunities with
customers. Customers that are identified to have lower observed play than
predicted are targeted for direct marketing efforts. Customized incentives can
therefore be provided to customers based on their future worth rather than on
their past behavior.

Q.2 How does Harrah's integrate the various elements of its

marketing strategy to deliver more than the results of
Database Marketing?
Harrahs has integrated the various elements of its marketing strategy to create
programs that target three key customer phases: new business, loyalty, and
retention. The New Business Program was created to convert new Total Gold
members into loyal Harrahs customers. DBM is used to predict customer worth
and to efficiently and effectively deliver incentives to those high worth or
theoretically high worth customers. The loyalty program was created to
increase the frequency that loyal customers visited the casino by offering
incentives and to increase spending per visit spending by getting customers to
make Harrahs their first stop. The retention program was created to entice
customers who had reduced their visits to return to the casino. DBM is used to
identify those customers who attendance falls short of expectations based on
historical patterns. Finally, the total rewards program was created to increase
cross market visits by enabling customers to use their rewards at all Harrahs
properties in the county.
The objective of the database marketing programs was to improve Harrahs
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 worththe theoretical amount that the company expects to
generate from a customer based on his past usage of Harrahs properties. This
was a transformational move for Harrahs. From a historical model of operational
CRM that focused on the customers 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 levelthus allowing the particular offer to be more

competitive with what the customer was currently receiving from their existing
scenario of choice.
Loyalty ProgramFrequency 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 frequentlyi.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 ProgramBudget 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. 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. Harrahs 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.