Thursday, April 10, 2014

Harrah's High Payoff From Customer Information




Problem/Issue Statement

Harrah’s Entertainment, Inc. adopted a business strategy that focused on knowing their customers, superior value, and rewarding customer loyalty.  In order to battle competition and grow this business strategy, Harrah’s needed to implement creative marketing tools and information technology software. To execute the new business strategy, substantial investments in information technology were required to integrate data from a variety of sources for use in Harrah’s patron database (operational data store) and the marketing workbench (a data warehouse). The company wanted to truly understand the customers’ preferences by mining data, running experiments and learning what met customers’ needs.  In order to do these tasks, Harrah’s chose to adopt a new IT solution which included a data warehouse, customer loyalty program (Total Rewards) and closed loop marketing.  

The main problem Harrah’s Entertainment experienced was operating its 21 casinos as separate entities where each casino manager ran their properties as independent fiefdoms and marketing was conducted on a property by property basis. Customer relationships were not understood or managed.  Harrah’s did not know their customer’s behaviors or preferences and were falling short of identifying specific target customer segments. Other symptoms of this problem including segmented advertising and offers, an absence of an all-encompassing brand image and a clear strategy for the company to expand into additional gaming markets.

The scope of the problem extends to Harrah’s 21 casinos that serve over 19 million customers and employ over 40,000 people. In addition, multiple databases were maintained and needed to be integrated to create one customer database where analytics could be conducted.

Situation Assessment

The context of the problem is based on the new business strategy that Harrah’s adopted which included establishing one brand image for the gaming company, building lasting relationships with its customers and a more cost-effective plan to attract, maintain and enhance customer relationship.  The context of the problem stems from Harrah’s expansion into multiple gaming locations, response to fierce competition and capitalizing on tight margins.  It was critical for Harrah’s to invest in software that could understand customer preferences and create target marketing offers. 

When assessing how Harrah’s should address the issues stated above, the following decision criteria should be considered:
-  Create a single brand image through marketing tactics
-  Foster customer relationships
-  Predict and analyze customer preferences and habits
-  Leverage IT systems to compete with new players in market
-  Prepare for future growth in industry

List of Plausible Alternative Courses of Action

To address the issues Harrah’s faced, management decided to develop WINet, which would collect customer data from various source systems, integrate data around customers, and identify market segments and customer profiles. It also helped create appealing offers for customers to visit Harrah’s casinos. WINet pulled data from a patron database that serviced as an operational data store. By creating WINet, Harrah’s was able to leverage their customer database and tailor offer’s to their customers.

Data was collected from a variety of source systems which included specific details about customer’s demographics, duration of stay and special events attended. All customer information was tracked. The Marketing Workbench (MWB) was created to serve as Harrah’s data warehouse. This is where analytics are performed. 

In addition, Harrah’s also developed its Total Rewards program, a customer loyalty program. This highly evolved program tracks, retains and rewards customers over time.
Harrah’s also implemented closed-loop marketing was developed to design, test and retain results for future use. The company was able to learn what types of campaigns or treatments provide the highest net value.

Harrah’s management team was able to successfully integrate the comprehensive data of their customers nationwide and derive target marketing programs designed for specific customer segments. The new business strategy aided by the IT solutions resulted in a 62% internal rate of return on investments in information technology, 14% revenue growth in same store sales and increased frequency of visits by customers.

However, Harrah’s competition is adopting similar technologies to learn about customer preferences, habits and needs.  It is in Harrah’s best interest to leverage these IT capabilities and continue to grow in order remain the leader in the gaming industry.  The company should constantly enhance the data warehouse and consider integrating a more dynamic analytical tool to further evaluate customers and possible offer insight into future habits.

It is commendable that Harrah’s did not fall victim of investing in gimmicks such as sunken pirate ships and roller coasters.  These investments are frivolous and fleeting. Rather, the company decided to be an early adopter of a data warehouse which was used to support its customer loyalty program and closed loop marketing efforts.

The company uses closed-loop marketing which allows it to learn what types of marketing campaigns provide the highest net value. Thousands of experiments were conducted and results were evaluated. Feedback provided insight into which campaigns generate a higher relative value. It is in the Harrah’s best interest to continue researching customers and finding which campaigns are best received by specific target markets. This will not only help foster customer relationships but also provide insight into trends, demographics and changing customer preferences.

Since Harrah's is revamping its website, the company can use this time to experiment with advertising offers on the site.  Harrah's can offer a free night stay, coupons to shows, restaurants. This also gives Harrah's the opportunity to integrate the Total Rewards program online. By enabling online access, the customer can track points, view upcoming rewards and offers.  This also gives the company the opportunity to link email addresses with customers and rewards. 

Another area Harrah’s should develop is in online hotel booking.  Currently, the internet is booming and growing at an exponential rate.  Competitor casinos and other hotels chains now offer online hotel booking to customers. Since Harrah's is in the transition of rebranding and revamping the website, it can enable hotel booking to provide a fast convenient way for customers to plan their trips. 

Harrah's needs to develop target marketing programs for not only the gamblers but also the customers who visit the casino and utilize the restaurants, shows and special events. Through the customer database, the company should develop ways to create special offers to customers who have visited the casino in the past for special events. For example, if a customer has visited the casino for a large boxing match, the company leverage this knowledge and send offers.
 
Harrah’s management team was able to successfully integrate the comprehensive data of their customers nationwide to derive target marketing programs designed for specific customer segments. The new business strategy aided by the IT solutions resulted in a 62% internal rate of return on investments in information technology, 14% revenue growth in same store sales and increased frequency of visits by customers.

Evaluation of Alternatives

When evaluating the decision criteria that Harrah’s developed one can see that Harrah’s was in need of two major items: develop an IT structure to support the new business strategy and in turn leverage the IT system to learn about customers.  Harrah’s was very successful in addressing all of the decision criteria.  Not only did Harrah’s successfully integrate the voluminous customer data but it also created a cohesive brand image. The new business strategy aided by the IT solutions resulted in a 62% internal rate of return on investments in information technology.  In addition, 14% revenue growth in same store sales and increased frequency of visits by customers.

However, Harrah’s should not be complacent and stagnant with their patron database and marketing efforts.   The alternative suggestions for Harrah’s such as developing a highly capable website site and offering discounts on coupon website further support the decision criteria and the new business strategy.

Since Harrah’s was a market leader in their decision to create one brand image, integrate all customer databases throughout the 21 casinos and offer a superior customer rewards program, the company should continue their imaginative ways when evaluating addition alternatives.  The company has prospered by adopting this market leader position and should continue for the future.    

Recommendation

After reviewing the success of Harrah’s new business strategy and IT software, it is clear that the company needs to continue with their practices.  My recommendation is to grow and enhance the already effective patron database by adding more analytical tools that can be used in conjunction with marketing efforts. In addition, the company should introduce apps for mobile devices and link the Total Rewards program.  The company should utilize its website to further their marketing offers.  Overall, Harrah’s should not abandon their business strategy or IT structure. It has proven to be capable and an effective means to grow the company.  
 
Presentation

·    If I were presenting as a consultant to the class, I would state that I have been commissioned to identify the effectiveness of Harrah’s new business strategy which was supported by a new IT structure that encompassed the WINet database, Total Rewards program and closed-loop marketing.  All features would be described in detail. I would address the decision criteria the company prepared and how their improvements led to addressing all facets. I would offer recommendations on how to further their marketing efforts and commend the company on their successes.

·         Visual aids to be used in presentation:

o   PowerPoint presentation for the major improvements and integrations the company implemented;
o   Decision criteria for the new business strategy; and
o   How to continue to be a market leader and further their understand their customers.

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