The Idea in Brief
In an industry notorious for fickle customers, Harrah’s Entertainment has the most devoted clientele. It’s recorded 16 straight quarters of revenue growth in its 26 casinos. In economically sluggish 2002, it posted $4 billion+ in revenues—while rivals wilted.
Harrah’s secret? Not billion-dollar facilities boasting fiery volcanoes and sparkling fountains. Instead, its employees dazzle customers with exceptional service. Valets greet them by name, hosts ensure they’re happy, and the company rewards them handsomely for choosing Harrah’s.
To develop its marketing and service-delivery strategies, Harrah’s doesn’t rely on intuition or assume that “if you build it, they will come.” Rather, it uses sophisticated, proprietary technology to deeply mine its customer database. By slicing information into ever-finer segments, Harrah’s gets to know its customers better and better. It continually enhances the benefits of choosing its casinos over flashier rivals.
The Idea in Practice
How to use your database to secure customers’ loyalty? Consider Harrah’s approach:
1. Acquire a rich repository of customer information. Example:
Total Gold customers inserted cards into slot machines and earned rewards for playing while Harrah’s gathered information about them. A transactional database recorded each customer’s activity at various points of sale—slot machines, restaurants, retail areas—at all Harrah’s properties, not just one casino. Harrah’s fed that information into its enterprise data warehouse, which contained data on customer demographics, spending, and preferences.
2. Slice and dice data finely to develop marketing strategies. Most companies do the opposite: design grand marketing schemes, then adjust their databases to those strategies. Example:
Harrah’s database information indicated the need for a loyalty strategy that would motivate customers to visit Harrah’s casinos more regularly—just as they routinely visit their hairdressers or mechanics. How? By enveloping customers in reasons to be loyal—cultivating intimately friendly relationships with them.
3. Identify core customers by predicting their lifetime value. Instead of emphasizing how much people spent during one transaction, calculate their potential worth over time. Example:
Harrah’s discovered 26% of its gamblers generated 82% of its revenue. And top customers weren’t high rollers—but middle-aged and senior adults with discretionary time and income. Because they enjoyed playing slots, they welcomed free casino chips more than rooms or dinners as rewards. Very happy customers spent 24% more annually; disappointed customers spent 10% less.
4. Gather increasingly specific information about customers’ preferences—then appeal to those interests. Reward customers for spending more, which increases their lifetime value. Example:
Harrah’s split Total Rewards cardholding customers into tiers based on their annual theoretical value, and treated the groups differently. For example, “Gold” customers waited in lines at reception desks or restaurants; “Platinum” customers waited in shorter lines; “Diamond” customers rarely waited. Seeing the perks others had, customers spent more to earn the higher-tier cards.
5. Reward employees for prioritizing customer service. Example:
Harrah’s measures employees’ speed and friendliness, paying bonuses for improving customer-satisfaction scores. Rewards hinge on everyone’s performance at a casino—and on customer satisfaction, not a property’s financial performance. In 2002, Harrah’s paid nonmanagement workers $14.2 million in bonuses.
It’s a Friday night on the Las Vegas Strip, and all of the neighbors are making spectacles of themselves. The $750 million Mirage boasts a Vesuvian volcano that erupts loudly every 15 minutes. Next door, at Treasure Island, a faux British frigate battles a pirate ship at regular intervals. Further down the Strip, the Bellagio sports a lake festooned with sparkling, dancing fountains that beckon to passing tourists.
