114 Part 2 Understanding the Marketplace and Consumere

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Companies everywhere covetthe title "The world's great-••• -s. est." Giant casino operator Harrah's Entertainment

rightly claims that title in the gaming industry. Following its recentacquisition of Caesars Entertainment, Harrah's now captures a huge$7.1 billion in revenues from its 43 properties around the nation andworld. The Harrah's portfolio, ¡ncludes such star-studded casino andgaming brands as Harrah's, Caesars, .Horseshoe, Bally's, Flamingo,Showboat, and The World Series of Poker.

The recent Caesars acquisition onlyaddsto the lusterofwhatwasan already very successful company. In the four years prior to theacquisition, Harrah's annua! sales grew 37 percent and profits soared76 percent. Harrah's stock ¡s worth nearly two-and-a-half times itsvalué five years ago, suggesting that Wall Street is betting on a brightfuture for the gaming giant.

Why has Harrah's been so successful? Everyone at Harrah's willquickly tell you that it's all about managing customer relationships.When you get right down to it, ¡n physical terms, all casinos are prettymuch alike, Most customers can't distinguish one company's slotmachines, game tables, restaurants, and hotel rooms from another's.What sets Harrah's apart is the way it relates to its customers and cre-ates customer loyalty. During the past decade, Harrah's tías becomethe model for good CRM and customer-loyalty management.

At the heart of the Harrah's CRM strategy is its pioneering card-based Total. Rewards program, the gaming industry's first and byfar most successful loyalty program. Total Rewards membersreceive points based on the amount they spend at Harrah's facili-ties. They can then redeem the points for a variety of perks, suchas cash, food, merchandise, rooms, and hotel show tickets. TotalRewards forms the basis for a two-part CRM process. First, thecompany .uses Total Rewards to collect a mother lode of informa-tion about customers. Then, it mines this information to identifyimportant customers and finely tune its market offerings to theirspecific needs. . : . ' . - . í) : • ' • „ . . . • .; . ;: ,-.-.;..-: Harrah's. maintains a. vast customer datábase. More than 80 per-cent of Harrah's customers worldwide—40 million customers ¡n all—use a Total Rewards card. That's roughly one out.of six adults in theUnited States alone. Information from every swipe of every card ateach of Harrah's 43 casinos zips off .to a central computer in;

Customer Telationship management: Harrah's CRM system helps thecompany to fbcus its branding, marketing, and service developmentstrategies on the needs of its most important customers. "We're tryingto figure out which producís sell, and we're trying to increase ourcustomer byalty."

Memphls, Tennessee. That's a lot of ¡nformation. Harrah's currentdata warehouse can store up to 30 terabytes (30 trillion bytes) ofdata, roughly three times the volume of data contaíned in the U.S.Library of Congress. Amazingly, Harrah's is rapidly reachingfull infor-mation capacity and plans to double its data storage capabilities.

Marketing Research in Small Businessesand Nonprofit OrganizationsJust like larger firms, small organizations need maxket information. Start-up businesses needinformation about their industries, competitors, potential customers, and reactions to newmarket offers. Existing small businesses must track changos in customer needs and wants,reactions to new producís, and changes in the competitive environment.

Managers of small businesses and nonprofit organizations often think that marketingresearch can be done only by experts in large companies with big research budgets. True,large-scale research studies are beyond the budgets of most small businesses. However, manyof the marketing research techniques discussed in.this chapter also can be used by smallerorganizations in a less formal manner and ai little or no expense. Consider how one small-business owner conducted market research on a shoestring before even opening his doors:24

After a string of bad experiences with his local dry cleaner, Robert Byerley decided toopen his own dry-cleaning business. But before jumping in, he conducted plenty of

Chapter 4 Managing Marketíng Information 115

Analyzing all this ¡nformation gives Harrah's detailed ¡nsights intocasino operations. For example, "visualization software" can genér-ate a dynamic "heat map" of a casino floor, with machines glowingred when at peak activity, then turning blue and then white as theaction moves elsewhere. More ¡mportantly, the information providesinsights into the characteristics and behavior of individual cus-.tomers—who they are, how often they visit, how long they stay, andhow much they gamble and entertain.

From its Total Rewards data, Harrah's has learned that 26 per-cent of ¡ts customers produce 82 percent of revenues. And thesebest customers aren't the "high-rollers" that have long been thefocus of trre industry. Rather, they are ordinary folks from all walksof life—middle-aged and retired teachers, bankers, and doctorswho have discretionary ¡ncome and time. More often than not,these customers visit casinos foran evening, ratherthan stayingovernight at the hotel, and they are more likely to play at the slotsthan at tables. What motivates them? It's mostly the intense antici-pation and excitement of gambling itself.

Using such insights, Harrah's focuses its marketing and sen/icedevelopment strategies on the needs of its best customers. Forexample, the company's advertising reflects the feeling of exuber-ance that target customers seek. The data insights also helpHarrah's do a better Job of managing day-to-day customer relation-ships. After a day's gamlng, by the next morning, it knows whichcustomers should be rewarded with free show tickets, dinner vouch-ers, or room upgrades.

In fact, Harrah's is now starting to process customer informationin real time, from the moment customers swipe their rewards cards,creating the ideal link between data and the customer experience.Harrah's chief information officer calis this "operational CRM." Basedon up-to-the-minute customer ¡nformation, he explains, "the hotelclerk can see your history and determine whether you should get aroom upgrade, based on booking levéis in the hotel at that time andon your past level of play. A person might walk up to you while you'replaying and offer you $5 to play more slots, or a free meal, or maybejust wish you a happy birthday."

Harrah's CRM and customer-loyalty efforts are paying off inspades. The company has found that happy customers are much

more toyal—whereas customer spending decreases by 10 percentbased on an unhappy casino experience, it increases by 24 per-cent with a happy experience. And Harrah's Total Rewards cus-tomers appear to be a happier bunch. Compared with nonmem-bers, ímémber:.: customers visit the .company's casinos, morefrequently, stay,tonger, and spend moré of.their gambling andéntertainment dollars ¡n Harrah's ratherthan in•riyátcasínps. Sincesetting up Total Rewards, Harrah's has seen its share of customers'average annual gambling budgets rise 20 percent, and revenuefrom customers gambling at Harrah's rather than their "homecasino" has risen 18 percent.

Harrah's CEO Gary Loveman calis Total Rewards "the vertebraeof our business" and says, "it touches, in some form or fashion, 85percent of our revenue." He says that Harrah's "customer-loyaltystrategy [and] relationship marketing . . . are constantly bringingus closer to our customers so we better understand their prefer-ences, and from that understanding we are able to improve theentertainment experiences we offer." Another Harrah's executiveputs it even more simply: "It's no different from what a good retaileror grocery store does. We're trying to figure out which productssel!, and we're trying to ¡ncrease our customer loyalty." Ka-ching!Through smart CRM investments, Harrah's has hit the customer-loyalty jackpot.

Sources: Quotes and other ¡nformation from Phil Bligh and Doug Turki"Cashing In on Customer Loyalty," Customer RelationshipManagement, June 1, 2004, p. 48.; Thomas Hoffman, "Harrah's Betson Loyalty Program in Caesars Deal," Computerworld, June 27, 2005;p. 10; Daniel Lyons, "Too Much Information," Forbes, December 13,2004, p. 110; Suzette Parmley, "When Its Customers Return, a CasinoAlways Wins," Philadelphia Inquirer, April 15, 2005; Kai Ryssdal andAndrew Park, "Harrah's Datábase of Gamblers," transcript fromMarketp/ace, August 4, 2005; Neal A. Martin, "A Temptlng Wager,"Barron's, April 10, 2006, pp. 28-30; John S. Webster, "Harrah's CTOTim Stanley Plays 'Operational CRM,'" June 7, 2006, accessed atwww.computerworld.com; and Harrah's annual reports and other¡nformation accessed at http://investor.harrahs.com/phoen¡x.zhtml?c=84772&p=irol-reportsAnnual, August 2006.

market research. MaMng a careful tour of the town, he observed a dry-cleaning estab-lishment in practically every strip malí. How would his stand out? To find ananswer, Byerley spent an entire week in the library, researching the dry-cleaningindustry. From government reports and trade publications, he learned it was a $16billion-a-year industry dominated by mom-and-pop establishments. Better BusinessBureau reports showed that dry cleaners accounted for a high number of complaints.The number one criticism: "Cleaners didn't stand behind what they did," he says. Toget input from potential customers, using a marketing firm, Byerley held focusgroups on the store's ñame, look, and brochure. He also took clothes to the 15 bestcleaners in town and had focus-group members critique their work. In all, Byerleysays he spent about $15,000 for the focus groups. Based on his research, he made alist of features for his new business. First on his list: His business would standbehind everything it did. Not on the list: cheap prices. Creating the perfect dry-clean-ing establishment simply wasn't compatible with a discount operatibn.

His research complete, Byerley opened Bibbentuckers, a high-end dry cleanerpositioned on high-quality service and convenience. Bibbentuckers featured a