Individual Case Assignment: Harrah's Entertainment, Inc.
1. What are the objectives of the various Database marketing (DBM) programs and are they working? There are two main overall objectives of Harrah’s Database marketing (DBM) programs. First, Harrah’s strived to build, increase and retain customers’ loyalty to their brand, similar to the way people tend to be loyal to their mechanic or hair dresser. The strategy to achieve this goal was to ensure that they crafted and sustained a relationship with their customers and reinforced the emotional tie with personalized attention and fast service. The second objective piggy-backs on the first – that customer loyalty will yield incremental business and increase company revenue. Overall, it is clear that the DBMs collectively achieved their goals as Harrah’s experienced a 100% increase in stock price and revenue growth of 50% in 1999, the year that Harrah’s implemented the DBM strategy.
It is also important to analyze the objectives and results of each specific DBM program, including the New Business Program, The Loyalty Program and the Retention Program. The objective of the New Business Program was to convert new Total Gold Program members in to repeat customers, and to make these customers choose Harrah’s over a competing casino. It is clear that this program was successful as the percentage of new customers returning to Harrah’s within 3 months of their first visit increased from 31% in April of 1999 to 50% in January 2000. Furthermore, their predicted customer worth upon returning increased from 98% to 118%.
The Loyalty Program was comprised of two strategies: The Frequency Upside and the Budget Upside. Both programs had the objective of making sure that Harrah’s current customers who had taken at least 3 trips or had been customers for at least 6 months would continue to be loyal to the Harrah’s brand. The Frequency Upside program focused on increasing the frequency of visits of these customers. The profitability of this program was judged on the difference between the incremental costs of the program and the incremental theoretical wins where the theoretical win is calculated as the product of the house advantage percentage, the average bet and the number of bets per hour. From July through September 1999, the incremental costs of this program slightly exceeded $8,000 (estimated by multiplying the percentage of guests redeeming offers (Red %) by the number of guests for that month by the average incremental costs of $40 per redeemed offer, and adding all three months). However, the theoretical wins for those three months was $188,339 as compared to the three months prior to June 1999 which total $20,647. Therefore the $8,000 cost brought in over $167,000 in additional theoretical wins, making it evident that this program was very successful.
Conversely, the benefits that the Budget Upside program demonstrated were less evident. The objective of this program was to increase the percentage of customers that chose to visit Harrah’s first as opposed to visiting a competitor first. The logic behind this objective was that a customer usually spends more money at the first casino that they visit, and less at each subsequent casino, so encouraging a customer to visit Harrah’s first would capture a larger share of their gambling budget. The data shows that after the implementation of this program, the number of trips per guest increased from an average of 1.6 to 2.38 trips, but also that these guests spent less hours per day gambling. This could indicate that the unconditional cash incentive for visiting brought the customers in the door but that the play-based incentive to increase gambling was not necessarily working.
Finally, the objective of the Retention Program was to bring back customers who had deviated from their historical spending behavior or who had displayed other signs weaning loyalty. This program did prove to work, as it brought back a...
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