InformationWeek
Defining The Business Value Of Technology
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December 11, 2000 |
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Harrah's Bets On IT To Understand Its Customers
Casino's loyalty program helps it personalize promotions.
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cross the Strip from a flaming charioteer announcing the Caesars Palace Forum Shops and a long walk down the main Vegas boulevard from the $1.6 billion Bellaggio and its 1,200 fountains in an 8.5-acre lake stands Harrah's Casino. The building bears a modest--by Las Vegas standards, at least--purple neon globe with a flashing gold corporate logo, while over a loudspeaker outside the entrance, a voice repeats, "Sign up for Harrah's Total Gold card today, and we'll cover your slot losses for half an hour--up to $100. Find out more details at the Total Rewards Center."Inside the casino, sitting at the dollar slots, Sam Circelli and his friend John Skarb have just arrived from Chicago, courtesy of Total Rewards, Harrah's nationwide casino-loyalty program. For the next four days, their every expense--hotel rooms, meals, even their bargain-basement $123 round-trip flight--is on the house, with the understanding that each of the two truck drivers will gamble enough money at Harrah's to justify the lavish incentives.
Total Rewards is Harrah's attempt to inject a great deal of science into the industry practice of handing out comps. The IT-intensive approach to customer service is more than just knowing the name and address of repeat visitors. By tracking what slot machines he plays, for how long, and how much he gambles, Harrah's can determine how profitable Circelli is as an individual customer and make special offers, tailored to his casino behavior, to woo him back. And, just as important, it will make sure he's well cared for in any Harrah's casino around the country.
"If you want the pomp and circumstance of the Mirage, go to the Mirage. If you want to have the best gaming experience, come to Harrah's. That's our core strategy," says Rich Mirman, senior VP of marketing for Harrah's.
The Total Rewards system works by linking each slot machine to a LAN, which connects to a server at each casino that feeds data into a centralized data center in Las Vegas, Atlantic City, N.J., or Memphis, Tenn. This network of card readers lets players check credit balances, checking Total Rewards points at that casino and across all Harrah's properties. Using data analysis and mining tools from Cognos, SPSS, and SAS Institute, Harrah's marketing department can splice the data housed in an Informix database on an IBM RS/6000 server and an NCR Teradata data warehouse and use it to create marketing programs.
Tracy Austin, who as VP of IT development helped build the system, says it's a byproduct of a management unafraid to take a new approach--moving away from the traditional casino-by-casino loyalty programs that still dominate the gaming industry. Harrah's, with 21 casinos in 10 states, has taken a different approach than other casinos, going light on the extravaganza and heavy on the customer understanding, focusing on building a network of properties across the country all linked by the Total Rewards program. Half of the revenue at Harrah's in Las Vegas comes from people who also gamble at its casinos in other markets. "We have a relationship with those customers at another Harrah's, whether it be Tunica [Miss.] or Atlantic City," Mirman says. "From Showboat Atlantic City to Harrah's Tahoe, you'll be treated consistently."
Circelli, who on top of everything else had a $500 entry fee waived for a spot in a weekend $25,000 slot-machine tournament, and Skarb are wise to the game. Five years ago, the day after he won a $121,000 jackpot on a slot machine at a small casino in Aurora, Ill., Caesars Palace called Circelli at home offering him a free trip to Las Vegas. "You've got to show something," he says. "They like to take care of their players, and he and I are above-average players." Now regulars at Harrah's properties, the pair intends to spend the majority of their time there while in town, spending about $500 a day each. But even these pampered guests will spend some time in other casinos, which highlights the difficulty of doing business in a town where there's really only one industry and the main drag is lined with competitors intent on building a better Tower of Babel more outrageous than all who came before.
Harrah's Total Rewards and direct-marketing program is aimed at capturing a greater share of the spending done by the 8 million people in the program. "It's in their best interests to stay and play with us rather than go across the street and play at Caesars. You want to impose a set of costs," Mirman says. "Customers are going to walk across the street--we're not kidding ourselves. We want customers to realize it's in their best interest not to."
The program, unveiled in September 1997 as Total Gold, has evolved through cooperation between the IT and marketing departments within the company. "Two years ago, the challenge was having the talent inside the organization that knew how to leverage the capability we were building to really enhance the customer experience," says John Boushy, senior VP of brand operations and IT.
Yet Harrah's still faces obstacles to getting a complete view of its customers. It recently upgraded its Web site to let Total Rewards participants check their status online. But the next step is more daunting: Harrah's is working to automate table games such as blackjack by inserting radio frequency transmitters into gaming chips and installing an antenna under the table felt to record the amount of each wager. It hopes to test the system early next year.
But do gamblers really want the house watching their every coin? Circelli had second thoughts at first, but he dismisses those fears now, partly because refusing to use the card means forfeiting his comps. Harrah's swears it doesn't shares customer information with anyone. Pete Thigpen, a former senior VP of operations of Levi Strauss & Co. who runs an ethics course at the Haas School of Business at the University of California, Berkeley, says customers accept these cards as part of the business relationship. "Provided that the choice is freely made without any kind of coercion to sign up for this, I don't think there's any problem with it," he says. "Obviously they're going to tell a customer, 'This is what we're going to do with this information.'"
Harrah's isn't limiting its innovation to casinos. It bought a majority stake in National Airlines, an 18-month-old airline that routes all of its 60 daily flights through Las Vegas, with free stopovers there. The hotel lobbies of Harrah's two Vegas properties have ticket counters to check in passengers, hoping people will kill those few extra minutes at the casino's slots rather than at the airport's. For incoming passengers staying at Harrah's, their luggage is checked in from their departure city to their hotel rooms. "We just checked in and started gambling," says Circelli.
Mirman stresses that the rewards program is designed for mass markets. Hollywood popularizes the Vegas image of high rollers and fast talkers, but the truth is much less exotic. The average Harrah's customer gambles less than $3,000 annually and comes to Vegas just once or twice a year. Most Total Rewards players hold gold cards, only 9% own platinum status, and just 3% have earned a diamond card like Circelli's, based on a minimum $10,000 a year spending. "You think of the high roller being the dominant force in the business, and it's really not," Mirman says.
Because it can track and market to critical regular customers such as gamers who come out twice a month in places such as St. Louis or Chicago to play $100 or so, Total Rewards helped boost same-site sales 14% last year. "Frequency is key," says David Norton, VP of direct marketing. "Our bread and butter is our feeder markets."
The competition isn't standing still. Caesars Palace owner Park Place Entertainment Corp. collects 35% of its sales in Las Vegas, but its 25 other casinos in five countries aren't linked. Next year, it plans to create a network model similar to Harrah's--and Harrah's executives know all too well that savvy gamblers won't pass up a better hand if they're dealt one.
Photos by Edward Carreon
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