1.

Protagonist
Philip G. Satre- Chiarman and CEO of Harrah’s entertainment
Gary Loveman- Chief operating officer
Benjamin Seigel- Casino Owner and gambler
Stephen Wynn- owner mirage resort
William Harrah- founder Harrah entertainment, industrialised gaming
John Boushy- head of marketing/ IT
Richard Mirman- Senior VP of relationship Mangement
David Norton- Vice President of loyalty marketing
Dave Kowal- VP of loyal capabilities and revenue management

2. Situation Analysis
a. What is Philip Satre trying to understand with respect to various
marketing activities at Harrah?
He wanted to know how much these marketing efforts had contributed to Harrah's overall
performance, and if the marketing results were a one-time event or if they could be repeated year after
year, especially since the competition had implemented similar programms.

b. Evolution of gambling in united states

Gambling has a long and complicated history in the United States. It was considered immoral by early
religious settlers. However, due to the frontier's limited entertainment options, gaming parlors
coexisted, often uncomfortably, with churches.
During the 1950s, known gangster Benjamin "Bugsy" Siegel saw an opportunity to elude California's
strict gambling ban while also quenching its citizens' thirst for gaming. Siegel went to Nevada, which
had tolerated gambling during the construction of the Hoover Dam in the 1930s, and built the
Flamingo, a luxury Caribbean-style hotel and casino in Las Vegas. To entice gamblers, Las Vegas
began offering low-cost hotel rooms, free food, and well-known entertainers. There, performers such
as Frank Sinatra and Elvis Presley performed to packed houses.
Casinos first appeared in Atlantic City in 1978, then in states such as Colorado, Louisiana, and South
Dakota. Casino resorts became more popular for both guests and businesses in the early 1980s, and
casino growth was expected to skyrocket by the decade's end. Casino gambling has been legalised in
Iowa, Illinois, Mississippi, Missouri, and on numerous Native American reservations. Iowa was the
first state to legalise riverboat gambling in 1989 on riverboat casinos.
When he built the Mirage resort in the late 1980s, Stephen Wynn almost single-handedly changed Las
Vegas by taking gambling to new heights. The casino resort featured a shark tank, a wild animal
sanctuary, and an erupting volcano. Others soon followed suit. The Sands, the Hacienda, and the New
Frontier were all demolished. To attract tourists looking for entertainment, new casinos such as the
Luxor—a glass version of the Great Pyramid with sculptures of Egyptian monuments and pharaoh
statues—were built.
Las Vegas, the largest gaming market in the United States, was a one-of-a-kind destination city that,
in the late 1990s, became a mecca for national conventions and “must-see” mega resorts. Vacationers
could easily spend a week in Las Vegas visiting all of the major casinos and other attractions, or they
could simply sit poolside, go to a show or shop, and dine finely. In October 1998, Wynn's $1.6 billion
Bellagio Hotel, inspired by Italy's Lake Como region, opened with an 8.5-acre lake and 1,400
fountains.
Atlantic City was more of a “day tripper’s” destination. Approximately 30% of its visitors arrived by
charter bus and generally stayed for less than a day. The winter cold made the Boardwalk less
appealing to tour group business.3 In 1999, there were 12 hotel/casinos, of which 10 were located on
or near the famous Atlantic City Boardwalk. Only one new casino had been built in Atlantic City
since 1987: the Taj Mahal, opened in 1990.
The geographic expansion of legalised and state-regulated gambling increased the industry's customer
base. People who had never seen the bright lights of Las Vegas or strolled the Boardwalk in Atlantic
City were being drawn to riverboats in states such as Iowa and Louisiana, land-based casinos in
Detroit and New Orleans, and casinos on Native American land in several states.

c. Harrah’s background and early strategy

William Fisk Harrah, the man who industrialised gambling, arrived in Reno, Nevada in May 1937 as a
26-year-old charmer, pathological car lover, and bingo entrepreneur. 6 Harrah's opened a bingo
parlour in the two-block gambling district of Reno, Nevada, in 1939, eight years after the state
legalised gambling. Harrah's first casino opened in 1942, with blackjack, a dice table, and 20 slot
machines. 7 In 1946, the company, now known as Harrah's, expanded and added roulette to the card
and dice tables, as well as beginning to serve liquor. The gleaming, glass-fronted, plush carpeted
casino stood in stark contrast to the rough frontier-style betting parlours of the time.
Harrah purchased a dingy casino on Lake Tahoe's southern shore in 1955, and four years later, he
relocated the casino across the highway to create the world's largest single structure devoted to
gambling. The new casino had a 10-acre parking lot as well as an 850-seat theater-restaurant that drew
star performers. Following that, Harrah built the tallest building in Reno, a 24-story hotel across the
street from his casino, and in 1973, he opened an 18-story hotel in Lake Tahoe. Every room had a lake
view and a marble-finished bathroom.
Harrah's Entertainment, Inc. was well-known in the gaming industry by 2000, and it operated casinos
in more markets than any other casino company. Harrah's operated 21 casinos in 17 cities, including
operations in each of the five major traditional casino markets (Las Vegas, Lake Tahoe, Laughlin,
Reno, and Atlantic City). In addition to Joliet and Metropolis, Illinois, East Chicago, Indiana,
Vicksburg and Tunica, Mississippi, Shreveport, Lake Charles, and New Orleans, Louisiana, and
Kansas City and St. Louis, Missouri, the company owned or operated casinos.
Harrah’s managed a number of Native American casinos located in Arizona, North Carolina, and
Kansas.
Early strategy of Harrah-
Customer Loyalty as a Core Competency
Becauze of the sustainable position in the market, it focused more on the people . The strategy seemed
to be working in the early 1990s as Harrah’s led the way to take advantage of legalized gambling in
many states beyond Nevada and New Jersey. These new markets provided Harrah’s with explosive
growth and a highly profitable business. Harrah started a program to communicate with customers
who won over a certain amount in the jackpots. Information on their future plans were recorded.
The company had excellent technology and great operations but not effective marketing.
 d. Customer analysis
Customer base
All five major traditional casino markets (Las Vegas, Lake Tahoe, Laughlin, Reno, and Atlantic
City)The company also owned or operated casinos in Joliet and Metropolis, Illinois; East Chicago,
Indiana; Vicksburg and Tunica, Mississippi; Shreveport, Lake Charles, and New Orleans, Louisiana;
and Kansas City and St. Louis, Missouri. In addition, Harrah’s managed a number of Native
American casinos located in Arizona, North Carolina, and Kansas and there were Riverboat
customers. Other category of customers included gaming cutomers who wanted to feel the rush of
adrenaline, tourists, afffluent old couples (estimated age 60)
Opportunity based segmentation based on the new crm strategy.

This process allowed Harrah's to track customers' play preferences, betting patterns, where they liked
to eat in the casino and whether they stayed the night, how frequently they visited, how much and
how long they played. When combined with the basic information on the application card, such as
birth date and home address, Harrah's could begin to develop a sophisticated customer profile.
Harrah's estimated that 26% of players provided 82 percent of revenue, with avid players spending an
average of $2,000 per year. Harrah's target customers were these "avid experienced players" who
tended to play in multiple markets. Harrah's predicted potential customer playing behaviour at its
properties using this detailed information for each customer. Harrah's compared observed and
predicted behaviour to identify opportunity segments based on a difference between predicted and
observed values. Harrah's used tailored marketing to achieve specific goals such as increasing
incremental frequency, budget, or both.

e. Competitor analysis
Park Place Entertainment Corporation, with revenues of $2.5 billion, was the industry leader in
1998. A spin-off of Hilton Hotels, it owned 18 casinos and 23,000 hotel rooms, including Paris Las
Vegas, Caesars, the Flamingo, Bally Entertainment Casinos, and Hilton Casinos. Park Place's
gambling operations included resorts in Las Vegas, Atlantic City, New Orleans, and Biloxi,
Mississippi, as well as Australia and Canada. The company seeks to maintain geographic diversity to
reduce regional risk and provide more stable income streams. It strives to cluster properties in key
locations to control operating expenses, reduce overhead and enhance revenue through cross-
marketing. Acquisitions are an integral part of the company’s overall strategy and a diverse customer
base is served through a variety of properties such as Caesars for the high end market to the Flamingo
for the value segment. Acquisitions are an integral part of the company’s overall strategy and a
diverse customer base is served through a variety of properties such as Caesars for the high end
market to the Flamingo for the value segment
Mirage Resorts had $1.52 billion in revenue and primarily operated casinos in Las Vegas, but it also
had operations and tropical theme parks in Mississippi, New Jersey, and Argentina. The Mirage,
Treasure Island, Golden Nugget, and Bellagio were among its more well-known properties. Mirage is
the market leader in the upper-middle and premium segments of the Las Vegas strip gaming market. It
accounted for roughly 60% of the high-roller market. The company's strategy has been to create high-
profile "must-see" attractions.
Circus Enterprises, Inc. had $1.47 billion in revenue and owned approximately ten casino resorts,
including Circus Circus, the Edgewater, Excalibur, and Luxor. Casinos were operated by the company
in Nevada, Mississippi, and Illinois. The company's strategy is clearly stated in its annual report for
1999. “In Las Vegas, we are building the most ambitious, fully integrated gaming resort complex in
the world, piece by piece, spectacle by spectacle—a fantasy of castles, glass pyramids, golden
skyscrapers, and more. Their aim was to own or control nearly 20,000 hotel rooms along a single,
continuous mile in the world's leading entertainment destination one day.
Trump Hotels & Casino Resorts, Inc. was also a gambling industry leader, with several casinos in
Atlantic City, including the Trump Plaza, Taj Mahal, and Trump Marina, as well as a riverboat casino
on Lake Michigan. The casinos, which are owned by Donald Trump, generated approximately $1.4
billion in revenue. 1999 was a bad year for the company, with no revenue growth and a $133 million
loss on top of the losses from the previous two years. Donald Trump, the chairman, assumed the
additional role of Acting President and CEO. They valued the customer experience during visits.
Finally, on the East Coast, Harrah’s competed with the largest Native American casino. The
Foxwoods Resort and Casino, run by the Mashantucket Pequot tribe in Connecticut, grossed about $1
billion a year. Harrah’s faced only local competition in many of the remaining markets.

Q3. What was the new approach Philip Satre attempted? How this has an impact on the
overall organizational structure of Harrah?

By the mid-1900s, the competition had entered the market with a better experience. For example,
MGM and Mirage created a highly themed environment with a dolphin tank and tigers. They were
becoming the must-see properties, and Harrah was facing the formidable task to expand business in a
limited market.
Satre realized that people's strategy was not sufficient to grow patronage and play at existing casinos.
Out of three core competencies: innovation of product, cost-structure and customer relationship,
Harrah selected customer loyalty and decided to become a world leader based on that skill. The
company had superior technology and great operations but not effective marketing. Satre consulted
with Sergio Zyman and a noted authority on consumer marketing, where they decided upon that they
require a COO who is a marketer and can implement marketing but make sure that all the properties
are aligned and there is no hiccup between the corporate strategy and the implementation on the
property level.
New Approach
Gary Loveman was recommended to fill this void. The main problem they built everything around
was that for customers who visited Harrah's once a year or more, the company got 36 cents out of
their gaming dollars. Hence they were visiting the competitors and showing very little loyalty.

Total Gold Program

The program, launched in 1997, was intended to increase customer loyalty in a variety of ways. To
achieve this goal, Loveman launched three major initiatives: changing the organization structure,
building Harrah's brand, delivering extraordinary service and exploiting relationship marketing
opportunities.
New Organizational Structure
Earlier, the Harrah's division president and their subordinate in brand operations, information
technology and marketing services reported the CEO; now, they started reporting to Loveman. This
was done to unify all the properties under Harrrah under a single brand. The organizational structure
at Harrah Entertainment has been led by different department heads, which look after their respective
domains. Since Harrah has been growing at a rapid pace, therefore, the management has been
focusing on investing on individuals who can lead the departments with conviction and vision.

Q4. The customer relationship management program at Harrah’s?

Answer:
The Customer Relation Management at Harrah’s Entertainment Inc. was made up majorly of loyalty
programs aimed at converting and retaining customers.
CRM at Harrah’s consisted of 2 aspects: Database Marketing (DBM) and the Total Gold Program.

i. Database Marketing: To understand customers’ worth, the management developed

quantitative models for its prediction instead of customers’ past behaviour. Proactive
marketing enabled opportunity-based customer segmentation - as soon as the players used
their Total Gold cards, their play preferences, betting patterns, their favourite eating spots in
the casino and if they have stayed the night or not began to be tracked by Harrah’s. This
enabled them to develop a dedicated customer profile. Based on an estimate, 26% of players
provided 82% revenues with avid players spending approx. $2000 annually. These players
became Harrah’s target customers.
Using this detailed information, Harrah’s predicted potential customer playing behaviour at Harrah’s
properties and compare the observed and predicted values.
Marketing Experiments were also given free reign which made it possible to track customers over
time. This assisted Harrah’s in discovering the right marketing instrument, for the right behaviour
modification, for the right customer.
Results were sought from the following programs:
 · New Business Program:
Designed to improve the effectiveness at conversion of new Total Gold Members into loyal
customers. Usage of predicted customer worth to make investment decisions at the customer level –
thus allowing particular offer to be more competitive.

· Loyalty Program – Frequency Upside

Offering incentives to those customers who spent only a small portion of their total
spending in a particular market. Harrah’s calculated the profitability by comparing the incremental
theoretical wins to the incremental cost of the program.

· Loyalty Program – Budget Upside

A customer’s allocation of the budget was directly related to the order in which they visited casinos
on a particular trip – the first received the largest share, the second the second largest and so on.
Hence, the objective was to encourage the customer to visit Harrah’s first and thereby capture major
single casino trips.

· Retention Program
Objective was to reinvigorate customers who had broken their historical visitation pattern or had
demonstrated other signs of attrition.
Mirman and his team accomplished these goals using a technology platform that was designed to
track and manage transactions in Casinos.

ii. Total Rewards Program:

The Total Gold program was designed to encourage cross-market visitation patterns of Harrah’s
customers. The Total Program was intended to capture the lost business by making it easier for
customers to earn and redeem rewards seamlessly at any Harrah’s property across the country. To
execute Total Gold, Harrah’s designed a completely integrated information technology network that
linked all their properties together.
To promote a consolidation, play over the course of a trip, the Total Reward Program provides a
Reward menu that translates reward credits to the various complimentary offerings. It enables
customers to know what level of play is needed to earn which incentive. To drive more frequency
annually, two additional tiers were added to the program. Total Rewards consisted of Total Gold (no
minimum customer worth), Total Platinum (theoretical customer worth $1,500 annually), and Total
Diamond (theoretical customer worth $5,000 annually). The criteria to earn a membership is based on
a customer’s annual accumulation of reward credits.

Q5. Discuss the effectiveness of analytical CRM (Earlier this was called as database marketing) at
Harrah’s with respect to New business program, loyalty program, retention program (Do the
analysis with the data given in the spreadsheet)

Analytical CRM is a subset of CRM in which a company collects data about its customer interactions,
to increase customer satisfaction and customer retention rates. It is also a good tool for tracking
potential/high value customers, to build relationships and finally increase customer loyalty towards
the brand.

Harrah's had to understand where their customers gamed, how often and what games they played,
how much they gambled, their profitability, and what offers would entice them to visit a Harrah's
casino. Armed with this information, Harrah's could better identify specific target customer
segments, respond to customers' preferences, and maximize profitability across the various casinos.

Harrah’s objective of using the DBM program was to track results from it by dividing the data base in
three programs to build customer relationship and increase loyalty:

· New Business Program

· Loyalty Program
o Frequency upside
o Budget upside
· Retention Program

The New Business Program:

Designed to create an offering which was more competitive with what the customers were already
receiving. These offerings were based on customer worth/theoretical wins (discussed later) and were
designed to improve the effectiveness in converting Total gold members into loyal customers. Exhibit
2b shows that in April 1999, 1022, new customers came, and each was given different offer out of
which 125 visited again in May, 103 the next month and 85 the month after. And the results show that
the revenue generated from these customers was almost constant with 34%, 33% and 32%
respectively in each month.
Loyalty program:
"Total Rewards," Harrah's customer loyalty program. Customers accumulate reward credits based on
their gaming and other activities at any Harrah's properties. These reward credits can be redeemed for
cast of comps on hotel accommodations, meals, and shows.

Frequency Upside: Designed to incentivize customers who were spending more on other casinos and
giving a small share of their spending to Harrah’s to make them switch. Exhibit 2c tracks the behavior
of 935 customers before and after. It shows that on the number of visits from customers increased
from 30 to 150 on average and it showed a profit which was calculated by doing a comparison of the
incremental theoretical wins to the incremental cost of the program.

Budget upside: Designed to encourage customers to visit Harrah’s first to capture majority of
their gaming budget as in most cases Harrah’s had found that a customer’s allocation of budget was
related to order they visited. The first stop received the largest share. Lastly, Retention program was
designed for customers who had discontinued their visits (broke historical visitation patterns). Hence
market experiments were modified for these customers to find out how much should be invested in
order to retain the right customers. They sent direct mail offer to 8000 customers each different
according to customer worth. Even though the cost for the program had gone up from $30 to $40 but
it seemed to be working and the returned customers were put into loyalty-marketing program and
managed accordingly. Moreover, they used DBM to “predict “their customers’ behaviour and their
total worth(Customer worth). This allowed them to build relationships with customers based on their
future worth rather than on their past play or experience. And how they predicted their worth was by
collecting important data and creating individual customer profiles. This data included customers
playing patterns, their visits to the casino, playing time, play preferences etc. Once this data had been
collected Harrah’s could find customers who they predicted can bring them high value and eventually
tailored offers were sent to them.
The DBM program not only allowed Harrah’s to forecast but also to track customers eventually. Their
quantitative approach allowed them to conduct some marketing experiments to find out which
promotion would best suite different customers and how would these transform their behaviours in the
best interest of Harrah’s.
 For example, their experiment on the two similar groups of frequent slot players suggested them that
a “less attractive” promotion was more profitable one. Hence their decision was to eliminate the
practice of “same day cash” at most of its properties. The customer database was centralized for all
Harrah’s properties.
Retention Program:

It focused on customers who had broken their historical visitation pattern. The goal was to
resuscitate customers who had revealed signs of attrition. Exhibit 2e, summarizes visitation pattern of
a group of customers whose visitation was declining. Harrah’s sent a direct mail offer to
approximately 8000 customers in Jan-99. The customers started returning to Harrah’s and were then
pun in loyalty marketing program. Though the cost of this program increased from $30 to $40 it was
proving to be profitable. Harrah’s realized that full potential of these programs can be achieved if
these capabilities can be used at local property level. Therefore, they made significant effort to train
their local managers and their marketing team. They accomplished the goal using technology platform
that was designed to track and manage transactions in casino.

Benefit:
Hence, with competition growing into areas outside of Las Vegas like Indian reservations, other
states, and even online, it is becoming more difficult to attract and retain new customers. This will
only get harder in the future as more states are allowing casinos into their communities. CRM will
help companies focus harder at their customers in order to keep them coming back. As long as
companies focus on their business strategies and the people, they have in order to make this
technology work, Analytical CRM can definitely help grow the business.

Q6. Why it is Important to use the customer worth (customer lifetime value) in analytical CRM
rather than actual level of play at Harrah’s? (Do the analysis based on data give in the
spreadsheet)
Harrah's Entertainment is a large corporation that provides a variety of services to its consumers, such
as casinos, restaurants, hotels, and rooms. In 1996, the casino made $1.33 million in net revenue,
$1.66 million in 1998, and $2.42 million in 1999. Food and beverages generated $4.25 million in the
previous month, while lodging income was $2.53 million in 1999.
In 1998, the casino offered the highest profit of $2.42 million and the highest expense of $1.24
million when compared to other sorts of categories.
The second profit-generating sector is foods and beverages, which generated a profit of $1.96 million
in 1996 and has steadily increased in subsequent years, reaching $4.25 million in 1998.
Harrah's would benefit from data and analytics in calculating predicted revenue. 953 and 578 clients
are estimated to earn revenue of $39,270 and $39473, respectively, from expected target customers.
Furthermore, statistics will assist Harrah in budgeting the theoretical value for the previous month.
Q7. How does Harrah’s integrate the various elements of its marketing strategy to
deliver more than expected results?

Here is how Harrah integrated different elements of marketing strategy, which helped it
deliver more than expected results-

1. Harrah focused on effectively implementing the CRM, which helped it improve

outcomes. The analytical CRM was of much use. The DBM efforts included-
Proactive Marketing and new marketing approaches (Tracked customers to
understand their behaviour, spending patterns, betting patterns, etc.) As a result, they
started different loyalty and retention programs.
2. It took the customer-centric approach, which helped increase the footfall in the casino.
Harrah’s trained its employees to handle unique situations to handle customers.
Harrah’s put in place various interventions at the employee level – service process
design, reward and recognition, measurement of executives, etc.
3. Other than being customer-centric, Harrah took up an IT-based approach and used
technology to improve the results.
4. Harrah divided the customers and took up opportunity-based segmentation to target
the customers stepping-in in the casino.
5. It gave utmost priority to make and maintain its brand name in the market.  Harrah’s
division presidents and their subordinates in brand operations, information
technology, and marketing services reported directly to Loveman. Hence, this
reinforced that the customers belonged to Harrah’s and not to one of its branches.

Q8. Can Harrah’s strategy be replicated? Can Harrah expect long term sustainable
performance?
Answer:
As mentioned in the case, Harrah’s CRM strategy consisted of two parts:
1. Database Marketing
Database Marketing was useful when a customer’s characters and behaviour was recorded
and analysed within the database. This gave them the correct rewards to be given to a
particular customer based on their individual likes and differences. However, it was also
dependent on experimentation. The experiment where free rooms and chips were given out,
had the output that free rooms did not matter as much as chips in rewards. This could then be
rolled out as a reward throughout Harrah’s other properties and on a wider scale. Therefore, it
is conclusive that the database marketing capabilities alone were not sufficient in letting
Harrah’s win customers. They had to obtain and process the right information on customers,
as well as understand the rewards that provide the highest return on marketing investment. A
different firm may replicate the same digital capabilities, but it cannot replicate the way
information on customers is processed and acted upon. In conclusion, it can be said that
“Database Marketing” as a program cannot be easily replicated, if at all, by other
competitors.
For long term sustainable performance, Harrah’s may have to keep experimenting and
changing their information processing and rewarding initiatives. This is important as
customer demographics may keep changing along with trends, tastes, likes and differences. A
suitable reward today may not be a suitable reward tomorrow for the same customer.
However, the flow of the rewards programs, i.e., New Business -> Loyalty (Frequency +
Budget) -> Retention is inherently focussed on building a customer based, and retaining their
casino experience to Harrah’s.
2. Total Rewards Program
This program was different from the Database Marketing program, in that it was focussed on
increasing the “share of wallet”. To do this, the program encouraged customers to play more
at Harrah’s as compared to other casino brands. The graduation of a customer from Gold ->
Platinum -> Diamond would encourage customers to play more at Harrah’s than at other
casinos. This could give them a leading edge even if other brands are able to replicate this
program. Since Harrah’s would have increased the share of wallet of the customers
considerably before others implement the program, it would not hurt Harrah’s much if other
replicate this strategy. However, Harrah’s would have to provide lucrative gifts, rewards, and
giveaways in order to continue to hold on to the share of wallet of the customer. If other
brands provide better rewards for their memberships with redeemable points, customers
would completely switch to the other brand. The rewards redeemable on loyalty points needs
to be up to date for this program to be sustainable at Harrah’s.