|
||
 |
||
|
In Las Vegas, known cynically as “Lost Wages,” casino operators know that for every $100 bet plunked down on a table more than $14 is raked in by the house. The question is: Which house? Many casinos seem to think that bettors will be drawn by the glitziest show they can find. So in Las Vegas, the New York-New York Hotel & Casino is housed in knockoffs of the Statue of Liberty, Empire State Building, and more than a dozen other landmarks that measure one-third the size of the real ones in Manhattan. The recently opened Paris casino boasts what it calls “authentic replicas” of the Eiffel Tower, the Louvre, and the Arc de Triomphe. The Mirage casino has built a tropical rain forest in the middle of the desert, complete with a volcano that erupts. Harrah’s Entertainment Inc.’s (www.harrahs.com) flagship property, by contrast, has such a low profile that even its own executives describe it as obscure. Harrah’s has bet on data, not rain forests; on service, not replicas. The bet might be called the Cheers strategy. Harrah’s used information technology to roll out a nationwide loyalty program, giving customers cards that identify the holders to Harrah’s computers so the customers can be rewarded for coming in frequently and so employees can know who has been a steady, Norm-like customer. Harrah’s also developed a sophisticated system for guessing who might become the next Norm—among other things, Harrah’s measures how quickly someone hits the button on a slot machine, then uses the information to understand how seasoned a gambler the user is. Harrah’s has done the gritty work necessary to tie together its numerous databases to ensure that someone who has been a good customer at one of Harrah’s 25 casinos finds that everyone still “knows his name” at all the others. In addition, the casino operator has taken care of all the human details, going to elaborate lengths to provide employees incentives to treat good customers as well as possible. Gimmicks “get bodies through the door,” says Phil Satre, chairman and chief executive of the Las Vegas gambling company. “But I’m more interested in building relationships.” His bet is paying off. Revenue rose 15% last year to $3.5 billion. Revenue at casinos open more than a year grew 12%—that is a key marker in an industry where expansion is restrained by limits on how many casinos can be opened in many states. Partly because Harrah’s focus on data and customer service has let it avoid the heavy capital expenditures necessary to open the $1 billion Bellagio, operating profit from Harrah’s casinos climbed 21%. In an industry known for high defection rates among customers, Harrah’s says its focus on relationships has increased its share of its average customer’s annual gambling budget to 40%, from 36% three years ago. It figures that every percentage-point increase translates into an additional $20 million in pretax earnings. Harrah’s is the envy of its industry. “The ability to identify your valuable customers and then treat them differently is the core of customer relationship management,” says George Day, a professor of marketing at University of Pennsylvania’s Wharton School (www.upenn.edu). “Harrah’s would not look nearly so good if the other casinos were competent at doing this.” Few businesses in any industry have managed to do what Harrah’s has done. Some of Harrah’s competitors are trying to emulate many of the things it does, but Eric Hausler, a gambling analyst at investment bank Bear Stearns & Co. (www.bearstearns.com), says Harrah’s has a four-year lead. “The gaming industry has historically thrown money at customers,” Hausler says. “Harrah’s has taken a very scientific and methodical approach to putting the best customers on the casino floor. It’s really a technology-driven marketing company that just happens to be in the gaming business.” “It doesn’t enter my mind that I could go to another place,” says Steve Thomas, a regular Harrah’s customer who owns a BMW car dealership in Camarillo, Calif. “Harrah’s never misses a beat.” Much of the reason is that Harrah’s knows so much about him. Personal information about everything from his age to his favorite drink are recorded in a database, which at 23 million—and growing by an average of 150,000 customers a month—rivals the coveted databases of Internet retailer Amazon.com Inc. (www.amazon.com) and Internet service provider America Online Inc. (www.aol.com). Harrah’s even keeps track of what his wife drinks and what entertainment she likes. Thomas’s “play”—the amount of time and money he spends gambling at Harrah’s—is recorded with the help of the Total Rewards loyalty card program. (Every time a customer plays the slot machines, for instance, he feeds his card into a special slot, which sends information to a central system. At a gambling table, the dealer collects the cards and records the play.) Because he has achieved what Harrah’s calls “Diamond” status, Harrah’s flies Thomas in whenever he wants to come. Whether he decides to hit Atlantic City, N.J., or Lake Tahoe, Nev., his Harrah’s limo will be on the tarmac waiting for him, stocked with a 12-pack of his favorite soft drink, Pepsi One. A VIP host will meet him at the hotel and hand him a room key. That host will be one of Harrah’s best employees, because policy dictates that top-rated employees handle the top customers. Many employees at the hotel will greet Thomas by name, because low turnover makes it more likely they will know him. “I don’t come here because of my luck,” says Thomas, who won a $100,000 jackpot on his latest visit but still has lost far more than he has won. “I always felt my luck was better somewhere else.” Thomas comes because he is treated so well that, he says, “it’s embarrassing.” How loyal has he become? When Harrah’s got Thomas, his wife, and daughter tickets to a Barbra Streisand concert, they were offered as much as $5,000 apiece for the tickets when they arrived at the show. His daughter turned to him and said, “Dad, I really don’t like Barbra that much.” But Thomas told her: “You can’t sell those tickets. Harrah’s got them for us.” Thomas hasn’t always been a regular customer of Harrah’s. Several years ago, while staying at a competitor’s casino down the strip, he lost $10,000 during a five-day stay. When he went to check out, the desk clerk asked him how he would like to settle his $380 hotel bill. Thomas explained the situation and asked whether the hotel would “comp” the room charges. After checking with a manager, the desk clerk offered to split the bill with Thomas. Furious, Thomas told the clerk to charge the entire bill to his credit card. “Take a good look at the name on the card,” Thomas told him, “because you’re never going to see it again.” Thomas still shakes his head in disbelief. “Can you imagine letting a customer who just spent $10,000 walk out the door like that?” I.A. “Mac” Mascioli, a regular customer at Harrah’s Las Vegas casino, says that Harrah’s not only knows when his birthday is, it also sends him a gift each year. “Hell, my wife doesn’t remember my birthday,” jokes the retired newspaper executive, who sells real estate in Port St. Lucie, Fla. Mascioli says he isn’t what most casinos would call a “high roller.” Mascioli says he pays a visit to the casino “every three or four months” with two of his pals: Phillip Cooper, who operates a plastics business out of Winter Haven, Fla., and Christopher Fogal, a partner in an accounting firm based in Ft. Pierce, Fla. The trio is known around the Las Vegas Harrah’s as “The Three Musketeers.” Still, there is no doubt that Harrah’s views them as loyal customers who warrant better-than-average treatment when they come to town. Just before their last trip, Cooper called the hotel with a last-minute request. He said Mascioli wondered if he could get a reclining chair in his room, because he was having trouble sleeping flat on his back. When they arrived, the chair was waiting. “The price tag was still on it,” Cooper says incredulously. “It was a brand new chair.” Like many casinogoers, the three men occasionally leave the Harrah’s building to try their luck elsewhere. “You can develop cabin fever if you stay here all the time. Plus, I think the odds are better at Caesar’s,” says Fogal, who won $4,500 across the street at Caesar’s Palace during his most recent visit. Still, he prefers Harrah’s, referring to it as his “home away from home.” Harrah’s has a long tradition of customer service that dates back to the company’s founding more than 60 years ago. When William Harrah bought the first Harrah’s gambling parlor from his father during the Depression, the younger Harrah decided the stools were cheap and uncomfortable and had them replaced. He also recognized that casinos could be turned into resorts, complete with beds, restaurants, and shows. He saw that becoming a resort would give Harrah’s far more chances to develop relationships with customers. The sophisticated approach it takes today stems from a slowing in industrywide growth in the mid-1990s. A few years before, the gambling industry had begun to boom, as more states began to legalize gambling. Companies were opening casinos as fast as they could. After a few years of hectic building, though, growth slowed. Harrah’s decided that its competitive edge would come from marketing to its existing customers rather than from opening bigger and better casinos. Harrah’s CEO Satre knew that gambling customers tend to visit as many as six different casinos when they stay in Las Vegas. Satre decided to focus on getting customers to consolidate their play at Harrah’s. Once someone became a loyal customer at one Harrah’s casino, Satre thought he could get the customer to visit other properties. Satre recognized that he needed a national database to be able to cross-sell his properties, but, like many executives, he wasn’t sure he was making the best use of the data he already had. Harrah’s estimated that 26% of all customers accounted for 82% of revenue industrywide, but nobody knew just which customers were in that 26%. “I needed to figure out how to take it to the next level,” Satre said. He hired Gary Loveman as president and chief operating officer. Loveman, who had provided Harrah’s with marketing advice while he was a professor at Harvard Business School, said he had been astounded at the “promiscuity” of customers when he began studying the gambling industry. “The customer is always on the market and willing to be bought off,” Loveman says. He was bent on changing that. The first order of business was to make sure that Harrah’s was lavishing the right amount of perks on the right customers. By knowing which customers are the most profitable, the company’s casinos can be sure to pull out the stops when they come to town. If a customer loses a significant amount of money on any given visit, Harrah’s can send a letter acknowledging the bad luck and can take some of the sting out of losing by offering to pay for all or part of the customer’s next trip to a Harrah’s property. Lavishing this sort of attention on the wrong customers is, obviously, a waste of money, so the trick was to figure out which was which. The Total Rewards program took care of that, by letting Harrah’s track all activity by loyal customers at all its casinos. Loveman notes that airline frequent-flier programs, while popular with travelers because of the free mileage awards, do little to take advantage of all the information they capture on customers. An airline could, for example, send an apology letter or e-mail and some kind of coupon to a frequent traveler whose flight arrived hours late. “You take a flight, and that’s about the end of the relationship,” he says. A retail chain such as Starbucks Corp. (www.starbucks.com) might have employees who know exactly how a faithful customer likes his latte served each morning. But when the same customer strolls into a store in another neighborhood, there is no way of knowing how important he is to Starbucks. There also is no way to reward the customers for their loyalty or to intervene if they stop coming. Once Harrah’s solved those problems by tracking interactions with customers nationwide and by using that information aggressively, the casino worked on making accurate predictions about occasional customers, to see if they were worth wooing hard. If a new customer—perhaps a loyal Mirage player—shows up at Harrah’s, signs up for a loyalty card, and plays for an hour, Harrah’s notices. It looks at the customer’s age as a way of guessing how much free time he has on his hands. It considers where the person lives to see if he might be near another Harrah’s casino in another state. If the player taps his finger quickly on the slot machine button, the computer system judges that he is probably an avid, experienced player who might be worth far more as a customer than he spent during his initial one-hour visit. Trying to leverage all that information “was something that no one had done before,” says Richard Mirman, senior vice president of marketing. “We put on our white coats and get out our slide rules and test by statistical correlation.” Knowing lots about longtime customers and making smart guesses about new ones helps ensure that Harrah’s fills its hotel beds with the right customers. With the hotel operating at near capacity—the occupancy rate is 96%—Mirman says the key is “to get the right people to stay in those beds.” Harrah’s investment in a national database also let it start tracking customer preferences and let all employees pay attention to the smallest details. If a guest happens to request a king-size bed with down-filled pillows at the Harrah’s in Reno, Nev., the next time the guest makes a reservation at Harrah’s in Atlantic City, N.J., or Shreveport, La., an agent will automatically ask whether the guest would like a king bed with down pillows. Because the hotels are linked on a network, any employee with security clearance can access information on a guest. To ensure that employees avail themselves of all the information in the database, Harrah’s has a “performance payout” program that gives employees a financial incentive to treat customers well. Employees can earn quarterly bo- nuses if their casino properties earn high ratings from customers filling out comment cards. The company gives “chairman’s awards” each year to people who go the extra mile to serve customers. “For an organization to make use of customer information like Harrah’s has, it has to have the right structure, culture, and incentives,” says Day, the Wharton marketing professor, who is the author of The Market-Driven Organization: Understanding, Attracting, and Keeping Valuable Customers. Day says it remains to be seen whether the other companies have what it takes to make their loyalty programs work. “This is really hard stuff,” says John Boushy, senior vice president and chief information officer at Harrah’s Entertainment. “As with any major cultural shift, there were people who were concerned that the strategy fundamentally challenged the status quo.” Managers of the various Harrah’s properties, for example, were initially concerned that turning over their customer data to a centralized system might lead them to lose business to other casinos. They were proved wrong. Loveman is going to keep tinkering with Harrah’s technology, its incentives for employees, and its organization to keep customers happily coming back. “We’re constantly looking at the relationship,” Loveman says. “We’re the poster people for customer monogamy.” Customers use almost the same terms to describe the relationship. “Every once in a while we stay at another property,” says Cooper, one of the Florida residents who frequents Harrah’s with his buddies. “But you feel like you’re cheating on your wife.”
|
