Context
In the late 1990s Harrah's Entertainment ran a chain of casinos in several US states. Competitors invested in luxurious buildings and entertainment. Harrah's had fewer such buildings, but it had a single loyalty program, later named Total Rewards. In 1998 Gary Loveman, a former Harvard Business School professor, joined the company; he later became its chief executive.
Symptom
Out of habit, the industry courted high rollers who come rarely and spend a lot. Marketing offers were sent out widely, and their return was hardly measured.
Cause
Decisions about whom to retain and how were made on impressions, even though data on customer behavior was already being collected through the loyalty program.
The fork
Compete with rivals on the luxury of the buildings, or use what Harrah's had that was better: knowledge of every customer across all the casinos in the chain.
Decision
The company started making marketing decisions based on loyalty program data and testing every offer with an experiment against a control group.
Execution
The analysis showed that the most valuable customers were not the high rollers. According to Loveman, they were more often middle-aged and older people who lived nearby and came regularly. The company began building offers around the frequency of visits and making sure customers came back to casinos in the chain.
Outcome
According to Loveman's article in Harvard Business Review (2003), the company reported 16 consecutive quarters of revenue growth, and in 2002 its revenue exceeded $4 billion. The approach became a textbook example of customer analytics.
What it means for you
A CRM is useful when decisions are made on its data and their results are checked. A customer table without such decisions stays a list of contacts.
- Do you know from data, not from impressions, which customers bring you the most profit?
- Do you test promotions and mailings against a control group?
- Which customer data do you collect but not use?
We would start by dividing customers by the profit they bring in a year, and comparing that with who currently gets the most attention.
Key dates
| Year | Event |
|---|---|
| 1997 | The chain's single loyalty program launches (later Total Rewards) |
| 1998 | Gary Loveman joins Harrah's |
| 2002 | Revenue exceeds $4 billion |
| 2003 | Loveman's article *Diamonds in the Data Mine* in Harvard Business Review |
Sources
- Gary Loveman. *Diamonds in the Data Mine*. Harvard Business Review, May 2003: Source
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