The High Stakes Casino Game in Vegas
In the mid 90’s the stakes got a lot higher in Las Vegas. The Bellagio hotel was just built for $1.8 billon; the Venetian for $3 billion. In comparison, the Casino at Harrah’s was just plain ordinary. They were falling behind and needed to act. So what do you do? Call, raise, or fold?
Send for the Professor
While the other casinos were building pirate ships and volcano’s to lure gamblers, Harrah’s adopted a more Bostonian approach. In 1997 they hired John Loveman, a professor from the Harvard Business School as their new COO. He brought with him a math whiz from the University the Chicago and together they studied the business. They knew that the cost of retaining an existing customer is 1/10th the cost of getting a new one, so their plan involved building customer loyalty; they needed to keep what customers they already had. What they also knew was that on average the Harrah’s guest spent 70% of their money in the competition’s casinos and facilities. How could they get the customer to spend more money with Harrah’s?
If you build it, will they stay?
To improve the customer experience and build loyalty they planned on building a large, sophisticated “CRM” or Customer Relationship Management system. This system, called WINet for “Winners Network”, would also be used to manage their customer loyalty program, Total Rewards.
The system was technically ambitious; IBM, a key player in the project, said it could not be done. At one point Jim Bouchy, the Harrah’s project lead, said he would not cut his hair till the system was completed. He wanted to inspire his team. A month later the system crashed, and their 300GB backup was unusable. It took a year to recover and finish things off. By that time Jim’s hair was half-way down his back and he had taken time off to play in a rock band with the 60’s rock legend Gary U.S. Bonds.
By 1998 the system was completed, and it has since spearheaded Harrah’s to become world’s largest and most profitable casino chain. The system is now so key to their success that they had it patented.
Big casino is watching you.
Aside from capturing the “basics” (e.g. name, address), WINet has been used to build an extensive customer profile for each of Harrah’s 50 million customers. It tracks how much they gamble, where they like to eat, their net worth, and many other attributes that they use to calculate the “potential lifetime value” of each customer. They are also very interested in what makes you “happy”. They know that a “happy” customer will spend 24% more during each visit. This happiness formula is as closely guarded as the recipe for Coke.
The buffet is now open!
Data is collected at each point of contact, with each swipe of the customer’s Total Rewards card, whether they are checking in, at the buffet, or playing the slots. Over 80% of their customers are now in this program. As more and more data is collected, it is subjected to analytics. How much is your estimated value to Harrah’s? What are your likes and dislikes? Taking these factors into account what should he offer Mr. Jones – another drink or the Dion Suite?
While this is not entirely new in the casino business, it had only been applied to large table gamblers. Harrah’s discovered that the real opportunity was with the low rollers, i.e. the “ordinary folk” sitting at each of their 78,000 slot machines. They represented a large revenue stream and had been entirely neglected. Today they earn points with each pull of the slot-machine lever. In fact just how fast and often you pull that lever tells the system what kind of gambler you are. If you pull that lever quickly again and again it will not be long before you will be served drinks and be offered two-for-one coupons for the buffet.
The database is also used to drive a $300 million direct mail program; they send out 80 million pieces of mail a year, each one individually tailored based on the customer’s profile. And with all those points you can earn, you can trade them for merchandise and even cruises (You will need 500,000 points for one of those).
“Wow, you really know me!”
What Harrah’s really strives for is the “wow” or “you know me” factor. So don’t be surprised if you find tickets to your favorite show waiting for you after a long day at the slots. And when you make it the top 5% or VIP level (which accounts for 25% of their revenue), you can expect increasing “offers”, and calls when you decide that you have had enough gambling for a while.
The dark side of technology?
Which raises the question: is Harrah’s using all this customer information to encourage compulsive gambling? When you are in rehab the last thing you need at your door is a limo driver holding two front-row tickets to Elton John! We can only hope that they act responsibly in this area. Ah, the dark side...
Databases – who knew?
Today this system is the foundation for Harrah’s success. They claim it drives their business and profitability by as much as 20%. And Mr. Loveman? He is the new CEO.
Being in the database business myself, I like to study cases were technology has been applied with such positive results. But what I find ironic is that the purpose of this large, complex database is to give each of the 50 million customers it now tracks the feeling, that in the eyes of Harrah’s, they are really special and appreciated.
Viva Las Database!