Destination Anywhere

Casino owners, by and large, are developers or operators, not direct marketers. Developers build mini-replicas of New York City and hope that patrons will be attracted.

Harrah’s Entertainment Inc. has rejected this model and uses a combination of loyalty programs and cross-sell marketing efforts to stimulate demand for its properties. While most casinos do some rudimentary customer contact, Harrah’s has taken a much more sophisticated approach. In doing so, it has increased the share of its customers’ wallets at all of its locations. “You can always put a head on a pillow,” says Gary Loveman, Harrah’s chief operating officer. “It’s getting a profitable head there that’s the problem.”

Much of what has spurred these efforts is the need for revenue growth in an industry with limited markets – Harrah’s has sites in every major U.S. market where gambling is allowed.

Loveman estimates that his company sees only 36 cents of every dollar customers spend in casinos. While Harrah’s maintains a promotional marketing team that focuses on getting new customers to try gambling at a Harrah’s property, the department’s primary mandate is to create relationships with current players who bounce from casino to casino, or who may be reducing the amount of gambling they do at Harrah’s.

“We are not in the business of creating [new] gamblers,” says Richard Mirman, Harrah’s vice president of relationship marketing. “We want to establish existing preference.”

Loveman estimates that 90% of Harrah’s marketing efforts focus on retention. Cross-market visitation efforts are a big part of that. Harrah’s – newly headquartered in Las Vegas – has initiated several campaigns geared at creating demand among desirable customers.

Part of Harrah’s approach is to centralize these functions; previously, each facility had its own marketing director trying to conduct individual DM programs.

The heart of the company’s retention program is WINet (Winners Information Network), a centralized database of gamblers that links all the information from Harrah’s various properties. WINet contains data gathered on members through Harrah’s Total Gold loyalty program. The program uses a magnetic stripe card to record transactional information – at the slot machine, at the roulette wheel, in the restaurants or wherever else the member interacts with the casino.

The information includes customers’ level of play, including how often and how much they win or lose, what they wager, the rate at which they play various games and the total amount of time they spend playing, in addition to name and address.

The amount of personal information WINet holds, however, is minimal. Loveman acknowledges that the relationship a casino has with a customer is delicate, and that if Harrah’s methods are perceived as intrusive gamblers will not provide data. For this reason, the company doesn’t collect income, occupation or Social Security data, and it doesn’t use third-party information sources.

Instead, data flows into WINet from all Harrah’s locations, with more coming online in the near future from the company’s recently acquired Rio and Showboat properties. But data also flows out from WINet, allowing each casino to offer service and rewards based on play throughout the entire enterprise. Every transaction is instantly loaded into the database, and the information collected is immediately accessible throughout Harrah’s facilities.

This real-time updating allows Harrah’s to provide amenities and rewards appropriate to the most recent level of activity. A customer playing the slot machines in Joliet in the morning, upon presenting his Total Gold card at Lake Tahoe that afternoon, will be led immediately to a machine with a cost-to-play appropriate to his level of gambling. Cash or comps earned that morning in Joliet, IL can be redeemed that afternoon in Lake Tahoe, NV.

This is a more likely scenario than one might think. Nineteen percent of all Total Gold casino play is from people gambling in more than one location. And there have been ancillary benefits to tracing customer travel: By tracking migration patterns of program members from, say, Atlantic City, NJ to Las Vegas, the casino knows which of its games to place in Las Vegas to capture more of the Atlantic City visitors’ attention.

A separate program, Marketing Workbench, allows individual site managers to tap into the WINet database and find gamblers in various Harrah’s properties with profiles similar to their own players. An operator in Tahoe, says Loveman, could analyze customers living in Philadelphia. The Tahoe marketer could then target an offer to them to visit the Tahoe casino.

According to Loveman, most casino programs reward players based on their average daily worth, without a series of tiered incentive thresholds that spur incremental gambling. “The programs [other casinos] have set up don’t hurt consumers if they take their business elsewhere,” he says.

Harrah’s Total Gold program, by contrast, is designed to have high switching costs, both pecuniary and psychological. Members lose out on points (which can be converted into cash or rewards) when they go elsewhere. But there is an emotional component as well.

“We want customers to think, `I want to go to Harrah’s because they know me, and they reward me like they know me, and if I went somewhere else they would not reward me like they know me,'” Mirman says.

Total Gold, introduced in third quarter 1997, awarded 3 billion points during its first year of existence, and currently has 2.5 million members. In July 1999 Harrah’s revamped the program, adding two levels of card membership: Total Platinum and Total Diamond. Qualification for each level is based on the average bet a cardholder makes as well as the number of hours played – no matter where or in how many casinos the gaming takes place.

At the initial Gold level, players are given points based on their play, which can be turned in for cash or comps. Cardholders also are given discounts on food and show tickets, in Harrah’s-owned gift stores and for complete vacation packages.

Platinum-level members receive the incentives offered Gold members, as well as priority restaurant seating, check-in, 800-number contact service and travel arrangements, and a series of direct-mailed offers and discounts.

Total Diamond players, in addition to the Platinum benefits, receive access to VIP lounges, attention from VIP hosts, room upgrades, complimentary tickets to shows and invitations to special Diamond member events.

The reward structure is designed to move program participants up through the levels by increasing their play. In short, the program is the loyalty marketing equivalent of a direct marketer foregoing mailing greater quantities in favor of mailing smarter.

The revamped program is still in its early stages but initial results have been very encouraging. Although not attributable solely to the Total Gold program, same-store revenue for the chain’s casinos is 15% above last year’s figures.

While Harrah’s certainly uses technology in cutting-edge ways – it’s currently investigating playing chips embedded with sensors, which would allow the casino to track wager flow during games – it also relies on an old standby, direct mail.

Through a series of algorithms Harrah’s is able to determine the potential worth of a gambler, and uses targeted communications based on that value. “Direct mail is the most strategic tool in our arsenal,” Mirman says.

Direct mail goes beyond Harrah’s World, the company’s customized newsletter. Harrah’s recently rolled out a series of incentive mailings based on demonstrated behavior. Customers just captured within the WINet database are qualified as “new to the brand.” These new customers are sent messages welcoming them to the Harrah’s family, letting them know about the short- and long-term benefits of the Total Gold program.

But not all customers are treated the same.

“You cannot focus on every new business customer,” says Mirman. “It’s costly. Some are checking you out and will not be back. Others have higher potential to be loyal. The challenge is to figure out which are which.”

Harrah’s has developed models based on just one trip that allow it to determine the potential for each customer.

Mirman declined to disclose whether those models are driven primarily by transactions or demographics. However, another Harrah’s executive, speaking about data mining in general and not about Harrah’s new business models, intimated that demographics are not a good indicator of gambling behavior.

“It helps to have money, it helps to have time, but that is not a predictor,” says George Dittmann, Harrah’s senior director for customer insights.

“And that Claritas [consumer clustering] thing – birds of a feather flock together – is not true of gamblers. It cuts across society,” Dittmann adds.

A combination of factors – demographics; where customers were captured by the system; and where they live – are used to determine when they are most likely to have a return visit. A trip to a “destination” location, such as one in Las Vegas, is more likely to be coupled with a vacation and may have a longer lag between visits than a Harrah’s property in Atlantic City, which draws more from regional customers making day trips.

Destination analysis, as part of the projected life cycle of the customer, comes into play in the timing of Harrah’s direct mail campaigns. Customers who have established visit patterns over time are classified as “due backs” and are sent solicitations before their next anticipated trip.

“We found that a lot of customers vacation habitually,” says Loveman. “To try to get them to come when they don’t vacation is hard. But if you get them the offer when they are making their decision…”

In addition to incentives (point offerings and discounts, for example), those mailings include a preview of upcoming events at the Harrah’s location they are most likely to visit.

If a due-back doesn’t return, he or she becomes a past-due customer.

“If they come quarterly and we don’t see them for four to six months, they probably went somewhere else and we are in a defensive strategy mode,” says Mirman. “We know they are potential attriters.”

Attrition is what Harrah’s is trying to avoid through all its efforts.

“Ninety percent of the battle is getting [gamblers] to make the trip [into a specific casino] when they are coming into the market,” Dittmann says. “If you can get them in the door and treat them nicely, you will get more of their wallet.”

Once in the door, Harrah’s loyalty efforts take over. “We want customers to establish a relationship with their local Harrah’s that should extend to their destination properties,” says Mirman.

Those would be destinations anywhere, east or west (they don’t care).