Posted by: Matthew Molinari | April 6, 2011

Harrah’s & Data Mining (Blog #13)

Harrah’s had a genius plan – look at what your customers are telling you and use it to make them happier. Surprising, that was a revolutionary idea in the gaming industry. For many years the casinos had looked to high rollers to bring in the real money. There was little or no research to prove it but that model was widely accepted so no one challenged it.

Harrah’s eventually got out of that box and began to look at the data, all of it free, that was being provided by gamblers using their player cards. What had begun as a promotion truly turned into a way to get massive quantities of data on customer habits. By simply using the card, customers were filling out a “survey” every time they gambled. What they found out was that by focusing on the high rollers and not the average customer, the casino was letting money walk out the door.

The idea soon became, rather than telling the customer that they want huge lavish casinos with water slides, Harrah’s could determine what actually mattered to the customer. Not surprisingly, it was customer service that really mattered. The most intriguing model that Harrah’s used was that every customer shouldn’t be treated the same. Harrah’s began to flaunt the differences between the levels of customers and used this to build a desire to get to the next “level”.

Much in the same way that a company can rely on employees always looking for the next promotion, Harrah’s relied on a Gold customer to desire what a Platinum customer had. Achieving it was easy – just spend more at Harrah’s and you’ll get to that level of service.  This idea fed directly into Harrah’s belief that better customer service led to more repeat business and repeat customers were where the big money was.

It is really a brilliant idea.  Show the customer that in order to get the best treatment they need to spend more knowing that the better a customer is treated the more they will end up spending. It created a model that provided for continued future business that a new “gimmick” hotel could not. After all, having a lion cage on the casino floor only draws a customer for so long if customer service isn’t backing it up.

The funny thing about the data mines Harrah’s ended up creating was that they were made almost by accident. The idea was simply to create a new way to track and give out comps. Over time, they began to notice that the cards gave information on everything from sex, age, and gambling frequency to what machines people wanted to play. Based on the data, Harrah’s was able to locate groups of machines in specific places to target the right people.

Other company’s had the same cards with the same data but they used their marketing program to drive the Reward Program. Harrah’s did the complete opposite. They used the cards to create marketing plans based on the information they pulled. The main marketing program they developed was that nobody knew their customers better than Harrah’s did.

Harrah’s created both and internal and external marketing plan to really drive home the importance of customer service. They completely reworked the way they hired, trained and motivated employees to reflect this. Incentives at all levels were based strongly, but not solely, on customer satisfaction scores. In order to achieve that, Harrah’s had to start from the bottom and rework the process of how and who was hired. High turnover meant that employees weren’t trained on how to give great service. Hiring the right person, and making sure they stayed happy became the first step to getting repeat customers.

In the end, these changes really allowed Harrah’s to become successful because their business became based on a steady stream of repeat customers. This meant that Harrah’s wasn’t as susceptible to the drops in tourism that can occur. They also hadn’t spent billions building new hotels and restaurants so there was not the same level of stress when rooms couldn’t be filled.

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