Harrah's-Gambling Big on Technology
The large investment made by Harrah's Entertainment Inc. in its information technology strategy has been tremendously successful. The results of Harrah's investment include:
10 percent annual increase in customer visits.
33 percent increase in gross market revenue.
Yearly profits of over $208 million. Highest three-year ROI (return on investment) in the industry.
A network that links over 42,000 gaming machines in 26 casinos across
12 states. Rated number six of the 100 best places to work in IT for 2003 by ComputerWorld magazine. Recipient of 2000 Leadership in Data Warehousing Award from the Data Warehousing Institute (TDWI), the premier association for data warehousing The casino industry is highly competitive (rivalry among existing competitors is fierce).
Bill Harrah was a man ahead of his time when he opened his first bingo parlor in 1937 with the commitment of getting to know each one of his customers. In 1984, Phil Satre, president and CEO of Harrah's, continued that commitment to customers. In search of its competitive advantage, Harrah's invested in an enterprisewide technology infrastructure to maintain Bill Harrah's original conviction: "Serve your customers well and they will be loyal."
HARRAH'S COMMITMENT TO CUSTOMERS
Harrah's recently implemented its patented Total RewardsTM program to help build strong relationships with its customers. The program rewards customers for their loyalty by tracking their gaming habits across its 26 properties and currently maintains information on over 19 million customers, information the company uses to analyze, predict, and maximize each customer's value. One major reason for the company's success is Harrah's implementation of a serviceoriented strategy. Total Rewards allows Harrah's to give every customer the appropriate amount of personal attention, whether it's leaving sweets in the hotel room or offering free meals. Total Rewards works by providing each customer with an account and a corresponding card that the player swipes each time he or she plays a casino game. The program collects information on the amount of time the customers gamble, their total winnings and losses, and their betting strategies. Customers earn points based on the amount of time they spend gambling, which they can then exchange for comps such as free dinners, hotel rooms, tickets to shows, and even cash.
Total Rewards helps employees determine which level of service to provide each customer. When a customer makes a reservation at Harrah's, the service representative taking the call can view the customer's detailed information including the customer's loyalty level, games typically played, past winnings and losses, and potential net worth. If the service representative notices that the customer has a Diamond loyalty level, the service representative knows that customer should never have to wait in line and always receive free upgrades to the most expensive rooms. "Almost everything we do in marketing and decision making is influenced by technology," says Gary Loveman, Harrah's chief operating officer. "The prevailing wisdom in this business is that the attractiveness of property drives customers. Our approach is different. We stimulate demand by knowing our customers. For example, if one of our customers always vacations at Harrah's in April, they will receive a promotion in February redeemable for a free weekend in April."
GAINING BUSINESS INTELLIGENCE WITH A DATA WAREHOUSE
Over 90 million customers visit Harrah's each year, and tracking a customer base larger than the population of Australia is a challenge. To tackle this challenge Harrah's began developing a system called WINet (Winner's Data Network). WINet links all Harrah's properties, allowing the company to collect and share customer information on an enterprisewide basis. WINet collects customer information from all the company transactions, game machines, and hotel management and reservations systems and places the information in a central data warehouse.
Information in the data warehouse includes both customer and gaming information recorded in hourly increments. The marketing department uses the data warehouse to analyze customer information for patterns and insights, which allows it to create individualized marketing programs for each customer based on spending habits. Most important, the data warehouse allows the company to make business decisions based on information, not intuition Casinos traditionally treat customers as though they belong to a single property, typically the place the customer most frequently visits. Harrah's was the first casino to realize the potential of rewarding customers for visiting more than one property.
Today, Harrah's has found that customers who visit more than one of its properties represent the fastest growing revenue segment. In the first two years of the Total Rewards program, the company received a $100 million increase in revenue from customers who gambled at more than one casino. Harrah's also uses business intelligence to determine gaming machine performance. Using the data warehouse, Harrah's examines the performance and cost structure of each individual gaming machine. The company can quickly identify games that do not deliver optimal operational performance and can make a decision to move or replace the games.
The capability to assess the performance of each individual slot machine has provided Harrah's with savings in the tens of millions of dollars. CIO Tim Stanley stated, "As we leverage more data from our data warehouse and increase the use and sophistication of our decision science analytical tools, we expect to have many new ways to improve customer loyalty and satisfaction, drive greater revenues, and decrease our costs as part of our ongoing focus on achieving sustainable profitability and success."
SECURITY AND PRIVACY
Some customers have concerns about Harrah's information collection strategy since they want to keep their gambling information private. The good news for these customers is that casinos are actually required to be more mindful of privacy concerns than most companies. For example, casinos cannot send marketing material to any underage persons. To adhere to strict government regulations, casinos must ensure that the correct information security and restrictions are in place. Many other companies actually make a great deal of money by selling customer information. Harrah's will not be joining in this trend since its customer information is one of its primary competitive advantages.
THE FUTURE OF HARRAH'S
Harrah's current systems support approximately $140,000 in revenue per hour (that's almost $25 million weekly). In the future, Harrah's hopes to become device-independent by allowing employees to access the company's data warehouse via PDAs, handheld computers, and even cell phones. "Managing relationships with customers is incredibly important to the health of our business," Stanley says. "We will apply whatever technology we can to do that.
Questions
1. Identify the effects poor information might have on Harrah's service-oriented business strategy.
2. How does Harrah's use database technologies to implement its service-oriented strategy?
3. Harrah's was one of the first casino companies to find value in offering rewards to customers who visit multiple Harrah's locations.
Describe the effects on the company if it did not build any integrations among the databases located at each of its casinos. How could Harrah's use distributed databases or a data warehouse to synchronize customer information?
4. Estimate the potential impact to Harrah's business if there is a security breach in its customer information.
5. Identify three different types of data marts Harrah's might want to build to help it analyze its operational performance.
6. What might occur if Harrah's fails to clean or scrub its information before loading it into its data warehouse?
7. Describe cluster analysis, association detection, and statistical analysis and explain how Harrah's could use each one to gain insights into its business.