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In the high stakes world of casino gambling, customer loyalty often trumps liquidity.
That's true of Harrah's Entertainment Inc. a casino network that says it keeps its eye, not so much on the high rollers, as on small-time gamblers who return to their establishments more often.
Several years ago Las Vegas-based Harrah's was struggling to compete with other gambling conglomorates and was even seen as a possible takeover target.
However, instead on spending cash on infrastructure, the company bet on business intelligence (BI) software from SAS Institute Inc., to turn the tables on competitors.
The plan was to identify "disloyal" customers, and develop reward programs that encourage fidelity.
"Customers are inherently disloyal," says David Norton, senior vice-president of relationship management for Harrah's which now runs 26 casinos in 13 states including the Rio All-Suites, Caesar's Palace and six other venues in Nevada.
Norton said casino gamblers tend to move from one casino to another as there are lots of other facilities available, and also because they want to "change [their] luck."
The challenge is how to make it more painful for them not to come to you, said Norton. Harrah developed a strategy to meet this challenge dubbed the Harrah Total Reward program, which offers customers credits each time they visit the casino and play.
Credits are stored in reward cards, and can be traded for rewards, cash, coupons or complimentary services. Credits are also tallied to determine customer loyalty levels of gold, platinum or diamond. Associated services and privileges become increasingly valuable with each new level.
Player transactions provide wealth of customer spending information – data that SAS BI software can mine and analyze.
SAS's Customer Intelligence and Cognos' business intelligence software retrieves the data from the casino's Teradata warehouse, organizes it and builds predictive models that tell Harrah's which customers should be targeted for loyalty and incentive programs.
The rewards program has data on more than 28 million participants.
"Information gathered through reward card use is stored in a data warehouse containing records of how our customers interact with us," said Gary Loveman, president and CEO of Harrah's.
One Canadian analyst says the use of BI software for customer relationship management (CRM) programs such as these is becoming increasingly common.
"Since its inception, BI software dealt mainly with products and statistics. But by the late 1990s, using BI for CRM has become ubiquitous to some extent," said George Goodall, senior research analyst for Info-Tech Research Group Inc. of London, Ont.
Goodall said BI software lends itself to CRM programs such as Harrah's Total Reward because the technology is geared towards drilling through disparate data and recognizing connections. "The program can identify the frequent players and their habits and help make decisions on how to market to these individuals."
The Total Rewards program revealed some interesting information:
• That customers spent an average of 36 per cent of their gambling budget at Harrah's;
• That much of the casino's gambling income came from the so-called low-rollers – gamblers who only spend a maximum of about US$50 each day.
The low rollers might not drop down thousands of dollars at the table but they come to the casino 30 times a year.
After deploying BI software, Harrah's income at the company's two Las Vegas properties rose by 10 per cent and income from operations jumped 26.6 per cent.
Customer gaming budgets also rose to 45 per cent. The company raised its share of the gaming market by 750 basis points, and its stock price has grown from US$14 to US$73 per share, according to Loveman.
After buying Caesars Entertainment Inc. for US$ 5.2 billion in 2005, the Harrah's began replacing the analytical tools used in Caesars' four Las Vegas properties with SAS 9 software with proprietary algorithms running on a Teradata data warehouse.
Norton said Harrah's could have achieved its turn around without BI tools but if would have been difficult.
For one, he said, without the precise targeting provided by the BI software, Harrah's would have to send marketing material to everyone on its mailing list.
With SAS, the company is able to divide customers into 80 different segments for specifically designed campaigns.
This is vital, as customers in Las Vegas do not necessarily have the same traits as those in New Orleans. Customers living near the casino also receive different materials from those living farther away.
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