The objective of the database marketing programs was to improve Harrah’s performance on each of the above-mentioned KPIs. The company hired Gary Loveman from HBS to bring quantitative muscle to its marketing strategy. What Loveman and his team did was development of quantitative models to accurately predict customer worth—the theoretical amount that the company expects to generate from a customer based on his past usage of Harrah’s properties. This was a transformational move for Harrah’s. From a historical model of operational CRM that focused on the customer’s past usage patterns, Loveman proposed an analytical CRM model that was predictive and therefore, radically different from how the company viewed profitable customers. Analytical CRM was implemented through the following programs:
New Business Program:
The New Business Program was designed to improve the effectiveness at converting new Total Gold members into loyal customers. The program used predicted customer worth (theoretical wins) to make more effective investment decisions at the customer level—thus allowing the particular offer to be more competitive with what the customer was currently receiving from their existing scenario of choice.
Loyalty Program—Frequency Upside
This program was designed to identify customers that, Harrah's predicted, were only giving Harrah's a small share of their total spending in a particular market. Harrah's capabilities enabled it to develop programs that offered incentives for these customers to visit Harrah's properties more frequently—i.e., switch a trip from a competitor to Harrah's. Harrah's calculated the profitability of these programs by comparing the incremental theoretical wins to the incremental cost of the program.
Loyalty