Harrah’s Entertainment Inc.

Harrah’s Entertainment Inc.’s primary objective is to continue their growth in the gambling industry by differentiating themselves from competitors and focusing on a customer-oriented strategy. Harrah’s wants to determine how much of their recent growth can be attributed to their marketing efforts and how to continue growth in an industry of rising competition. Recommendation

My recommendation for Harrah’s Entertainment Inc. begins by investing about $1M to expand Harrah’s Database Marketing program. Next, focus on brand differentiation and advertising the core of gambling – the exuberance of “gambler’s high”. Last, expand the Total Reward program to provide more incentives and rewards to maintain a loyal, high-spending customer base. Basis for Recommendation

Database Marketing. Investing about $1M in this area of the company’s marketing strategy will hone in on the customer relationship management strategy that separates Harrah’s from competitors. Also, database marketing within Harrah’s has proved to be profitable. Once Loveman launched the Total Gold program and began DBM in 1998, Harrah’s net income more than doubled in 1999, increasing from $102,024 to $208,470, while the increase from the previous year was significantly smaller: an increase from $99,388 in 1997 to the $102,024 in 1998 (Exhibit 1). The investment in expanding DBM will also allow Harrah’s to be more effective in customer investments. With even more detailed customer profiles on hand, Harrah’s will be able to analyze profitability and efficiency of customer rewards. As the accompanying financial analysis shows, Harrah’s can segment customer types and attach proper customer goals and rewards. This reduces money wasted on ineffective services, justifying the increased investment in DBM (Exhibit 5). Brand Differentiation and Advertising. Brand differentiation will help Harrah’s distinguish themselves from competitors and thus, reel in more customers.

While competitors specialize in “must-see” attractions and lavish scenery, Harrah’s needs to focus on that feeling that “makes [customers] want to put more money into the machines” (7). By targeting that “gambler’s high”, Harrah’s advertising will focus on the core of gambling and reel in avid gamblers that feed off this exuberance. Harrah’s has estimated that 26% of players contribute to 82% of revenues, with avid players spending about $2000 annually (9). As in most service and merchandise companies, most revenue comes from large spenders and loyal customers. By reeling in loyal, avid, large-spending gamblers, Harrah’s will establish a customer base that will maximize their profits. Once reeled in, establishing loyalty with these customers is detailed in the following recommendation.

Total Rewards Program. Expansion in the Total Rewards program will not only be profitable, but also effective in establishing a greater, loyal customer base. The program should increase complimentary services to attract loyalty and increase incentives to encourage cross-market spending within Harrah’s. This investment and expansion in the Total Rewards program is justified by the fact that nearly 50% of the property’s total revenue is from cross-market revenue. Also, as the accompanying financial information indicates, cross-market revenues grew from 13% in 1997 to 23% in 2000 as a result of Total Gold. The rewards program also works hand-in-hand with Harrah’s steps to brand differentiate. Personalized letters and rewards to each customer through the rewards program allows gamblers to feel like valued customers (Exhibit 6). Alternatives, Risks, and Assumptions

An alternative is to eliminate focus on brand differentiation and allowing the customer-oriented strategy to take precedent. This is not recommended because Harrah’s would lose its initial appeal to avid gamblers, losing some market share to competitors. A risk is that large spenders may request higher standards; targeting high rollers may require large investments in “flashiness” and end up in close competition with competitors. A factor assumed possible is that previous customer spending and behavior trends will continue.