While the Harrah’s story might not be so rosy now as it was in 2003 (they are down $1 billion at last check), the HBS story written by Gary Loveman of Harrah’s and the other article entitled “Harrah’s Entertainment & Gary Loveman” certainly show a company that was focused on the right things. Interestingly, the right things they were focused on in 2003, probably are keeping Harrah’s going in the current recession (in spite of their current losses).
While I believe that the facts presented in these HBS Best Practice Case studies are true, I believe that there probably is much more to the Harrah’s story than meets the eye. My thoughts were confirmed when I read the HBS article entitled “Gary Loveman and Harrah’s Entertainment. By reading that article, it became clear to me that while all of the data mining and customer service efforts culminated into a winning strategy, the transformation of Harrah’s by Gary Loveman did come a quite a personnel and culture shock cost.
And, the cynical side of me couldn’t leave the “more of the story than meets the eye” subject without mentioning that it is interesting that there were at least 2 HBS articles (though I believe more) written on the subject of Gary Loveman’s impact at Harrah’s and that Gary was an assistant professor at Harvard. Connection? I think yes…it looks on the surface to be a local boy done good reason for all the attention. That said, I think that Harrah’s does deserve the kudos it gets from the articles.
Another interesting tidbit when comparing the two articles is that there seemed to be quite a bit of “cronyism” going on. Some of the most senior people that Gary Loveman brought on were also from Harvard.
Now that I have gotten out all the negative things I took away from the articles, here are the positive things…which really do outweigh the negative. While the article is entitled Diamonds in the Data Mine, the article really should be entitled “Having the Courage and Vision to Know You Know and What You Don’t Know and Doing Something About It.” I really like the managerial courage that Phil Satre showed in hiring Loveman and also the managerial courage that Loveman showed when he got to Harrah’s as the COO and the continued courage after he became CEO.
So, what do I think they did right? A lot of things, but here are my top nine; they:
- Built a humungous data base of customer preferences, usage, demographics and psychographics, which allowed them to really understand and segment their customers.
- Hired a COO that was a well educated Marketer.
- Followed the data—they let the data show them how to target their marketing efforts. They didn’t force fit their database management to their Marketing programs.
- Focused on lifetime value rather than individual spends—CLV was really just a new concept in the late 90’s and I am glad to see that they got on board early.
- Focused on a multi-store strategy—they borrowed the retailer’s strategy in which they focused on getting the player to one of their casinos…it didn’t matter which one.
- Prioritized customer service—they shied away from the very expensive gimmicky strategies that many of the Vegas casino’s employed during the 90’s to attract more family friendly gambling and just focused on providing excellent customer service to their most important and profitable customers…the average spender (rather than the high roller).
- Tested/piloted marketing programs rather than just spraying and praying.
- Employed a Good/Better/Best strategy—they identified through their test marketing and marketing research efforts that people want to get to the next level of service; they want something that shows others that they are better than them. They did this through the three-tiered system employed through the Total Rewards program.
- Rewarded employees based on improved customer satisfaction rather than financial results—there is just one down side to this approach and that is something called the laws of diminishing returns. At some point, the amount of effort to improve the scores will be so great that it is not possible to increase the satisfaction scores. So, in that case, you could have a location that has near perfect customer satisfaction but can’t improve their scores without doing something illegal, immoral or unethical. In that situation, you have disenfranchised the employees because they have been too good for their own good. They have to decrease their scores in one year so that they can achieve a payout in the next.
All-in-all, it seems that Harrah’s would be a place I would like to work. They hold all the key things that I currently employ at my job dear: test and learn marketing, customer segmentation and focusing on customer satisfaction.