Double-Digit Growth: How Great Companies Achieve It--No Matter What by Michael Treacy

Author:Michael Treacy
Language: eng
Format: mobi, pdf
Publisher: Penguin Publishing Group
Published: 2004-12-27T14:00:00+00:00

Tailor Your Offering

Information is cheap these days. Many companies have collected masses of data about their customers. Right now, somewhere in the bowels of a data center, the grocery store in your neighborhood has probably stored your family’s entire purchase history. The problem is, the store can’t figure out what to do with it. Remember Staples’ early efforts at loyalty cards? Staples replaced them with a much simpler program when it realized the difficulty of turning its ambitions into reality. Owning information and not knowing how to use it is an all-too-familiar business experience.

Casino operator Harrah’s Entertainment, based in Las Vegas, also had big dreams about taking advantage of incumbency to gather information about customers and using it to shape the customers’ value criteria. But, in Harrah’s case, the dreams were realized. The key to its base retention strategy has been to understand customer behaviors, motivations, and value judgments so well that it can personalize the entertainment experience for its best customers. Thus, the company can create an offering that a customer is hard-pressed to find elsewhere.

Harrah’s was founded in Reno, Nevada, by the legendary operator Bill Harrah in 1937 and now operates twenty-six casinos in twelve states. At more than $4 billion in revenues, Harrah’s has grown revenues, gross profits, and net profits at an average rate of more than 20 percent since 1997. An MIT-trained Ph.D. economist named Gary Loveman runs the company. Loveman has used his skills to install sophisticated systems for gathering and analyzing data about his best customers and then used that information to customize the entertainment experience that his organization can provide to each of them.

“My approach was based on a very simple realization,” said Gary Loveman. “We learned that of all the casino customers who visited Harrah’s once a year or more, we got 36 cents of their gaming dollar. So the fundamental issue was not getting more people to gamble, or even getting more people to know our name, but increasing the percentage of time our customers spend at a Harrah’s casino.... We rallied everything around the notion that we had to get that percentage up.

The result? In four years he has raised the percentage that Harrah’s collects from its customers’ gaming dollars from 36 percent to 42 percent. The company’s customers are more often choosing to come back to Harrah’s for their next gaming experience. Among Harrah’s best customers—let’s call them the big losers—retention is even stronger.

The key to Loveman’s system is the Total Rewards card that gives customers prizes every time they pull a slot machine lever, see a show, or have a meal. That allows the company to collect invaluable information about customers’ behavior, and Loveman’s training as an economist has allowed him to expand his company’s ability to turn that data into actionable insight. With the help of clever tools that estimate the gaming potential of each customer—what he or she might be spending elsewhere—Harrah’s is able to arm itself with the information that it needs to influence the customer’s repurchase decision.

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