Why Harrah's Loyalty Effort Is Industry's Gold Standard

Casino Owner Rewarded With $6.4 Billion In Revenue; Program Set to Go Mobile

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NEW YORK (AdAge.com) -- Joseph, a 30-something New Yorker, was visiting Harrah's Resort in Atlantic City on a weekend the hotel was booked solid. But after using his Total Rewards card while playing the tables, he was directed by a pit boss to the front desk, which informed him a room had become available for a "special rate of around $100 a night." When he checked out two nights later he was told all the room charges were on the house.

David Norton, CMO, Harrah's
David Norton, CMO, Harrah's
Was the sudden vacancy pure luck or was it just a case of good customer-relationship marketing on Harrah's part? Ask any of Harrah's 10 million active Total Rewards program members, and they'll all tell you it's unequivocally the latter.

"They are very good at upgrading or in some cases finding a room in a full hotel," Joseph said in an e-mail. "And I always liked the fact that no matter where I gambled, [Atlantic City], Vegas, Kansas City or New Orleans, or which of their hotels I gambled in, I was always able to use my rewards card for comps and hotel rooms."

Opportunities for the marketing and media industries in an otherwise bleak year
Total Rewards, which was rolled out as Total Gold in 1997 and renamed Total Rewards a year later, is heralded by many as the gold standard of customer-relationship programs. And with the program generating $6.4 billion yearly, or 80% of its gaming revenue, Harrah's is confident where it ranks among competitors as well. "It's certainly the best program in the gaming industry and, more broadly, in loyalty," said David Norton, chief marketing officer.*

David Frankland, principal analyst at Forrester, frequently cites Harrah's, along with Disney and 1-800 Flowers, as the industry's leading examples of how loyalty programs should be run. Mr. Frankland said one reason for the program's effectiveness is that Harrah's has a customer insights and intelligence culture that starts at the top with President-CEO Gary Loveman and Mr. Norton.

"In every company we see running really strong loyalty programs, it's always driven from the top down," Mr. Frankland said.

'Next tier of sophistication'
Mr. Norton said the company communicates with its members regularly via 250 million non-acquisition pieces of mail a year; good customers can receive as many as 150 pieces of mail a year from one or all of its hotels. Harrah's sends nearly 8 million e-mails collectively to its loyalty members in a month. Harrah's average response rate for direct mail is in the high single digits. The company's belief in its loyalty program is so steadfast that it cut its traditional ad spending from 2008 and 2009 more than 50%. The company spent $106 million on measured media in 2008; for the first half of last year it spent $52 million and in this year's first half $20 million.

Mr. Frankland said Harrah's isn't only measuring things such as direct response, click-throughs and open rates. "The most-sophisticated firms also think about business metrics, like revenue, customer profitability and customer value, and how they are all linked. Once customer-intelligence people start thinking about business metrics, you know that they have gone into the next tier of sophistication."

In describing the role Total Rewards plays for Harrah's, Mr. Norton called it the "vertebrae of the company." This mentality took root back in 1998, when Mr. Loveman joined the company and brought Mr. Norton aboard from American Express to revamp Harrah's relationship-marketing practice. Across its dozen casino brands Harrah's now has more than 60,000 slots, 2,000 tables, 40,000 hotel rooms, 390 restaurants, bars and clubs and 240 retail shops from to gather valuable consumer data. And it tracks everything.

"We know if you like golf ... chardonnay, down pillows, if you like your room close to the elevator, which properties you visit, what games you play and which offers you redeemed," Mr. Norton said. "We not only use these things on the front end of marketing but for the service experience."

Mr. Norton said it's a mixture of good customized messaging and a strong loyalty program that sets Harrah's program apart. (The program is powered by SAS's predictive-analysis program and Unica's marketing management software.) "Airlines have good loyalty programs but don't do as much customized marketing," he said. "Then you have someone like Capital One who is sophisticated on the direct-mail front but doesn't have a good loyalty program. We have managed to do both well."

Over the years Harrah's has made significant changes to the program based on the data and research it does with its customers. Last year one of those changes included adding the ability to track and reward non-gaming spending, which has allowed it to better entice people who don't view themselves as big gamblers. "We wanted to make it relevant to them as well because they could spend a couple of hundred dollars on a room, the spa, food and shows and not be treated any better than a $50-a-day customer," Mr. Norton said.

Going forward Harrah's is looking to take its program mobile and is working on a dozen or so early stage programs. "Ultimately," Mr. Norton said, "we see it as a great device for two-way interaction."

What you can learn

Don't try to create a loyalty program overnight. It took Harrah's nearly 10 years to create an industry-leading loyalty program.

Don't just collect data. Use every consumer interaction to learn something new about your customers.

It's not only about leveraging the intelligence to drive revenue. Use what intelligence you've gathered to improve the customer experience. Total Rewards members receive mailings and marketing from whichever hotel they visit. Harrah's has tested its members' sentiment on receiving multiple mailings from multiple locations, and they actually like it.

Make customer intelligence a cultural thing and teach it throughout the company. Harrah's spends a great deal of time educating and rotating people through various positions in corporate and at its properties. This helps to strengthen the partnership element with the properties.

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CORRECTION: An earlier version of this incorrectly stated Mr. Norton's title.

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