Harrah's Crm Strategy

The dilemma faced by Harrah’s is an increasingly competitive gaming market that is becoming that way because of a trend that is mostly outside of Harrah’s control or influence: the changing legal environment. Due to this fundamental shift, a major expansion of gaming operations took place across the United States, and the main response of gaming firms was to attract revenue by adding to their casinos capital-intensive amenities that would normally be associated with high-end hotels. As these new facilities and upgrades to rooms were not themselves intended to be revenue-producing, but rather peripheral to the core gaming operation, this approach was a costly way of competing.

While spas, restaurants and shopping may be effective in attracting customers, the direct effect of these on customers’ spending behavior is difficult to determine and may not justify the large sums required for their construction and operation. Thus, rather than compete in a costly amenity war, Harrah’s chose a smarter way of gaining a greater and more profitable share of the gaming market.

In addition to the changing regulatory environment, casinos followed hotels in the 1990s and 2000s by offering more lavish amenities in order to simply keep up with the competition; new and expensive ways of retaining customers were now a “must” rather than an extra, and this cut into hotel and casino operators’ profitability. Here, too, is a relationship between investment and benefit that is difficult to measure and analyze; with expensive amenities becoming a must-have feature of an upscale casino or hotel, the operators were assuming that all customers not only had the same expectations and preferences, but warranted the same level of enticement to remain customers. Higher expectations combined with a wider market means that hotels and casinos would have to keep pouring money into a black hole, with no idea of how well or poorly spent these sums were.

Recognizing that not all customers are...