Tuesday, October 6, 2009

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

October 5, 2009: summarized from AdAge.com -- 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.

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.

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."

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