Better Take Care Of Big Spenders

Better Take Care Of Big Spenders
Harrah’s Chief Offers Advice to Cablers

By Linda Haugsted -- Multichannel News, 7/30/2007
Washington— Consider adopting a customer-service policy based on meritocracy, providing faster responses and rewards for customers who pay you the most each month, advised Gary Loveman, chairman and CEO of Harrah’s Entertainment.

The keynoter at the CTAM Summit here July 23 related a bit of his personal cable-buying history as justification for this recommendation. The Las Vegas resident complained that he pays $230 per month for cable services. “By the way, that’s ridiculous,” he said as an aside about his total.

“Where are my toys?” he asked, noting his businesses give loyalty program members free rooms, Celine Dion concert tickets and meals. “Not a free movie, not a hat … just a bill every month. That’s the love?” he asked.

And when he calls for service, he added, don’t put him in a queue behind a customer who’s paying $19 per month. When the tech comes out, it should be a $230 tech, too, he said.

“Treat me differently! I deserve it!” he said to audience applause.

Harrah’s policy of treating customers according to their value to the gambling concern has increased the company’s stock price from a moribund $19 per share in 1999 to $90 this year, he said. That improvement is linked to a focus on customers 45 years old and older. His explanation: 20-somethings are always broke and too busy; 30-somethings are married with kids.

“God bless you, but we don’t need you,” he said of the latter category. Harrah’s target group has time and discretionary income to spend, and marketing is executed based on actual play and potential, as determined by software programs. There are now 44 million people in the firm’s “Total Rewards” loyalty program, including diamond-level members spending $10,000 or more per year at Harrah’s, and “Seven Stars” members, at $75,000 in expenditures per year.

Harrah’s adopted a centralized marketing scheme after operating its casinos as individual profit-and-loss centers. Loveman said he was able to execute that fundamental change by taking over ultimate profit-and-loss responsibility and basically ordering individual property managers to adopt the new scheme.

To replicate Harrah’s success, he advised operators to seek analytical experts for their systems, not just creative types that can create eye-catching ads. The casino chain indicated that the cash-back coupons drew repeat business, even in the months beyond the offer’s expiration date.

Harrah’s has increased revenue by deciding which customers it needed to spend marketing dollars on, a strategy cable executives said their industry needs.

One stumbling block, participants mentioned, is the inflexibility of billing computers to provision such customer-rewards offers as a buy two pay-per-view movies, get one free deal.

Also, the “silo mentality” built into the structure of most organizations can limit the success of marketing initiatives.

At Harrah’s, customer focus came from the CEO on down and was pursued by all divisional units, according to the study.

Now here's the interesting part. LVBear complains the the CEO was being truthful instead of being politically correct. I always thought that it was good business to treat your best customers/patrons with favors and to encourage them to return. Am I missing something?

 

business practices

What business could survive if they only offered sales and discounts to the customers who spent the most money. I can't see Walmart selling discounted products only to those that spent the most money. Most businesses use promotions to attract as many customers as possible. A percent of a high-roller's bankroll is not going to exceed a percent of the multitude of non-high-roller's bankrolls. I believe that this practice of Harrah's will eventually get them in trouble. I realize that it will take a long time based on their present assets. I believe that businesses that value all of their customers will survive the longest.

tgun

 

There's an old saying that says "Nothing Succeeds Like Success". Harrah's has proved that their formula works and I venture to say it will continue to work. They want the players that will make them money and discard those that don't. If I were in the casino business and had the opportunity to hire Harrah's CEO, I would do it in a heart beat. It's all about the money, nothing more, nothing less.

 

mega-corporations, Harvard Business School, and 6-5 Blackjack

In the 1950s, Harvard Business School profs started pushing some revolutionary theories - one - fairly well known - was a theory of labor - where labor was to be regarded as any other commodity resource utilized by a business - just as, when you need to buy steel to manufacture a product - you buy only the lowest grade of steel you need - at the cheapest possible price - that's how you 'purchase' your labor resource - you deliberately hire the most minimally qualified employees who can do the job - give them only the most minimal possible training - as you can pay them the least - and easily replace them - when an employee demands better wages and benefits - you evaluate the cost/benefit ratio for replacing the employee versus granting their request - if it is cheaper to replace the employee - fire them - and since the employees are the cheapest and least qualified you can find - they are generally easy to replace - if you want an example of this approach to human resources by a corporation - try Wal-Mart - a perfect application of Harvard Business School recommended practice -

at this same time - HBS also pushed a similar theory of customer relations - ie - produce the shoddiest product the customer would accept, provide the least in the way of customer service that you can get away with - and charge as much as possible - providing only the least, least expensive, and absolutely critical quality/service points that you must to keep your customers -

both approaches - for labor and customers - were literally meant to be appied on a case by case, individual basis -

these theories resonated well with the emerging mega-corporations - and their impersonal, by the numbers, management style - again - think Wal-Mart - shoddy products, poor customer services - long check out lines - but - the critical factor of low prices - Wal-Mart is the perfect example of what these HBS theories result in

as mega-corporations emerged in the retail and services industries - they adopted the HBS theories - and this is exactly what is happening with casinos and the consolidation of the gaming industry - think Harrah's - the Wal-Mart of gaming -

the philosophy that was expressed by Harrah's CEO - was text book Harvard Business School - the low rollers are garbage - not enough profit - treat them as such - give your high rollers just enough to keep them coming back - but use sham benefits whenever possible - and lower the product to the worst you can suck them into buying -

thus the rules for bj get worse and worse - no double after splits, dealer hits S17, double only on hard 10 or 11 - 8 deck shoes - poor penetration - and now 6-5 bj - keep making the game worse and worse for the players - until you have found the lowest quality product they will buy - same for comps - player's want comps - great - but - make them expire ever 6 months - make them good only for the current trip - a sham benefit to fool the players - and you don't need to pay off on most -

but this is not the key to success - Wal-Mart is growing revenues only through new stores in new locales - mostly in expanding to new countries - it is losing sales at its existing stores - as customers are tired of the shoddy merchandise and poor treatment - and stores that provide a little better product and sevice at a little higher price - such as Target - are stealing business from Wal-Mart - this HBS approach for retail and services works great at first - but eventually the mega-corporations push it to such an extreme they damage themselves -

I remember reading many years ago - a writer (I can not remember who) remarking that while the high rollers gave the casinos their profits - it was the low rollers who kept the casino doors open - paying off the contruction costs, paying the utilities and dealer salaries, etc - no low roller, as an individual, is important - but the mass of low rollers - as a market share - is where most of the casino revenues come from - in fact - I would bet that the majority of casino revenues/profits are an accumulation of the many small profits made off of their low rollers - not the few big profit high rollers -

low roller profits are also more stable - there was a recent article about casino revenues being down in the last quarter as a few high rollers got lucky at baccarat - high roller profits are highly volatile - low roller profits are very steady -

any casino that follows the practices of a Harrah's will eventually shoot itself in the head - as they will always have that 'lowest roller' segment to cast off - while they concentrate on the high rollers - until they have thrown away their stable profit base - find profitability has become extremely volatile - then their early success will turn into failure -

and a smarter, aggressive, casino company will provide the low/mid rollers a better product and better services and steal away that stable revenue/profit base - then use that profit base to leverage themselves into the high roller market place - but until then - Harrah's approach will dominate - and casino treatment of their patrons will worsen, the games will worsen, and we'll see more stupid and arbitrary treatment of gamblers - such as Harrah's ousting someone for getting lucky at video poker - did I mention 'low quality employees' - even at the management level - obviously -

Harrah's CEO is not a good businessman - he is an incompetant fool - and his approach will eventually destroy Harrah's

can't happen too soon

 

Great points and intersting post RK

I just happened to get back from a trip this weekend. While I have stayed at Harrahs properties in the past - I don't now. I choose where to spend my time and money and right now it's NOT with Harrah's

Any other views of opinions?

 

Harrah's

when I moved to Yuma - I started having to do regular business trips to Bullhead City (across the river from Laughlin) - so started staying in Laughlin - as it was cheaper - and Harrah's was the cheapest - so stayed there - quickly found myself getting free room offers from Harrah's - a couple of nights a month - I am definitely a low roller - but - still got free rooms at Harrah's - kept returning to Harrah's - as it saved the agency I work for a considerable amount of money (like - 50 free nights, one year) - but every time I stayed there - I would get really irritated - at the bad games - the poor cocktail service - the really horrible and over-priced food - the bad service - and the 'we don't care' attitude whenever I made a complaint - eventually started staying elsewhere - Harrah's is expert at knowing just what they have to offer to keep people coming back and putting up with the bad food, bad service, and bad games and treatment - free rooms - Harrah's comps 80% of their rooms -

am now staying at other places - mostly Riverside, Edgewater (no more Edgewater - since they canceled their bj tourneys!!!!!!) - River Palms - and get enough free room offers for my low roller play - that I am happy - better food, better people, etc. - one complaint I had at Riverside - I got comped into a suite my next visit - that's keeping customers happy -

the basic theory that HBS advanced in the 50s was: everything is a 'transaction' - all transactions must be evaluated by cost/benefit assessment - and the cost/benefit ratio of each individual transaction must be maximized to the company's benefit, to the most possible degree -

result - Wal-Mart, Harrah's, 6-5 bj, etc. - blame it all on Harvard Business School

 

Confused

RKuczek, I'm not contesting your evaluation of Harrahs, Laughlin per say but am confused why as a confessed "low roller" that received 50 free room nights within one year you find that an inapprotiate reward for your "live table" play. It seems liberal to me being almost 1/6th of a calendar year.

Having made only one trip to Harrahs Laughlin my experiece fortunately didn't include as yours poor cocktail service, horrible overpriced food, bad service and having not made any complaints I didn't experience any "we don't care attitudes" but rather found the service employees attendent to my requests, in fact I found them quite pleasant.

Maybe Wal Mart was a foundation for the HBS program not vice versa, Wal Mart continues to reinvent success year after year as does Harrahs if Wall Street is an indicator.

 

Harrah's and such

Harrah's was giving everyone free nights for a few years - One person who works where I do would get free nights every month - even though she did not gamble - at all - that was their hook for getting people there - that stopped a couple of years ago - still comp their players - but not so much us low rollers - I think they were comping based on stays - when you used your free nights - they would start giving you even more - this was before the changes that the first post on this thread talks about -

I thought a lot of the line staff and dealers were quite nice at Harrah's - and hard working - but food was terrible - expensive compared to other Laughlin places - I play races in evening - basically no cocktail service at race book after 5:00pm - they were understaffing their restaurants - I dislike having to stand in line for 45 minutes to get into the coffee shop - and then wait another 30 minutes for a waiter - etc etc etc - any complaint about anything - they would just brush it off -

Harrah's basically impressed me - even then - as a place that knew exactly how poor a product they could provide - rather game rules, service, food, etc. - and still keep you coming back with the hook of free rooms - as I haven't stayed at Harrah's for quite a while - maybe some aspects have improved - while others (such as room comps for us low rollers) have worsened - but - the attitude expressed by their CEO in that article - was exactly how I saw Harrah's - even before then -

I think we see more and more - the mega-corporations - no matter what industry - following the practice of viewing everything from a very narrow cost/benefit analysis - and driving product/service quality down to the absolute minimum, while driving prices as high as possible - and taking the same attitude towards their employees as their customers - this does produce a very profitable company - at first - but - has very real and bad long term consequences - as the effects of this way of doing business eventually have cumulative impacts which are very bad for the corporation -

Wal-Mart is not doing as well as people think - they are starting to lose customers, finding communities being very hostile to Wal-Mart locating in them - have a lot of very unhappy employees and horrific turnover - etc - what makes them look good is their growth by expansion - into new countries basically -

what happens with the Wal-Mart/Harrah's approach is - they are right - losing a low skilled employee means nothing - but by treating their employees badly - they produce a constant high turnover situation - which is very disruptive of operations - even at their minimum level - and the cumulative impact of constantly losing and having to replace employees is much worse than the sum of the individual incidents - same with Harrah's losing their low roller customers - one doesn't matter - but losing, or, rather, driving away - all thier low rollers and some of their mid rollers - and the cumulative impact will very much hurt their cash flow and profitability -

 

Well, not to switch gears but Harrah’s is a publicly traded company, at least until the sale to Apollo Gaming is completed. Then it will be interesting to see what happens to the company. Whether they keep it intact or begin the selling of different non-performing assets.

How about the MGM group? I didn’t realize how many of the casino’s that group owns. Are they public or private and how do members feel about that group? I know that the MGM group has a LOT of invite BJT at their properties.

 

The MGM Group is publicly traded on the New York Stock Exchange under the name MGM MIRAGE (don't know the full proper name or the symbol). They own all the casinos on the West side of the strip from Mandalay Bay to Treasure Island except for Caesars Palace and the new one going up just South of the Ballagio in addition to other holdings. They also own various casinos outside Nevada. Virtually all of their tournaments in Las Vegas are invites for the higher rollers.

Now let's hear the bashing on this group but remember, they also make big bucks like Harrah's and Wal-Mart.

 

He he he - just because a company makes big bucks I won't bash them. I just don't want them to make big bucks off of me! :laugh:

I also found out that MGM owns Gold Strike in Tunica and Beau Rivage in Biloxi.

I just find it "interesting" that I haven't seen (doesn't mean they don't have them) any "open" BJT at the MGM group. Heck in Atlantic City they just don't have ANY BJ tournaments.

As far as how a company treats their customers - well the more companies, the more choices, the better for us, the consumer right?

I just don't understand why a company, like a Harrahs feels the need to have all their properties "identical"? I mean look at the Boyd Gaming Group. Their "flagship" is the Borgata in AC (I've never been there) but I hear great things from everyone about it. Heck I even had a pit boss at (XXXXXX) tell me, while playing at (XXXXXX) to "check the place out before you leave" (seriously)

What shocked me about this is that the Boyd group runs The Fremont, downtown and trust me they DON'T cater to high rollers. It seems like they (Boyd gaming) have different tiers and encourage/steer their customers to different places.

 

I disagree with this statement. Let's say you took a complete gambling newbie who's never been to LV and knows nothing about who owns what. Now take him to MGM, Imperial Palace, Mandalay Bay, Harrah's, Flamingo, Paris, Riviera, Stratosphere, Bally's, Caesars Palace, Planet Hollywood, Bill's, O'Shea's, New York, Venetian, Circus Circus, and any others you want to name. Don't let him see any player's cards or Diamond Lounges. Then ask him the name the casinos owned by Harrah's because their "identical" qualities. Do you think he would be anywhere near correct?

On another note about what I said about bashing the casinos, that was just sarcasm. Enjoy, Enjoy.

 

Ahhhhh... Once again I'm allowed the written word to misconstrue what I really "meant" to write/say.

By "identical" I was referring to the CEO's statement about focusing on the "high rollers".

Sure their properties are different - as well as they should be. However let me provide a different example here in Florida

Walt Disney World. If you want to stay at a WDW property they have their "high roller" resorts - Contemporary, Polynesian & Grand Floridian (250-350/night). They they have the medium value resorts (175/250) and finally value priced resorts (79-150)

There are several value priced, several medium and 3 high end resorts. Each has it's own characteristics and caters to the clientèle that they are attempting to "bring in"

In AC Harrahs has 5 properties: Harrahs, Caesars, Ballys, Wild West and Showboat. Now for the high rollers they send the limo's to Caesars and Harrahs and Bally's. Showboat - not really and definately not Wild West.

Go to Caesars on Sat night and all tables are $50-$100 minimum. You want a $10 table - you gotta go to Hilton or Resorts. Wild West will get you a $25 table.

THAT's what I meant.

 

I'm still not getting this "identical" thing.

So 3 provide limo service and 2 don't. What's "identical"?

So Caesars has higher minimums then the other Harrah's properties. Again, what's "identical"?



Now I really don't mean to belabor this point and maybe I'm just dense, but I'm just not getting the "identical" thing.

 

ok I'll try again.

Re-read the article. He's advocating going to a system that dumps the 20 & 30 somethings. The Rewards programs treats everyone alike and doesn't really differentiate.

In Vegas the Terrible's (the name) isn't attempting to attract the Venetian crowd. The Plaza downtown is going after a different crowd than TI.

However most of the Harrahs properties are doing just that - dumping the undesirables (in their opinion) skimming the top and treating them like robots - kinda like the HBS model RK discussed. Rather than niche marketing.

Whereas other properties give their hosts the lattitude and freeway to treat certain players better/worse - at Harrahs you're just a number

 

OK. I GOT IT. :celebrate

Finally, I'm done with this thread! :cheers:

 

Harrahs

To RKuczek I say amen. You stated the arguement much better than I did. Harrah's "can fool some of the people some of the time but not all of the people all of the time". I'm done being fooled.

Great thread Fred.

tgun

 

An interesting thought occurred to me as I re-read this thread and I know that there are people out here who probably know the answer so here goes:

Do the casino's make more money off their "high rollers"

or

The multitude of red and green chip business?

Secondly what is more important?

A customer who comes to your casino with a BR of 5,000 once a year for a week

A customer who comes to your casino with a BR of 2,500 four times a year

A customer who comes to your casino with a BR of 1,000 once a month

or

A customer who lives in your city and comes 2-5 days a week?

Of the above 4 customers who is the best "client" and who "should" get the preferential treatment?

 

Big Spenders

fgk42,
You're asking some tough questions here but I think the easy answer is obvious. They make the most money from NON AP high rollers. It's like taking candy from a baby. For that reason they will give this category of player a free room (suite) and many other comps until 1.they die or 2. they run out of money.
Please send me a PM and let me know if we've ever met. Am I detecting something in your posts that looks familiar?

Billy C

 

most money

I think it is obvious that a casinbo makes the MOST MONEY PER PLAYER off of their high rollers - but - I think if we had good data - it would show that they moke the most money - TOTAL - off of their low/mid rollers - as there are so many more of them -