Online Extra: Harrah's: A Big Payoff from Loyalty

President and CEO Gary Loveman explains how a new info-based incentive program gets gamblers to spend more at his casinos

In the mid-1990s, Harrah's Entertainment (HET ) had a problem: The gaming company was getting only 36% of each of its customers' business. So it set out to improve that with Total Rewards, a high-tech loyalty program that tracks the games players play and lets Harrah's target benefits like free meals, shows, rooms, merchandise, and even a ride with Harrah's-sponsored NASCAR driver Larry Foyt, all based on customer preferences.

Today, the 26-casino chain is getting 43% of each of its customers' gambling bucks, with President and CEO Gary Loveman arguing that Total Rewards adds $1.10 to Harrah's $47 stock price. The idea is to let even small gamblers get treated like movie stars in Vegas, helping Joe Blow live a little like J. Lo. Loveman recently talked to BusinessWeek E-Business Editor Timothy J. Mullaney about the reward program and the role info tech plays in it. Following are edited excerpts of their conversation:

Q: What was the business problem you were trying to solve when you began Total Rewards?


The problem was that casino-gaming customers were surprisingly disloyal. They shared their business with a lot of casinios. In 1998, for all customes who visited Harrah's once a year or more, we received only 36% of their gaming budget, which is an astonishingly low number for an important service like this.

The idea was to get them to bring more of their business to their preferred provider, which would be us. Think of a customer who lives in the Philadelphia area. He goes to Atlantic City and sees us four times a year. If he goes to us eight times a year, there's an enormous change in profitability. We don't need more gambling, we need more loyalty.

Q: What is Total Rewards, and how does it work?


It's a loyalty program that gives customers incentives to consolidate their gaming business with us. People put their [Total Rewards] card in a slot machine or give it to a pit boss for a table game. It's used to give you complimentaries and points, and to give you an aspiration to be a platinum or diamond member, which comes with a lot of important benefits.

[Rewards vary] by property, but it might be free valet parking, guaranteed room reservations at peak times, invitations to special events like a private party with Bruce Willis and [his band] The Accelerators at Lake Tahoe. You can either use your points in modest increments for meals and room, or you can accumulate them for a NASCAR ride, or [even] a car.

Q: You upgraded the program this summer. How is it different now?


After the upgrade, people can accumulate their credits. If you lived in Omaha and you came to see us in Council Bluffs, Iowa, every day and spent $20, you were offered $20 a day in goodies -- which was nothing. Now, you can accumulate all those little benefits, so you'd get to $100 of credits, which would mean something you cared about.

Q: Why haven't other companies in the casino industry done this to the degree you have?


It has been very expensive from an information-technology point of view. The strategy of most gaming companies doesn't focus on the experience of the slot gambler, like we do. We're all about casino gambling -- that's what our company does. All the companies have a loyalty card. But there's an enormous difference in how much value you get from that information. A card is not a card is not a card.

There are two or three critical differences. We track your card anywhere you visit is. We track you across your different visits. We get $1 billion in revenue -- 20% of our revenue -- from [people visiting a property other than the Harrah's casino they visit most often]. And we use the data it generates to market in a highly customized way, depending on what you tell us.

You don't just get something for any person who plays slots, and we don't just throw out buffets. We customize the offer to you. You may be very interested in dining or entertainment or special events. We can drive visits with you that someone else can't.

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