Customer Lifecycle and Database Marketing

Customer Lifecycle and Database Marketing

Customer Relationship Management is perhaps one of the most important activities business managers can engage in. Customers dictate the life cycle and demise of the business. Hence, the better the business relationship with the customer, the more likely the company is to survive in the long-term. Harrah's has implemented a customer relationship program in order to ensure that it retains current customers, attract new customers, and maintain a long-term relationship with potential return customers.

The customer relationship management program at Harrah's includes two elements: Database Marketing and the Total Gold program. These two elements work together to enable Harrah's to engage in direct marketing strategies to optimise the efficiency and effectiveness of its marketing investment.

The database marketing program concerns they way in which Harrah's invests in its customers. This entails making decisions based upon the projected worth on customers rather than relying on observed worth. In other words, Harrah's would invest in the probability of customers returning by means of submitting customer profiles to the database and targeting them for direct marketing. In this way, a customer centric approach was taken to direct marketing, where customers dictated the marketing action.

To promote this, several CRM programs were implemented at Harrah's. The objective of the New Business Program, for example, was to improve the process of converting new Total Gold members to loyal Harrah's customers. Through the program, customer worth predictions are used to make more effective decisions regarding marketing to potential customers, and to enhance customer loyalty.

The Loyalty Program for the Frequency Upside was used to target customers estimated to give only a small proportion of their potential customer time and loyalty to Harrah's. This enabled Harrah's to create programs by means of which these customers were encouraged to spend more time at Harrah's properties. The Loyalty Program for the Budget Upside was used to identify customers who were only giving a small amount of their gaming budget to Harrah's, while the rest was spread towards other competitors.

The purpose of the Retention Program is to target customers who are showing signs of attrition, or who had broken their historical visitation pattern. The Total Gold program's purpose was to encourage cross-market visitation by Harrah's customers. Customers who visit destination markets are encouraged, in this way, to visit and play at Harrah's facilities.

Predicted customer worth is an important component of CRM, because it predicts the possible future of customer loyalty (Berndt, Herbst & Roux, 2005). The observed level of play serves only as an indicator of past behavior, which is not necessarily a predictor of total customer loyalty for the future. By predicting potential customer worth, the casino is able to target customers who would otherwise have been ignored and lost as a result.

When comparing the theoretical wins for the customers targeted in the frequency upside loyalty program with the incremental cost of the program, the difference is 18%, or $110,948, which results in considerable profitability as a result of sending out offers.

When comparing the theoretical wins of customers targeted with the budget upside program with its incremental cost, the difference is $1,927, which amounts to 4%. This is significantly less than the results of the frequency upside program, but nonetheless a positive value that resulted in profit. The initial investment in this program is also significantly lower than that of the frequency upside program.

Harrah's CRM strategy is to focus entirely on customers and their potential behavior. It is assumed that everything Harrah's gives them has an effect upon customers' future gambling decisions. Hence, the Gold Card program is used to collect customer profiles, which in turn are used in it direct marketing efforts targeted towards customers who have shown the potential for loyalty. In this way, the programs are conducted in an integrated way to target customers who are most likely to be loyal in the future of Harrah's.

Specifically, this effort occurred in three phases: new business; loyalty; and retention. The first phase focused on encouraging new customers to return a second and third time. The second phase was focused on extending existing relationships with customers who have visited Harrah's for three times or intermittently for six months. The final retention phase was focused on customers who have demonstrated signs of attrition in order to reinvigorate their loyalty.

This strategy is highly sustainable, as it focused not only on new and existing customers, but also on customers who are showing signs of leaving. By considering elements such as future customer worth, the hotel ensures a dynamic and sustainable strategy to maintain its customer relationships and continually forge new ones.