Operations Management OM Tools

Operations Management Tools

Headquartered in Las Vegas, Nevada, Harrah's Entertainment is the world's largest gaming company (Harrah's Entertainment, Inc., Hoover's) with revenue of more than $4.5 billion in 2004 and a one year sales growth of over ten percent. Harrah's owns, operates, and/or manages more than forty casinos (under such names as Bally's, Caesars, Harrah's, Harveys, Horseshoe, Showboat, and Rio) in four countries. Its operations include casino hotels, dockside and riverboat casinos, and Indian gaming establishments. Harrah's success is based on a very successful operations management system called Winner's Information Network (WINet) that has fueled customer-driven operations and marketing programs.

Instead of building glitzy casinos with attractions such as volcanoes, sinking ships and replicas of the Eiffel Towe to stay on top in the competitive gaming industry, Harrah's developed a service-oriented strategy based on collaboration (Levinson, 2001). In the mid-1990's, Harrah's implemented WINet in order to execute its strategy. WINet was an innovative operational management system that linked all its properties and allowed the company to collect and share customer information across all properties. WINet consolidates data from all of the company's transactional, slot machine, hotel management and reservation systems. Every transaction is instantly loaded into the WINet database, and the information collected is immediately accessible throughout Harrah's facilities. Thus, all reservation agents have real-time access to a customer's history and marketing uses the data to create individualized marketing programs for customers. According to Levinson, WINet is credited with changing Harrah's corporate culture "from an every-casino-for-itself outfit to a collaborative, customer-focused enterprise."

What Harrah's WINet has done that is different from other approaches is link its different databases to create a complete profile of its customers -- their hotel information, what games they play, what they spend in retail outlets and what entertainment they like (Gerwig, 1998). Thus, it's not just useful for marketing people, rather it empowers all employees to have ready access to information to improve operational decisions. WINet paved the way for a very successful national loyalty program called Total Rewards that targeted and rewarded customers (Harrah's uses science to stimulate sales). Unlike many loyalty programs that focus solely on marketing to customers, this program drives real-time service as well.

Essentially, patrons apply for a Total Rewards loyalty card and earn points by gambling and spending money in the casino (Harrah's uses science to stimulate sales). Harrah's assigns cardholders a "customer value" based on the expected revenue they will generate. This data then drives operations to cater to the most profitable customers. For example, customers with higher values get quicker responses from Harrah's phone systems that have been programmed to allocate callers to the appropriate service queue. Harrah's even goes as far as attempting to persuade less profitable customers to go elsewhere by quoting ridiculously high room rates. Further, customers have powerful incentives to consolidate their gambling with Harrah's, boosting same-store revenues and earnings.

Can Harrah's demonstrate hard dollar benefits resulting from its efforts? You bet it can. There are ample metrics demonstrating success (Make every customer more profitable: Harrah's Entertainment Inc., 2003). For instance, Harrah's estimates its customers spent about forty-three percent of their annual gambling budgets at Harrah's properties in 2002, up from thirty-six percent when the Total Rewards program began. And, Harrah's states that it has been able to leverage the Total Rewards program to increase cross-market play -- the amount of gambling revenue generated by customers outside their home markets -- by twenty percent since 2001. In 2003, Harrah's loyalty program included six million active member who had used their memberships within the past year and a total of twenty-six million members. In the same year, seventy-five percent of the company's gaming revenue was tracked on the card.