Case 3
Harrah's Big Database Gamble
1. Analyze Harrah's using the competitive forces and value chain models.
As the case points out, Harrah's is facing stiff competition. This competition is
coming from traditional competitors (Las Vegas and Atlantic City), as well as from
new entrants (riverboats and Indian reservations). Customers have many options
in terms of how, when, and where they gamble. These same customers can elect
to take a trip to the beach, as opposed to travel to a casino. When performing a
value chain analysis, it appears that Harrah's is using its new business strategy to
create a new service, enhance product penetration, and lock in its customers.
Harrah's new information system is having a strategic impact on its operations,
sales and marketing, and service activities.
2. Describe Harrah's business model and business strategy. How do they differ
from those other gambling companies?
Harrah's business strategy is a customer relationship management strategy.
Essentially Harrah's is successfully competing by “knowing” its customers.
Harrah's uses its technology to identify, track, and cultivate its profitable
customers. Harrah's Total Rewards program allows Harrah's to gather important
information about its customers, as well as reward its customers for the amount of
time that they spend gambling at Harrah's casinos. Harrah's competition relies on
fancy casinos, extravagant rooms, and entertainment. In contrast, Harrah's is
getting to know its customers by studying and analyzing their behavior.
3. What role has database technology played in Harrah's strategy? How
critical is it to the success of the company?
Database technology is central and critical to Harrah's strategy. Harrah's database
tracks information about Harrah's customers, including gender, age, home location,
favorite games, length of playing time, size of bet, number of bets, average size of
the bet, and total points. Harrah's uses information gleaned from its business
processes to build personalized marketing programs for its customers. Each time
a customer makes a transaction, his record is updated. Since all Harrah's casinos
now have access to the centralized database, Harrah's employees are able to view
each customer's record and offer that customer consistent treatment regardless of
which casino the customer frequents.
4. How did Harrah's use CRM software and modeling tools to address the
company's problem?
Harrah's uses CRM software to coordinate business processes that deal with
customers. After combining its gambling and hotel reservations data, Harrah's
uses its CRM software to build detailed gambling profiles for each of its customers,
analyze the customer data, and build personalized marketing programs. Harrah's
WINet system enables the company to estimate how much money the company
can earn from a customer over a given amount of time.
5. Are there any ethical problems raised by Harrah's use of customer data?
Explain your answer.
While the potential is there to sell customer data, Harrah's has said that it will not
sell customer data to third parties. Some argue that Harrah's is exploiting
gamblers, perhaps gamblers with a gambling addiction. If this argument is true,
then encouraging a person with a gambling addiction to spend more of his money,
is obviously wrong. Harrah's counters by saying that it is only encouraging people
who gamble to do their gambling at a Harrah's casino, as opposed to gambling at a
non-Harrah's location.
6. What problems can database technology and customer relationship
management software solve for Harrah's? What problems can't they
address?
The database technology and customer relationship management software help
Harrah's achieve a competitive advantage in the gambling industry. The database
technology and customer relationship management software enable Harrah's to
maintain sharp customer profiles, analyze its data to identify the most profitable
customers, improve its customer service, and offer consistent customer service.
The database technology and customer relationship management software cannot
address organizational issues, such as the switch from a casino-focus to a
customer focus, loss of privacy fears, and gambler exploitation criticisms.