Gambling on Innovation

How Business Intelligence Helped Caesars Out-Think the Recession

What would you do if a guest wanted to bring a tiger to your swimming pool?  If you were Caesars Entertainment, the largest gaming corporation in the world, you would apply business intelligence to the problem.

Business intelligence, extracting meaningful information from data, has not been mastered by many.  In 2003, the concept was new in gaming.  That’s when Gary Loveman, a Harvard Business School professor, became CEO of Caesars (then called Harrah’s Entertainment) and launched the industry’s first comprehensive business intelligence initiative, the Total Rewards program.

With Total Rewards, Caesars gained the ability to study preferences and probabilities, and determine with remarkable accuracy how much a guest (like the one with the tiger) would be worth to Caesar’s over a lifetime of gambling.  This strategy helped drive growth and reduce risk…right up to the recession.

ONE STEP BEYOND
Recently I sat down with David Norton, Chief Marketing Officer of Caesars, and the man behind Total Rewards.  Norton had just received Loyola University’s Lattanze Executive of the Year Award for distinguished and strategic application of information technology to organizational objectives. I wanted to learn how business intelligence helped Caesars navigate the recession.

“When the recession hit, and revenues started falling away, we analyzed the data,” Norton said.  The data told them their best customers were spending about 20% less.  Why were they slowing down?

To find out, Norton needed to peel back another layer of the data.  He knew he had to take Total Rewards one step further.

If you’ve spent any time with Caesars, you probably know how Total Rewards works.  Guests receive membership cards.  When they use the cards, Caesars collects information on their gender, age, favorite games, where they live, what they do, how much they earn, how much they wager, how often and for how long.  The loyalty program has become the world’s largest database of gambling indicators, with information on over 40 million members.

Norton’s innovations centered on taming the power of this data.  He created a dedicated VIP task force, a cross-functional team for analyzing and utilizing the reports extracted from Total Rewards.  The team reported to finance and served as internal consultants who helped establish a deeper set of analytics for understanding VIP behavior.

Through this effort, Norton discovered many realities about the business, including why VIP spending was down.  Turns out, it was partly self-inflicted.  Early in the recession, Caesar’s cost containment strategy had included laying-off front line employees, and the VIPs felt the difference.

“This taught us that you can’t cost-cut to success,” Norton said. 

He returned to the data for insight into how they currently added value, and found that, apparently, they didn’t.  Service scores had converged between two VIP status levels, gold and diamond.  One report even showed that diamond-level VIPs were giving Caesars a lower service score than gold VIPs – the opposite of what one would expect.

What did this mean?  It certainly brought into question the robust infrastructure in place for diamonds.  With shorter lines and faster check-ins, diamonds were getting a better experience.  But they didn’t feel it.

Norton decided to assign fewer guests to each service host so they could touch more VIPs.  As a result, service scores, which had dipped to the low 50s when Caesars cut front-line staff, reached an all-time high.  Confident he had stopped the losses and safeguarded future profitability, Norton put the task force on the prowl for more revenue.

DIFFERENTIATED SERVICE
“In everything we do, we are trying to understand incremental profitability,” Norton said.  "We need to understand what extra programming is going to get them to make a third or fourth trip in a month.” 

Differentiated service is that special something that brings people back.  Competitors such as MGM and Las Vegas Sands deliver good service, Norton said, but not differentiated service.  For instance, their hosts might come from behind the desk to point guests in the direction of the elevator.

“That’s nice, but not differentiated," Norton explained.  “Let’s say you and seven buddies book a tee-time and spend a couple hundred bucks a pop.  We’ll meet you at the airport with a limo that takes you out to Cascata.  We’ll make sure you get checked in right away.  That’s part of the insight of leveraged data."

THE PROOF OF PROFITABILITY
Revenues are not back to pre-recession levels.  But Caesars has continued to gain market share and grow.  According to Norton, everything they have done to remain competitive during the recession is transferable to other businesses.  It starts with how you think about data.

“We can prove analytically what customer behaviors are more profitable to us, and drive those behaviors with differentiated service, backed by technology innovations,” Norton said.  “That’s important to our bottom line.  Our competitors don’t do that.”

Their competitors also probably don’t let guests bring a tiger to the pool.  But that’s because they haven’t captured, as Caesars has, the power of business intelligence to influence loyalty, increase revenue and drive profitability.

View this article online at SmartCEO.