Based on the Case study you are about to read, answer each of the questions found below.
Caesarâ€™s Entertainment Inc.
Gambling has long been a controversial topic in the United States. While the morality debate over legalized gambling remains present in modern society, legalized and state administered gambling has maintained geographic expansion. This legalized gambling growth allowed companies in the gaming industry to broaden their customer base to people who may have never visited a casino. In 2000, Caesarâ€™s Entertainment Inc. had emerged as the market leader of the gaming industry, operating casinos in more markets than any other casino company. Media, investors, and competitors alike noticed Harrahâ€™s widespread success as the companyâ€™s earnings more than doubled in the past year and took notice of Harrahâ€™s unique marketing strategy. Competitors began copying Caesarâ€™s marketing methods, stock prices quickly rose as investors learned about the marketing results, and Wall Street analysts were also taking note of Caesarâ€™s competitive advantage increasing.
Philippe Fatro, Chairman and CEO of Caesarâ€™s, too, had his eye on the companyâ€™s strategic marketing efforts. Fatro wanted to determine to what degree â€œthese marketing efforts had contributed to Harrahâ€™s overall performance, and if these marketing results were a one-shot event or could be achieved year after year, especially as the competition introduced similar programs.â€
Marketing Strategy Background
In the early 1990â€™s, Caesarâ€™s was spearheading casino companies taking advantage of legalized gambling expansion in states beyond Nebraska and New Jersey. Fatro also established a communication program surveying customers who had won over a certain amount in the casinoâ€™s jackpots, as well as began developing rewards programs for frequent customers at each of their different properties. These factors made Caesarâ€™s people-focused marketing strategy appear to be working. However, the emergence of flashier, themed casino environments in the mid 90â€™s proved that this people strategy was inefficient for continued customer growth. Fatro determined that Harrahâ€™s true core competency was customer loyalty, and they would use that skill to build them into an industry leader. To accomplish the task of developing a new marketing strategy and implementing it smoothly in each autonomous property, Gary Oveman was hired as COO in 1998. Oveman was able to expand upon the already existing rewards system, establishing the customer-pleasing rewards card, and properly applied customer data Caesarâ€™s IT department had collected to home in on specific target markets and strengthen overall customer relationships.
Analyzing the strategic marketing decisions Oveman implemented and customer responses to them will assist Fatro with determining just how much of Caesarâ€™s growth can be attributed to marketing efforts, and if this marketing approach would be sustainable.
Overall, Ovemanâ€™s many pronged marketing strategies, highlighting Caesarâ€™s core competency, customer loyalty, as a competitive advantage, does seem to have played a role to some extent in the companyâ€™s boom between 1998 and 2000. When examining the Total Rewards program, it has proven to be successful when attracting new customers, but effectiveness of the program turning these new customers into frequent customers was lacking. Existing Total Rewards members were targeted through cash and food-based offers, which did prove to result in a spike in the number of guests that visited the casino after the offers were distributed. Other offers of cash and free play were extending to a separate group of customers as an attempt to extend the time customers spend at Caesarâ€™s, and thus, increasing the percentage of the customerâ€™s gaming allotment Caesarâ€™s receives. This resulted in about a fifty percent increase in trips per guest but did not see a significant result in extending how long a customer stays at Caesarâ€™s. Lastly, coupons redeemable over a three-month period were mailed out to a massive pool of customers whose visits were declining unexpectedly to retain them as loyal customers. Of those who received this offer, a little less than half of them returned to Harrahâ€™s at least once a month.
Each of these initiatives to increase customer loyalty and growth were technically success, even if in unintended ways or in smaller amounts than anticipated. Despite being theoretically successful, I do not believe these marketing strategies were a significant contributing factor to Caesarâ€™s growth to become the industryâ€™s market leader. Nor do I think that continued use of this strategic marketing plan would deliver sustained yearly growth for the company. With the geographical expansion of legalized and state supervised gambling, Harrahâ€™s was extending their reach throughout the country as they opened up new locations as gambling became legal in that area. These expansions provided a whole new set of customers, previously unattainable. Therefore, Harrahâ€™s will inevitably increase the number of new customers they are obtaining. While the marketing efforts were able to refurbish customer relations with some of those who had unexpectedly stopped coming, they primarily appealed to newer customers who did not often turn out to become loyal customers. I would suggest Fatro pursue additional marketing efforts to ensure the sustainability and effectiveness of their marketing strategies.
Final Recommendations & Implementation
Numerous options are available for Caesarâ€™s to improve upon their marketing efforts to maintain steady company growth. My first suggestion would be to start introducing different company-wide specialty nights, where certain food, cash, or free-play offers are extended to targeted customers (like their loyal customers, Total Rewards customers, female customers, seniors, etc.) on designated days on a weekly or monthly basis. An example of this could be to offer an Early Bird special on Thursdayâ€™s from 3pm to 6:30pm, where Caesarâ€™s provides a number of the first customers to arrive with $15 in free-play, and then after they have reached the cut off, each following customer gets $5 free-play. This would not only bring in new customers, but also would bring in repeat customers each week for the various specialty nights offered.
Establishing a Refer-a-Friend program, where existing Total Rewards customers are given a tiered reward system where the more people, they refer to the Total Rewards program the bigger your prizes get, would allow for retention of existing customers, but introduction of new customers that have a higher likelihood to become loyal customers because they at least know one friend who also frequently visits the company. Lastly, Caesarâ€™s could use the high responsiveness they received with mailing customers (or potential customers coupons/promotions) and start mailing out coupons or vouchers to customers on their birthdays, holidays, and when they reach various milestones in how long theyâ€™ve been a Total Rewards member. Implementation of these marketing efforts, as well as maintaining those already existing would provide Caesarâ€™s a better probability of sustained financial and customer growth on a yearly basis.
- Which strategy did the Caesarâ€™s Entertainment Inc. adopt? Customer-centric marketing or product- centric marketing? List specific relevant evidence to support your argument.
Hint: refer to key differences between customer-centric marketing and product-centric marketing in lecture notes, it provides a good guide for itemized discussion. Note that you donâ€™t need to discuss every aspect listed in lecture notes, however, try to find as many supports as you can.
- Explain why â€œCRM is organizational, and not departmentalâ€ based on CRM implementation of Caesarâ€™s Entertainment Inc.
- What did Caesarâ€™s do to enhance customer loyalty? Did they work? (make your conclusion convincing through numbers).
Hint: you may follow four steps to answer question 3 and 4. First, specify the objective(s) of the relevant marketing program(s). Second, identify the key performance index for the corresponding objective. Third, divide whole period as pre-program period and post- program period, calculate summary or comprehensive statistics such as average, percentage or sum for these indexes at each period. Forth, compare them and draw your conclusion, if possible, link your discussion with incremental revenue and profit.
- What did Caesarâ€™s do to retain the customer? Did they work?
- What are the competitive advantages of Caesarâ€™s Entertainment Inc.? Are they sustainable? Why?