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Using Insights to Launch an Innovative New Business in Recessionary Times

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Veronica Smiley, director of marketing at Harrah’s Entertainment, presented at the AMA MRC in Atlanta. Many researchers know Harrah’s for its Total Rewards loyalty program, which has 40 million customers in the program, with 8 million active in the last 12 months. “Total Rewards enables us to execute our world-class CRM capabilities,” Veronica said. Total Rewards tracks 80% of Harrah’s revenues. For Harrah’s, service differentiation continues to be a priority; high rollers get private lounges, expedited lines, limos, special events and promotions.

When the recession struck, business became tougher but the overall strategy was the same. Occupancy is very high but Average Daily Rates have declined from $150 to $90, with a decrease in spending during the stay. High rollers reduced gambling expenditures before cutting back on other entertainment expenditures.

In the past, Harrah’s did not pay much attention to the “leisure group on occasion” segment. Trip planning is so stressful and time consuming that Harrah’s is applying its strengths to introduce “Total Experiences”, a high-roller experience for small groups that don’t gamble. The key occasions include family and friends’ reunions, bachelor/bachelorette parties and birthdays.

Harrah’s hired Booz to estimate the size of the small groups market for Las Vegas and Atlantic City. This equaled 10 million trips per year, with an average spend per person per trip of $455, for a $4.55 billion market (revenue excluding gambling).

Multi-channel service offering helps match segments with the economics of service: the top segment gets a VIP concierge, the midmarket gets phone service and the entry-level segment uses the web for self-service. The concept was tested using an online community and was measured to have very broad appeal.

Harrah’s developed the service in two months. “The Total Experiences Value Proposition” provides an “occasion-based platform, a full roster of amenities and experience, personalized service, inside access with no service fee.” The target audience is the affluent leisure traveler seeking a diverse entertainment experience with price not being their primary consideration. The service increases the share of wallet from such guests.

Consumer demand and phone calls were coming in at a higher level than ever before during the recession, as people realized the importance of spending time with friends and family. The New York Times article “But Will It Make You Happy” article “new studies of consumption and happiness show that people are happier when they spend money on experiences instead of material objects… ‘It’s better to go on vacation than buy a new couch is basically the idea,’ says Professor Dunn.” Harrah’s Total Experiences was the right proposition at the right time.