Customer Behavior that Gets Rewarded Gets Repeated

I attend a lot of franchise conferences in Las Vegas.  When you look around Las Vegas, gambling seems to a very profitable business, right?  But you also see a ton of competition.  And no matter where you play, it is basically the same games!

What is really the difference between one casino and another?

Let me tell you a story about the unlikely little company that has become one of the world’s most distinguished casino operators. The company started as Harrah’s in Reno, Nevada.  Over time, Harrah’s was acquired by Holiday Inns and built casino’s all around the US, including Harrah’s Las Vegas.  As the new luxury casino resorts were built between 2000 and 2010, Harrah’s properties did not compare well on style and class and resort amenities.

Gamble2For example, the Harrah’s Casino in Las Vegas cost $315 million to build.  But then down the street and across the block, The Bellagio opened – at five times the cost – $1.6 billion.  Not long after that Wynn Resorts was built for $2.7 billion.  Word on the street in Las Vegas was that the Wynn was the kind of place God would’ve built – if He had the money.  No expense spared.   Harrah’s could not compete on that basis.

Harrah’s didn’t have opulent swimming pools or Celine Dion and Elton John performing.  So customers would have to go Harrah’s for other reasons. Gamble3

And those reasons would be all about service, they decided.  Unfortunately, Harrah’s service was nothing special either.  Their customer experience was not really special or different.  Harrah’s knew that because they collected a lot of data about the customers who already visited them.  Customers who gambled at Harrah’s only spent 36 cents of their gaming dollar at Harrah’s.  Where were customers spending the other 64 cents out of every dollar?  At the competition!  Customers were  giving nearly 2/3 of their business to the competition.

Harrah’s started scientifically measuring the overall customer experience to figure out the key drivers of customer loyalty.  They rewarded each property’s management and staff on how well they delivered a loyalty-inspiring customer experience.  Why bonus employees for better service?  Because that would be worth a ton of incremental revenue and profit  – since it did not require a huge capital investment to increase customer loyalty by creating a superior customer experience.

The basic idea is that behavior that gets rewarded, gets repeated.

Harrah’s identified and ranked their most profitable customers by creating a customer loyalty program called Total Rewards.  Every dollar customers spent on gambling, hotel rooms, dining and entertainment with Harrah’s translates into points.  Those points translated into tiers in the Total Rewards Loyalty Club – the highest tier is Diamond, then Platinum, and Gold.  One Diamond member is worth about 200 times as much as a Gold Member.

Harrah’s made sure that their most profitable customers always stood in the shortest lines.  Though every customer could count on uncommonly friendly and helpful gamble4employees, those who spent the most at Harrah’s got tons of extra perks.  Besides short lines, VIP rewards included free tickets to shows and restaurants and special deals, even complimentary rooms.

Within eight years, Harrah’s built the largest customer loyalty program in the casino industry, with 20,000 members.  They also improved their customers’ experience every year, proven by higher repeat sales, customer satisfaction and loyalty scores.

In 2008, Harrah’s acquired Caesar’s Palace and applied Harrah’s Total Rewards Club marketing and operating model to all of it’s properties.  But with Caesar’s superior resort amenities and brand name, they kept that.  And that’s how a little company named Harrah’s became known as Caesar’s Entertainment – demonstrating the power of customer loyalty.

Sign up for my blog to get more customer experience stories like this.   – Jack Mackey

Jack Mackey helps clients win more new business  and deliver loyalty-inspiring experiences.  As a keynote speaker he is best-known for infecting his audiences with a spirit of creative discontent and stimulating record-breaking client results.