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L. Mohan
L. Mohan
Harrahs Strategy
1. Strategic Focus: Casinos
Not Restaurants or Bars or Shows Belief that competing on the basis of billion-dollar facilities was NOT the most prudent use of capital Returns on such facilities often weaken when the novelty wanes
2. Build Lasting Relationships with Core Customers Slot Players for Sustainable Profit Growth
Get customers to visit Harrahs regularly AND Spend more of their gaming money at Harrahs Increase Wallet Share
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Harrahs Strategy
3. IT Investment to Create an Enterprise Data Warehouse AND Analyze the Data for CustomerTailored Marketing 4. Absolute Focus on Customer Service & Customer Satisfaction.
Changed Harrahs from an operations-driven company which viewed each casino as a stand-alone business into a data-driven marketing company that built loyalty to the Harrahs brand in ALL properties.
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2002
16 straight quarters of same-store revenue growth Revenue: Over $ 4B Stock price: Pushing all-time highs at $ 50
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The Bottom-Line
Customers Wallet Share: 42% in 2002 Vs. 36% in 1998 Each percentage-point increase in Wallet Share has coincided with an additional $125M in shareholder value.
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From the moment I signed up for my Total Rewards card in the casino lobby and filled in my name, address, date of birth and drivers license number, Harrahs had a pretty good hunch that my long term potential was already low.I was a 32-year old man from the distant state of Montana.did not fit the profile of a high-value customer ! Age, gender, and distance from the casino were identified as
critical predictors of frequency.
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customers who spent between $100 and $500 per visit to a Harrahs
casino accounted for 80% of company revenues and almost 100% of profits. Surprise: NOT the gold cuff-linked limousine-riding high rollers that casinos fawned over many years Middle-aged and senior adults with discretionary time and income who enjoyed playing slot machines Did not stay in a hotel but visited a casino on the way home from work or on a weekend night out
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If we only observe her once in a quarter, its likely that its because shes playing three or four times a quarter at our competitors. So were going to make an educated guess and market to her as if she were a more frequent visitor, and well let her confirm or disconfirm that. Then well update the profile on what she does.
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Customer-Tailored Marketing
High-value customers are placed into 90 targeted segments, each of which receives custom-tailored direct-mail incentives to visit any of Harrahs 26 properties. Customers who live far away from Harrahs properties typically receive direct-mail discounts on hotel rooms or transportation. Drive-in customers get food, entertainment, or cash incentives Most offers are time-sensitive, with tight expiration dates.. to encourage visitors to either return soon or switch a visit from a competitor to a Harrahs property For each direct-marketing pitch, response rates and return on investments are trackedfuture campaigns are adjusted accordingly Every marketing campaign is tested first before launch
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Harrahs IT Investment
Magnetic Card Readers: Harrahs Total Rewards card readers are installed on all of the companys 40,000- plus gaming machines. The readers capture a customer ID number from each card, and a small LCD screen flashes a personalized greeting along with the customers current tally of reward points. Electronic Gaming Machines: All gaming machines are computerized and networked. Each machine captures transaction data and relays it to Harrahs mainframe computers. Onsite Transaction Systems: IBM-based transaction systems are located at each casino property; they store all casino, hotel, and dining transaction data.
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Harrahs IT Investment
National Data Warehouse: A Unix-based data center in downtown Memphis links all of the casinos mainframe systems and customer data. Customer history and reward-point tallies are passed down from this database to the onsite mainframe systems - which, in turn, relay the data to the card readers. Predictive Analysis Software: Developed by Harrahs and software firm SAS, these programs produce nearly instantaneous customer profiles that allow the company to design and track marketing initiatives and their results.
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Benefits
Customer service reps will have a single unified view of members Customers would get one bill Medical claims proceed faster and more efficiently
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What they should have been doing is investing a half or third of the money spent on repurchasing stock to improve IT systems
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Objectives:
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Implementation Process
Began moving members to new systems in 2001 but in relatively small numbers 10,000 to 15,000 people at a time; there were minor problems that were dealt with but nothing major. At the same time, began laying off customer service reps as part of a planned consolidation of 20 primary and specialty service centers into 9 regional centers Rationale: Expected new IT system to deliver huge gains in productivity from automated claims processing and customer service. Cost of Reorganization: $33M in severance for the 3,100 laid-off employees and $32M to build the new regional centers
January 2002: Moved 3.5M customers in one fell swoop problems erupted immediately
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A Migration to Nowhere!
- Customers Suddenly Had Trouble with Coverage
In one case, Cignas systems could not confirm health coverage for some new members for several weeks Workers at another company effectively lost coverage when their membership information would not load properly into the new system Cigna issued member ID cards with incorrect identifiers. - Prescription icons were missing Result: People could not get their prescriptions filled at their local drug stores Morgan Stanley analysts heard about these snafus in late January 2002 and promptly downgraded Cignas stock
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3. Slowed down the pace of migration and shored up those processes around the conversion of customer data
4. Instituted more thorough testing practices 5. Moved 20 experienced application developers into the project 6. Relying less on its systems integrator and more on in-house IT staff to manage the project
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Launched MyCigna.com, an online portal where Cigna members can look up their benefits, check on the status of their claims, retrieve health info and talk to nurses online
Able to cut another 3,900 positions as part of a streamlining of Cignas sales force and medical management team New IT systems have enabled that downsizing by eliminating duplication in claims processing and billing Customer satisfaction surveys conducted by Cigna in late 2003 show that 83% are satisfied with the service they get compared to 58% earlier in the year
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- After you've tested the system with your sales, marketing and customer service reps, go back and redesign the front end so that customers can actually use it.
5. Train and retrain the customer service reps on the new systems 6. Don't expect productivity gains for months after the new platforms go live - Don't make business decisions based on anticipated projected savings or gains. Wait to see if they materialize.
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What Went Wrong? No Customer Strategy - CRM focused on performing processes faster
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Rolled out the CRM program in stages to capitalize on early wins - also, reduced risk of any problems affecting the entire company
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L. Mohan
General Electric
Information on orders, sales and margins are of maximum value when tied to meaningful market segments. And segment-based data are of limited use to finance, hence the common misalignment problem between finance and marketing.
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Mission Statement of Cullen/Frost Bankers (an $8 B financial holding company in San Antonio,Texas) More than 98% of our companys assets and those of our customers are managed by data and information and less than 2% are in the form of cold hard cash. Just as we are careful and meticulous in managing cash and negotiables, we have a duty and obligation to exercise a high degree of care with the data that is the basis for customer relations and decision-making.
Source: The Data Warehousing Institute Report, 2001 L. Mohan
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Extracting, Transforming & Cleansing Customer Data - 80% of Firms Underestimate Time & Resources*
Example: Problem: Poor quality of customer master data in the ERP system of a manufacturer - a subset of large customers was labeled with an incorrect industry classification code. Result: Overlooked in market segmentation analysis performed by the Marketing dept. - this customer segment received no promotions, which would have generated an estimated $ 5M in revenue within one year.
Good data quality does not drive value in and of itself but it is the means to achieve high-value benefits. Although data quality maintenance is not the front-facing functional module in a CRM project, it is a necessity to get value from the CRM investment.
* Source: Gartner Viewpoint, Nov.29, 2001
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Buy-in from opinion leaders would persuade others Better to get criticism from the inside, than resistance from the outside Let them take some ownership of the project
Participation creates a feeling of control
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Managing Change
A very useful framework for thinking about the change process is problem solving. Managing change is seen as a matter of moving from one state to another, specifically, from the problem state to the solved state in a planned, orderly fashion.
Unfreezing
Moving
Refreezing
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People Issues
Levi Strauss
Time to fill orders too long
Embarked on BPR project
BUT.
Created extreme turmoil by demanding that 4,000 workers re-apply for their jobs as part of a reorganization into process groups BPR project timetable stretched to 2-years Had to make repeated promises for no layoffs Spent an extra $14 million for a 2- year education effort to calm
employees
WSJ Nov.26,1996
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Hammer Acknowledges.
...Reengineering forgot about people.
I wasnt smart enough about that. I was reflecting my engineering background and was insufficiently appreciative of the human dimension. Ive learned this is critical.
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As much as CRM promises to improve customer relations and increase revenues, there is the potential for disaster. Your website has to be friendly . . . Should not confuse visitors . . or, people will not come back.
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You control the evolution of CRM in line with customer needs, using the companys business processes and customer data, without having to rely on upgrades or services from a vendor
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Why Build ?
- One reason : Lack of Integration
CRM packages do not offer adequate tools for integration with back-office applications, e.g., ERP Critical data has to easily flow back and forth between ERP and CRM Systems Otherwise, difficult to create customer profiles with information on shipment performance and customer spending habits The vendors sell you the package, but they fail to tell you what can and can't happen with that software.
(CIO Magazine, August 15, 2000)
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Greatest Drawback
- Adapting Package to Customer Relationships
Tailoring software to entice customer loyalty can be far more challenging than developing process software.
In finance, a company is legally bound to create reports in certain ways. Its a science. In CRM, there are absolutely no rules. Whats the best way to keep a customer happy and loyal ? There is no best way. Its an art.
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Because Dell built the system, it is Internet-based and linked to Dells back-end system; And, Dell controls its evolution in line with users needs.
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- Other aspects of Salesforces services were also a plus. You miss out on the customization features of traditional enterprise applications, but you get Internet service functionality. They upgrade every three months or so and you get the upgrade immediately It can be very painful and expensive to upgrade on the traditional enterprise systems.
Source: Computerworld, Mar.6, 2001
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Action Item:
Must have a Data Quality Strategy Devote one-half of the total time-line of the CRM project to define data elements and data cleansing
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Action Item:
Formulate CRM strategy at the enterprise level Appoint a senior manager to oversee cross-departmental CRM
Customer-related processes in most organizations are flawed because of years of minor corrections and neglect of customers demands Automating a flawed process makes it run faster - a real danger because the enterprise can more quickly and efficiently anger its customers Use CRM as a springboard to examine all customer-related processes Remove those that are not needed; rework those that IT impacts
Action Item:
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Action Item:
Educate employees on the benefits of the CRM initiative Train them to use the tools to communicate with the users more effectively Rule of thumb: For each dollar spent on software, $1.50 should be spent on training
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Action Item:
Action Item:
Explore ways for CRM to enrich the jobs of employees Institute performance measurement system that is aligned to CRM goals - it should drive the reward system: What gets measured and rewarded gets done!
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Source: Mining the Value of Data: A CFO Perspective, CFO Research Services, August 2002
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When accurate customer data, advanced IT systems and marketing experts are in short supply For example: Emerging Markets; Small and Medium Enterprises
Problem: Mistaken Notion About CRM Systems
All relevant data must be captured in an integrated data base The data should be accurate
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A Pragmatic Approach
1. Determine the profitability of your customers
2. Identify the critical pain points in your current relationships with these customers
3. Limit the project to the top customers (80:20 Rule) 4. Create an integrated data base with metrics that matter about customers Resist the 360-degree customer view results in too much data of too little consequence 5. Clean the data to get satisficing (or good enough) accuracy 6. Analyze the data to get insights into how you can improve the relationships with these customers 7. Develop a plan of action for each customer AND implement it
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