Branding Entertainment. Harrah’s was a Meritocracy
By Tom Dougherty
We found this brand study to be most informative. While it speaks mainly to the destination/tourism industry, the lessons can be applied to any category and represents hoe you should go about branding entertainment and not just gambling.
Since this article was written, Harrah’s was purchased by Caesar’s Entertainment. But the lesson to be learned still applies. Brand building for destination and tourism is more complicated than more traditional services and goods. Harrah’s branding efforts have addressed these complexities well. In many ways it is
easier to transmit the brand meaning, and yet it has other more dangerous pitfalls. Traditional products must convey their brands strictly through intrusive marketing channels. Aside from packaging and POS, the only interaction the brand has is through media channels. This retail marketspace is an inefficient way to convey brand meaning. Destinations have the advantage of being able to immerse the customer in the brand, and they have deep, personal and rich ways of delivering the brand. Because of a customer base limited by accessibility and availability, it is not as cost-effective to spend as much money on mass marketing as a traditional packaged goods company.
Campbell’s and P&G can spend $60 million dollars on advertising “Sunny Delight” because reach and frequency, along with availability, is what drives their marketspace. Penetration in this market is limited only to the company’s capacity to produce more and by the advertising’s reach and persuasiveness. While destinations have a faster and more efficient highway to brand meaning — straight to the visitors hearts — most of the brand meaning is conveyed during usage and not before. This means your brand should be managed to great effect during usage. Packaged goods do not enjoy such luxury. However, it means that managing your brand is much more complex because the brand relationship has many touch-points and facets. As a result your brand is only as secure as your weakest link. Let’s take a look at how one hospitality/destination provider grew their brand.
First they overhauled their marketing, replacing the industry veterans with customer relationship management “rocket scientists.” They used a loyalty card
program and sophisticated technology to collect and analyze data from customer interactions. The insights thus obtained guided every marketing plan and investment decision. Second, they raised the bar in one particular way: despite Harrah’s widespread recognition as the best casino operator for customer service, they persuaded property managers that it could—and had to be—improved. Third, leveraging Harrah’s unique national distribution network, they invested heavily in building the Harrah’s brand.
A Human Resources Approach
Finally, they shook up Harrah’s culture with a new human-resource approach that valued brainpower and leadership over industry experience. The gamble was to make the existing businesses grow without access to new casino development. This was a retail strategy—a loyalty-oriented, same-store-sales-growth strategy—which had no precedent in the casino business. “We (management) said that you don’t primarily need more gaming; you need more loyalty among players who already know you.” That meant orienting the company toward influencing consumer choice. So this whole strategy was about modifying consumer behavior. They set about building a bunch of self-reinforcing mechanisms that enveloped “players” (as they call customers) with reasons to be more loyal.
Build a REAL Brand
Part of this effort was to create a brand they could be attached to, and that required a significant improvement in service quality. Part of it was using relationship-marketing tools that constantly tried to develop closer and more valuable interactions with customers. “I’ve always been fascinated by the power of brands to influence consumer decisions. The gaming business is a service that provides deep enjoyment. People are very caught up in gaming. I mean, it’s every bit as personally rewarding as fragrances, fashion, automobiles, resort destinations—you name it. It’s an experience that cries out for a brand, yet nobody was stepping up to that.” “We could step up by creating a national gaming brand, and no one else could …we wanted a brand that really inspired customer loyalty. “ They also had the opportunity to create a powerful brand because they focused on just one thing: a great gaming experience.
They Maintained Focus
They were not primarily for families or for destination getaways. They were a gambling joint. “We’re there for people who want to gamble, and that’s where we wanted to center the brand. The economics are very transparent. So we’re just for gamblers. Your property-positioning statements are centered specifically on gaming and the thrilling, exciting experiences your customers describe while visiting your casinos.” They called this positioning “exuberantly alive” because it focused on the customers’ raw energy and enthusiasm for this form of entertainment. All of their brand advertising clearly illustrates this feeling and resonated extremely well with gamblers. “It’s all about gaming.” The Total Rewards program was the first thing they worked on. It was a customer-recognition rewards program then, not a loyalty program. It did not have loyalty incentives. If you were a $500 customer, they would give you $100 in goodies—discounts on rooms, free meals, and so on—every time you came in. But if you didn’t come for a year and in the meantime visited competing casinos, still, the next time you came in again they treated you like a $500 guy and gave you $100 in goodies.
They Raised The Bar
They changed the program by building in loyalty incentives so that as a customer, each time you think about visiting a casino, you end up visiting Harrah’s because it’s better for you. Or to put it in the negative, if you don’t visit Harrah’s you lose something. So there’s this clear pecuniary and non-pecuniary signal that influences decision-making. Total Rewards is now a three-tiered loyalty program, with gold, platinum and diamond levels. You can consolidate all your gaming with them in any of their casinos. The more of your gaming you give them, the bigger the rewards and you go up the tiers.
The results of that program have been stunning. People who are close to a gate—from gold to platinum, from platinum to diamond—aspire to get over those gates by consolidating their business with them. “We know that if they make ten visits to Atlantic City—and we used to give them, say, three of those visits—they know that to get a Diamond Card they have got to give us six visits, and they do. If you look at your same-store-sales growth and your overall revenue growth, it is disproportionately among those who have advanced through the tiers and consolidated their business with us. It’s exactly what we set out to do.” They also collect a tremendous amount of information on what players do. “We know when you arrive at a casino, what you do there, and when you leave. We have information on 26 million customers. And we measure everything.” The only business that comes close to measuring as much as Harrah’s is Wal-Mart. “Testing and measuring is important to us. When your employees use the words ‘I think,’ the hair stands up on the back of my neck. We have the capacity to know rather than guess at something because we collect so much information about your customers. And if we say, ‘I know,’ let’s really make sure we know.”
The Real Secret
They credit the number one, most important thing in this whole process as this: bringing in the marketing director as the chief operating officer, not the chief marketing officer. “Chief marketing officers have ideas, and they try to sell them to the guys with line authority. They spend all their lives selling. Most of their work is not done against competitors; it’s done internally, trying to get the P&L people to let them do things. That’s a losing battle. And if you’re trying to generate change in an operating business, it’s almost a doomed exercise. As chief operating officer, I had the authority to say, ‘Here’s how we’re going to engage customers.’ Architecturally, they did a couple of other critical things. The corporate office was not adequately serving the operating businesses. It was isolated, had a lot of inefficiencies in it, and the property general managers hated it. So they made it clear that they knew where the customers were and where the money was. They weren’t confused about that. “We really tried to change the whole gestalt around the corporate office, and we implemented some things that helped. For example, to raise money to support the brand-advertising campaign, I instituted a 1 percent brand tax on the properties. Now, if you were a McDonald’s
franchise you’d have to give 9 percent, so lucky you, you’re only giving 1 percent. We’re going to put it in the budget, and Richard Mirman, your chief marketing officer, will figure out what to do with it. “ Bonuses depended on customer satisfaction results. They developed a service curriculum, which came out of research with their best customers on the issues that really motivated their loyalty. For the first time in the company’s history, every single employee attended this training.
They paid them their tipped wages while they were in training. At the end of the program, they had to pass a test—otherwise they could not keep their job. Coupled with this they started paying out a bonus to every non-management employee of the casino if his or her property improved its customer service scores by 3 percent over the same period a year earlier. They have paid out $40 million in bonuses to employees across the system—anywhere from $75 to $300 each, each quarter. “If I hadn’t been chief operating officer, this would have been a dead program. But it’s a big deal to employees. In the employee areas there are graphs to let them know their service numbers, which are based on customer satisfaction surveys. The data come in each week, and employees check to see how they’re doing.”
In order to do a better job of entertainment branding they track the customers who fill out surveys and can track their gaming behavior, so they can assess whether a player who rates them better this year than last year also plays more. And the answer is remarkably positive. The people who are happier with their service play much more with them, and the people who become unhappy play much less with them. There’s no question but that the results are largely service driven. They also worked on reducing employee turnover. A lot of it comes from making sure employees know what they’re being hired into. They check in with employees the first week they’re on the job, the second week, the fourth week, the eighth week. They work very hard on supervision reviews and so on. They have managed to reduce turnover quite a lot, which in turn helps out customer service scores.
“I think the single biggest cultural change has come by instilling a meritocracy. I’m very pleased with where we’ve come on this. Once, people were considered adequate if they were meeting the minimum standards of the job. I do talent reviews annually with all of your operating and corporate people, and, frankly, I say to general managers, ‘Do we really want you to spend your time trying to make a barely OK person successful? Why wouldn’t we rather have a case where employees are so good that they are putting some heat on you and teaching you some things and pushing you around a little bit and making you better?
If you’re not working with people who make you better, something is wrong. I wanted to instill the notion that jobs didn’t belong to people; jobs belong to a company. It was the company’s responsibility to get the most capable person it could find into the job. People say this used to be a safe, family company, and now that damned professor has turned this into a place where nobody can feel safe. And there’s an element of truth to that, because it is results that make any of us safe.
If we don’t produce, the shareholders and the other employees deserve better.” The result of this meritocratic approach has been that we have assembled the best management team in the industry. And management talent has been key to your success. “We look for people who are very, very smart. I think this business will become a consumer distribution business, and I want us to be the leaders of that process. We’re the only casino company currently that will offer you gaming in a land-based traditional casino, a riverboat, a Native American reservation, and a ‘racino’—a race track with a casino.”