Harrahs Customer Loyalty Program - Case Study Example

Name: Professor: Institution: Course: Date: Customer loyalty is referred to as the key to the success of an Organization and the operational benefits come from excelling in continuous improvement of products or service, the products or service design and how the design conforms to customer’s expectations. Today Companies have embarked on rewarding their repeat customers who have been loyal to the purchases and continue returning for more. In a recent research Book, (2007, p.33) suggested that in order to improve the loyalty of customers the marketers conduct thorough research on the customers by collecting data which they strategize on how to improve customer loyalty. Notte (2010, p1) states that in 2007 a survey carried out in U.S membership in a firm known as Colloquy’s revealed that the number had reached 1.8 billion. Elements that made Customer Loyalty Programs successful The blue print Companies have developed better strategies to win customers through bringing them back to buy more goods and services. Gordon,(2010) found that today it is not a matter of winning customers but it’s about building a relationship with an existing customer so that they get to know and trust you. Harrah’s case is no different from other Companies which have also followed suit to make a success of their operations and activities. The elements that made Harrah’s program to flourish are personal contact management, decision science based tools, hotel revenue management initiative and total gold reward customer loyalty program. The CRM initiatives were also very knew in the U.S at the time of implementation in 2000 and the competition was not so high at the time. That is why Harrah’s revenue rose to $1.4 billion in 2004. The program entailed customers had to fill a form that included details of their address, telephone number and names. This is very vital information that can be used to learn a person’s daily activities and preferences. The electronic card which conformed to the changes in technological communication is evident enough that Harrah was up to date with the latest technology. The card provided data on the days that the customers logged in to the system, the kind of games they played, the property that they used at Harrah’s and whether they won the game or lost. Jacobsen,(2011, p1) cited that if an Organization fails to retain their customers then the competitors will have their way and attract your customers. The technology way has changed the system of marketing globally and Harrah embarked on this method with an aim to retain the level of existing customers. The rewarding of customers with goodies such as casino complimentary, hotel accommodation and discounts on meals were some of the benefits offered to the customers. The personal contact management system used by Harrah ensured that VIP treatment was given to the VIP customers who were highly valued and a relationship was formed with the hosts who were mandated to offer personalized services to the customers on learning their tastes and preferences. They had an in-depth knowledge of the customer’s likes and dislikes and the hosts would book rooms for the clients which were stocked with the guest’s preferences. Customers appreciate when they are treated with excellence and when much attention is focused on them they feel content with the service provided. Jacobsen, (2011, p1) suggested that it takes quite a while to establish customers in depth knowledge of their likes and dislikes which Harrah had already established in the Organization. Customer loyalty programs demand dedication and commitment from the management because they take long to establish. Suitability of the Customer Loyalty Programme to a Pet Food Company The total Gold reward programme may be used in a pedigree Company that sells pet food. Customers who frequently visit the shop to buy pet food for their dogs can be requested to fill up forms indicating the number of dogs they have, names and addresses of their residence. It is possible to reward the customers who frequently visit the supplier with reward points and reward them with goodies such as discounts on pet food, compliments to attend dog races and offer them dog kennels. The electronic cards which represent decision based tools can be used to tract how much money the customer spends on the dog food and how often they visit the Company. It is also possible to segment the customers into four different categories that is attritor, prospect, loyal and non-loyal customers. The same treatment that was provided at Harrah’s of marketing to instill customer loyalty can be given to the pedigree customers. The loyal customers would be encouraged to maintain loyalty. The non loyal segment should encourage the customers to consolidate their points at the shop. Personal contact management system can also be applied by getting hosts who can learn from the customers the likes and dislikes of their dogs. Personalized treatment can then be given to the customers when they visit the shop to offer the best services according to the customer preferences. The data collected from the clients can also be clustered to seek trend. Specific campaigns tailored to each individual owner of a dog would ensure that customer loyalty is maintained. Harrah’s HRMS can be used to offer clients dog kennels at attractive rates a part of the hospitality marketing tool. Samantha,(2011) research found that the prizes offered to customers bring them back to buy the particular brand for a consistent period and extend their products and services. Organizations have to be very diligent on how they get information from customers and the client’s demographics so that they reduce their expenses incurred in acquiring the critical information. COGNOS impromptu cannot be used on the customers buying the pedigree food because the food is only of one type and make thus the customers are only restricted to buying that kind of brand while in the COGNOS system it was used to tract the customers movement from one property to the other. Unfortunately the online services of using information technology may not be applied to the dogs because the customers often shop without their pets and at the same time it is not possible to have the customers visit the shop with their dogs. Thus there is nothing much to learn from a dog using information technology because they only eat, play and sleep. The games played by dogs are not computerized but a dog trainer trains the dogs on how to respond to voices and different requests. The best marketing tool that pedigree can use is to provide dog trainers at affordable rates to the customers and even offer free dog training services to gold card holders. Ramshaw, (2011, p1) stated that Organizations have for several years applied customer satisfaction surveys but with time they have turned shifted to customer loyalty programs following their dissatisfaction with the surveys. This has been as a result of 10 years of customer surveys without showing any improvement in American customer satisfaction index even after Organizations have invested more than 800 Million U.S Dollars. The role of organizations is to implement the loyalty programs by first understanding the areas in the business that requires improvement. How to improve Customer Loyalty Programs The recommendations that can be applied to Harrah’s include following steps such as in step 1 linking the business outcome to customer loyalty program. The basis by which Harrah used for consideration of using Casinos games as the only profit making business sector is not enough to build Loyalty of the customers. The goals and objectives of the Company should not be left out in decision making such as market share growth and revenue. The management should be well informed of the decisions made or presented to them for approval so that they can also have an opinion on the matter. The costs may be a major concern and should be evaluated against the benefits derived from the program. Business measurement on how much profit growth arises from an increase of say 20% would enable the Company improve on the customer loyalty program. The increase or decrease of revenue and expenditure derived from the measurement would help Harrah’s strategize on the way forward. The second step is to seek for a loyalty indicator that makes your customer to score your performance as 5 out of 5. Today the competition is so high and customers habits of buying changes ultimately for one reason or the other depending on their likes and dislikes. Ramshaw, (2011) suggested that it is evident that Company’s have to do better than they used to do just to keep the customer loyal. The net promoter score method has been applied by many Organizations which seeks recommendation of a product or service to a friend or colleague. The method is easy for the customers to understand and follow and for the last few years it has generated a lot of respect. This question should be applied to all the customer loyalty marketing surveys at Harrah’s to act as an indicator of the outcome. The third step is to identify the drivers of the customer loyalty program such as the type of games played, the goodies offered or even the service provided by the hosts or staff. Harrah’s should come up with different questions to determine the drivers but not too many of them approximately 10, then design a rating scale which should be used by the customer to identify your performance from the customers perception. With the results collected a consultant should be used to analyze statistically either through regression or correlation and determine the influential significant drivers of customer loyalty. The less significant drivers should be eliminated indefinitely or dealt with as a last option. The fourth step is implementation of customer loyalty programs. The results tabulated by the consultant should be used by Harrah to concentrate on the significant business attributes that will improve customer loyalty programs. Harrah’s should concentrate on the most influential drivers that will retain the customers and the changes implemented into the business. For instance the staff may have been identified as a key driver of customer loyalty and therefore Harrah’s should liaise with the staff to identify ways of rewarding staff either through compensation, bonuses or through recognition which improves their identity. The fifth option is to re-survey the customers because frequent surveys will identify whether new services and products offered to the customers are impacting positively or negatively to the customers. Harrah’s should be aware that the goal is to improve the current customer loyalty program by implementing the findings derived from the customer surveys. Notte, (2011) stated that implementation of loyalty programs is very expensive and in the supermarkets the costs range between 1% to 1.5% of the revenue while in the rest of the industries they range from 1.5% to 5.5%. Thus patience should be the best virtue for it takes a minimum of 18 months to enjoy the benefits of the program. Harrah should also survey if there are any customers who have left the casino and conduct exit interviews to identify and understand why the left. Organizations need to look beyond the box for more options on customer loyalty programs because with time they reach saturation points. Loyalty programs fail because they aim to distinguish future behavior. Harrah’s can specifically make the program flexible such that the customers get an opportunity to choose their rewards instead of predicting for them. Weeding out unprofitable customers is also an option that Harrah should take into consideration because it is useless to keep unprofitable customers loyal. The program should not leave room for the unprofitable customers to benefit from the rewards. Loyalty comes with everyday excellence operation for any existing information based loyalty program. Communication should be a two way street between the customers and the supplier. Emails with rewards and promotions should be sent to the customers informing and making them aware of the current offers. However, with the latest method of e-commerce Harrah’s should avoid sending junk emails to their customers because they are a turn off and end up being deleted as spam. Impact of the proposed changes to Harrah’s financial performance Projected Financial Summary for the Year 2005 on implementation of proposed changes Year 2005 2004 2003 2002 2001 2000 Revenue $ Millions 6348 4548 3948 3747 3317 2977 Total costs 5555 4181 3656 3512 3108 2989 Net Income 793 367 292 235 209 -12 Source; Author, 2011 Based on the five year plan financial summary the above projections for the year 2005 are likely estimates for Harrah’s Company. The above proposed changes to Harrah’s business will result in an increase of the net income by 1.16% if the H.R costs, capital asset investment and tax factors are held constant. Other factors like fixed costs and overheads are assumed to remain constant. The above estimates have been arrived at based on the trend of the revenue increase between 2002, 2003 and 2005. Between 2002 and 2003 the revenue increased by $200 and between 2003 and 2004 the revenue tripled to $600. (See below the calculation derivation). Assuming the customer marketing surveys carried by Harrah’s positively impacted by increasing the market share and customer loyalty for the Organization then the same trend will be reflected and revenue will triple from $600 to $1800 in 2005 to a total of $6348. The total costs have been estimated statistically using simple linear regression method and the formula formulated as Y= 585+0.783x. (See below calculations on how to derive the trend formula). On application of the linear regression formula the total costs will be $5,555 resulting to a net income of $793. The loyalty indicators derived from Harrah’s survey are assumed to be beneficial to the customers enough to make them come back for more games which result in them spending more of their cash and dig dip into their budgets. The total costs of the Company will still increase by approximately 33% as a result of hiring a consultant to statistically analyze the indicators of customer loyalty. The rewards offered to the staff should be geared towards non-monetary benefits to eliminate the costs of Human Resources. Recognition of staff and giving them Company certificates should not cost the Company extra money. The staff can also be offered accommodation with their families in the casino which will not be expensive for the Company or even get a chance to play the games in different properties round the state. Calculations year Revenue Year Revenue 2002 3748 2004 3949 2003 3949 2003 4548 Difference 201 599 Simple linear Regression calculation Year X Y 2004 4548 4181 2003 3949 3656 2002 3748 3512 2001 3317 3108 2000 2978 2989 Source; Author, 2011 Using the calculator XY = 65,826,186 and X²= 70,197,382 thus a=585.23 and b=0.783x. Using the formula y= 583.23+0.783x on application of the estimated revenue 6348 as X then the total cost will be shs.5, 555. Ethical Issues that may arise from Customer Loyalty Programs Codes of conduct specify ethics in the work place and every Organization should ensure that the staff have a copy and understand what it entails. It is also important to explain to the staff how to conduct themselves to the customers so that conflicts and unethical behavior is not practiced. The policies made should be legal and depending on the size of the Organization the roles may differ from one department to the other. Ethical issues normally arise in Organizations and they are detected where there is an existence significant conflict among the members as a result of interests that differ and where there exists equality justifiable alternatives. The employees of Harrah’s may be faced by a dilemma whether to lie to a customer or not whose interest is more than just business during personal contact management system implementation. The host staff may also have access to too much personal information of their clients such that they may be faced with a dilemma of stealing from the customer attempt to manipulate them in the pretext of doing business. The customers may insist that the accommodation rooms offered for them, that if the clients are not willing to spend the night the offer should be converted into monetary terms. The management also has loop holes on the audit of rewards offered to the clients such that the program may favor some customers more than others. Through the use of information technology the IT staff may hack into the passwords of the customers debit and credit cards which is not an ethical operation. The management may also face the dilemma of offering their friends complementary and rewards that they have not attained through favoritism (Notte,2011). McNamara, (2011, p1) suggested that managing the ethical issues that arise from the Company will require the management to have values by which the behaviors of the staff are monitored. Managing ethics is normally a process and a day to day activity which reflects on activities that are skeptical. The programs formulated produce deliverables such as authorization forms for staff that maintain passwords, items of budget, procedures, policies and codes of ethics. However, the most essential goal is the process of communication used for the program. The best ethical practice outcome expected is the preferred behavior at work place and this can be achieved through training of staff. Avoiding the occurrence of ethical dilemma will minimize the chances of acting contrary to the Company policies and ethical standards. Ethics decisions should be made in groups to reduce any bias against some staff and increase the credibility of the decision made. In addition when Harrah is designing Organization Human Resource Policies they should reflect on the exact behavior expected from the staff to eliminate misunderstanding or wrong interpretation of information. The best possible way is to include employees in the formation of Organization ethical standards so that they may participate in the process and thus it will be easy for them to adhere to the program. The management should further help employees recognize their mistakes and help them to know how to continue behaving ethically by forgiving them because people are very sensitive to their mistakes. It is important to note that the attempt made to act ethically is better than not trying to do anything at all. Trying brings about peace of mind although when an Organization acts unethically and the public gets to know the word spreads round and the impact is loss felt by the Organization (Beal, 2011). In conclusion, buyers are becoming more aware of what they want to buy and they are willing to spend much less than their budgets by negotiation of cheaper and more reliable options. Not counting the tough completion that Organizations are faced with globally getting your customer to be loyal to the brand and continue visiting the business has become a challenge which requires constant innovation and designing strategies by the management. Harrah’s Company is a representation of what other industries have implemented to try and retain their customers. Special audits should be conducted to establish the prevailing ethical standards existing in Organizations in the attempt made to retain customers. Customer loyalty programmes should be treated carefully because they may be drivers to increasing expenditure or act as a threat to the operations of the Company in the aim of increasing revenue. References Ramshaw A, 2011. 5 steps to effective Customer Loyalty Programs. Retrieved on 15th September 2011 from http://www.genroe.com/5-steps-to-effective-customer-loyalty-programs Beal A, 2011. Getting loyalty programs right. Retrieved on 15th September 2011 from http://searchcrm.techtarget.com/news/992695/Getting-loyalty-programs-right McNamara C, 2011. Complete Guide to Ethics Management: An Ethics Toolkit for Managers. Copyright Authenticity Consulting, LLC Retrieved on 15th September 2011 from http://managementhelp.org/businessethics/ethics-guide.htm Book G, 2007. Customer Loyalty Programs Retrieved on 15th September 2011 from www.greatbrook.com/customer_loyalty.htm Notte J, 2010. 5 Best, 5 Worst Customer-Loyalty Programs. Retrieved on 15th September 2011 from http://www.thestreet.com/story/10788796/5-best-5-worst-customer-loyalty-programs.html Gordon K, 2010. The newest insights into loyalty programs reveal the best ways to engage customers. Entrepreneur Media, Inc. Retrieved on 15th September 2011 from http://www.entrepreneur.com/article/205508 Jacobsen S, 2011. Customer Loyalty Programs Retrieved on 15th September 2011 from http://www.salesincentivesblog.com/customer-loyalty-programs-top-ten-ways-to-improve-customer-loyalty/ Read More