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Head Games

Businesses are deploying analytical software to get a better fix on customer behavior.

Casinos may be glittering, neon-bathed temples to the cruel goddess of fortune, but when it comes to wringing money from wallets, casino operators leave precious little to chance.

Consider Harrah’s Entertainment Inc., a Las Vegas-based gaming specialist with 26 hotel casinos in the United States. Last year, Harrah’s generated $4.3 billion in sales, much of it from gambling operations. The key to Harrah’s green machine, say observers, is the company’s intimate understanding of its customers. Harrah’s hotels, for example, had a remarkable 95 percent occupancy rate in 2003. More remarkable: the company turns down twice as many requests for reservations as it accepts, which is why it continues to invest in new hotel rooms.

“It’s not about filling each room,” explains David Norton, senior vice president of relationship marketing at Harrah’s. “It’s about maxing out the profit from each room.”

Toward that end, Harrah’s launched a hotel revenue management system (RMS) in 2001, enabling it to optimize the profitability of its hotel rooms through a combination of gaming revenue and room rate. RMS forecasts occupancy at a detailed customer-segment level based on historical and projected trends, and makes a decision in real time about whether a customer should get into the hotel and at what room rate, based on the customer’s profile in the data warehouse, which is based on NCR Teradata technology. The customer will get a consistent answer whether booking over the phone or online at harrahs.com.

Patrons who play a lot get sweetheart deals from Harrah’s. They also tend to get lots of mail from Harrah’s. “About 75 percent of our revenue comes from direct-marketing offers,” notes Norton. “If we didn’t do it, our revenues would tank.”

Few companies are as zealous about communicating with customers as Harrah’s, and judging from the success of Total Rewards, the company’s loyalty program, customers appreciate the contact. In fact, Harrah’s is currently looking into communicating with customers while they are playing in the casino. But many companies are likewise considering the use of customer relationship management (CRM) technology to wring more money from their customers’ wallets.

First developed in the early 1990s by Siebel Systems as a management tool for sales personnel, CRM has since morphed to include campaign-management applications, call-center software, and customer self-service programs.

Despite years of declining interest in CRM, and despite its miserable track record — just 16 percent of projects result in a positive ROI, according to Boston-based AMR Research — spending on CRM products is now on the rise. The hottest segment in the market is customer analytics — tools that dissect consumer-buying patterns, suss out preferences, and predict future behavior. AMR reckons that sales of business-intelligence/analytics products will top $9 billion this year, up from $7.7 billion in 2001.

Why this surging interest in analytics? Analysts say frustration over earlier CRM projects may be fueling current sales of CRM analytics products. After funneling large amounts of capital into call centers — centers that are now faster but not better — executives appear keen to get something for their CRM money. “Companies want to know how they can turn these cost centers into revenues,” notes Stan Martin, CEO of Deerfield, Illinois-based Adroit Consulting Inc. Mining the prodigious amounts of data generated by call centers and other points of customer contact may be one way.

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