Cable can learn one big lesson from casinos – treat different customers differently.
That was the word from Harrah’s Entertainment, Inc. Chairman/CEO/President Gary Loveman, who addressed a crowd of some 2,000 cable industry associates gathered today in DC. Cable operators, like casino operators, know a lot about their consumers and stand to post considerable profit margins if they can increase consumer loyalty. The key to doing that, he said, is to find out as much as possible about those consumers’ behavior and use it market to them individually – and efficiently. “God may have created all people equally, she did not create all customers equally,” he said. “We treat everybody differently. The cable television industry is at pains to treat everybody the same. You can argue whether that’s well or poorly but everybody is treated the same. “Somebody has to decide its OK to treat customers differently depending on their current and prospective value.” Loveman spoke at the Cable & Telecommunications Association for Marketing’s annual gathering about the dramatic turnaround he spearheaded at Harrah’s using “relationship marketing.” His team works like “epidemiologists,” he said, learning as much as possible about individual consumers and trying to predict their future behavior based on past choices. Harrah’s has improved performance and stock price (the company was $14 a share in Dec., 1998 and decided to go private last December at $90 a share) by introducing “Total Rewards Cards.” The casino chain uses the cards to track what and how much some 44 million of its consumers are buying and when, and then rewards them accordingly with incentives like free steak dinners, Celine Dion tickets and comped nights at the hotel. Similarly, Harrah’s has increased revenue per hotel room by using algorithms to assign each customer a different total worth. For New Year’s Eve, for example, when the chain expects to fill some 97% of its 41,000 domestic hotel rooms, a business traveler who spends only $200 a night but books weeks in advance could be denied a room to save space for the heavy gambler who spends $100,000, but waits until the last minute to book. Loveman said cable operators stand to capitalize on their own existing rich databases of information about their individual consumers, but said they must target their treatment of those customers if they want to do so. The customer who spends upwards of $200 on a triple-play package of voice, video and data services from their operator, he said, should not be treated the same way as the $19-a-month customer. The heavy spender should be rewarded with freebies, like hats and event tickets, as well as faster and better tech support and service, he said. “Don’t put me behind the guy who’s paying $19 a month,” he said, noting that he spent about $230 a month on cable. “Treat me differently. I deserve it. I’m paying the bills.” “It’s a meritocracy, our world,” he said of casinos. “You spend more, you get treated better.”