Business Briefing: Diamonds in the Data Mine

Keywords: Data Mining, Customer Loyalty, Database Marketing, Customer Segmentation, Service-Profit Chain, Analytics
Source: Harvard Business Review
Link: Read the full article on HBR.org
Author: Gary Loveman
Published: May 2003
Est. Read Time (Original): ~30 minutes

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The Core Idea

In this first-person account, Harrah's CEO Gary Loveman explains how the company transformed itself from an operations-driven collection of casinos into a marketing-driven powerhouse. The core of the strategy was to abandon the "build it and they will come" philosophy of its rivals and instead win through a relentless, data-driven focus on customer loyalty. By creating a massive transactional database, Harrah's was able to identify its true high-value customers (not the stereotypical high rollers), predict their lifetime value, and design a tiered rewards system and service model that created powerful incentives for them to consolidate their spending.

Why It Matters for Business Today

This article is a foundational case study in how to use data and analytics as a central competitive weapon. It provides a clear playbook for any business looking to build deep, profitable customer relationships.

• Data as the Source of Strategy: Unlike competitors who based incentives on intuition, Harrah's let the data suggest the strategy. This allowed them to discover that their most profitable segment was not the one everyone else was chasing, giving them a massive, uncontested market to dominate.

• The Shift to Lifetime Value: The strategic pivot from focusing on single-visit spending to predicting a customer's long-term theoretical value was critical. This allowed Harrah's to make targeted investments in customers who would deliver the highest return over time.

• Connecting Data to Operations: The genius of the Harrah's model was connecting its data insights directly to its service delivery. By linking employee bonuses to customer satisfaction scores, not the property's financial performance, they created a culture obsessed with delivering the high-quality service that the data showed would drive loyalty and profits.

The Strategic Question for Leaders

Harrah’s used its customer data not only to create targeted marketing offers but also to fundamentally redesign its service delivery and employee incentive systems. Beyond marketing, how are you using the deep insights from your customer data to change how your employees are trained, managed, and rewarded to deliver a superior customer experience?

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