Introduction to Competitive Advantage in Information Systems

Data Asset in Action: Caesars' Solid Gold CRM for the Service Sector

Who Are the Most Valuable Customers?

All that data is heavily and relentlessly mined. Customer relationship management should include an assessment to determine which customers are worth having a relationship with. And because Caesars has so much detailed historical data, the firm can make fairly accurate projections of customer lifetime value (CLV). CLV represents the present value of the likely future income stream generated by an individual purchaser. Once you know this, you can get a sense of how much you should spend to keep that customer coming back. You can size them up next to their peer group, and if they fall below expectations, you can develop strategies to improve their spending.

The firm tracks over ninety demographic segments, and each responds differently to different marketing approaches. Identifying segments and figuring out how to deal with each involves an iterative model of mining the data to identify patterns, creating a hypothesis (customers in group X will respond to a free steak dinner; group Y will want ten dollars in casino chips), then testing that hypothesis against a control group, turning again to analytics to statistically verify the outcome.

The firm runs hundreds of these small, controlled experiments each year. Loveman says that when marketers suggest new initiatives, "I ask, did we test it first? And if I find out that we just whole-hogged, went after something without testing it, I'll kill 'em. No matter how clever they think it is, we test it". The former ops professor is known to often quote quality guru W. Edwards Deming, saying, "In God we trust; all others must bring data".

When Caesars began diving into the data, they uncovered patterns that defied the conventional wisdom in the gaming industry. Big money didn't come from European princes, Hong Kong shipping heirs, or the Ocean's 11 crowd - it came from locals. The less than 30 percent of customers who spent between one hundred and five hundred dollars per visit accounted for over 80 percent of revenues and nearly 100 percent of profits.

The data also showed that the firm's most important customers weren't the families that many Vegas competitors were trying to woo with Disneyland-style theme casinos - it was Grandma! The firm focuses on customers forty-five years and older: twenty-somethings have no money, while thirty-somethings have kids and are too busy. To the premiddle-aged crowd, Loveman says, "God bless you, but we don't need you".