Wednesday, July 28, 2010 | 2 a.m.
Beyond the Sun
The increasing popularity of gambling and casinos as mainstream entertainment is a double-edged sword for casino operators that must compete with properties offering the same games and similar entertainment options.
This makes casinos more dependent on marketing — and the battle for customer loyalty all-important.
Harrah’s Entertainment founder Bill Harrah took this to heart more than 30 years ago with the introduction of Premium Points — a predecessor of the company’s Total Rewards loyalty club that distributed paper tickets to customers who won slot jackpots, redeemable for products such as TVs and golf clubs.
Customers hoarded these tickets, the low-tech equivalent of last century’s S&H Green Stamps, saving up for bigger-ticket items and returning to Harrah’s to accumulate points playing mechanical slots, former Harrah’s CEO Phil Satre recalled at a recent conference.
Satre, who lives in Reno, retired in 2004 but is still in demand for his business insights. He serves on numerous corporate boards and made a rare appearance in Las Vegas last week.
Satre imparted some marketing lessons to casino operators at the sixth annual Casino Marketing Conference at Paris Las Vegas.
“Change creates an opportunity to learn,” he said. “It’s in these times of great change that those who capitalize on it create inordinate wealth.”
Satre joined Harrah’s in 1980 when the company had only two casinos. When Nevada’s casino industry viewed the fledgling business of riverboat and Indian casinos with trepidation, Satre saw opportunity. Under his tenure, the company grew exponentially, transforming from a small, regional casino operator to a nationwide casino chain.
If Harrah’s hadn’t taken advantage of the spread of casino gambling, others would have — and did, he said.
Much of the company’s growth can be traced to Total Rewards, a 12-year-old loyalty program that has boosted profit at Harrah’s casinos relative to competitors lacking a comparable program. Believing that the company’s future lay in its marketing strategy, Satre hired a Harvard University marketing professor, Gary Loveman, as the company’s chief operating officer, setting up an epic battle between Loveman, now Harrah’s CEO, and his team of marketing technicians and old-line casino operators.
Despite his belief in the superiority of marketing, Satre had never taken any college or graduate courses in the subject.
“In my 25 years at Harrah’s, I never had a job with the word ‘marketing’ in the title,” said Satre, who graduated from Stanford University with a psychology degree before getting a law degree.
Although Harrah’s stumbled in 2008 with an expensive leveraged buyout that left it saddled with more than $19 billion in debt, Total Rewards is still paying dividends. Recently, Harrah’s executives said revenue has increased at Planet Hollywood, a cash-strapped resort purchased in February, despite job cuts there.
Even in better times, Satre questioned the casino industry’s increasing emphasis on luxury and high-end customers, saying there may not be enough of them to support such investments. He has also suggested that operators focus on developing attractions for middle-class, budget-conscious customers.
Satre serves on the boards of NV Energy, Rite Aid, Nordstrom and, since last year, International Game Technology. All, he said, are using marketing techniques to boost business.
NV Energy is undergoing a major change as it adopts new ways of generating energy and encouraging savings, he said.
Through the use of smart meters and energy-saving techniques, he said, customers are exerting more control over their energy bills.
Rocked by an accounting scandal in the 1990s, Rite Aid is a distant third to drugstore chains Walgreens and CVS. As a result, Satre said, it has lacked the resources to grow a network of stores to compete. Instead, he said, the company has moved rapidly to invest in its website and online shopping mechanism.
Nordstrom, a century-old retailer, began making its inventory available online last year, he said.
Customers can order online and pick up merchandise at stores, he said.
“Shopping across channels is more convenient” for customers and more efficient for companies, he said.
Likewise, casinos — which are most similar to retailers among other American companies — must focus on selling rooms and other offerings online and engage with customers using social media networks, he said.
Even slot machine giant IGT, Satre said, is jumping on the consumer marketing bandwagon. Despite its history of selling machines exclusively to casinos, it aims to work more closely with casino customers to promote its slot machines to gamblers.
As a rule, he said, casinos should get to know their customers by talking to them directly, and by listening. “They will give you your strategy if you listen to them,” he said.
Marketing wizardry has its limits, however.
Satre said he’s worried customer service is suffering because of casino job cuts.
Under pressure to reduce expenses to pay off debt, casinos are threatening the ambience and service that distinguished them from other types of businesses, he said.
“It saddens me a bit,” he said. “We’re going to lose that customer who was not a traditional casino customer.”