Test or get Fired! Harrah’s casino’s amazing philosophy

Analytics needs a evangelist! Without such a person, you just don’t get the impact that Analytics actually is capable of providing! Mostly this evangelist needs to be right at the top, the CEO! I have worked with a range of industries & everywhere the degree of impact shoots up once you have a CXO who is evangelising this change.

Of course, some CMOs have led their organizations into embracing the practice, including John Costello, former exec VP-CMO of Home Depot; John Elkins, head of global brand and marketing at Visa International; and Cathy Lyons, CMO-exec VP at Hewlett-Packard.

One organization which has become a huge case study in the application of a “fact” based approach to business is Harrah’s Entertainment! Recently though it had a messy bankruptcy of its casino operating unit and reportedly faced fines of up to $20 million over money laundering allegations. The most valuable of the assets being fought over by creditors is the data collected over the last 17 years through the company’s Total Rewards loyalty program.

Back in 1998, as Harrah’s was about to embark on a wave of expansion, their CEO Philip Satre asked Gary Loveman to take a break from Harvard to become chief operating officer of Harrah’s Entertainment. The important thing was the he was not brought in as a CMO but as the COO-he had the line authority to make changes that would impact the business!!

“In terms of income, it was actually a pay cut,” Loveman says, since he had to forego the consulting that supplemented his income as a professor.

He went on to develop the gaming industry’s most successful loyalty and analytics program—Total Rewards—which boasts more than 40 million members.

In an interesting article, Karl Taro Greenfeld says this about Gary Loveman, who has since then also become the CEO: the chief executive officer of Harrah’s Entertainment Inc., the largest gaming corporation in the world, sees his customers as a set of probabilities wrapped in human flesh.

Since taking over as CEO in 2003, Loveman, 50, has relied on the numbers to build Harrah’s from a regional operator of 15 casinos to one with 39 in the U.S. and 13 more overseas.

His first big move as COO was to start a loyalty program called Total Rewards, which became such a success — growing to over 40 million members by 2010, the largest database of probabilities in the industry — that by the time Satre stepped down in 2003, Loveman had become the logical choice to succeed him.

Loveman earned a Ph.D. in economics at MIT and went on to become CEO, president, and chairman of Caesars Entertainment, owner of Harrah’s casinos and other resorts worldwide.

Loveman says there are three ways to get fired from the hotel and casino company: theft, sexual harassment, and running an experiment without a control group.

But this seems like common sense, run experiments , see what works & scale up! And yet very few companies do it.

Dan Ariely, a behavioral economics professor at Duke University and the author of Predictably Irrational, outlined some of the resistance to experimentation that he’s come up against.

“I’ve often tried to help companies do experiments, and usually I fail spectacularly,” Ariely writes. For a company struggling with getting a good bonus system in place, he suggested experiments or even just a survey. Management, he says, “didn’t want to add to the trouble by messing with people’s bonuses merely for the sake of learning. But the employees are already unhappy, I thought, and the experiments would have provided evidence for how to make them less so in the years to come.”

But Gary Loveman managed to stay incredibly committed to Testing. These tests run from the use of coupons to offers of free meals or hotel stays, all designed to get customers to spend more money during their playtime.

This is what he said when asked about the Testing culture: “We need to overcome hunch and intuition with empirical evidence. . . . We can start with a hunch or strong belief, but we act on it through experiment. We want evidence. We’ve gone from the introduction of experimentation as a technique to a culture of experimentation as a business discipline. We hire people predisposed to do this by temperament and by background. Organizationally, we’re committed—and I’m committed—to making sure we have the discipline to have the decisions we make informed by this evidence”.

So what is the future for analytics in Gambling? Over time with data being leveraged by everyone, it was only natural for analytics to also start helping the players. Big data services quickly appeared that were designed to empower gamblers, giving them more information and helping them strategize more effectively. One such site that made full use of big data is SharkScope, which collects data from millions of online poker games every day. Players can track all their statistics on the site as a way to improve and increase their chances of winning.

And lastly we must also ask ourselves, is this kind of Analytics good for society! It’s estimated that 3 to 5 percent of people who gamble develop an addiction to the activity, which can lead to an array of problems for gamblers, their families, and society at large. Keeping gamblers coming back may hurt them & cause a lot of turmoil in many lives! Does analytics not have a social responsibility!

Customer journeys are not good enough, we need Customer context!

It’s a rainy day in Mumbai & my daughter is furiously multitasking to find fashionable rain coats. She is looking at customer reviews & social networking sites & is on Flipkart & Amazon too! All of them know she is from Mumbai, in some cases they have profile information from her registration data but none of them suggested she buy other stuff that she may need in the rains: Boots, umbrella!! Marketers need to understand the context in which consumers are & today there is enough data to give you insight on this. Retailers like Flipkart could have further used marketing campaigns across email, sms, in app, browser push to tell her more about expected weather in Mumbai over next 3 days & also providing her recommended brands to buy.

Consumers reach out to brands in many ways. India has 1.03 mobile connections & over 350 million internet users. Consumers connect with brands for a wide variety of reasons. Consumers want more information, improved service & better deals. And technology is making it easier for consumers to connect with brands. By 2020, the average person will have more conversations with bots than with their spouse, so says Gartner. They also say that “New audio-centric technologies, such as Apple’s AirPods, Google Home and Amazon’s Echo, are turning “voice first” interactions into ubiquitous experiences. By eliminating the need to use your hands and eyes for browsing, vocal interactions extend the web experience to multiple activities such as driving, cooking, waking, socializing, exercising, operating machinery.

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Today’s omnichannel customers will end up using the retailer’s touchpoints, in all permutations & combinations. Not only will they use smartphone apps to compare prices or download a coupon, but they will also be users of in-store digital tools such as an interactive catalog, a price-checker, or a tablet. Consumers will buy online and pick-up in store, or buy in the store and get their purchases shipped. Some research done by HBR has shown that customers who used 4+ channels spent 9% more in the store, on average, when compared to those who used just one channel.

Always connected customers can’t be pigeonholed into linear journeys. These consumers automatically turn to their phones in search of information, whether they’re at the gym, commuting to work, or shopping for groceries. Google refers to these spontaneous instances of discovery as micro-moments.

But even while consumers are finding increasing number of ways of reaching brands, companies struggle to provide them a seamless experience as they use these myriad channels.

This is further complicated by the emergence of communication channels that rely on proprietary standards — like Apple’s iAd, Android’s open architecture, and Facebook’s platform.

Each channel tends to be used by it’s distinct customer segments-like customers in the older demographics who are using i pads or multi device using millennials & so messages need to be customised to appropriate customer journeys.

Banking customers often struggle to engage seamlessly with banks. Citibank saw that an important concern of customers was to stop any charges on their card after it was lost or stolen, the company introduced Citi Quick Lock that allows users to quickly lock their card from a mobile app while they look for it.

None of this can happen unless companies start to change structure & processes keeping the customer at the heart of the thinking.Overseeing all of a firm’s interactions with customers is someone in the role of chief experience officer, a relatively new position in the C-suite. Chief digital officers are also starting to have this top-level responsibility. Marketers need a structure within their teams that brings the customer journey up front & centre & connects it with context!

As all of your products and services generate more and more data, the resulting context gives you the opportunity to disrupt your competitors. Also today consumers are allowing marketers to know their location. Since 2014, the number of Internet searches using a “find the nearest” term has doubled. Customers are also beginning to see the value of revealing their location in physical environments. The number of connected devices is growing by 15% to 20% per annum and will reach approximately 30 billion in 2020.Many devices, such as mobile phones, cars, and wearables, constantly monitor their user’s location, so the volume of inbound, spatially related data has never been greater. So the ability to further drive relevance by using location context is becoming real! Marketer’s need to be conscious to not overdo this & risk looking “creepy” to consumers!

McCormick developed FlavorPrint, an algorithm representing the company’s flavors as a vector of 50 data points. FlavorPrint helps consumers decode the flavors they already love, and invites them to discover, share and bring new flavors into their homes. FlavorPrint site has a simple promise: Tell it what you like, what ingredients you have, and what cooking equipment you have, and it recommends recipes. Those recommendations become finely tuned to your context as you continue to interact with the site. McCormick’s now partners with retailers and food suppliers, as well as social media networks and third-party services like Foodily, to create more relevant customer experiences.

Over the next few years or so, we’re likely to see a radical integration of the consumer experience across physical and virtual environments. Mckinsey research says that by 2016, the web will influence more than half of all retail transactions, representing a potential sales opportunity of almost $2 trillion. All this will drive marketers towards using “consumer context” in all of their marketing engagements. Many industries have a large opportunity in looking to align their Marketing with the context in which consumers discover, buy & experience their products & services.

Forrester calls this Context based marketing:

“For all the activity you try to catalyze through campaigns, individuals more commonly interact with your brand outside of those campaigns. They may learn about your product or service prior to purchase. Then they’ll use your product, connect with others, and even organize activities around it. They spread word of mouth, positive or negative — and that, whether you
like or not, is your actual brand image.The context of all those interactions determines whether they will engage and, more importantly, transact with your brand again. Marketing’s job now is to identify and use context to create a repeatable cycle of interactions, drive deeper engagement, and learn more about the customer in the process. The more marketers can internalize and act upon what they learn, the easier it is to make future interactions that much more engaging”.

Many businesses will create data led marketing advantage as they build competency in storing , interpreting & taking action on these vast terabytes of context data. Contextual marketing will yield a new form of “owned data” that is generated from the interaction cycle. Smartphone owners pick up or glance at their mobile phones 150 to 200 times each day, spending on average over two hours a day accessing apps and websites. This leaves a huge data trail behind as well.To get the full customer portrait rather than just a series of snapshots, companies need a central data mart that combines all the contacts a customer has with a brand: basic consumer data plus information about transactions, browsing history, and customer-service interactions.

But to do this CMO’s will have to take charge & demand a level of technology hitherto not seen in the Marketing department.And yes, 2017 is the year when Gartner predicted that CMO’s will spend more on IT , than CIO’s!!

How banks are missing the “millenials” mark?

“Banking is essential, banks are not,” Bill Gates, then CEO of Microsoft, famously said in 1994.Mobile phones, however, are essential. And many of us today are doing a majority of our banking transactions on the mobile.

Forrester had this interesting thought –“The moments that characterize the mobile mind shift are getting shorter. Simple triggers — messages, sounds, even tactile sensations — spur consumers to take action, both on devices and in the real world”. Forrester defines this quick-reaction subset of mobile moments as micro moments.

Millennials are digital natives — the first generation to have grown up with Internet-enabled devices and digital technologies — and they expect real time engagement with brands.

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According to a study by Viacom Media, banking, as an industry, runs the highest risk for disruption. 53% of the Millennials they surveyed said they didn’t think their bank offered anything different than a competing bank. 71% said they would rather visit the dentist than hear what banks have to say. 73% would rather handle their financial services needs with Google, Amazon, Apple, PayPal or Square than from their own national bank.

India has a strikingly young population, especially compared to China. It has 440mn Millennials, larger than China (415mn).

So what must banks do to engage better with the Millennials :

  1. “To service is to sell” will be the new philosophy

Banks will leverage the rich customer data to “service first” , rather than sell. Sales will happen because banks anticipate service moments that lead to a sale. This will need appropriate technology investments for banks to sense “customer moments” in real time & respond to them. Millennials will demand that. Customer service may completely morph with Marketing into a Customer Experience function. More importantly banks will need to control their “push selling” paradigm. Regulators may help by mandating an end to “mis- selling” …but that may not happen anytime soon. More progressive banks will regulate themselves & move to this new philosophy! Banks have huge data that signifies a “service need moment”-eg providing an NOC to an auto loan customer without any follow up. Also picking up a credit card airline transaction & converting that to a bunch of “partner privileges & offers for that country”.

Again research shows that “marketers will build their own contextual marketing engines to connect with customers not through campaigns, but through ongoing interactions. To do so, they will have to combine systems of insight and systems of engagement”. So the mass & blast campaign management will change & instead much more relevant service based messaging will engage customers.

2. Become “Gurus”
Financial marketers have a clear opportunity to become financial gurus to Millennials. This generation is hungry for knowledge, is ready to learn digitally, and would prefer simple, easy to understand content to make better decisions about their lives. But this content has to be created to connect to Millennials.
Bank of America’s initiative “Better Money habits” launched in collaboration with the non-profit Khan Academy is one of the examples of interactive education resources targeted at the Millennials.      http://bit.ly/1xce4Uv

3.Think ‘Outside the Bank’

 Millennials are the experiential generation. They focus on today’s needs and take on debt for vacations or education. Research from Facebook IQ has shown that Millennials tend to show off not through the ownership of things but through experiences. How can financial marketers leverage this knowledge to bring an “experience edge” to their marketing. American Express provides its members with live streaming concerts on its unstaged website, and Chase treats some of its Sapphire cardholders with VIP access to music shows who can then share their experiences via social media.

http://bit.ly/1KPmY0N

None of this is new & brands should find more exciting partnerships – with writers, photographers, Theatre artists, social sector leaders, and other influencers. Research shows that “Such collaborations could result in storytelling initiatives with advice on different experiential topics in connection with financial matters behind them. Communications should be built not so much around a transaction, but rather all the exciting things you can do with it”.

4. Tear down the silos

Define, and start executing an overall payment strategy. Not only is responsibility for payments split between retail and business banking teams, but even credit cards and debit cards are often run by separate teams. Marketing tends to be a central team but may not have as much authority across silos to own a consistent communication paradigm.

5. Embed analytics into Mobile banking: 

Help customers see an accurate forecast for their spending. DBS digibank leads in the Indian market with its budgeting and spending tool. This allows customers to manually categorize transactions and autopopulate transactions like bill payments; they can also choose to receive email alerts when they hit 70% to 90% of their budget. DBS digibank also provides a basic saving tool to enable customers to assess their spending and save money. In terms of advice and planning, ICICI Bank offers customers a few useful tools, such as calculators for mortgage payments, investments, and pensions.

Mobile banking offers the opportunity to cross-sell to existing customers and to promote additional services. “Yet few banks use the context of a customer’s current product portfolio,recent life events, location,past behavior,and other factors to offer personalized marketing in their mobile apps”.

Customer centricity-bringing customers in the boardroom!

Amazon aspires to be “Earth’s most customer-centric company.” Numerous mission statements are sprinkled with customer focus. But in reality it is hard to actually be customer centric. Many companies talk about it but only a few achieve the holy grail!

I loved the concept that Prof Ranajoy Gulati speaks about:  “In fact the big leap that companies need to make is to “not sell what they produce” but to “solve customer problems” & then suddenly “who produces the product is no longer important “because you start “owning the problem space”.

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Customer-centric companies tracked by Gulati between 2001 and 2007 delivered shareholder returns of 150 percent while the S&P 500 delivered 14 percent. While research like this looks great, one wonders why there are not too many companies who “really put the customer at the centre”. Only companies who are great at “disruption” seem to truly belong to the category of obsessively customer focused. A customer-centric organization’s business is built completely around the customer. This kind of company has a strong understanding of the customer’s value and what the customer represents to the business’s profitability. With this knowledge, a customer-centric company adapts everything it does – from R&D to Customer service – to deliver the best value at the right cost to their customer.

The old adage that customers are always correct may not always be right. Current breed of customers are spoilt for choice & empowered. E commerce industry in India is a classic example where consumers are getting pampered with discounts. But there is a difference between “customer friendliness” & “customer centricity”. Companies create value for customers but also have to capture value in their business to be sustainable.  So are companies like Amazon & Zappos the outliers? Zappos actually says that If a customer calls for a product and Zappos does not have the product in stock, they recommend a competitor who has it. While Zappos will lose the sale, in the long run it’s best for Zappos because the customer appreciates the help and tells their friends the story. It creates word of mouth.

Peter Fader, of HBS, has this interesting take: “Customer centricity is a strategy to fundamentally align a company’s products and services with the wants and needs of its most valuable customers. That strategy has a specific aim: more profits for the long term. This is a goal that every business would like to achieve… But you’ll only be able to get there and put customer centricity to use if you are willing to start thinking in new—and in some cases, truly radical—ways.”

So how should companies become more Customer centric:

  1. Sort customers into –who gives value & who does not?
  2. Operations-develop the ability to deliver different products & services to different customers-not easy! At first the operations folk will always say no!
  3. Creating a customer-centric culture where you don’t script every interaction. Therefore, employees need to be able to make the right judgment calls on their own when dealing with customers.
  4. Focus on customer satisfaction & retention over customer acquisition. In a 2013 Forrester survey of global CMOs, 63% listed acquiring new customers as their top priority, while just 22% said retaining current customers was their top goal. In India this is particularly hard because of low penetration of products & services.
  5. Customer-obsessed enterprises must migrate investment budgets from areas that traditionally created dominance — brand advertising, distribution, mergers for scale, and supplier relationships — and invest in Retention & customer experiences

Prof Niraj Dewar, Professor in marketing at the Ivey Business School has this interesting comment:  “Companies’ upstream activities, such as sourcing, production, and logistics are being commoditized or outsourced, while downstream activities aimed at shaping customers’ perception and reducing their costs and risks are emerging as the main sources of competitive advantage. To compete effectively, companies must shift their focus from upstream to downstream activities, emphasizing how they define their competitive set, influence customers’ purchase criteria, innovate to solve customer problems, and build advantage by accumulating customer data and harnessing network effect”.

I had written about this earlier as well. What does Customer centricity mean to you? I would love to have your feedback. Here is what I feel:

  1. Being loyal to customers & not the other way around (customers needing to be loyal to the company). This needs companies to have a longer term view of customer lifetime value & not a short term view of immediate profit. It needs an internal senior level stakeholder who champions the customer cause (CMO?)
  2. Become more accessible to customers & respond faster to their needs. This needs companies to move from “insight to action”. To act faster, companies need to break silos within their organisation to be able to respond to customers.
  3. Use information to make every interaction relevant & use customer data to more powerfully personalise company’s interactions with the customer. The Big data world is only producing more such information for marketers to leverage. This amounts to a mass customisation strategy where the CIO & CMO need to work very closely together to make meaningful changes in the company’s operating environment. And most critically, to do this keeping the customers sensitivity to privacy as paramount!
  4. Strategically think through what culture changes the enterprise needs to become more customer centric. Today technology & Big data based insights can help you accelerate this process.

For those of you in Mumbai, we at Cequity are doing this wonderful conference called Customer centricity world 2015 which has a keynote by Dr Bala Balachandran. Do join us for this conference & you can learn more here: http://www.customercentricityworld.com/#about