Lessons from Loveman

31 Mar

One aspect of reading business cases I enjoy is assessing the present tense of the company and reviewing the effects over time. What have the programs or principles reviewed achieved for these companies today?

At the time of Gary Loveman’s Harvard Business Review Best Practice article, Diamonds in the Data Mine, and the Stanford Business School case, both of which were published in 2003, Harrah’s was a $4 billion company with 43,000 employees. In the eight years since, the company has more than doubled via acquisitions. Today, Harrah’s is an almost $9 billion company with 85,000 employees. There’s a slight irony to Loveman’s opening jibes in the article at the mega casinos with the mega malls, as Harrah’s now owns Caesars.

No question Loveman is a brilliant strategist, analyst and marketer. A few nuggets I found especially wise:

  • Evaluating the customer’s worth over time. This would naturally create a huge motivation for marketing, operations, food and beverage and other departments. While the long-term value is probably not bookable from an accounting perspective, internally it could certainly be treated as such.
  • Creating a tiered reward system, and letting customers see what others are getting. This also helps mitigate any negative perceptions about wait times and service. “My check-in line may be slow, but not all service is bad at Harrah’s. Look at how fast that preferred customer line moved.”
  • Playing patterns and data driving the placement of slots on casino floor. This avoids the “tyranny of experts” – the operations guy or the architect who are convinced they “know” what slot placement works best, when really their evidence is nothing more than personal experience and preferences.

I’m a long-time marketer, with experience in advertising, direct mail and web campaigns. Loveman is absolutely correct: Many companies design the marketing strategies first, then adjust the data to suit. In fairness, however, it’s often the lack of a data mine at the outset which leads to this approach. Often, the marketing program is used to build the database — for example, buying a direct-mail list of hypothetical customers, and then tracking response to marketing efforts.

The marketing lesson I’ve adopted from Loveman, along with Pfeffer and Sutton’s Evidence-Based Management:

  • Hypothesize based on your marketing strategy and available data
  • Develop a rule
  • Test data
  • State conclusion
  • Implement program and test again, or adjust hypothesis and test again

Loveman’s data mine is larger now by orders of magnitude. Wonder what diamonds he is discovering now?

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