Dealer's Choice: Gaming Companies Use Development, Conventions, and Marketing Metrics To Achieve Success
MGM, the Sands, and Harrah's dominate the Las Vegas Strip, as well as much of the gaming industry around the globe. But they each took a different path to success, as Wharton Fellows learned in meetings with senior executives of the three companies during an executive education program in Las Vegas in January.
"We often talk about best practices," notes Wharton Professor David Reibstein, who is co-academic director of Wharton's Competitive Marketing Strategy program and was co-director of the Wharton Fellows Master Class in Las Vegas. "Within an industry, we typically see who is doing well and imitate them. But there are multiple ways to the top. We spend a lot of time trying to understand what the competition is doing. It doesn't mean that is what we need to do. Three giants used three different strategies for success."
MGM focused on developing its valuable land holdings, including creating new hotels and a massive new CityCenter, combining residential towers, retail, and a casino hotel. MGM also is expanding to new destinations such as Macau, Dubai, and Atlantic City. Each will be a draw for new visitors.
The Sands, in contrast, focused its business on convention visitors. Sands founder Sheldon Adelson, who also created the successful Comdex show, described how he "challenged the status quo" of the gaming industry. He realized that convention traffic could bring lucrative tourists to town midweek, when room rates were low. Adelson, third richest man in America, continues to challenge conventional wisdom in Macau, by building supporting infrastructure — including a large ferry fleet — to bring customers into his casino hotel operations.
Harrah's Total Rewards: Mastering Marketing Metrics
Harrah's has been a leader in customer relationship management, with its Total Rewards program. David Norton, vice president of relationship marketing at Harrah's and the architect of the system, says that by careful attention to customers at 40 properties in 16 states, the company has been able to increase "share of gaming" of its customers. Total Rewards allows the company to use metrics to measure and increase its business. A casino player in Omaha can earn points and status in the four-tier loyalty program, which can be used for trips to Vegas. With the addition of Caesar's Palace and other hotels to its portfolio, Harrah's also offers a diverse portfolio of properties that cater to different tastes. In contrast to MGM, where different properties compete against one another, Harrah's takes a more collaborative approach.
Harrah's can use the metrics derived from this consumer data to develop and continuously refine marketing strategies. "Harrah's system for customer relationship management is considered the best in the industry and a model for other industries," says Reibstein, who is Wharton's academic director of Marketing Metrics: Linking Marketing to Financial Consequences and co-author of Marketing Metrics, 50+ Metrics Every Executive Should Master. "They are not only looking at their market share of spending by customers at their properties but also their "share of wallet' across the entire category. By paying attention to these measures, Harrah's has been able to increase its share of wallet."
A Research-Based Campaign: What Happens in Vegas Stays in Vegas
Vegas is undergoing one of the most rapid periods of growth in its history, with 40,000 new hotel rooms planned for the next three years. As one executive said, the end of this growth "will not be in our lifetime."
But endless growth is about as likely as a winning streak at the casino tables. "Isn't there a limit?" Reibstein asks. "They keep talking about market growth rather than market share, but this growth may be more driven by ego. Everyone is forecasting the same increase in market share. It is not going to happen. The market share cannot exceed 100 percent. They have to take into consideration what competitors are doing."
One driver of Vegas growth has been one of the most successful marketing campaigns of any city. Fellows heard from one of the creators of the "What Happens in Vegas Stays in Vegas" campaign. Terry Jicinsky, vice president of marketing for the Las Vegas Convention and Visitors Authority, said that the campaign was developed after careful research. The research included testing "Vegas IQ" with subjects around the country, and even shadowing tourists on trips. In the process, they learned that every visitor has a story to tell. Marketers turned the idea on its head — every visitor has a story they would rather not tell. They built on the success of the campaign with new secondary campaigns that emphasize specific non-gaming activities such as shopping, theater, and restaurants.
Challenging Mental Models
Wharton Professor Jerry Wind, who founded the Fellows program, said the program in Las Vegas highlighted one of the program's guiding principles — the need to challenge mental models. "It is important to challenge mental models," he says. Sands founder Sheldon Adelson attributed his success in founding more than 50 businesses to his ability to challenge the conventional thinking. "We saw two extremes," Wind notes. "Sheldon followed an incredibly intuitive approach and Harrah's used an incredibly analytical approach. It is not either/or; it is both/and. How can we combine analytics with intuition? Intuition based on experience is invaluable. We need to combine intuition with the right research and tools."
Wharton Fellows
The Wharton Fellows: Ongoing Network and Master Classes for Senior Executives program is a lifelong network of thought leaders, senior executives, Wharton faculty, and leading experts. The network provides continuous critical knowledge and unparalleled decision support to meet the business challenges of nonlinear, disruptive change. The program's unique format — short, global master classes and a continuously linked community of experts — helps senior leaders to constantly challenge their assumptions, develop and test new ideas, and stay ahead of the competition. Upcoming master classes will look at "innovation and creativity" in Philadelphia in April and "Islam and the West: Insights and Business Opportunities" in Dubai this September. The program focuses on changing mental models and managing disruptive change and uncertainty.
