Vegas Baby, Vegas: Loyalty Lessons from Sin City

Nov. 28, 2012

By Noah Glass

Heading home after a recent restaurant show in Las Vegas, I was reminded of a an eye-opening Bloomberg/BusinessWeek article by Karl Taro Greenfield about Gary Loveman, the one-time Harvard Business School professor turned chairman and CEO of Caesars Entertainment Corporation, the largest gaming company in the world. Loveman is an "academic theoretician," noted the article, who uses empirical evidence to drive customer loyalty.

Loveman's genius customer loyalty tactic was the development of his "Total Rewards" his casinos, which enabled guests to "check-in" and identify themselves with every casino transaction, linking their identities to both their gaming activities (the most profitable activity for Caesars) and their restaurant and entertainment purchase history. Through Total Rewards, casino goers could earn rewards like 'Free Buffet Breakfast' or show tickets simply by checking in every time they transacted on the casino property. By 2010, the Total Rewards program had grown to 40 million members – the largest such program in the gaming industry. For Loveman, this was not just about delighting the customer with altruistic customer service. It was about harvesting and linking rich sources of customer data.

Total Rewards helped Caesars to identify its most valuable customers and target offers to those customers based on their check-ins. This form of database marketing begins with the recognition that not all customers are equally valuable. In fact, customers tend to be widely disproportionate in the value that they represent for the brand. The "Pareto principle" (better known as "the 80:20 principle") holds that for many events, 80 percent of the effects are the result of 20 percent of the causes. Applying this principle to the gaming industry, that means that roughly 80 percent of Caesars profits come from 20 percent of its customers. The brilliance of Loveman's Total Rewards program is that it helped to identify the top 20 percent customers and, more importantly, allowed the casino to tie an accurate "profit-per-visit" amount to each customer in its database. Loveman then used this data to drive relevant "come-back-soon" offers for high-profit customers.

So what can restaurant brands do to emulate Total Rewards? These days, there are many options. Let's examine three: 1) check-in programs; 2) loyalty programs and 3) mobile ordering apps.

Check-in programs

Foursquare popularized the concept of the "check-in." It allows users to take action to make it known every time that they visit a favorite location. Restaurants can run promotions based on a certain number check-ins and reward the user with the highest number (e.g. "The Mayor"). This approach allows brands to track and reward high-frequency users and dole out generic rewards. However, check-ins alone do not give the brand access to spending data or insight into what exactly the user purchased (or if they indeed purchased anything at all – which is why I use the term "user" rather than "customer" in this section). What results is an incomplete view of the user and a lack of certainty as to just how valuable they are to the brand. But hey, it's a start.

Loyalty programs

From punch cards to dollar-based rewards, many restaurants have experimented with loyalty programs that reward customers for purchase frequency and spend. Many brands embrace such programs and have seen great results in both identifying loyal, high-value customers, and driving them back to the store for return visits. Still, some brands do not like to give away free or discounted products. Loyalty programs are a step up from check-in programs in that you can tie actual purchases and purchase amount back to the customer and gauge customer value. However, these programs do not offer insight into the exact purchase item, which leaves out a key clue for how to drive the customer back for a future visit with anything other than a free product or discount.

Mobile ordering apps

When customers download a mobile ordering app, they usually do so because mobile ordering provides convenience; it allows them to bypass the line and get their food faster by pre-ordering and pre-paying. Even customers who are less time-sensitive often prefer to order through a mobile app because it allows them to save their favorite orders on-file just the way they like, so that they do not have to repeat a complex order on every visit or risk a cashier error that leaves them with something other than their favorite. With mobile ordering apps, brands can see how frequently a customer makes a purchase, how much they spend, and exactly what they ordered, right down to the toppings they put on their hamburger – all without providing the customer any additional incentive other than a more convenient and more personalized ordering and payment experience. The result is a powerful customer loyalty database that enables restaurant brands to identify their best customers.

This new approach to digital customer loyalty has led to an explosion of interest in mobile ordering apps as restaurant brand CEOs and CMO's make it a top priority to create Total Rewards-like platforms of their own.

What happens in Vegas doesn't always stay in Vegas.

Cover photo: Chase N.

Noah Glass is the Founder & CEO of online and mobile ordering provider OLO. Highlighting OLO's innovation, Glass has been featured on Good Morning America, The Wall Street Journal, ABC Wor

Topics: Online / Mobile / Social , Operations Management

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