The Harrah’s Quandary: Will Bad Credit Change the Customer Experience?

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One of my students recently asked if a past bankruptcy or negative credit report would likely impact their opportunity to get a job. They were concerned that as HR departments get inundated by more candidates that more eliminating factors would be put into place, such as a credit check. In today’s dreadful economy many people are having a hard time paying bills on time which in turn can lead to bad credit. The question was quickly turned on its head though to the following: Is large debt likely to force a shift in the ability of many organizations to acquire customers and maintain their customer experience goals? In short, what happens to your brand and to the customer experience when your financial problem is worse than the worst-case-scenario?

Today’s WSJ contained an article about Harrah’s (“Harrah’s Changes Its Game – Tough Times for Gambling, Large Debt Force Shifts”). Harrah’s is often mentioned in marketing and CRM type presentations for its branding around the customer experience. As mentioned in the article, “Harrah’s customers have been especially spoiled by perks they earn through a loyalty plan, called Total Rewards that is similar to airline frequent-flier programs.” The article stated Harrah’s “recently cut the hours at some of its casino VIP lounges, and even replaced plates full of hearty sandwiches with bruschetta and hummus. The moves riled Harrah’s middle-market customers, who are accustomed to getting the high-roller treatment in exchange for their loyalty. The changes were a small sign of larger problems at the nation’s biggest casino company.”

The question facing Harrah’s is becoming universal for marketers in today’s economic downturn. “How does an organization build their brand and create marketing buzz without spending cash?” The answer may be simple – it just can’t be done. The article went on to state that Harrah’s “is scrambling to cut costs where it can, laying off hundreds of employees, deferring development projects key to its growth plans, and trimming customer services.” When you decrease headcount and trim customer services the customer experience is bound to be impacted. Place your bets?

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3 COMMENTS

  1. Alan, you quote the WSJ question raised in respect of Harrah’s – “How does an organization build their brand and create marketing buzz without spending cash?” Here’s your answer – it’s called creativity. Dull, sluggish, quotidien marketing will reap what it deserves – nothing. Stand out from the crowd by doing something different. Richard Branson, now Sir Richard, and possibly Saint Richard in the future, can teach these boring old marketing types a thing or two. Dare to be different; be creative; innovate.

    As for Harrah’s prosperity and survival, to be honest, I don’t care. If they were an organization that contributed to the welfare of human kind in some socially desirable way, I’d care, but gambling establishments take so much and give so little ….. !! And no, I don’t work for their competitors, and no I’m not opposed to people having fun. Come on Harrah’s, tell your side of the story.

    Francis Buttle, PhD
    The Customer Champion

  2. According to Forbes’ 2008 list of billionaires Richard Branson is the 245th richest person in the world. It would certainly be great to be Sir Richard.

    The WSJ | Europe did carry a story today that stated that even Sir Richard is feeling the pressure of the current credit crunch though. The quote from the article:

    “The credit crunch is putting pressure on at least one of his companies’ debt, though it isn’t clear how much debt is held by Virgin Group as a whole. Based in the British Virgin Islands, Virgin Group isn’t publicly traded and doesn’t report its accounts.
    His British cable-television company, Virgin Media Inc., faces a Friday deadline for lenders to approve postponing £1.66 billion ($2.64 billion) in loan payments coming due in 2010 and early 2011. The company may not have enough cash to repay the senior secured debt, according to regulatory filings.”

    At some point – daring to be different, creative and innovative – generally takes cash flow which may impact people, programs and technology decisions. The impact on the customer experience is generally not far behind.

    Perhaps the Virgin brands true customer experience test is in the making. The next few months will be very interesting for several brands.

  3. We in the UK and USA need to get out of the habit of thinking that having debt is tolerable. It isn’t. Even multi-national corporations maintained big debts to stop themselves being takeover targets, prior to the recession. Then, when the recession hit, their credit-flow dried up and they started getting into trouble.

    I hear countries like Germany, Spain and Italy don’t use credit cards much. In Germany, they prefer to rent rather than have mortgages. Guess who’s coasting through the current recession (particular national idiosyncracies aside)?

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