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Computerworld - While most mergers and acquisitions are undertaken for cost-cutting purposes, Harrah's Entertainment Inc.'s $6.8 billion acquisition of gaming rival Caesars Entertainment Inc. earlier this month was driven largely by revenue opportunities.

Extending Harrah's customer loyalty systems and processes to Caesars clients could help drive 90% of the new revenue expected for the combined firm, said Harrah's executives and industry analysts last week.

Today, roughly 80% of the 200,000 to 250,000 customers who visit Harrah's properties each day are members of its Total Rewards customer loyalty program, while just 30% to 40% of Caesars' customers are enrolled in that company's Connection Card program, said Tim Stanley, senior vice president and CIO at Harrah's.

Combining the companies' rewards programs and processes is part of Harrah's planned $130 million integration of its IT systems with those of Caesars.

The appeal of Harrah's customer loyalty program combined with the company's marketing abilities should enable Harrah's to convince more than half of Caesars' customers to join its Total Rewards program by 2007, said Dennis Forst, a gaming industry analyst at Keybanc Capital Markets, a division of McDonald Investments Inc. in Cleveland.

That could add a few hundred million dollars in revenue to Harrah's coffers, Forst said. Harrah's declined to speculate on the size of potential revenue gains.

Harrah's was the first casino operator to collect and analyze information about customers in order to cater to them individually and thereby capture a greater share of their gaming budgets, said Martha Rogers, founding partner of Peppers & Rogers Group, a Norwalk, Conn.-based customer strategy consulting firm.

Since launching its rewards program in the late 1990s, Harrah's has increased its share of customers' gaming budgets from 36% to 50%, Stanley said. The company expects similar success with Caesars' customers.

Harrah's CIO Tim Stanley Image Credit: Martin Le Pire/KlixPix

Harrah's is one of a handful of companies, including U.K.-based retailer Tesco PLC, that use membership rewards programs to gather personal information about customers so they can cater to their specific needs. That allows those companies to improve customer loyalty and gain new business, said Rogers.

Harrah's stores customer data from its casino floors in its so-called Winners Information Network, an IBM Informix database running on an IBM AIX-based system. A Teradata data warehouse is used to parcel and analyze the data, said Stanley. Harrah's has already mapped customer data from Caesars' DB2 database running on an IBM AS/400 into its data warehouse, and it plans to begin analyzing that data next month.

Harrah's expects the combined systems to strengthen the Total Rewards program's ability to "help us cater the right level of service to the right level of customer" and significantly boost revenue by adding Caesars' most profitable customers, said Stanley.