Customer Relationship Databases
Friday, March 11, 2005
8:00 a.m. - 9:00 a.m.

Mr. Scherf: Good morning, everyone. One of the laws of conferences is the first session on the second day is always a little slow loading, but I am sure we will fill up and we will get started right away. Our first speaker this morning, talking about customer relationship marketing, just got in off the also eligible list, so she is just as surprised to see you as you are to see her. She got the call last night, and found out that she is now a speaker. She is quickly subbing in, but I have known Annie for about 15 years, and she has not met a challenge she can’t handle yet. 

Annie Allman was born in Alaska, took off for the mainland, landed her first job at Churchill walking hots, then moved on to the University of Pennsylvania, where she got her bachelor’s in English. She then earned an MBA from Dartmouth College. Then her education really began, when she went to work for Bob Levy. She spent five years doing numerous and sundry things for Bob and his horse farm in Maryland. She spent those five years grooming and galloping, and as she mentioned to me, that included breaking Housebuster as a baby. She did racing stable administration three seasons as a racing official at Atlantic City Racing Association. Now she has been with Harrah’s for nine years, holding a variety of marketing positions. She is involved in developing Harrah’s Chester Casino and Racetrack located just south of the Philadelphia airport. It is going to be a 5/8-mile harness track and racino, and here to talk about Harrah’s experience with customer relationships, please welcome Annie Allman.

Mrs. Allman: Thank you. Good morning, and I have to say all of that previous life on the racetrack prepared me well for the phone call I got last night that my compatriot David would not be making it in to speak to you today, and asking if I would please take his place. Appropriately, the folks I was with counseled me not to go back and prepare. 

          I am not a technology person as Michelle from Sci Games can attest to. She had to teach me how to turn the ringer off on my phone yesterday. But as a marketer and someone in operations, I am a heavy user of the products that our technology team has built at Harrah’s corporate. I am delighted to share with you some of our strategies and what we have going on. 

          I will begin with just a little background on Harrah’s. As many of you know, Harrah’s is one of the oldest names in casino gaming. It was started in the early days of Nevada by Bill Harrah, and has grown to include five casino brands: Harrah’s, Harvey’s, Rio, Showboat, and the Horseshoe. Of course we are also working on a deal to merge with or acquire Caesar’s. Hopefully that deal will be closed this summer. We are over a $4 billion revenue company. We have consistently shown growth for the last three years, or even longer than that. We have a big team of 43,000 employees across the country. We have 29 million names and information about our players on our database. We have 15,000 hotel rooms, over 200 food and beverage outlets, so it is big and getting bigger. 

          Some of our key strategies--of course we were some of the earliest to get into expanded gaming. We are all about consolidating play. My job as a marketer at Harrah’s is not to encourage someone to gamble beyond what their entertainment budget is, but is to make sure that I get as much of their gambling and entertainment wallet out of Harrah’s property. Because of that we do a lot of cross property play. We move players across the country to our various brands and casinos, and we are very customer service focused. 

          Underlying all of this is a very tight customer relationship management system. The backbone of this is total rewards. Many of you I have talked to are total rewards members. You gamble with us. It is our loyalty card program. Some key features, you can sign up in Las Vegas, and the next month when you are in Atlantic City, your card is recognizable. We know you. You can come in, put your card in, and start to play. We know what you like and what you like to play. It is portable. The cash and comps that you earn are transferable, so you can save up in your local market for a trip to New Orleans or Las Vegas. Our tiered card status is, again, recognized across all properties. If you are a diamond member at Harrah’s Las Vegas, you are also a diamond member at the Rio. Because of that we can offer some differentiated service and offers. 

          What is the result of all this? Well, our cross market play, which we define as, if you sign up in one area or your home base is Harrah’s Joliet, and we have convinced you that you should play in Las Vegas, we are tracking that cross market play. It has risen to a record $1.4 billion in 2004.

          What are all the elements of our CRM system? Of course, our games, our slot machines, we are collecting information about what you like to play. That is the backbone of our marketing programs. We have some pretty sophisticated customer contact through the Internet, through our call centers. We are very heavy into direct mail. We have some great analytics to measure the results.

          One thing we focus on is trying to convert people into known gamblers. As many of you know, especially in the racing world, a lot of your best players do not really want to be known, so that can be a tough thing to achieve, but we have really focused on that. In one sense you could say, “Well, you are converting all these people, then you offer all these rewards and incentives, and are you lowering your profit on the individual customer?” We have shown over time that strategy allows you to target your reinvestment and do a better job of applying your marketing dollars.

          Our tiered card program, our entry level card is the gold card, based on your play. I think a big part of this, we communicate upfront and tell you what you have to do to achieve your platinum status, diamond status, and we now have a fourth level that is about one-tenth of our database, our seven stars. 

          What this allows us to do is not just to target your reinvestment dollars or your marketing spend, but really offer a differentiated level of service. That starts at the slot machine. You come in, you insert your total rewards card, and we instantly know your status with us. We can use that information to do everything from prioritize the dispatch of your jackpots. If you are playing on a floor, and you hit a jackpot over here, someone else hits over here at the same time, the system tells our slot attendants who should have higher priority based on their relationship with us. A seven stars player will never wait for anything. Diamond, our goal is to never make them wait. The rest may have a little longer time, but it has proven to be very popular with our players. 

          The engine of all this is something we call “Win-net.” I believe it was years ago, winners information network, and it is sort of the central collection of all these data points. We use this for this closed-loop CRM marketing. So you come in, you play with us, we collect the data from the slot machine on what types of games you like to play and how you like to play, and use that to both see what your play is with us today and then based on some modeling that we have done, we make predictions about when you might like to come in. We can tailor our offers to when you come in and we can tailor our direct marketing to hit that. 

          We have also been very focused for years on our core business VIP. We define that as players with an average daily worth of $400 and above. By really focusing our people and resources on growing and developing that core group, we have seen tremendous growth in revenues. 

          Our Internet site has an icon of Elvis, and we have really tried to leverage our brand and other brands by building strategic marketing partnerships. This is something we did a few years ago. We partnered with a music company who built a mobile Graceland touring museum and brought it to a bunch of our different sites. We had Elvis commemorative total reward cards. We did giveaways with an Elvis theme. These are just some of the promotions that we use to kind of spice up our brand.

          This is just some information that I will not go too far into that lays out who is utilizing our online system to either to book a hotel room, to check their total rewards account, and it is definitely skewed towards our better players. Our diamond and platinum customers are bigger users of this. 

          We have a corporate managed email campaign, and one problem that we have had is that as you develop your databases or you have already built your customer loyalty program, you will probably run into as well, you get very excited about having all this information, and you are constantly pounding them with offers and e-mails, and you really need to manage your customer contact. That is something that Harrah’s has been working on. I think we still have some way to go, but these are some of the standardized e-mail campaigns. 

          Another partnership with IT and marketing that has proven successful is that a few years ago we entered into a partnership with an outside company that develops revenue management software for cruise lines, airlines, that type of thing, to really maximize how we were allocating and marketing our hotel rooms. Probably the biggest asset a casino has in many markets is their hotel rooms. Everybody wants to get a hotel room. They want to get a comp. How do you determine who the best player is? How do you drive the most bottom-line profitability? This software and the strategy behind it allows it to stop being a human decision, and it really pushes it into an analytical framework where it does the calculation and says, ‘Today they want a room for Tuesday, March 31, it is 28 days out, I will take any one at a hundred theoretical and above, or if you are willing to pay a cash rate at 159, I will take that customer.’ By getting our properties to really embrace this technology, and having marketing really work to create the proper offer so you are driving the right demand, we have increased our revenue per occupied room in some cases over 50 percent. 

          What is coming next? We had this thing called the sand box. I think it came out of someone saying, “Oh, if I had all this data, I would just like to get in and play around like I was in a sand box.” It takes historical and current data from a variety of sources. From our promotional software, our casino management software, our slot machine information, and brings it all into one database that you can easily work with. 

          We are starting to do some test things, real time business rules engine, but what it means is that we have the software and the capabilities so that we can start to analyze and intervene on someone before they have even left. We do not even have to wait now until your trip closes and you walk out the door and we look at your play and send you an offer. I can look and say, “Gee, Michelle, it looks like you are on a losing streak. We want you to have a winning experience at Harrah’s. Here is a $10 real rewards coupon. My name is Annie. It is great to meet you. What else can I do to improve your stay?” We are testing that and it will be rolled out nationally in the next 6-8 months. 

          So, just some conclusions and results, it is really key to have a great partnership between marketing and IT. We really look at the two as if they are linked. We have a CEO, Gary Loveman, who is absolutely 100 percent committed to technology and marketing. They have built a real partnership that has shown terrific results in our earnings per share. One of the measurable objectives we always look at is what percentage of a customer’s wallet are we retaining. We determine these figures based on market research. We have increased that over all across the country from 36 to 45 percent and above. We have also achieved almost an 80 percent tracking rate or 80 percent of our play is linked to a specific account. 

          What is coming next? We need to continue to develop these and I was very excited to hear the gentleman from Microsoft and to hear what Woodbine is doing and I look forward to talking with them more. We have all these great systems but I has not gotten down to the level of wireless or having a device I can walk the casino floor with. I can’t come up to you and take your driver’s license and swipe it and sign you up. Those are some of the things we need to work towards. Then, the benefit of being in a large company is that you have these great folks working away in Las Vegas, but sometimes it is hard to translate that in the field. If I have responsibility for a property, I need to have people on my staff that are trained to do database analysis or use these tools. That has probably been an area that has been misjudged for a few years. We did not realize the training, the recruiting, and the focus you need to put on getting those folks into your organization. So we are really looking to scale up the capabilities and integrate that infrastructure. Then of course the big thing is integrating two new brands, Horseshoe and Caesars, and Caesars includes several brands underneath the Caesars umbrella. Then the big question is how do we drive all this together for the racing industry. Louisiana Downs is trying out some different things and working with the total rewards program and how to use that to give incentives to horse players as well. How do we use some of our technology to help drive the racing business? We certainly do not have any answers today, but it is an area we are focused on and looking at. 

          That is my presentation, and thank you so much for your time. If there are any questions after Atique maybe we could address them afterwards together.

Mr. Scherf: Thank you, Annie. Our second speaker, you want to talk about a CEO who has embraced the idea of customer relationship marketing and is getting passionate about it, I think Tom Meeker fits that category. Our second speaker is the Vice President of Customer Relationship Marketing and Technology Solutions for Churchill Downs, Inc. He spent 16 years in technology and predictive database marketing, which is where this all is heading. I have worked with Atique on wagering transaction protocol and while most of the people in the room are worried about getting the tote system working better or faster, he is more interested in getting it working so he can mine more information data. He just wants more data about the customers and he believes that is the way you move the business forward. Before joining CDI, he worked as the VP of CRM and marketing technology for a number of companies, including GSI commerce, the NBA, Vendi, the NFL, Sony and other companies. He has two undergraduate degrees, two MBAs and a PhD from Columbia, so he has almost as many degrees as Dr. G. Let me introduce Dr. S, Atique Shah. 

Mr. Shah: The doctor is in the house. I promise to tell you the truth, the whole truth, and nothing but the truth, so the story we are going to share with you is going to be a bit different. I am going to try to share with you some of the things that we as a company are going through, what I have seen previously in other implementations. This is my seventh implementation, so every implementation tends to be very unique. Most importantly, there are going to be some new and fancy things, so I hope you get the entertainment value from this presentation. But first of all, please understand that the following presentation does not necessarily represent the views of Churchill Downs, Inc., its officers, affiliates, or any other entity that is directly or indirectly associated with the company, but it should because it is my idea and it is going to change the company and the world. Now, what you are about to see, work with me a little bit because I give you this warning, it is going to be contagious content. You will have some scary ideas coming to you, and there may be some humor involved, so be cautious.

          I came across this little line over the last couple of years, and it went straight to my heart. Sometimes you get connected to one of these statements. This one was very interesting. It goes something like this. It says, customer relationship management is the art of using information technology to uncover customer intelligence and insights resulting in effective marketing programs and execution. Isn’t that a great statement? You know who said it? It was me! I said it at the 2003 Gartner Awards ceremony. It was a great implementation. This was a couple of years ago, and this company out of nowhere wanted to do some stuff. They had a lot of data, a lot of transaction data, history data, customer data, so on and so forth, and what we were doing was trying to find how that data could be utilized to do business different ways. They had exhausted a lot of advertising, direct mail, and email marketing and everything. Please, this is an interactive group, so let me ask you guys one thing. How many folks are from the IT field in this room right now? Show of hands please. One human. Alright. Glad to have you. How many folks are from the marketing side of the house? Wow, quite a few. Who are the rest of you? Operational folks? Or are you from my competitors trying to see what we are trying to do?

          Once upon a time, there was a company named Churchill Downs, Inc., located in a place called Louisville, KY. In December of 2003, I moved to this place from the New York area, and boy, let me tell you, what a difference. Outside of everything, the funniest thing was the way people drive. I tell you, it was like a ¼ of an inch of snow, and I saw 13 accidents. We saw all kinds of fancy things like that, but it is my home now. I have learned the word y’all. It is an unbelievable, powerful word. You can use it for one person, a man, or a female, a group, or any of those, and y’all works all the time, so y’all better be careful because I am going to be using it. 

The company is basically Churchill. I am from the corporate office. My job is only one thing—to serve my tracks. Our goal in corporate is to serve all of our tracks. We want to give them the necessary tools, the intelligence around their customer, the loyalty programs, and the things along those lines that can then have a better relationship for their fans with their tracks, because at the end of the day, a customer walking to Arlington Park or Hollywood Park is not going to care about the corporate guy called Atique. But they do care about their relationships with the tracks and the folks that are at the track level. 

So, again, we are a public company. We are in the middle of a lot of stuff. Our story is a little different than Harrah’s. No, we do not have 29 million customers in our database, but we have 1.6 million customers. That is not bad. I have 229 million transactions in the databases strictly associated with our loyalty club, which is called Twin Spires Club. When I joined the company, I went to the marketing guys, and said, “Hey, you guys have a loyalty club?” They said yes, and I said, “Good. How are they structured.” They said they have four tiers, bronze, silver, gold, and platinum customers. So I said, “Wow that is great. So you guys did the analytics and the segmentation and all that kind of stuff?” They said, “Sure.” So I said, “How come you came up with four?” They said because there were four color cards available. That threw me off a little bit, and I said, “Atique, you have got your challenge coming up.” One of the funny things that we had to do was look at our data and transactions. The field of CRM is a brand new thing to some of the people, but it is actually a very old principle. It is a technique. It is database marketing. Whether you call it one to one marketing, customer relationship management, customer management, or any of those fancy words, at the end of the day all that it means is to use the data that is collected on transactions on a customer to serving them better. It is not a selfish act. It is not something that I do for my sake only. It is to provide value back to the customers. All of you guys are beautiful people. Look at you all. You are wearing nice clothes, nice ties, nice shirts, and none of you are wearing the same thing because you are unique. That is what database marketing does. It treats you in a unique way and that is what our goal is. My challenge when I joined Churchill, was finding out the first day it was my first Derby last year. I had never been to a Derby before. I had no idea about the Kentucky Derby, but what an event. It changes your life forever. As I was standing there, I was looking at all these customers coming in. Of course there were thousands and thousands of these guys. What I realized was that the platinum customer was in the same line as Bubba, who has five dollars to spend on us. The platinum customer on average spends, let’s say $150,000 in aggregate on one of our tracks, or across the tracks, compared to a Bubba who is spending $5 to $20. This is why when you come on first class trips they give you those nice red velvet things to make you feel good. That is exactly what Harrah’s message was, as well, to differentiate with you customer base. Anyway, those were just some of the things that we are looking at, but they are going to be the story points for today. I will give you the situation that we were working, the overall strategy, our action plan, and then our message towards the end.

Why did this company called Churchill decide to do CRM? CRM is a very fancy thing. It costs a lot of money. It is a multi-million dollar investment. One of the reasons why we did it was exactly to Chris’ point. Thanks to the leadership of our senior executive group, they said we have exhausted direct mail, we are doing email marketing, all kinds of channel marketing, media marketing, and all that stuff, but we have continued to face the challenges that the thoroughbred industry and the harness industry continues to face, which is 85 percent of the customers that bet on me, I do not know anything about. I know you are out there somewhere, but I can’t reach out and touch. I can’t communicate with you. I have nothing to talk to you with. So what we were saying was that, is there a way we can focus on the 15 percent, build something that would then attract the 85 percent? That became our mantra within our CRM group. Since the day I was hired, we have hired 18 people in the group. So as you can very well see these are folks that are very much committed to developing something like this for the company and the funny thing is that the results are already coming in. Things are definitely different than what they were. 

Number one, the reason why we did this was to increase competition. Your customer, you think you own the customer. You think you have the affinity of the customer. The fact of the matter is that it is about value and rewards and the recognition. If the customer feels that they are getting a better deal from Delta, they will pick up Delta and drop Continental anytime. They will do this unless there is a hook for them. For example, since I am a silver lead customer for US Airways, I force myself to go to Pennsylvania, and then go to Minneapolis, St. Paul, then down to over here. I do not want to lose that thing because at least I get to go inside before everybody else puts their luggage in and all that. You know exactly what I am talking about.

Second thing, ever demanding customers. Guess what? They are you. You are the customer. You are so demanding. Have you ever looked at yourself? And me. We are so demanding. We want the best service from everything. We want the best value. Everybody in this room is going to be saying, “Hey, I will give you ten bucks, you give me $100 worth of value back,” because we are a value conscious society. One of the first things that we recognize is that it is the same thing at Churchill. My 1.6 million customer base is composed of demanding customers. They want that special treatment when they go to Arlington Park. They want that recognition to be as a platinum customer when they go to our parks. 

We are very good at mass marketing and mass communication. Buy everything. Go ahead. Send the broadcast to everybody in the database. Here is an email campaign. Some segmentation, but nothing based on predictive analytics or anything. Then obviously limited customer inside. We had no idea. If you were to ask me how many platinum customers are at risk in your database today, I would say I do not know. How many of my customers have the tendency or the likelihood of going from a bronze to a gold and a gold to a platinum level, and so on and so forth. I do not know. So what we needed to do was look at all the opportunities to generate the insights we needed on our customers. Again, these are all steps for effective CRM. Then finally, increased media spend. We were spending more and more and more and the return on that investment was not all that appealing as it used to be in the good old days. 

Okay, next step. What did the company do? Here is what they did. We focused on the customer. That is it. At the end of the day, the one thing if I could ask you guys to please take from here is the day that you decide to put the customer in the center of all of your strategies, whether it is operational, whether it is the design of your new facility, whether it is the type of races you are running on a specific day, whether it is the type of race card you are going to present, what kind of programs you are going to print, your customer data can tell you a lot of stuff. We, at Churchill, are looking at everything to do a lot of stuff. We have made investments in predictive analytics. One of the first things that our folks from Harrah’s were talking about, and we did the same thing. We can predict with a 56 percent accuracy on one days worth of transactions what the future potential of that customer is going to be. You know why I need that? Because if I know on day one, yeah, you build a relationship with me, you bet on my product day one, and if I have that transaction and I can now predict with a 56 percent accuracy that you are going to be a “Wealthy Will” type of customer in the future, then I will start talking to you as if you are already a “Wealthy Will” because that is behavioral analytics. 

Next step, in thirty days the data model comes, sniffs again the performance of the customer. What it does is sees if it projected the right path or is the person on the right track. It re-interjects and re-predicts the score on the customer, giving you a 76 percent accuracy. The third one is 86 percent accuracy after 90 days. So those are the types of analytics that we have already put into production today on the back end of our CRM systems. 

We have made investments in new resources. We already talked about it. 18 people from all over the US made investment in customer data programs. We are very sensitive to what kind of data we collect. We will not ask you anything that is not relevant to us and to our relationship with you. I will not ask you, what is your favorite color if I do not know how to use that data for you. I will not ask you what kind of car you drive, because what am I going to do with that? So you will see me asking for relevant information, which is a critical part of any successful CRM implementation. Ask what you know you can use to build a stronger relationship with the customer. 

Finally, focus media spend. With all the information and the insights on our customer base, what we are doing is focusing on the top zip codes where the customers are coming from. I do not focus on the seldom Sally. She comes only three times in a year, and whenever she comes she bets $34. Net, I make a couple of bucks at the end of the day. If she comes only three times, versus a wealthy Will who comes 125 times, each time a wealthy Will comes, he or she drops $5000-$6000, versus a seldom Sally with $34. Who do you think my targeting communication is going to be with? And there is nothing wrong with that. One of the first things that I had to face internally, was like, no, no, no the seldom Sally lives over here, and the wealthy Will lives next door to her. If I send communication to one and not to the other, they are going to get upset. Yes, that is okay because even if I lose the seldom Sally, what is going to happen versus if I lose the wealthy Will, because that goes straight to the bottom line. You get discriminated every day. All airlines discriminate. I checked in last night. I got my special gold card treatment from Hyatt and everything. Why? Because they are discriminating against those that do not have that, and it is okay because I am more profitable than a normal Joe. 

Here is what we are doing. Predictive analytics, we talked about, we put the customer in the center. When I say this, a lot people say this, all the gurus of CRM and all the folks that have been doing this, they are great people. I am from an IT background, so I try to ride the wave once we create the wave as well. One of the fun things is predictive analytics is critical. Please know what intelligence you need to have on your customer to generate some reward programs like the Harrah’s club, like the Churchill Downs Twin Spires club. Those are the foundation of communicating with your elite customer base. I have 175,000 very highly active customers in our Twin Spires club. These customers are generating over $300 million every year, just based on normal wagering and everything. E-mail communications, direct mail, wagering applications, we are doing all of this. We are putting the focus around the customer as it relates to race cards, infrastructure design, track operations, employee programs, rewards, and recognitions. We as a company are changing everything we have been doing for the last who knows how many years. Our company is very old. Derby is like 131 this year. The interesting thing is it takes a lot of guts, it takes a lot of commitment and a lot of passion and everything to change, and it does not come easy. Nothing that I am talking about came easy. It is not like people said, okay we will do CRM and change everything. The operational guys were against it. Customer service guys were against it. Mutuels were against it. We have to go and talk to each and every one of them. It is not an easy thing, but you have to do what you have to do because at the end of the day it is the customer that makes the money for us. Because without the customer, no matter how many races we run or how many Smarty Jones we have, if there is nobody betting on it, guess what? I am out of business. If the tracks go out of business, we all know what ripple effect that will have.

Five step program, that was our action plan. Number one, customer analytics was the foundation. Everything we do in our company is based on analytical data. That is just the way it is. CRM tools and campaign management systems is what we have built right now. We have purchased some CRM applications and integrated those with some campaign management tools. Customer centered wagering applications, that is what we are building with our partner, IWP. The dot com side has a customer relationship mechanism. Every channel that we have in our company is going to be customer focused. The re-launch of the Kentucky Derby.com website, I do not know if you guys have seen it, but I welcome you to go out and check it out. It will be a very unique experience for you because there are 4,500 images on the back end. What we are trying to do is give you a new experience every time you come. One of the funny things we are going to be doing is on April 1, I will go live with the next phase of our sites and these are for our tracks. So the first track that is going live is Churchill Downs racetrack because the meet is beginning and everything. Please go and check out churchilldowns.com. I guarantee you that the person sitting next to you is going to have a different experience because there are analytics on the backend, there are new offers that you will get that someone else may or may not get, and you can change content on the fly. You can click on a button if you would like to see larger font, for example. See one of the funny things is we looked at our data on the dot com user and we found out that there were people that are like 25-34, folks 35-45, then 45+. They all need different ways of looking at information. You can’t put a small font in front of them. So you click on a button, your experience changes completely. You will see a 14 size font versus someone else who wants to see a 4. Why? Because that is exactly what leverages that channel. When I leverage that channel, what happens is this. The customer rewards you. Last year, one of the funniest things, and this is just a small example of how success happens when you listen to your customer, we had so much communication from a customer telling us that the want interactive stuff, content that is more fresh an colorful, and everything. That is exactly what we gave them. Guess what happened? The session, which is the duration of how long a customer stays on the dot com site, used to be 6 minutes and 19 seconds. Today it is 9 minutes and 33 seconds. Second, average page view, which is the number of pages a customer sees when he or she hits the dot com site, used to be 4 pages. Today it is 7 pages. It is a small example, but I kid you not, it takes a lot of stuff to get that kind of lift from a customer base that is not used to getting all that kind of stuff. 

Simple message from the company to you is the following: Number one, please dream. This CRM, if you want to adapt it, if you are interested in doing database marketing or one to one marketing, please do it, but do it with your eyes open. In this field, if you do not keep your eyes open and you take one step in the wrong direction, you go ten steps back because you are playing a chess game against the god of CRM and he wants you to fail because 75 percent of these implementations fail. There is a reason for that because of operations and people’s unwillingness to change and things along those lines. 

Second point, please expect the unexpected. Do not be alarmed when your operations guys come and say, “Oh, my tote cannot talk into this.” Do not be alarmed when your people leave in the middle of the thing, or you are two months away and your database cluster goes down or something like that. There will be things happening that you will be amazed with, but that is just CRM.

Third, aim high and do not lose sight of your vision. Your vision is the biggest asset you have. Never lose sight of it, and continue to plow through and kind of go through that because that is what we are doing. Reward your evangelists. Those people that are in your organizations that are adapting to CRM and this new way of thinking, please reward them. They are different. Your five fingers are never the same. Guess what? Your employees are all the same as well. At 5 p.m. most of your employees leave. Check around. Who are the people that are staying outside? There is a reason behind why they are still there. Reward them, recognize them, and give them the backup that they need in order to be even greater evangelists for something like this in change. 

Finally, go ahead and dare to change. Change is not easy. We already talked about it. I think you guys already know this. It is not going to come very easily, but you have to. You have to, as leaders, go out and embrace change. It comes from you. If you don’t do it, guess what? The second and third lines will not do it. At the end of the day, we may end up failing the battle. The reason why I have a link on change is because of this. 

We are doing something at Churchill Downs this coming Derby. I want to give you an example. You want change? You say, “Atique, you stand up and you preach change and everything.” Well, guess what? I am about to show you something that hopefully will excite you a little bit. It is a brand new idea. It is called digital derby technology summit. It is an example of something that required a lot of going up the ladder, because everybody that I was talking to said it would not work out. It is a technology summit event taking place on the 5^th of May, as just a simple thing. We as a company are leveraging our brand Kentucky Derby and introducing an opportunity for a lot of our industry folks and out of the industry folks to get connected with us. Folks from AOL and Sony and Yahoo! And MSN and what have you. What I am about to show you is basically the site we have launched for this product and it kind of gives you an idea of what this thing is.

(shows video)

That was just the introduction. Let me show you who the people are that will be attending this event. The moderators for the event are Paula Zahn and Charlie Rose. There will be key presentations by Tom and Charlie. It is a panel discussion, and there will be four panels all together with leaders like the CEO from AOL, John Miller, the CEO from Sony, and the CEOs from many companies. Basically what I did was I contacted every other old executive that I had in my portfolio. A lot different people outside of industry will be coming to this event as well. The fun thing is that it is a brand new idea. I will give you an example. Everybody said, “Atique, it is not going to happen. Nobody is going to come through.” I tell you, there are 34 panelists, I have 36 requests to put people on the panels. You know, it all starts with a small idea, it may be a small concept, but I can guarantee it will be one of the best successes for our industry around a product called the Kentucky Derby. 

If there are any questions, please feel free to ask me or our colleague over here. Thank you so much for your time.

Mr. Scherf: Thank you. Are there any questions?

Audience member: My question is for Atique. Horse racing is kind of interesting in different markets such as Hollywood or southern California and Miami, and you have a track that is only open part of the year, and another part of the year business that you help create at your track might actually migrate to your competitor. I was just wondering what kind of initiative CRM involves that would get them to make sure that even though they might go to Santa Anita after being somewhere else that they will return?

Mr. Shah: We have their attention. We know we have their loyalty for the duration or the time they have given to us. Our goal of CRM is working with our, actually Allen Gutterman is in the audience right there, so I do not know if he actually paid you to ask me that question or not, but absolutely our job at corporate is to help Allen and his team in continuing to build that relationship and that experience for the customer so even though when it is dark there may be some opportunities for that customer who is living in the Hollywood Park area to go out and bet on some of my other products. If Hollywood is dark, it does not mean that Fair Grounds is not dark, so it is the communication that happens with the customer at the Hollywood Park level that will come into consideration for us to communicating with them. We will not lose communication just because we are dark. If Hollywood is not operational, it does not mean I have nothing else to offer to the customer base. We have other products, so we are working on programs like continuous communication with the consumer base through our CRM systems. 

Question, Nick: I have a question probably primarily for Atique. The toughest thing about CRM is I am coming to understand it is finding a way to make the ROI work, and obviously you have got a significant ROI opportunity. What does your business plan look like in terms of impact on wagering, percentage of customers tracked, just measures such as that?

Mr. Shah: Absolutely. Our CFO is probably one of the most critical folks involved in the CRM/ROI programs and things, and you are absolutely right, it is very challenging. What worked for us was where you would look at the bird in hand. What is the bird that you have in hand? Is it a loyalty program? Ask yourself, are you a company that has some database today? If you have your database in Excel or if you have 5,000 customers and 15,000 customers, then I am not sure if CRM with a multimillion dollar investment is the right thing to do. There are other ways of doing it, but if you guys have a million over database just like us with 200-300 million transactions, which I know most of us do, then obviously you might want to look into that as well. Again, if you have a loyalty program, start with that. It is very easy because they are already loyal to you because of something. You have already done something. There is some trigger, and all you have to do is just communicate around that. The other ways, outside of horse racing I will give you an example. At BMW, one of our goals when I joined the company was to move every three series customer to a five series and every five series to a seven series. We went to Germany and talked to the director there, and we were all scared. I will tell you the concept of moving scaling people is not going to generate the ROI, because what we found was that in BMW, while it is great if you can move a three series to a five series, it is very unlikely for that to take place. The reason why is that a three series customer has a separate potential for purchase and a five series has a whole different line of product. So it is better for a 323 to pitch to a 328 and so on and so forth. Again, I would say, bet on things that you already have in your hand. Generate a list, generate a database, and that becomes the foundation.

Question: Any sense of impact on wagering? What are you anticipating? 

Mr. Shah: As far as wagering goes, I will give you some of the general formulas that we used, was repeat rate. We did not want to do the foaling, which is, I am never saying that we are going to increase somebody’s life cycle with us for the next five years or six years because there is nothing our database that came out and said just because you have someone in your database means you are going to have ownership of him or her for the next seven years, he is going to be betting on you. The answer is no. Most of my metrics basically came out and said the maximum a person’s relationship with you is going to be over 2.8 years. It is what you do during those 2.8 years because the person could be spending this much, you could get him to spend this much. So you maximize the time he has with you. That is our strategy. We are not prolonging, we are just maximizing during the relationship we have.

Mr. Scherf: Any other questions? I would like to thank our panelists especially since they were geared for nine and they had to get psyched to go at eight, which is difficult. They did a great job, and please join me in thanking them.