Assignment Questions: Cabo San Viejo, Harvard Business Case
Harvard Business Case Cabo San Viejo: Rewarding Loyalty 1. What are the characteristics of Cabo San Viejo‘s customer base? In general the customer base in summer differs slightly from the one rest of the year due to reductions in price to maintain optimum occupancy levels. 70% to 80% of the guest are female, affluent and middle-aged. 82% of the guests base have a household income of over $150K, however, in winter the percentage of guests with HHI > 150K drops to 59%. Palm Springs summer guests also average 4 years younger.
They‘re most common reasons for coming to Cabo San Viebo is rest and relaxation, a healthy vacation, spa treatments, pamper and fitness. Their Vacation habits reads as followed: The average guest takes 3-4 vacations per year if not to Cabo San Viejo , then most often to Euroe and the Caribbean islands. Few Cabo San Viejo frequent guests visit competing spas and the the majoritxy of guests leave Cabo San Viejo with a strong intention to leasd a healthier life. Cabo San Viejo‘s customer base gets older each year on average by one year. 004 the age of the average customer was already 58 starting from 47 year old at 1992. This means the customer base is loosing out on guests younger than 35 years which state only 4,1% in 2004. How healthy is this customer base? The customer satisfaction level is pretty high: 74% say its Outstanding, 21% very god and 3% satisfactory. So 95% rate their stay highly and the retention is high aswell. Cabo San Viejo receives about 3500 new guests each year, 32% of the first time guests return withhin 5-6 years and 62% of return visitors return again withhin 5-6 years. Should Cabo San Viejo adopt a rewards program?
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Why? Why not? Competition is stiff and rising expecations amongst the customers force the management to be very careful and attentive as how to cater the target customers. In general an systematic loyalty programm should be established since its benefits outweigh largely its drawbacks. Not having a loyalty program would mean „we are too good, we don‘t need your business and we‘ll be fine wheter you come back or not“. This elitist attitude can backfire as well as it doesn‘t comply with the original vision of Cabo San Viejo which only states to deliver a healthy vacation and cater the customer.
Since a good chunk of customers nowadays expect reward programes and even see them as standard it‘s vital to have them to be competitive and retain customers. Moreover, the reward program can help to attract new customers since the customer base is aging and can give you access to a younger customers. Last but not least there are tremendous cross selling oportunites between the DaySpas and the resort. One thing which the promotional plan is lacking at the moment.