Canyon Ranch was the undisputed leader in the luxury segment of the spa industry. It had both breadth and depth of offerings, and integrated portfolio of treatments from traditional spa and fitness to health and healing services. Canyon Ranch was considered the gold standard in the industry as a result of being heads and shoulders above the industry due to their attention to guest needs.
Its astonishing array of services made available under a single roof and its Health and Healing department set it apart from most competitors. IT systems started off being used solely for support functions; e. g. property management, reservations, spa and wellness services scheduling, accounting, purchasing, and payroll. As a result of the need for business Intelligence, decision-support functionalities, and expected growth and turnover in management, IT was beginning to be viewed increasingly as strategic and operational, and personnel saw the potential value of information to enable better evidence-based decision making.
The economy will continue in the same status as it has been during Canyon Ranch’s successful years for the near term (i. e. at least 2 to 3 years which is a reasonable time to expect a return on investment). A Business Case Analysis (BCA) would attest that there would be a return on investment of implementing a CRM in a two-to-three year period. Critical Issue Historically in the SPA industry, little attention had been paid to the potential benefits offered by IT. Traditionally, the industry had been a high-touch, people intensive business.
Computerization was viewed as a threat due to the perception that it would depersonalize and dehumanize the experience. It was felt that because many spa goers were seeking an escape from their stressful office lives; therefore, they were very careful to avoid any technology that might damage the “carefully choreographed atmosphere of the setting. Objective From the perspective of Canyon Ranch, the objective was to attempt to grow the business while maintaining the fundamental characteristics of Canyon Ranch and ensure that Canyon Ranch maintained its competitive advantage in the face of increasing competition.
Executives were constantly seeking ways to leverage the preeminent position of being the undisputed leader in the destination segment of the spa industry to extend the Canyon Ranch brand and to maintain future dominance in the destination spa segment. Should Canyon Ranch in the Berkshires develop a clear Customer Relationship Management (CRM) strategy and make it a cornerstone of its positioning as a preeminent destination spa? If so, what should this initiative look like? What is the value of substantial amounts of data that are generated during the customer experience? Can this data be used during prospecting? Can this data be used during the customer’s stay? Can the data be used after the customer’s stay?
The significant decision criteria are effectiveness, cost, return on investment and implementation time. The initial outlay of capital for the CRM strategy will outweigh the cost just like the Health and Healing Center in the start up of the Canyon Ranch was not profitable, but now with over 50% of the guest taking advantage of the Health and Healing Center, the Canyon Ranch has seen a 6% increase recently in Baby Boomers. Canyon Ranch has found their new niche for the Health and Healing Center.
The three streams of revenue from the Canyon Ranch were from the hotel, spa, and health and health departments. With the implementation of the CRM strategy, the linkage of these departments could develop the relational databases from one source. CRM strategy would assist managers in making support decisions from transactional data.
The theoretical repurchase frequency of staying at Canyon Ranch is in the middle ground. Customers may frequent the resort once or at most twice per year. The repurchase frequency is certainly less than that of going to a restaurant, purchasing consumable products, or going to a movie, yet is higher than purchasing a house or obtaining an advanced degree. The degree of customizability of the Canyon Ranch experience is very high. Shown below with a blue star is where Canyon Ranch would fall on the customer data strategies matrix. [pic] Canyon Ranch falls in the Acquisition Strategy Quadrant of the Customer Data Strategy matrix.
This suggests that Canyon Ranch would benefit by collecting exhaustive data about its current customers in an effort to profile them and develop predictive models to identify and attract new profitable customers while avoiding non-profitable or marginal ones. A CRM, if properly designed and implemented would facilitate a high degree of unobtrusive data capture.
Develop a clear Customer Relationship Management Strategy: A strategic orientation that calls for iterative processes designed to turn customer data into customer relationships through the active use of and learning from the information collected.
Advantages:
- Profiling high-profit customers for targeting of potential first-time customers by marketing.
- Identifying high-profit customers to target by marketing for return visits.
- Obtaining customer feedback to improve services and stock of incidental products.
- Overall, based on the value matrix analysis and the customer data strategy analysis, implementation of a CRM would be very effective towards meeting the company’s strategic goals.
- Potential for a significant return on investment in a reasonable period of time after implementation is complete.
Disadvantages:
- A CRM strategy only relies on transactional and behavioral customer data relating to the interactions of the customer with the firm. This could be a primary disadvantage if customers not only bought products for themselves, but as gifts too. In addition this would be a primary disadvantage if customers purchased products for different reasons.
- A CRM could have limited predictive ability. A CRM would not be able to predict significant life-changing events that would directly influence a customer’s decision to make a purchase. A new position, a substantial raise, an event or situation that raises concern for a potential customers health-lifestyle, or an event or situation creating a newly found high level of stress all could lead a potential customer to purchase a get-a-way and could not be predicted by a CRM.
- Initial Cost to develop and implement would not be insignificant.
- Time to implement. It would take time to implement; however, there did not seem to be an immediate crisis that would require a more immediate solution.
- Third-order Change. The implementation of the CRM would be a 3rd order or transformational change.
New processes would have to be developed and employees would have to be trained; moreover, the company organization would have to be modified. Buy-in will be required from the employees and even the customers to the extent that they are affected if Web-based questionnaires, reservations, payment options, etc. are instituted and integrated with the CRM.
Customer Managed Interactions (CMI): Predicated on a shift in the collection and control of customer data collected whereby the data are stored and managed either by an intermediary or by the customers themselves.
Advantages:
- Mitigates the two fundamental short comings of the CRM (numbers 1 and 2 disadvantages cited above). Customers maintain control over the decision to interact, the timing of the interaction, the channel to be used, and the data generated.
- Profiling high-profit customers for targeting of potential first-time customers by marketing.
- Identifying high-profit customers to target by marketing for return visits.
- Obtaining customer feedback to improve services and stock of incidental products.
- Overall, based on the value matrix analysis and the customer data strategy analysis, implementation of a CMI would be very effective towards meeting the company’s strategic goals.
- Potential for a significant return on investment in a reasonable period of time after implementation is complete.
Disadvantages:
- Potential customers who are not specifically planning a get-away may not know of the options provided by Canyon Ranch and may not have incentive to look. They might not even consider one of Canyon Ranch’s products unless they are educated as to what they are and what the benefits are.
- Initial Cost to develop and implement would not be insignificant.
- Time to implement. It would take time to implement; however, there did not seem to be an immediate crisis that would require a more immediate solution.
- Third-order Change. The implementation of the CMI would be a 3rd order or transformational change. New processes would have to be developed and employees would have to be trained; moreover, the company organization would have to be modified.
Buy-in will be required from the employees and even the customers to the extent that they are affected if Web-based questionnaires, reservations, payment options, etc. are instituted and integrated with the CMI.
Conduct Business as Usual Advantages:
- This alternative has been successful to this point in time.
- There is no additional cost.
- The current system has been touted (or justified) as having a very personal touch that clientele have savored.
To do nothing new would not impact Canyon Ranch’s short-term viability; however, it could be devastating to their long term sustainability. Recommendation and Conclusion Execute a BCA to confirm that there would be a return on investment within a 2-3 year period after implementation is complete; the recommendation would be to proceed with the CRM assuming there would be. Implementation would include a customer tie-in via on-line reservations, questionnaires, and payment options.
Although the CMI at first glance looks like a better choice, the model does add benefit over a CRM model for Canyon Ranch for the following reasons: It is likely that Potential new and repeat Canyon Ranch customers are purchasing get-a-ways primarily for themselves for primarily the same reasons; therefore, the first disadvantage cited for CRM would not be a primary detraction.
The second disadvantage cited for CRM also would not be a significant detraction, because the “predictive” goal of the CRM would be to identify a pool of potential customers to market to thereby increasing the effectiveness of that marketing and the results of CRM would meet that goal. The two most significant benefits of using a CMI strategy over a CRM strategy would therefore not be realized for Canyon Ranch.
