This week’s material introduced the Rosewood case study as well as an article on customer profitability and lifetime value. As an engineer who isn’t afraid of numbers, I thoroughly enjoyed the Customer Lifetime Value (CLV) equations and analysis that was presented both in the article and in the Breeze session.
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Example of a GM Loyalty Program Advertisement
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At GM, I think we are just beginning to understand the total value of our customers. There is a very large opportunity here – if we can sell a vehicle to a new customer, make them see/feel/drive the value in the product, and retain them as a lifetime GM customer for several future new vehicle purchases, the potential profitability is huge. At the same time, GM is entering the accessories business, by allowing customers to accessorize their vehicles with GM approved products that are custom made for their particular vehicle and backed by a GM warranty. We are also trying very hard to improve the dealership experience, both when purchasing a new vehicle and when having it serviced. As proof that GM is intent on raising customer loyalty, Mark Reuss, our Vice President of product development, announced a new employee compensation program in June this year that ties our bonuses to how well we retain customers.
In support of the new customer lifetime value initiatives, GM has implemented several loyalty programs that are designed to keep and retain customers. These programs range from giving customers additional discounts on new vehicles, to credit card reward point programs, to customer appreciation days for existing customers.
However, not all CLV initiatives are easy. First, consider the amount of data that is necessary to track customers throughout a “lifetime” of purchases with a company. This data must be constantly acquired, analyzed, and then acted upon. Secondly, customers have to be categorized, and then poor customers dropped and additional attention directed towards rewarding loyal customers. Finally, at a large company (such as GM), cross-communication between brands is necessary to identify cross-selling opportunities that may mean greater overall profitability for the company. In the case of GM, this means tracking Chevrolet, Buick, Cadillac, and GMC customers in the same database and identifying promotional opportunities for increased sales.
In the Rosewood case, the main issue is that the company lacks a unified brand image to link together all of their individual hotels around the world. From the Strategic Marketing Solutions report, it appears that the majority of customers do not know they are staying at a Rosewood hotel, or of the Rosewood brand in general. For increased customer recognition and potential profitability increases, a corporate branding strategy is being proposed. The potential benefits are realized through enhanced customer awareness of the brand and cross-property marketing. However, the corporate branding strategy would definitely put the individualism of each hotel in jeopardy.
I would suggest that Rosewood management conduct a full customer lifetime value analysis of the proposed corporate branding strategy. I will discuss the results further in my individual case memo, but my initial analysis shows a positive result for corporate branding strategy. Therefore, I would recommend that the management of Rosewood adopt the strategy to take advantage of the increased profits. At the same time, Rosewood should be very careful to market the exclusivity of each hotel and keep their “A Sense of Place” strategy in place to differentiate their hotels from chain-like competitors.
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| Rosewood Little Dix Bay, BVI |
Great posting!!! strategic marketing management
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