Meagan Ayers
Mike Hoffman
Ashley Barnes
Dineshkumar C.
Jason Graven
Chris Bomer
Cabo San Viejo: Rewarding Loyalty
Issue
Cabo Can Viejo is now faced with deciding on
whether or not to implement a rewards/loyalty
program and if so, how to go about making this
change.
Background
• Founded in 1977 in Palm Springs as one of the first
wellness centers in the United States
• Founder was inspired by his own life changes
• Mission Statement – Cabo San Viejo seeks to help
people unlock their hidden potential so they can become
healthy, happy, and fully self-actualized individuals.
• Wellness
– Body, Mind, Soul, Relaxation, Weight Loss, Fitness
Offerings
Cabo San Viejo
– Overnight destination resort
– Gymnasium, weight training, sports, meditation, skin
care, massages, sauna, aquatics, golf, etc…
– Wellness lectures; Workshops for stress
management, disease prevention, and weight loss;
cooking classes, nutritional consultations, and
alternative medicine awareness
CaboDaySpas
– Different business
– Focus primarily on pampering, not overnight
Customers
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288 maximum, goal occupancy is 270
Minimum 4 night stay, average $455/day on
accommodations and $165/day in services
3,500 new guests per year, mostly from western California
75% female
67% heard of by word of mouth
Relaxation, being healthy, spa treatments, and fitness
96% rate stay highly
32% of first timers return in 5-6 years
62% of repeat customers return in another 5-6 years
Summer is most challenging; reduce rates by 35% and
different crowd
Marketing and Sales
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$2.76 million/year on marketing
$1.32 million/year on advertising
$1.92 million/year on sales
Pricing and promotions, goal of meeting revenue
and occupancy targets
• Marketing – “Evoke the right emotions so
people are reminded that they want to feel
good”
• Brand awareness (online, print, radio)
Competition
•New trend in wellness has sparked fierce
competition
•Day-Spas, Beauty Salons, High End Health
Clubs, Cruise Ships, Vacation Resorts
•“Competing against everybody because a lot of
people only take one vacation a year”
Strengths
• Very prestigious, one of the best destination
resorts in the world
• Clientele from all over the world
• Staff (personal trainers, guest services, etc.)
are all very friendly and well trained
• Strong repeat business
• Extremely high customer satisfaction ratings
– Management capacity and employee dedication
Weaknesses
• No loyalty program currently
• Customer service seemed hit or miss
• Extremely expensive
– Lower prices in summer attract a less affluent
crowd
• Company lacks cross-functional promoting
• Doesn’t attract the male audience (70-80% of
guests are female)
Opportunities
• Untapped market segments in male and
younger demographics
• Increase in demand with an increase in
health awareness
Threats
• Heavy increase in competition
• High increase in customer expectations
Situation
• Faced with the decision of whether or not to
implement a rewards/loyalty program
• Reasons for implementing this system:
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Staying competitive
Increase sales
Attract new customers
Increase customer satisfaction and encourage repeat visits
• Hope to achieve:
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Enhanced customer recognition
Tangible benefits to encourage repeat visits
Privileges for repeat customers to make them feel valued
Acknowledgment of customer loyalty
Issues
• Must remain highly competitive and offer similar
rewards as competitors
• A few problems:
- Customers are not concerned with monetary rewards,
they are interested in recognition and preferential
treatment
- Cabo San Viejo strives to make every customer feel
like the most important customer so giving any kind of
preferential treatment is a concern
- Customers have high incomes and tastes, rewards
must match those tastes
Issues Continued
- Outdated and incomplete CRM system
- CRM systems are not linked between Cabo San
Viejo and the CaboDaySpas
- Aging customer base, need to attract a younger
crowd who now expect rewards systems
Barriers
• Grandfathering - Outdated CRM system does
not have current customers’ complete
information, obtaining this information from
current loyal customers might be offensive
• New CRM system is costly (hours, training,
hardware, etc…)
Lack of Action
• Cabo San Viejo will not remain competitive
with competitors who already offer such
programs
• Attracting a younger customer base will be
difficult
• Encouraging repeat visits will be difficult
Option 1
•Consists of 2 parts:
– Implementation of a rewards program for repeat
customers at the Cabo Day Spas
– Implementation of a customer recognition
program at all Cabo San Viejo locations and
would include installation of new CRM system to
keep track of customer information and
preferences
Option 1 – Rewards Program
•Would allow customers to receive a 10% discount
at the Cabo San Viejo overnight resort in Palm
Springs after 5 visits to any Cabo Day Spa
•Objective is to get the more price-sensitive
customers at the day spas to try the Cabo San Viejo
overnight resort
•Repeat customers who only visit the Cabo San
Viejo overnight resort would not be eligible for
discounts (potential negative outcome)
Option 1 – Recognition Program
• Objective is to recognize repeat customers,
making them feel valued and part of the Cabo
San Viejo family
• New CRM system would be implemented that
would track customer activity and service
preferences
• All locations would have access to CRM system
and upon arrival at any Cabo San Viejo location,
repeat customers would be greeted by name and
receive list of recommended activities based on
activities they participated in on previous visits
Option 1 – Recognition Program
(Continued)
• Repeat customers at Cabo San Viejo overnight
resort would receive a fruit basket, flowers and a
greeting card addressed to them by name at
check-in
• Repeat customers would not receive any type of
preferential treatment when scheduling activities
or services (potential negative outcome) which
prevents first-time customers from feeling
alienated or in a lower tier than repeat customers
Option 2 - Memberships
Membership program
– Helps to alleviate the 35% price drop during
summer months
– Helps to provide cross-functional marketing
– Takes advantage of first time customers overall
satisfaction
– Allows company to track which facilities are being
used by which customers which allows for Cabo
to tailor visits more specifically to the needs of
frequent customers
Option 2 Reasoning
• An extended membership payment plan would guarantee revenue
throughout the summer months giving Cabo the ability to lower rates less
than the current 35% for first time visitors
• By providing a membership that can be used at all locations, some
customers may be more willing to visit the resort or one of the day spas
providing cross-functional marketing
• First time customers may be so pleased with the experience that they sign
up for the membership expecting to visit often when realistically they may
not, providing revenue not currently present
• Allows Cabo to track which customers use which facilities making CRM
easier
– Provides the ability to tailor visits for the most frequent customers and provide benefits
such as fruit baskets because we know exactly how often customers are visiting
Option 2-Cons
• Membership program
– Possibility of a decrease in revenue if customers visit more
frequently than the memberships account for
– If a customer visits even one time more frequent than
their tiered membership, do you charge for the entire next
tier?
– If a higher tiered member visits less do we refund the
money?
– Do they charge more for those who visit both the day spas
and resort even if those customers visit less than someone
who only visits one?
– How to “grandfather in” past loyal customers?
Option 2-Cons
• Referrals
– Continuing motivation after rewards have been
paid out
– Fraud
Final Recommendation
• Option 1 (rewards program & customer
recognition program) is the most cost effective
way to increase perceived value
• Increases at least 3 of 6 dimensions of value
(functional price value, emotional value, social
value) of the Fandos Roig et al. model
• Increases in perceived value lead to increased
satisfaction and ultimately increased customer
loyalty
Fandos Roig et al. model
Functional value installations
Functional value personnel
Functional value service
Satisfaction
Functional value price
Emotional value
Social value
Intentional loyalty
Behavioral loyalty
Questions/Comments