Assignment Questions: Cabo San Viejo, Harvard Business Case

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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. 2004 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? 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...
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