Cabo San Viejo - Hbs

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Assignment 2: Cabo San Viejo by Stefan S****t and others

Course:Customer Relationship Management
Faculty:Erasmus School of Economics


1.Cabo San Viejo’s customer base3

1.1General information3

1.2The ageing of the customer database3

1.3Customers are becoming more heterogeneous3

1.4Lack of cross-selling3

1.5Complaints and the lack of a loyalty program4


2.Rewards program4

2.1Stimulating retention4


2.3Connect personally5

3.Structure rewards program5

3.1Cross-selling program5

3.2Program for young ‘middle-aged’’ customers5

3.3Overall loyalty reward program5

Cabo San Viejo’s customer base

1 General information

Cabo San Viejo (CSV) is a health resort based in Palm Springs. CSV has one big resort and four smaller day-spas. The company was founded in 1992 where the concept was ahead of its time. In the following years the total amount of stays at the big resort (Palm Springs) kept on increasing (Exhibit 7). 96% rate their stay at CSV highly, while 62% rate their stay at CSV beyond what they expected. A lot of customers (67%, Exhibit 6) know CSV via ‘word-of-mouth.’ 32% return within 5-6 years from their first visit, from those returning customers another 62% returns again within the next 5-6 years (Exhibit 6). To evaluate these number, branch figures would be needed so there is no way to say if these figures are good or not.

2 The ageing of the customer database

At first most of this seems positive, however the average age of the customer database kept on rising. Over the past twelve years the average age has increased from 47 to 57 in 2004 (Exhibit 7). If this trend continues, the average age will keep on rising and this could result in a major decrease in customers. In a theoretical scenario the company could eventually end up without any customers. Rejuvenation of the consumer base is therefore very important.

The problem with rejuvenation of the customer database is that younger consumers are probably less wealthy than the older consumers (In the summer the average HHI > 150K drops from 82% to 59% while the average age also drops with 4 years, Exhibit 6). Combined with the price segment CSV is operating in this could very well be the explanation of why the average of the consumers also keeps increasing. The CSV resort vacations are simply too expensive for the younger people.

3 Customers are becoming more heterogeneous

Another problem for CSV is that serving the customers as good as possible is becoming harder and harder due to the fact that, according to CSV, the customers are becoming more heterogeneous. Knowing that the current customer database of CSV is far from complete it is becoming increasingly hard to act on the different needs and wishes of different customers. A good CRM system is needed to attend on the needs of the different customers as good as possible. A good CRM system is also needed if the company is going to implement a customer loyalty reward program. The CRM system should be able to provide valuable information on the clients so CSV can make important decisions on which customers should be rewarded and how they should be rewarded.

4 Lack of cross-selling

Next to the CSV resort there are also four day-spas. The four day-spas all offer different kind of treatments and health programs which a lot of customers really like. Customer research shows that a lot of the customers of the day-spas really like to go to the CSV resort for a complete health vacation. “My dream is to go to Cabo San Viejo in Palm Springs for a week,” one customer said. “It would be the thrill of a lifetime,” exclaimed another, “like seeing an Elton John concert in Las Vegas (P9).” However there are not a lot of customers who started going to the day-spas and ultimately went to the CSV resort in Palm Springs. This lack of highly desired...
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