Executive Summary
The purpose of this paper is to discuss and analyze the opportunity of implementing a rewards loyalty program in the Cabo San Viejo resort and Cabo San Viejo day spas.
Cabo San Viejo
Company Background
Dave and Florence Blumenthal founded Cabo San Viejo Resort in 1977. The resort was built on the site of a former peach orchard in Palm Springs, California. The successful change in Dave’s lifestyle inspired the creation of the resort. They created a place where individuals with an unhealthy lifestyle could go to for the purpose of learning how to live happier and healthier lives. In the late 90’s the company opened several CaboDaySpa’s sites around the country that offered the same services without the overnight facilities.
In 2005 the company operated five properties around the country. One full service destination and four smaller day spas. The resort destination was regarded as one of the best in the world. The resort accommodates 288 people and offers a wide variety of wellness services and sports facilities for customers to enjoy.
Customers
The resorts demographic profile is predominantly composed of middle aged women with an average household income of $150,000. This demographic makes up 70% - 80% of the resorts total customers. Out of the firm’s 3,500 new customers each year, the majority hear about the resort from friends, family, or through direct referrals by travel agents. About a third of the customers returned to the resort within five to six years and about 62% of those returned again within another five to six years. Although 95% of the Cabo San Viejo guests rated their stay favorably, they have very high and growing expectations.
Cabo San Viejo’s SWOT Analysis
Strengths
One of the most prestigious destinations in the world.
Staff is highly committed and trained to offer the very best in personal services
Loyal customer base
Very high customer satisfaction
Weaknesses
No loyalty program to reward good customers
The company lacks a successful promotional strategy
Cabo San Viejo only caters to the wealthy population
The males only compose a small percentage of total customers
Opportunities
Available market segments: Males and younger customers
Increasing demand in health spas and health awareness
Threats
Increasing competition
Customers have increasing expectations

Cabo San Viejo’s Situation

Cabo San Viejo’s management is considering implementing a loyalty reward program to remain competitive in the growing market, to increase sales, to attract more customers, and to build customer equity and satisfaction. In recent years, a wide variety of companies that compete with Cabo have appeared in the market. The new competition includes day spas, beauty salons, high end health clubs, cruise ships, and vacation resorts. The growing market has the potential to discourage customers from returning to the resort since the competition also has wide assortments of amenities similar to Cabo San Viejo. Considering that the majority of Cabo San Viejo’s customers are repeat customers, the company wants to use the reward program to deliver a high customer value to keep them coming back. The company presumes that the rewards program will increase loyalty in an already loyal customer base. Increasing loyalty to the resort is a very important asset to the company. The well-known 80-20 rule states that at least 80% of your company’s profits come from the top 20% of the customers, if the rewards program is successful in increasing customer loyalty, the business will not only maximize the lifetime value of the customer but it will also benefit from an increase in word of mouth advertising. By cultivating a relationship with a customer through the rewards program, the company will have the opportunity to enact precision marketing designed to