Individual Case Question assignment; Cabo San Viejo: Rewarding Loyalty (40 Points)
1. What are the biggest problems facing the company in terms of customer management and how could a rewards program help address these problems?
Very specific target market with really high income who are “very demanding, they expect the best”. Therefore,” it’s better for us to do nothing than to implement something that we really can’t deliver effectively”
Incomplete and inaccurate customer database
Outdated computer system
Customer’s rising expectation of rewards for their loyalty since other competitors are having their reward programs already
No customer service department. Beside marketing team, the sales team is quite small (only six people) and a team of reservation specialists who take good care of customer throughout the reservation process only. No after-sale service
A rewards program will force the organization to collect data about customer, make the database more accurate and complete. The computer system will be forced to upgrade as well. Customers’ expectation of a reward for their loyalty will be met. However, in order to make the reward program successful, Cabo San Viejo needs to delegate more human resources specifically to manage customers’ information and keep track of rewards.
2. Should Cabo San Viejo adopt a rewards program? Why?
I think Cabo San Viejo should adopt a rewards program. First of all the program will meet customer’s expectation of being rewarded for being loyal to Cabo’s services. It will also increase loyalty because customers will have more incentive to come back in order to accumulate more points to get better rewards.
Secondly, it introduces opportunities for cross‐marketing between Day Spa and Destination while lowering the advertising costs and improving word of mouth. Finally, the rewards programs give customers additional value because Cabo San Viejo makes them feel more special because the organization has collected and organized customer’s information so that to understand their specific needs and customizer offerings to each and every one of them. Customers will also have a chance to try more services at Cabo that they did not have a chance to try or did not think of before (by getting a reward join a new a class or get a massage for free)
3. If Cabo San Viejo were to adopt a rewards program, how should points be awarded?
I think Cabo San Viejo should create a tier system: Silver, Gold, Platinium. The higher the tier the more valuable the rewards will be. For example, Silver customers will receive a voucher for free services at Cabo Day Spa. Gold customers will receive free service at Cabo Destination. The last Tier will give customers the options to either convert points to use at a partner’s store or to get free one-day stay at Cabo San Viejo. Flowers, fresh fruits or small surprised gifts