MKT 502

Date: 2nd February, 2017

Aarjav Thakkar

CASE ANALYSIS

Problem Identification:

The problem faced by Cabo San Viejo is what will be their next marketing strategy to stay ahead
of their competitors? Whether to adopt a loyalty rewards program for their loyal and returning
guests? Is it easy to implement a rewards program and satisfy the high-end customers they serve?

Analysis of Key Marketing Problems:

Key Marketing Problem: How to compete with the fierce competition in the market?
Competitive Factors:
Major competitors in the market. Major destination spas like:

Canyon ranch - Emphasis on first class medical services.

Golden door - Geared towards female customers.
Rancho la Puerta Worlds first eco resort featured food grown on its own organic farm.

Consumer Behavior:
Currently, majority (70-80%) of Cabo San Viejo customers are female. They should target a
different demographic which include males and a younger audience.

Marketing Strategies:

The marketing department spends about $2.76 million and $1.32 million a year on marketing and
advertising respectively. It handles pricing and promotions with specific focus on meeting
revenue and occupancy targets. The marketing goal is not to educate people about Cabo San
Viejo but to rather evoke the right emotions so people are reminded that they want to feel
good. The most widely used form of advertising is spent on brand awareness (online, radio and
print). Sending Cabo San Viejo News bulletin to the customers which includes regular updates
and developments at Cabo San. Very little direct marketing and cross marketing efforts as of
now.

Two Mutually Exclusive Solutions:

1. The first potential option would consist of two parts. The first part involves implementing
a rewards program for repeat customers at the Cabo Day Spas where they could earn
rewards points that could be redeemed at the Cabo San Viejo overnight resort in Palm
Springs. The second part involves implementation of a customer recognition program that
would recognize to repeat customers with the intent of making them feel recognized and
valued as a returning Cabo San Viejo customer.
Cons: Customers at the day spa and at the resort will feel special and valued which
 increases their likelihood of visiting again, hence, increasing the revenue.
Pros: Customers will always expect more benefits.
Financial Implication: They will have to allocate more money towards marketing for
implementing the rewards program.

2. Cabo San Viejo also faces another problem which is the fluctuation of pricing to
accommodate guests during the summer (off-season). During summer they almost lower
their prices by 35%. This change is due to demand, as less are prone to vacation when the
weather is nice. Coupled together with an already high price point, a 35% drop in revenue
is quite extreme. A way to address this issue is through a membership program. Their
high prices force many out of the market for their services. However, providing a way to
extend the payments on a monthly basis over the course of a year would prove beneficial
for those with less luxurious incomes. They can implement an EMI (Equated Monthly
Installments) scheme with 0% interest so that customers could pay the amount in
installments throughout the course of the membership (monthly, quarterly or annually).
For regular/loyal customers they can also offer a discount in the membership so that way
they also feel special and valued.
Pros: Can attract a whole new set of customers who were not targeted earlier due to the
high price.
Cons: Customers might feel bound by the membership and forceful to visit even if they
do not want to.
Financial Implication: They could earn more revenue as the losses in off-season can be
compensated as the membership installments would be same throughout the year.

Final Solution:

I would recommend the solution offered in option 2 above. The membership program would
guarantee revenue during the summer months and the company could afford to lower their prices
much less than the already present 35%. This approach also provides for a sense of equality
amongst the less affluent. A tiered approach based on use would be the optimal way of
implementing the membership; charging more for those using the facilities more.

A membership would also provide an opportunity to visit all 5 sites the company controls. This
would be an optimal approach for a traveling business person, but also allows for someone who
is just visiting to enjoy the services. This would provide a boost for cross-functional marketing.
Informing membership customers, they could use the facilities at all Cabo institutions may
influence members to try these separate entities out.

Most importantly, memberships provide a way for the company to take advantage of first time
customers overall satisfaction. A satisfied customer at the end of their stay may see themselves
visit often and quickly sign up for a membership, when realistically they will visit infrequently.
However, a membership program would allow for the company to track visits and facility use
providing key information in relationship marketing. Customers can also be told to refer other
customers for the membership program and for every successful referral, the customer could get
benefits.

Implementing the membership program could help increase the revenue overall, will help to
attract a new branch of customers and also satisfy the existing loyal customers.