Meagan Ayers

Mike Hoffman
Ashley Barnes
Dineshkumar C.
Jason Graven
Chris Bomer

Cabo San Viejo: Rewarding Loyalty

Issue

Cabo Can Viejo is now faced with

deciding on whether or not to
implement a rewards/loyalty program
and if so, how to go about making this
change.

Background
Founded in 1977 in Palm Springs as one of the first
wellness centers in the United States
Founder was inspired by his own life changes
Mission Statement Cabo San Viejo seeks to help
people unlock their hidden potential so they can
become healthy, happy, and fully self-actualized
individuals.
Wellness
Body, Mind, Soul, Relaxation, Weight Loss, Fitness

Offerings
Cabo San Viejo
Overnight destination resort
Gymnasium, weight training, sports, meditation,
skin care, massages, sauna, aquatics, golf, etc
Wellness lectures; Workshops for stress
management, disease prevention, and weight
loss; cooking classes, nutritional consultations,
and alternative medicine awareness

CaboDaySpas
Different business
Focus primarily on pampering, not overnight

Customers
288 maximum, goal occupancy is 270
Minimum 4 night stay, average $455/day on
accommodations and $165/day in services
3,500 new guests per year, mostly from western California
75% female
67% heard of by word of mouth
Relaxation, being healthy, spa treatments, and fitness
96% rate stay highly
32% of first timers return in 5-6 years
62% of repeat customers return in another 5-6 years
Summer is most challenging; reduce rates by 35% and
different crowd

Marketing and Sales

$2.76 million/year on marketing

$1.32 million/year on advertising
$1.92 million/year on sales
Pricing and promotions, goal of meeting
revenue and occupancy targets
Marketing Evoke the right emotions
so people are reminded that they want
to feel good
Brand awareness (online, print, radio)

Competition
New trend in wellness has sparked fierce
competition
Day-Spas, Beauty Salons, High End Health
Clubs, Cruise Ships, Vacation Resorts
Competing against everybody because a
lot of people only take one vacation a
year

Strengths
Very prestigious, one of the best
destination resorts in the world
Clientele from all over the world
Staff (personal trainers, guest services,
etc.) are all very friendly and well trained
Strong repeat business
Extremely high customer satisfaction
ratings
Management capacity and employee dedication

Weaknesses
No loyalty program currently
Customer service seemed hit or miss
Extremely expensive
Lower prices in summer attract a less
affluent crowd

Company lacks cross-functional

promoting
Doesnt attract the male audience (7080% of guests are female)

Opportunities
Untapped market segments in male
and younger demographics
Increase in demand with an increase
in health awareness

Threats
Heavy increase in competition
High increase in customer
expectations

Situation
Faced with the decision of whether or not to
implement a rewards/loyalty program
Reasons for implementing this system:
- Staying competitive
- Increase sales
- Attract new customers
- Increase customer satisfaction and encourage repeat visits

Hope to achieve:
- Enhanced customer recognition
- Tangible benefits to encourage repeat visits
- Privileges for repeat customers to make them feel valued
- Acknowledgment of customer loyalty

Issues
Must remain highly competitive and offer
similar rewards as competitors
A few problems:
- Customers are not concerned with monetary
rewards, they are interested in recognition and
preferential treatment
- Cabo San Viejo strives to make every customer
feel like the most important customer so giving
any kind of preferential treatment is a concern
- Customers have high incomes and tastes,
rewards must match those tastes

Issues Continued
- Outdated and incomplete CRM system
- CRM systems are not linked between
Cabo San Viejo and the CaboDaySpas
- Aging customer base, need to attract a
younger crowd who now expect rewards
systems

Barriers
Grandfathering - Outdated CRM
system does not have current
customers complete information,
obtaining this information from
current loyal customers might be
offensive
New CRM system is costly (hours,
training, hardware, etc)

Lack of Action
Cabo San Viejo will not remain
competitive with competitors who
already offer such programs
Attracting a younger customer base
will be difficult
Encouraging repeat visits will be
difficult

Option 1
Consists of 2 parts:
Implementation of a rewards program
for repeat customers at the Cabo Day
Spas
Implementation of a customer
recognition program at all Cabo San
Viejo locations and would include
installation of new CRM system to keep
track of customer information and
preferences

Option 1 Rewards Program

Would allow customers to receive a 10%
discount at the Cabo San Viejo overnight resort
in Palm Springs after 5 visits to any Cabo Day
Spa
Objective is to get the more price-sensitive
customers at the day spas to try the Cabo San
Viejo overnight resort
Repeat customers who only visit the Cabo San
Viejo overnight resort would not be eligible for
discounts (potential negative outcome)

Option 1 Recognition Program

Objective is to recognize repeat customers,
making them feel valued and part of the Cabo
San Viejo family
New CRM system would be implemented that
would track customer activity and service
preferences
All locations would have access to CRM system
and upon arrival at any Cabo San Viejo location,
repeat customers would be greeted by name and
receive list of recommended activities based on
activities they participated in on previous visits

Option 1 Recognition Program

(Continued)
Repeat customers at Cabo San Viejo
overnight resort would receive a fruit
basket, flowers and a greeting card
addressed to them by name at check-in
Repeat customers would not receive
any type of preferential treatment when
scheduling activities or services
(potential negative outcome) which
prevents first-time customers from
feeling alienated or in a lower tier than
repeat customers

Option 2 - Memberships
Membership program

Helps to alleviate the 35% price drop during

summer months
Helps to provide cross-functional marketing
Takes advantage of first time customers
overall satisfaction
Allows company to track which facilities are
being used by which customers which allows
for Cabo to tailor visits more specifically to
the needs of frequent customers

Option 2 Reasoning
An extended membership payment plan would guarantee
revenue
throughout the summer months giving Cabo the
ability to lower rates less than the current 35% for first time
visitors
By providing a membership that can be used at all locations,
some customers may be more willing to visit the resort or
one of the day spas providing cross-functional marketing
First time customers may be so pleased with the experience
that they sign up for the membership expecting to visit often
when realistically they may not, providing revenue not
currently present
Allows Cabo to track which customers use which facilities
making CRM easier
Provides the ability to tailor visits for the most frequent customers and
provide benefits such as fruit baskets because we know exactly how
often customers are visiting

Option 2-Cons
Membership program
Possibility of a decrease in revenue if
customers visit more frequently than the
memberships account for
If a customer visits even one time more
frequent than their tiered membership, do you
charge for the entire next tier?
If a higher tiered member visits less do we
refund the money?
Do they charge more for those who visit both
the day spas and resort even if those
customers visit less than someone who only
visits one?

Option 2-Cons
Referrals
Continuing motivation after rewards
have been paid out
Fraud

Final Recommendation
Option 1 (rewards program & customer
recognition program) is the most cost
effective way to increase perceived value
Increases at least 3 of 6 dimensions of
value (functional price value, emotional
value, social value) of the Fandos Roig et
al. model
Increases in perceived value lead to
increased satisfaction and ultimately
increased customer loyalty

Fandos Roig et al. model

Functional value installations

Functional value personnel

Functional value service

Functional value price

Emotional value

Social value

Satisfaction

Intentional loyalty

Behavioral loyalty

Questions/Comments