What Are the Characteristics of Cabo San Viejo’s Customer Base? How Healthy Is the Firm’s Customer Base?

Cabo San Viejo –

 Rewarding Customer Loyalty

                                                                                                    [pic 1]

1)What are the characteristics of Cabo San Viejo’s customer base? How healthy is the firm’s customer base?

Ans) Cabo San Viejo founded by Dave and Florence Blumenthal in 1977 in Palm Spring, California. It is a vacation/fitness resort which provides healthy lifestyle to its guest. The enormous number of Cabo San Viejo’s spring guests are rich or the upper middle class and females from California. In Palm Springs during the fall, winter and spring 82% of the guests have an income of over $150K.

The guest’s average age is also rising, from 47 years in 1992 to 58 years in 2005. In summer time in the Cabo, the rate of Spa’s decreases, so its increase the guests from lower income bracket of less than $150K and about 70-80% guests are female. The spas customer base falls within the baby boom demographic. On average baby boom women are educated, these women held a job and have fewer children.

These guest’s needs are health, relaxation, stress relief, fitness and vacation time and CSV is known for providing these kind facilities. Also, CSV offered a number of special programs for the targeted audience, including executives, healthcare practitioners, people with medical conditions. They take three to four vacation a year. One-thirds portion of Cabo’s first-time guests returns for the second time with in half decade. And remaining two-thirds portion of the guest visit the Cabo visits after five years. And these variations happen due to the huge cost. Two-thirds of the guests or 67%of the guests heard about the Cabo due to networking effect or by the word of mouth and a majority number of guest lives in California and west coast region.

The health experience provided by the CSV are appreciated by 62% of the guests and the guests claim that the experience was much more than the expectations while 55% ranked the health experience beyond what they expected. 74% of the guests claim that they had an outstanding experience, 21% of the guests claim that CSV is very good and only 1% are unsatisfied. All the guests came here with the intention of leading a healthy life.

By observing all the above characteristics, we can say that firm’s customer base is very healthy. Visitors had a variety of motivation to come back to Cabo San Viejo’s. Generally, visits to Cabo was marked by an experience of discovery and adventure. There are so many people who have experienced a sudden life change, such as divorce and career change, will often come back to learn and grow.

Below table gives the idea about what CSV offers at Palm Springs Location:

[pic 2]

This table shows the facilities offered by the Cabo San Viejo’s at Palm Springs. These explain why people choose again and again this place for their vacation. Despite being all these facilities are very costly people came over here as they experience beyond the expected.

Cabo San Viejo’s customer response:

[pic 3]

2) What is the biggest the problem(s) facing the firm?

Ans) The after being launched in 1977 Cabo San Viejo was facing some serious competitions in early 2005. The company was thinking about launching a loyalty reward program. But launching such program wasn’t easy as company saw many problems in doing so.

• Cabo San Viejo noticed that their average customer age was increasing each year with increasing loyalty. Also with variety of people increasing, the demands for services was increasing.
• They also had problems in on who they’ll provide such benefits. Whether to provide it to someone who comes frequently or to someone who comes for a long vacation.
• They couldn’t decide the type of rewards they will be providing. Something like a welcome gift (e.g. flowers or fruit in the room, addressing guests by name), or something more tangible like discounts. Some of them thought that providing such a loyalty service would increase the services that they needed to provide and in turn create a never-ending demand cycle from the customer.
• Partnerships was another issue to be resolved if they were going to get into loyalty rewards. They were to decide whether to give points to customers which were redeemable at potential partners after a certain amount of patronage to Cabo San Viejo.
• With launching such a program, they realised that they needed strong customer database, which they didn’t have. They were in process of upgrading the computer database system, but they weren’t sure how long will it take to complete that. The situation in Cabo Day Spas was especially bad.
• With rich clientele, they couldn’t afford leaks in service and their reputation till now was built on ‘word of mouth’.

3) Should Cabo San Viejo adopt a Reward Program? Do you think reward program will be a solution to the stated problem?

Ans) Introducing of a reward program by Cabo San Viejo seems to be a sensible approach in the face of increased competition in the industry. The ultimate goal is to increase sales. Under a rewards program, customer loyalty should be rewarded with monetary and/or other tangible benefits.

A well-structured reward program will-

1. Help the enterprise in maintaining and leveraging its relationship with its clients.
2. Provide greater recognition for and loyalty towards the brand.
3. Increase brand equity.
4. Induce customers to purchase more by pledging benefits like gift cards, loyalty bonuses etc.

However, due to the unpredictable purchasing habits of the customers, implementing this successfully will not be less than a challenge successful implementation would be a challenge. So, a smartly devised reward program has to be preceded by thorough market research and analysis of perspective of behavioural economics.