Week 11 - Customer Lifetime Value and Rosewood Hotels

Customer Lifetime Value – Reflections from Customer Profitability and Lifetime Value

I do not have direct visibility to how my company knows the value of its customers. I believe there are some fundamental concepts of CLV that could be used, however, the nature of my company’s business is such that it primarily business to business relationships, rather than selling direct to the consumer. Since we sell engine systems, it is often necessary to work with OEM’s, which require individual attention and a case by case valuation. Our Marketing function therefore assigns account representatives for all of the major customers, and the smaller, more niche market customers are attended to by the Distributorship network. The Parts and Service division is probably the closest analogy to the model of product being bought directly by the consumer. Because of the B2B aspect, and being very tailored to each customer, I believe it would be difficult to apply the formula as it is being used for the retail examples in the article.

Unfortunately, all of my old pictures
of Massave Video are on "real" film, and
back in the US. But, this does look a little
 like my store.

I started a video rental business in 1997, called MassAve Video on 425 Massachusetts Avenue in downtown Indianapolis (no longer there though!). Although I sold my interest in the venture in early 1999, the business survived for almost another 10 years despite the shift in technology trends that buried most brick and mortar video rental stores, including Blockbuster. I can tell you from firsthand experience that there is certainly a cost to getting customers and quantifying the returns from those efforts, and I humbly wish that I would have had this Marketing Class back then. I could have definitely utilized the CLV aspect, to help me to identify which customers to target, measure from my own databases on which customers were actively renting for promotional considerations, and which customers to stop wasting my time with. I remember my first advertising campaign – I printed our logo with a coupon for a free introductory rental on colored half sheets of thick paper (about 5000 copies), and canvassed the Chatham Arch neighborhood with them, some by direct mail, others of me walking around and distributing them myself. The campaign netted around 300 customers in the first 3 months. By the time I sold my share, we had about 1700 customers in the database. I could certainly write many more blogs about things I learned (including many humorous stories) and what I would have done differently during that time. I also won’t go into my thoughts on their target segmentation after my departure, which was definitely towards the over 18 crowd!  Despite my lack of marketing knowledge at the time, the store actually did decent business and we broke even in the first year. Running a small business was a true learning experience that has helped me keep perspective working in a large corporation.

The Rosewood Hotels Case Study

The Rosewood Hotel case outlines the challenge in trying to keep those with a traditional view of the brand while trying to appeal to a larger market opportunity. The goal is that they want their customers to recognize and utilize other Rosewood locations, but customers seem to be unaware that these hotels exist or are connected to the same parent company. They want the enhanced name recognition by making the brand more prominent, but don’t want to lose the impression that each hotel is so distinctive and posh, that each property speaks for itself without needing such “common” advertising.

It seems to me that there can be a balance to achieve both goals, if the message is shaped thoughtfully. Associate the brand of Rosewood, but highlight the distinctiveness of each location while emphasizing the standard expectations of exceptional quality and service via the brand. I don’t believe this would really cost that much more than implementing the loyalty program proposed, and could be handled creatively while guests are staying at the hotel. Printed material in the guest rooms can highlight the other locations, and reservations can be directed through a common website using today’s internet technology. Email confirmations can include promotional material and links, and they can target major travel publications to advertise collectively rather than individually.

Rosewood Little Dix Bay

For myself, I am eyeing the resort in Virgin Gorda, BVI. After 6 months of dreary grey cold and rain that is the hallmark of English weather, I am ready for some warm Caribbean sun, beaches and fruity drinks!