Cabo San Viejo: Rewarding Loyalty | Market Management Case Analysis | |

Caryn Harrington
3/18/2015
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Background
Cabo San Viejo was founded in 1977 by Dave and Florence Blumenthal. It was an inspiration due to Dave’s success in changing his unhealthy lifestyle and creates a place where smokers, overweight people, and others could go to feel better and learn how to live healthier lives. Their mission’s statement is the following: “Cabo San Viejo seeks to help people unlock their hidden potential, so they become healthy, happy, fully self-actualized individuals.”
In the late 1990’s and early 2000’s, the company opened several smaller, branded CaboDaySpa sites that offered spa services without the overnight facilities. In 2005, Cabo San Viejo operated five properties; one full-service resort in Palm Springs, CA, and four smaller CaboDaySpa’s in Miami, Hilton Head, Aspen, and Nantucket Island. Cabo San Viejo has been featured in many publications as the best in the world.
Cabo San Viejo can accommodate a maximum of 288 guests and expanded to include an air-conditioned, 100,000-square-foot spa complex; 4,200-squar-foot golf performance area; and a 13,000-square-foot Aquatic Center. They have about 3,500 new guests per year: 70-80% of guests are female; 82% of the guest have household income of over $150,000. Cost is the primary reason for why the guests do not return; 67% have heard of the resort by word of mouth. Most common reasons for visiting are rest, relaxation, healthy vacation, spa treatments, and fitness. 96% rate their stay highly, most guests live in western California; average guest takes3-4 vacations per year; 32% of first-time guests return within 5-6 years; and 62% of repeat customers return within another 5-6 years.
The summer is the most challenging time of the year and because 59% of guests have less than $150,000 household income.
Problem Definition
Cabo San Viejo needs to decide if they should implement a loyalty/rewards program and if they should implement it how are they going to make the changes. If they decide to add a loyalty/rewards program the repeat customers could receive this as a bonus for their loyalty to the Spa. Cabo must make all clients feel equal. Cabo San Viejo would still need to remain competitive with their competition who also is offering a reward program. The program can increase the clientele between destination and day spa. This would give them the competitive boost they need. Having this kind of program can increase the overall customer experience. With implementing the reward program, it can enhance recognition and satisfactions to the guests. Allowing them benefits like discount’s and or coupons to have the customer to return more often, give special guests the feeling of being of value to Cabo San Viejo.
If Cabo San Viejo does not implement a reward program, they will not be competitive with other spas and lose old and new clients. Some clients do not care about rewards but rather want to be treated as a special returning client. Client may be offended if other get preferential treatment and they do not.
Other issues that Cabo San Viejo would need to face if they do implement a rewards program is, they would have to update their computer system as it is outdated. This is an issue they have been having with customers records were inaccurate or incomplete. Cabo San Viejo destination resort and the CaboDaySpa didn’t keep a customer database and data collection at individual locations wasn’t complied system-wide.

Alternative Course of Action
Should only the clients that invest in longer stays, longer memberships, or spend more money get more rewards? Can the reward points be spent at other locations? With all these questions, the rewards program needs to remain fair and then answer this question; what should Cabo San Viejo reward customers for; money spent, days stayed, or visits?
Members should be given a member card that consists of information regarding their preferences. The membership card would be linked to a database, which keeps all the documents of their preferences; like a preferred room, activities, treatments, what time of year they like to visit or the amount of money they spend. The customer database will help Cabo San Viejo customize their client’s needs according to their likes.
Cabo San Viejo will need to update their computer to get their database working properly. The cost of new systems, training, and hours to learn the program will be an expensive project.
If Cabo San Viejo does not implement a rewards program, they can face losing their high rank in the completion of their industry. Customers may not feel recognized or free special remaining with Cabo San Viejo and will move to other completion that will give them the recognition and the special feeling they are looking for.
To get the rewards program working Cabo San Viejo will need to give repeat customers rewards that they could use at either location. Also, give the customers recognition for returning to your Spa. With the new system up and running, this will help track the clients’ information and preferences each time of their visit.

Option 1:
With the rewards program, give a 15% discount after five visits. These discounts can be used at either location, to give the customer incentive to use any of the locations and help the word of mouth to bring in more clients to Cabo San Viejo. With new recommendations, give clients that recommend new clients points that can accumulate to earn points to receive coupons, discounts, or products during an activity or service during their stay. Start a program for families; this will bring in younger clients and including children that also need a health style change.
Option 2:
Since Cabo San Viejo has a decrease in summer months of clients, they could incorporate a decrease in the summer rate to draw in more clients. With the decrease of rates, this will bring in new clients which would fit in the middle-income level. Start special programs only for gender specific targets. Gender programs will bring in more male clients to participate in these programs.

Analyze
Key Concepts
Cabo San Viejo five types of needs:
Stated needs: Clients want to be rewarded for their loyalty. Real needs: Customers want to be recognized and treated equally for their loyalty to Cabo San Viejo. Unstated needs: Clients want a rewards/loyalty program for their patronage. Delighted needs: Clients want benefits, discounts, and coupons to use at either location of Cabo San Viejo. Secret needs: Clients want the feeling of being a loyal customer to Cabo San Viejo.
Five company orientations in the market place:
Production concept: Cabo San Viejo production is services and activities to clients. They also use other manufacturers to supply their product they have or use on their clients. Product concept: Cabo San Viejo is set up for the client to help them get healthy through education, exercise, products, services, and activities. Selling concept: Cabo San Viejo may have high prices, but the service and product are of high quality. Marketing concept: A Cabo San Viejo high rating, for healthy spas and services, targets a large consumer audience. Holistic marketing concept: Cabo San Viejo is about helping people unlock their hidden potential, so they become healthy, happy, fully self-actualized individuals.
Growth Strategies
Intensive growth: Cabo San Viejo should review the opportunities for improving existing business. Integrative growth: Cabo San Viejo business can be increased through backward, forward and horizontal integration within its industry. Diversification growth: Cabo San Viejo can grow with diversification by getting younger clients with services and programs to fit their health styles. Target different income levels that the middle-class income could afford.
SWOT Analysis:
Strengths: Cabo San Viejo is one of the nation’s highest-ranking health and wellness companies, becoming one of the best destination resorts in the world. They have been known for a premier total vacation/fitness resort by the magazine journalist. Cabo San Viejo has clients come from all over the world due to it high-ranking reputation of having the best services and programs for their business. This company has 38 years of experience in the wellness field. Clients have remarked on how the staff at the resort, expertly training sessions, friendly dispositions, and make clients feel welcome which they want to returns to the resort.
Weaknesses: The Company’s computer is out of date; database is incomplete and inaccurate. Cabo San Viejo has no reward/loyalty program which can lose their cliental to their competitors. They only target clients in the high-income bracket, if they could design a program that could also target the middle-class income they could bring in more clients. Since they own both a Health Resort and DaySpas they should incorporate advertising both through each of these which they don’t. This could bring in more clients.
Opportunities: Cabo San Viejo is a successful resort. They need to incorporate a program to continue their success. Since 70-80% of the guests are female, they have the opportunity to target other markets such as males and the younger generation. To gain the interest to these targets, they could offer a variety of services and programs to them. The younger cliental could help the future growth of the resort. With having the younger cliental, this would be new loyal customers that would continue to use Cabo San Viejo as a resort and vacation spot for many years.
With many people across the nation wanting to get healthy to better their lives, this could be a big opportunity for Cabo San Viejo to increase the awareness of their services. Since Cabo San Viejo has high rankings for healthy lifestyle changes through their services, they can continue to outrank the competitors by encouraging new clients to visit their Resort and Spas.
Threats: Competition is Cabo San Viejo biggest threat. Other companies are adding newer programs and services to attracted clients. They are also in competition with cruises, beauty salons, high-end health club, destination spa’s, and another vacation resort that tend to give their customers attention and make them feel special.
Demographics: As stated above in my background. Cabo San Viejo has five properties; one full-service resort in Palm Springs, CA, and four smaller CaboDaySpa’s in Miami, Hilton Head, Aspen, and Nantucket Island. Cabo San Viejo has been featured in many publications as the best in the world.
Cabo San Viejo can accommodate a maximum of 288 guests and expanded to include an air-conditioned, 100,000-square-foot spa complex; 4,200-squar-foot golf performance area; and a 13,000-square-foot Aquatic Center. They have about 3,500 new guests per year: 70-80% of guests are female; 82% of the guests have household income of over $150,000. Cost is the primary reason for why the guests do not return; 67% have heard of the resort by word of mouth. Most common reasons for visiting are rest, relaxation, healthy vacation, spa treatments, and fitness. 96% rate their stay highly, most guests live in western California; average guest takes3-4 vacations per year; 32% of first-time guests return within 5-6 years; and 62% of repeat customers return within another 5-6 years.
The summer is the most challenging time of the year and because 59% of guests have less than $150,000 household income.

Five Steps of Purchase Decision Process
Problem Recognition: Clients want to get fit and healthy. For this, they can live longer and be more active. Visiting Cabo San Viejo they can learn how to have a healthy lifestyle change in their lives. And apply what they have learned to remain fit and healthy.
Information Search: Making the decision to want to change their lifestyle and become healthy, they research health site for top ranking and best outcome of education services in resorts and ask other clients of their opinion of the facility.
Evaluation of Alternatives: the consumer has decided where to attend; they will review and compare other facilities. Does the resort or Spa offer the type of service and products that they are interested in? What are the results of the clients in weight loss and fitness? The consumer can talk with a Cabo San Viejo representative to view the package or service that would benefit them the most.
Purchase Decision: The consumer will compare and views the services and products, and this will be the time they decide if this is the facility that will fit their needs and wants. Will the services and products help their decision? Cabo San Viejo trainers can provide recommendations and information to make their decision less stressful.
Postpurchase Evaluation: This is the final step when the client is satisfied with the services or product they received or how they were treated while staying at Cabo San Viejo. With a reward/loyalty program in place, this can establish a great customer service to their clients.

Recommend:
Our recommendation is Cabo San Viejo implement the option 1 reward/loyalty program. This program will keep their clients happy and give them the recognition they deserve for being loyal to the resort and spa. When clients stay at either location, they will be able to use the discount or coupons they receive. They would receive a 15% discount after five visits at either location. With new recommendations, give clients that recommend new clients points that can accumulate to earn points to receive coupons, discounts, or products during an activity or service during their stay. With the family program set in place, this will bring in new clients that are younger and their children as well that will help the future growth of Cabo San Viejo.
With the many changes in Cabo San Viejo Resorts and Spas, they too can have a healthy future in the competitive world of health fitness. As their mission states; “Cabo San Viejo seeks to help people unlock their hidden potential, so they become healthy, happy, fully self-actualized individuals.” Not only does this apply to their clients but themselves as well.