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Kenan-Flagler Business School

Marketing 741

SWETHA VASU
SECTION 1

Executive Summary
Rosewood is battling with a brand identity crisis. While it has maintained a low-key brand
image till date (by adopting the individual brand strategy), the potential of a corporate brand
recognition in a long run seems alluring. Based on the customer life time value analysis,
customer perception analysis, and after analyzing customer needs, we recommend the following:
1. Rosewood should adopt the corporate brand strategy through a smooth transition- start
slow, and expand if met with positive response
2. The corporate branding should focus on the motto: A sense of place or a Perfect
Holiday destination, rather than on factors such as say, Luxury at a never seen before
price, Impress your clients at Rosewood resorts, Perfect for businesses etc.
However, before making this transition, Rosewood should fully understand its future target
markets, and analyze the potential impact of this branding on its future ventures.
Understanding a Rosewood Customer
Rosewoods customers are typically classified as shown in Exhibit 1. It may be safe to assume
that individually owned brands like Rosewood may attract the vacation customers more than
the corporate brands that typically attract the business travelers. This is because, a business
traveler may not be too concerned about a unique experience while on a business trip, while
this factor may be an important one for the vacation customer. Also, corporate brands may
have mutually beneficial ties with the large corporates that have geographically distributed
business activities, owing to their wider geographic presence (compared with the individually
owned resorts). Now, knowing that a Rosewood customer values the A sense of place feeling,
and the unique experience that Rosewood provides, it becomes very important for Rosewood to
keep this customer preference in mind if and while rebranding its image. The centralized
reservation system should enable Rosewood to keep a track of customer preferences, based on
geographic or demographic segments. Using data collected from this central system, Rosewood
should continue to provide customer oriented services (independent of the rebranding decision).
This suggestion stems from the idea that re-branding neednt always be accompanied by a drastic
turnaround in strategy; rebranding is more about bringing better awareness while retaining the
best practices.
Market Assessment (Competition)
Now, lets analyze the attractiveness of the Luxury hotel segment using the 5-force framework in
Exhibit 2(b). This industry isnt an easy one to penetrate, given the high bargaining power of
consumers, availability of substitutes, and industry rivalry. Rosewoods position in this industry
is as shown in the perception map in Exhibit 2(a) - it thrives on its unique sense of place
identity, an image that the corporate brands arent generally associated with. While Rosewood
thrives on its uniqueness, it loses out on its obvious advantages of a corporate brand:
Brand recognition, and consequently brand loyalty. This in turn will lead to a long term
customer wholl contribute to a steady stream of revenue (greater CLTV- Exhibit)
Reduced marketing expenses in a long run. Once the brand image is established, lesser
money needs to be spent on branding- one ad will bring visibility to the group of hotels

under the Corporate brand, unlike in individual owned brands in which separate
advertisements will be required
Our aim here is to achieve a high brand awareness while also retaining the uniqueness and the
perception of the customers. Rosewoods branding strategy should hence be targeted at
promoting the brand while associating it with the feel factor. In doing so, Rosewood could start
with adding the Rosewood brand to a select few resorts or to the newly inaugurated resorts and
wait for customers reaction to this branding before scaling the branding program to all its
resorts. However, by shifting to corporate branding, Rosewood is entering into a market with
many more players when compared with the individual branding segment. It hence becomes
important for Rosewood to differentiate itself from the existing players in order to subsist in the
competition, which brings us to the feel factor branding. For instance, in India, the Club
Mahindra group of resorts focusses on this strategy- while they offer great customer satisfaction
in terms of the sense of place, they have never competed with the Taj group of hotels in their
identity. Both Club Mahindra and Taj offer luxury services, and both have a strong brand
recognition- while one thrives on its image of a family holiday destination, the other thrives on
the business customer model.
Impact on the Bottom Line (Company)
Since we propose a brand recognition strategy that aims at bringing collective awareness of the
brand while not depriving the customers of their unique experience, this move may not have an
impact on the employees perspective- they may continue doing what they were. However, this
branding might affect those resorts that are collectively owned. Individual owners who want a
sense of unique identity might not respond well to this move. In this situation, we recommend
that Rosewood adopt branding after achieving positive results in other locations (start with other
resorts that are not strongly opposed and then target the collectively owned ones). When success
is achieved in branding, the initially resistant ones might be more willing to give in and adopt
this strategy.
Financial Considerations
The 3C analysis and the CLV analysis are presented in Exhibit 4 and 3 respectively. It seems like
the maximum that Rosewood can spend on a customer in a year is limited to about
$460/customer (if it adopts corporate branding), beyond which it may become an overhead. In a
long run, this will be a good investment if these customers maintain a long term relationship. By
opting for a membership program in future, we believe that Rosewood might be able to recoup
the cost through 2-part pricing strategy.
Recommendation:
Both from financial and strategic perspective it seems prudent for Rosewood to adopt a corporate
branding first in slow steps, and based on response, extend it further. Also, in order to sustain in
a competitive corporate branding segment, Rosewood should differentiate its service through the
sense of place motto, while targeting a customer segment such as the family vacationers

APPENDIX
Exhibit 1: Types of Rosewood customers- before rebranding

Exhibit 2
2(a): Perception Map for Rosewood and corporate branding hotels

Exhibit 2(b): 5-force analysis of the luxury resort segment

Threat of new
entrants
LOW

Threat of
substitutes
MODERATE-HIGH

Bargaining power
of suppliers
LOW

Bargaining power
of Buyers
HIGH

Industry Rivalry
HIGH

This is a capital intensive investment that requires hotel management expertise. Given the
unique skills required for entering this industry , and the fact that it is already dominated by
corporate and individual players, the threat of new entrants is Low

Within the luxury hotel industry, the corporate branded hotels are a substitute for the
individual owned brands, and vice versa. We do not recognize the cost-effective/ lower end
resorts as substitutes for a luxury brand given the fact that the target segments are people
belonging to different income groups, or those with different needs. A bigger threat might
be a luxury hotel that works on the cost-leadership model. Nevertheless, since customers
have the choice to choose between resorts nless thay have a strong preferance for one
type, the threat is moderate-high

In a way, travel agents constitute suppliers- they supply customers to these resorts. They
also form an important link in educating the customers about a hotel/resort. A travel agent
with reputation has the power to make or break a brand and consequently demand certain
services in exchange for customer awareness. For a resort that provides quality services ,
this should not be a great concern. Other suppliers include service providers and
manufacturing business owners who have little bargaining power. Consequently, we shall
consider this - LOW

The buyers here are the end customers who use the resorts services. These customers have
a unique need that in turn defines their decision to choose and re-choose a resort in a long
run. With several corporate brands and individually owned brands that provide services
within a difference of a $100, the bargaining power of the buyers seems high, unless the
resorts service cannot be reproduced by any competitor, or if the customers' needs are
exclusive

With several players competing in this segment, the industry rivalry seems to be on the
higher side. This is accentuated by the fact that the target segments of these players are
more or less the same- customers who value the luxury resort experience. However, it
needs to be noted that corporate branded hotels might attract the Corporate travelers
while the individual brands might target a vacation crowd.

Exhibit 3: CLV analysis


Reference

3
4
5
6
7

8
9

10

11
12

13
14
15
16

Without
Rosewood
Branding
Total number of
unique Guests
Average daily Spend

115,000.00

With
Rosewood
Corporate
Branding
115,000.00

$750

$750

Number of days
average guest per stay
Average gross margin
per room
Average number of
visits per year per
guest

32%

32%

1.2

1.3

Average Marketing
expense per guest
(system-wide)
Average new guest
acquisition (system
wide)
Total number of
repeat guests (s)
of which: Total
number of multiproperty stay guests
Discount Rate

$130

$138.70

$150

$150

19,169

24,919

C11+(D12-C12)

5750

11500

2*C12

8%

8%

Average Guest
Retention Rate (f)
Marketing costs
Increase
Average gross Profit
Guest increase

16.67%

21.67%

3.00%

3.00%

6%

6%

CLV- without

(D3*C9+1000000)/D3

D11/D3

17

18

22

Corporate Brand
strategy
Cost to acquire
customer
Time spent during 1
stay
Number of stays
(repeated)
Average daily spend

23

Revenue/ Customer

$1,908

$2,022

$2,144

$2,272

$2,409

$2,553

24

$610.56

$647.19

$686.03

$727.19

$770.82

$817.07

$133.90

$137.92

$142.05

$146.32

$150.71

$155.23

$476.66

$509.28

$543.97

$580.87

$620.11

$661.84

27

Gross Profit /
customer
Marketing cost per
customer
Cash flow retained
customer
Retention factor

0.1667

0.02778889

0.004632408

0.000772222

0.000128729

28

Discount factor

0.925925926

0.85733882

0.79383224

0.73502985

0.6805832

0.63016963

29

NPV of cash flow

($150)

$441.35

$72.78

$12.00

$1.98

$0.33

$0.05

30

NPV of customer life


time value
(multiplying by
retention rate)

$378.49

19
20
21

25
26

$150

1.2

1.2

1.2

1.2

1.2

1.2

1.2

$750

$795

$843

$893

$947

$1,004

$1,064

Increases by 6%
=Time spent during
1 stay*Number of
stays
(repeated)*Average
daily spend
=Revenue*Average
gross margin
Increases by 3%

$130

=sumof values in
row 29

31
32

33

CLV Calculation
With Corporate
Brand strategy
# of Nights per stay

34

# of Stays per guest

1.3

1.3

1.3

1.3

1.3

1.3

35

Revenue per Night

$795

$843

$893

$947

$1,004

$1,064

$750

=Gross profitMarketing cost


=Retention
rate*previous
year's retention
rate
=(1/(1+discount
rate)^year))
=B26*B27*B28

36

39

Revenue per
Customer
Gross Profit per
customer
Marketing cost per
customer
Cash Flow

40

Retention factor

41

Discount factor

42

NPV of cash flow

($150)

43

NPV of customer life


time value
(multiplying by
retention rate)

$461.09

37
38

$138.70

$2,067

$2,191

$2,322

$2,462

$2,610

$2,766

$661.44

$701.13

$743.19

$787.79

$835.05

$885.16

$142.86

$147.14

$151.56

$156.10

$160.79

$165.61

$518.58

$553.98

$591.64

$631.68

$674.27

$719.55

0.216686957

0.046953237

0.010174154

0.002204606

0.000477709

0.925925926

0.85733882

0.79383224

0.73502985

0.6805832

0.63016963

$480.17

$102.92

$22.05

$4.72

$1.01

$0.22

*All discount rate and growth rate assumptions are based on assumption data given in the case study
Exhibit 4: 3Cs analysis
Customers

Individual Branding (IB)


Customers care about the unique experience at Rosewood
resorts- the sense of place feeling

Company/Employee From a CLTV perspective, the individual branding seems


to generate lesser value. A shift will require employees to
adjust to common standards thatll be difficult if their
services are unique
Fewer in the Individual branding segment.
Competition
A shift to the corporate segment will lead to bigger
competition for Rosewood. The key would be to build a
brand that is different from that of the existing players by
focusing on the target segment- untargeted primarily by
existing players- viz Vacation customer

Corporate Branding (CB)


Luxurious stay; Brand recognition leads to repeat visits
From a CLTV perspective, the corporate branding seems
to generate better value for company

Fairly bigger players in this segment.