Rosewood Hotels and Resorts

I found the Rosewood case to exemplify common challenges a company faces – deciding what tradeoffs are best for the firm. Rosewood’s dilemma involved trying to enhance its brand name without losing each hotel’s identity. Rosewood hotels pride themselves on their ability to create a unique and cultural experience for its guests. It is important for the company to create a balance between these two factors. My team felt it was in Rosewood’s best interest to include corporate branding at all properties as a way to increase visibility to customers and encourage guests to try alternate locations. In order to not hurt the value of some property names, Rosewood should allow managers to add the company name to the beginning or end of the current title. This will associate all properties together without lowering the value or customers’ perceptions of well-known properties. Through calculating the CLV if Rosewood was to participate in corporate branding, we confirmed this decision would be most profitable for the firm.

This case also demonstrated the benefits of customer relationship management. When marketing its various locations, it is important for Rosewood to properly identify consumer preferences in order to satisfy their demands. For instance, being able to differentiate travel lovers from those who wish to do nothing by lay on a beach for a week can be very advantageous. This information would allow the company to promote its additional hotels to one group of consumers while focusing on getting the other group to return to their preferred location. Customer relationship management will also identify the company’s less profitable clients, permitting employees to allocate marketing budgets in the most efficient and effective manner. 

CLV and CRM: Ingredients for Success

Customer lifetime value is a very important tool to analyze which customers to invest in and acquire. While it is helpful for determining the financial consequences of different decisions, there are challenges associated with this measure. It can be difficult to determine some of the factors included in the calculation. For example, a lot of data is required to obtain retention rates, acquisition costs, and response rates used in the equation. Furthermore, as discussed in class, a portion of this value is consumer valuation and their perception on the firm. This value is hard to obtain and subjective. Since so much data is necessary, CLV may be timely and/or costly. However, I believe the information it provides is very useful and important for firms.

Playing around with the Harvard Business School CLV problem, I found it interesting to see how each input influences the total CLV. For instance, through analyzing the graph which compares profit per customer versus present value over 6 years, I can see the affect of each input. All other factors equal, changing the average number of purchases from 3 to 6 increases the maximum profit per customer, but maintains each line's slope. However, increasing average retention rate from 60% to 75% has no effect on maximum customer profitability by increases the PV of each customer. Hence, depending on a company’s objectives, it can use various marketing tactics to enhance CLV through understanding its consumers.

Also, I especially enjoyed Fred Vogelstein’s article, “Great Wall of Facebook: The Social Network’s Plan to Dominate the Internet – and Keep Google Out.” I was very surprised by the amount of information the company is able to collect from its users. Facebook is a great example of a company that constructed a business model which makes users want to share their data. One factor I believe has led to Facebook’s success is the importance it places on its users. When the company changed its terms of service, giving itself ownership of anything someone posted to the sight, many were extremely upset, and petitioned. Facebook answered this negative response by reversing the changes. Clearly the company understands the significance of its users’ satisfaction, and caters to them appropriately. Understanding the demands of its clients has played a huge factor in Facebook’s success.

The Fashion Channel: How to Stay Competitive

The Fashion Channel case details the importance of segmenting customers. WHile competitors begin to enter the market, such as Lifetime and CNN, TFC needs to identify its desired audience and market towards this defined segment. Currently, TFC is a basic channel, therefore reaching many households and accommodating four viewer segments (fashionistas, planners/shoppers, situationalists, and basics). The CEO believes marketing should appeal to a large group in order to capture high ratings and increase the number of viewers. However, I believe the CEO, who is also the founder of TFC, is allowing his emotional connection with the company to interfere with implementing the best strategy. If TFC does not refine its audience to a specific group, its current viewers are likely to switch. The channel needs to gain a loyal customer base. I agree with Wheeler that targeting the fashionista segment will be beneficial. Although this is the smallest segment, this customer group has the most interest in the channel and is therefore most likely to stay loyal. This will allow the channel to differentiate itself in terms of the programming it offers. Marketing and promotion catered towards the fashionista group can also help increase the volume of customers. As we discussed in class, fashionistas tend to be trend setters, and can have a large influence on others, attracting more toward the channel. Without defining a market, TFC will lose control of its audience and limit growth opportunities.

Blockbuster: How Marketing Myopia Led to its Downfall

As Levitt states, “If a company’s own research does not make a product obsolete, another’s will.” No product has a guaranteed future, and it is important for management to not treat a product as if it does. Despite the difficulty involved with thinking that a successful company could fail, management must operate with a mindset of an uncertain future. Industries do not begin with a firm’s product/service, they begin with the customer and move backwards to satisfy the consumers’ demands and create necessary items.

Blockbuster demonstrates Levitt’s principle of suffering from marketing myopia.  Blockbuster fell victim to creative destruction by other movie rental businesses including Netflix, RedBox, and iO TV On Demand. Blockbuster’s market strategy was to provide customers with an opportunity to enjoy a night by staying home and watching a movie with the family. In addition to movie rentals, movie style popcorn, candy, and beverages are available to purchase at its stores. Unfortunately, when consumer preferences changed, and many began valuing convenience and/or inexpensive options, Blockbuster failed to alter its strategy. This permitted companies such as Netflix and RedBox to steal the market, offering consumers at home delivery/online services and $1 rentals. Despite Blockbuster’s efforts to expand its services and provide customers with more convenient methods of video rental, competitors had already positioned themselves in these areas. Had Blockbuster observed the market’s preferences and initiated its home delivery and On Demand amenities prior to Netflix, it would have likely been able to establish a positive reputation for these services and not need to declare bankruptcy. The company had thought of these ideas prior to competitor’s existence, but failed to act soon enough. Clearly Blockbuster did not believe there could be a competitive substitute for its products and services, a concept Levitt discussed as leading to marketing myopia.

Marketing Myopia

"Marketing Myopia" has strengthened my understanding of effective marketing. While I was aware of Levitt's argument that marketing is about the buyer versus the seller, I have always primarily associated marketing with the product rather than the consumer. Levitt makes it clear this is incorrect, and companies must listen to the customer before producing a product rather than producing an item which caters to their own preferences. Through focusing on the consumer's preferences, a company will adapt/change to satisfy these demands and be successful. It is important to observe the environment your company is performing in. Failing to do so may give a company the perception their product(s) are good enough to maintain and increase its current customer base and sales levels, but this is not the case. Regardless of how  amazing your product is, when the market changes, you will need to as well.

I found Levitt's "stepchild treatment" theory very interesting. Marketing is a process assumed to be taken care of, and tends to be forgotten about. I believe companies do not prioritize the factors included in effective marketing (such as researching and understanding consumers' demands / reasons for these desires), resulting in their tendencies to forget about the customer and focus on the product, therefore prohibiting growth.