Week11: Customer Lifetime Value & Rosewood Hotels

Customer lifetime Value: It is hard to get a loyal and profitable customer, but fairly easy to lose one. Constant effort and strategic planning is required to keep profitable customers happy and engaged. Any company that starts to take its customers for granted is in for a rude awakening.

1. Does your company explicitly know the value of its customers?

The company I work for, Cummins Inc. puts significant focus on understanding and attending to needs of its customers, esp. the key customers! Customer Support Excellence is a key initiative at Cummins. A recent company article announcement, May 11, 2012.

Excelling at customer support across Cummins will demonstrate to our customers that we care about their success as much as we care about our own. In fact, delivering customer support excellence is one of the five growth accelerators outlined by Tom Linebarger (Cummins CEO) as necessary to accelerate Cummins growth into the future.

2. If not could your company utilize CLV (Customer Lifetime Value)?

I am not directly involved on the sales and marketing function, and therefore cannot comment on the utilization of CLV at Cummins. But based on what I have seen, I would be surprised to hear if CLV analysis is not being used in some capacity at Cummins. I do plan to float this concept to my colleagues within the customer engineering group that I interact with on a regular basis.

I find the CLV analysis an excellent tool to bring objectivity in decision making. Many times subjective reasoning is critical in making decisions, but without impact and correlation to the bottom line, a purely subjective decision cannot be sustainable. CLV analysis is a good tool to bring objectivity into the decision making process without discarding the subjective nature of customer relationship management.

3. What are some of the practical issues of implementing the use of CLV in a firm

Upfront investment cost, operational cost to implement and maintain CLV, lack of historical data to predict future customer behavior, lack of company-wide buy-in towards a huge investment, lack of cohesion within various business units to make CLV a success, territorial protection within departments and scale of implementing CLV, are some of the practical issues I see with this concept.    

3.  What are the major issues in the Rosewood Case? 5. What recommendations do you have for the management of Rosewood.

I am part of Team 1, tasked with submitting case memo on Rosewood, so decided to

keep my comments reserved for the 1 page summary J.

3. Which Rosewood property would you like to visit?

I’d like to visit Las Ventanas al Paraiso, located in Los Cabos, at the tip of Mexico’s Baja Peninsula on the azure Sea of Cortez. I will be honest the pictures of this property piqued my interest. I am that customer who values what the pictures have to say or at least try to project. A week-long vacation near the beach sounds like an amazing idea to re-charge my batteries after a 12 week spring term J.