Wednesday, March 10, 2010

Services Branding

In my MBA brand marketing class, we had to analyze a Rosewood Hotels and Resorts case as well as analyze some Starbucks data in accordance with Pine and Gilmore's Experience Economy model

Here is the full assignment:
  1. Considering Pine and Gilmore's article, where would you place Rosewood Hotels & Resorts on the continuum ranging from commodity to experience? Justify your answer. (Sumbit Word document, 200-word maximum)
  2. The data in the attached Excel file show the results of a Starbucks segmentation study. Each column shows the values for a typical customer in each class (constant over the lifetime of the customer). The annual retention probability applies only after the first year. That is, no one defects until after a full year of patronizing Starbucks.
    1. Assume that Starbucks' gross margin is 50% and that its (one-time) customer acquisition cost is $50. Further assume that Starbucks uses a discount rate of 8%. What is the 5-year individual CLTV for each class of customer? Show your work on one Excel sheet
    2. Suppose Starbucks is considering the investment of $40 million in their 3,500 company-owned North American stores to improve service quality. How many customers per store would have to be converted from Gold to Platinum for the investment to achieve breakeven? Show your work on a second Excel sheet. Submit just one Excel workbook for (a) and (b).
Here is what I came up with. I got a 98 on the assignment.
  1. This is a bit of a trick question. As the article points out, Rosewood Hotels & Resorts is basically white label, lacking a true brand. That said, the individual hotels that comprise RHR go beyond being a commodity, good or service and form an experience for their guests.

    According to Pine and Gilmore, there are two dimensions of experiences: Customer participation and connection. Looking at the Four Realms of an Experience diagram, RHR properties clearly fall under the immersion category as they provide strong esthetic and escapist properties for their guests. It does this by adhering to its core concept to provide “A Sense of Placeâ”. The properties fit their geographic standing, assimilation location, architecture, history and culture.

    Additionally, Pine and Gilmore say “commodities are fungible, goods tangible, services intangible and experience memorable.” A guest response recorded in exhibit 7 demonstrates this feeling as the guest clearly recalls the names of the properties in which (s)he stayed even while not recalling the overall brand.

    Finally, RHR economic offerings are, what Pine and Gilmore call, external. The overall offering engages guest on an emotional and physical level by adapting itself to the unique culture and feel of its surroundings.

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