Branding & Rosewood Case

Here is an excerpt on Corporate Branding that I came across as I researched the topic:

“Corporate branding is the practice of using a company's name as a product brand name. It is an attempt to use corporate brand equity to create product brand recognition. It is a type of family branding or umbrella brand. Disney, for example, includes the word "Disney" in the name of many of its products; other examples include IBM and Heinz. This strategy contrasts with individual product branding, where each product has a unique brand name and the corporate name is not promoted to the consumer.

Corporate branding can result in significant economies of scope since one advertising campaign can be used for several products. It also facilitates new product acceptance because potential buyers are already familiar with the name. However, this strategy may hinder the creation of distinct brand images or identities for different products: an overarching corporate brand reduces the ability to position a brand with an individual identity, and may conceal different products' unique characteristics. (è This is clearly our dilemma in the Rosewood case).

It has been argued that successful corporate branding often stems from a strong coherence between what the company’s top management seek to accomplish (their strategic vision), what the company’s employees know and believe (lodged in its organizational culture), and how its external stakeholders perceived the company (their image of it). Misalignments between these three factors, may indicate an underperforming corporate brand. This type of corporate brand analysis has been labeled the Vision-Culture-Image (VCI) Alignment Model”

  So in the Rosewood case, we have the company’s current top management seeking to accomplish the strategic vision of a common corporate brand. But there is clearly a distinct identity that is maintained by each of the hotels, where the long time mantra and guiding principle of the company has been the inspiring phrase: “A Sense of Place”. We do see the concerns in the readiness and willingness of the employees to move to a common brand, even some customers share the same sentiment. There is also the uniqueness that is maintained by each of the hotels that has been the major attraction and success factor of these establishments, which we don’t want to jeopardize or even threaten with a major rebranding initiative.

  At the same time, there are clear advantages and financial benefits in resorting to common Rosewood branding – It can be seen that some properties enjoy return visits from guests up to 40%, but only 5% of these guests had stayed in other Rosewood properties. Also, from Exhibit 7, it is very clear that  there is extremely low brand awareness of the Rosewood brand. Also, based on the Customer Lifetime Value (CLV) calculations, there is incremental value that comes with branding, even after including the additional marketing expenses that will be incurred with branding.

ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE (CLTV) ANALYSIS Inputs Without Rosewood Branding (2003) With Rosewood Corporate Branding Sourcce Total Number of Unique Guests 115,000 115,000 Exhibit 8 Average Daily Spend $750.00 $750.00 growing at 6% Exhibit 8 Number of Days Average Guest Stays per Stay 2.0 2.0 Exhibit 8 Average Gross Margin per Room 32% 32% Exhibit 8 Average Number of Visits per Year per Guest 1.2 1.3 Exhibit 8 Average Marketing Expense per Guest (system-wide) $130.00 $138.70 growing at 3% Exhibit 8 Average New Guest Acquisition Expense (system-wide) $150.00 $150.00 Exhibit 8 Total Number of Repeat Guests 19,169 24,919 of which: Total Number of Multi-property Stay Guests 5,750 11500 Additional Costs Required per annum $1,000,000 Page 5 Discount Rate 8% 8% Exhibit 8 Average Guest Retention Rate 16.67% 21.67% CLTV Calculation With No Changes to Brand Strategy Year 2003 2004 2005 2006 2007 2008 2009 Number of Nights per Stay 2.0 2.0 2.0 2.0 2.0 2.0 Number of Stays per guest (assuming they are retained) 1.2 1.2 1.2 1.2 1.2 1.2 Revenue Per Night $795.00 $842.70 $893.26 $946.86 $1,003.67 $1,063.89 Revenue per Customer $1,908.00 $2,022.48 $2,143.83 $2,272.46 $2,408.81 $2,553.33 Gross Profit per Customer $610.56 $647.19 $686.03 $727.19 $770.82 $817.07 Less Cost to Acquire Customer ($150.00) Less Annual Marketing Cost per Customer ($133.90) ($137.92) ($142.05) ($146.32) ($150.71) ($155.23) Cash Flow from Customer if Retained ($150.00) $476.66 $509.28 $543.97 $580.87 $620.11 $661.84 Probability of Being Retained 1.00 1.00 0.17 0.03 0.00 0.00 0.00 Expected Cash Flow from Customer ($150.00) $476.66 $84.90 $15.12 $2.69 $0.48 $0.09 Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587 NPV of Expected Cash Flow from Customer ($150.00) $441.35 $72.78 $12.00 $1.98 $0.33 $0.05 Total NPV of CLTV $378.49 CLTV Calculation With New Brand Strategy Year 2003 2004 2005 2006 2007 2008 2009 Number of Nights per Stay 2.0 2.0 2.0 2.0 2.0 2.0 Number of Stays per guest (assuming they are retained) 1.3 1.3 1.3 1.3 1.3 1.3 Revenue Per Night $795.00 $842.70 $893.26 $946.86 $1,003.67 $1,063.89 Revenue per Customer $2,067.00 $2,191.02 $2,322.48 $2,461.83 $2,609.54 $2,766.11 Gross Profit per Customer $661.44 $701.13 $743.19 $787.79 $835.05 $885.16 Less Cost to Acquire Customer ($150.00) Less Annual Marketing Cost per Customer ($142.86) ($147.14) ($151.56) ($156.10) ($160.79) ($165.61) Less Additional Marketing Cost per Customerb ($8.96) ($9.23) ($9.50) ($9.79) ($10.08) ($10.38) Cash Flow from Customer if Retained $509.63 $544.76 $582.14 $621.90 $664.19 $709.16 Probability of Being Retained 1.00 1.00 0.22 0.05 0.01 0.00 0.00 Expected Cash Flow from Customer ($150.00) $509.63 $118.04 $27.33 $6.33 $1.46 $0.34 Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587 NPV of Expected Cash Flow from Customer ($150.00) $471.88 $101.20 $21.70 $4.65 $1.00 $0.21 Total NPV of CLTV $450.64 Increase in CLTV per customer of new Marketing Plan $72.14 Multiplied by # of Customers to obtain increase in profit of Rosewood from new brand strategy $8,296,505 Divided by 32% gross margin to obtain increase in Revenue of Rosewood from new brand strategy $25,926,579 b $1 million growing at 3% per year allocated to 115,000 guests

  Based on the above, my recommendation is to introduce corporate branding in a subtle way, where the Rosewood brand does not overpower the uniqueness of each hotel and destroy the ‘Sense of Place’, but acts as the unifying factor that ties together the unique elegance, ambience and experiences that the customer is bound to enjoy and assured of at each of the Rosewood facilities. The central reservation system is the first right step in this direction which helps to build the customer profiles and even helps to shortlist the other hotels in the Rosewood chain that can offer experiences along the customer’s preference. The customers who are bound to travel to various destinations will benefit from the knowledge that The Bristol in Panama City will offer unique experiences, quintessential expression of its location and a sense of place of its own, while at the same time the customers can be assured to experience the same unrivaled level of service and attention to detail that they received at The Carlyle in New York, which is the commitment that comes with the Rosewood Brand that ties them together with the promises of Unity in Diversity. So I would not recommend changing the hotel names to include ‘Rosewood’ in them, but would recommend that the names be followed with –‘A Rosewood Group’, similar to the sample below, maybe in even smaller fonts, in a subtle way which is not overpowering the hotel name. This can be reflected in all the major areas like corporate websites and individual hotel web-sites and pamphlets so that they get tied back to the brand – but I would not go to the extent of changing the room amenities and such at each of the individual hotels to reflect the Rosewood name.