CRM, CLV, and Hotel Living

Which came first, the chicken or the egg? The customer or the strategy? 

In marketing, the customers are arguably more important than the strategy, and as such are the true value of your business. With this methodology as their mantra many companies have leveraged new technologies to develop a Customer Relationship Management system. Not only has the technology to track this information changed but so has the methods each company uses to obtain it. Companies such as Kroger has initiated customer loyalty programs that offer price discounts for the exchange of information about their purchases. It seems companies finally discovered trends in their customer's purchases and utilized this information to effectively price their goods, offer discounts, and market to the most profitable customer segments. 

Enter CLV analysis, a tool used by a vast amount of companies to determine the presumed profitability of each consumer over their lifetime. While the benefits of this methodology are quite vast, the method itself caused me to question the validity of this analysis. How are the retaining probabilities determined? How are customers assessed a yearly level of business? What's the margin for error of each of the estimates present int he CLV equation? All these uncertainties culminated in a feeling that CLV is quite variable and volatile. While it may weed out some unprofitable customer segments I would be hesitant to rely upon this analysis to solely identify a profitable customer segment. I would assimilate the uncertainty in the assumptions made to predict future customer interaction to that of forecasting. While it is an educated guess, it is still a guess, and as such caution needs to be taken when relying upon CLV. 

I felt this point was missing in our analysis of Rosewood. While the individual profitability of each customer was not specifically addressed, CLV was still utilized to determine the best move for the resort chain. While the corporate branding strategy was the ultimate decision of my team, I believe that CLV for this case was arbitrary in that there are plenty of ways this branding strategy could be achieved without tarnishing the prestige of each property. These varieties of options within the branding strategy appeared to have no effect on CLV analysis. Herein lies my take away from the week, while the numbers hint that the branding strategy would increase CLV there is more than the numbers to consider in such a game changing decision.