Loyalty and thereby repeated visits might further be increased with corporate branding by applying the proposed central reservation system (CRS) which may be used to cater for personal guest preferences. According to Dev & Stroock (2007) regarding the example of the Aman Resorts, Scott wanted to create a similar strong brand that attracts guests to stay in Rosewood hotels only. It can be suggested that by using customer information collected from all properties by the CRS, Rosewood will be able to predict more accurately guests individual preferences and thus increase quality and help fulfil expectations. Economies of scale might also occur by including a single centralized marketing operation in contrast to an independent effort, simplified messaging and creative work, and a single unified sales effort (O'Neill & Mattila, 2009).
Cons
The implementation of a corporate branding strategy will most likely take time. In the process Rosewood might lose a number of guests who currently identify themselves with individual property brands. It might be difficult to unify all properties while maintaining a unique atmosphere and a high level of quality as corporate design and service standards might lack flexibility to adapt to the cultural locations of each property. This may in turn lead to a loss of unique Sense of Place identity which each hotel currently enjoy (Dev & Stroock, 2007).
It may be assumed that the individual properties may take better care of their guests as opposed to when corporate policies has to be maintained. The intimate VIP culture may be lost in the transition, and the corporate mind-set may compromise the unique values that have been established in each individual property brand.
It can be assumed that cooperatives feel an emotional bond to the individual properties and own these rooms because they identify with the lifestyle that these individual hotels offer. It can be argued that these guests will have difficulties identifying with a new corporate brand as their perception of exclusivity is very different from standardized services no matter how high the quality is. Since the local property brands are already established with a prestigious reputation, and the Rosewood brand would have none while being implemented, these guests may oppose the corporate transformation. Finally, both among employees (internally) and guests (externally) in general, the change to corporate branding may bring discontent and resistance to those who do not adapt well to changes (Dev & Stroock, 2007).
Rosewood has very low brand awareness and most guests have not even heard of the Rosewood brand, the few that have heard of it, are usually past Rosewood guests. Also, one travel agent stated in relation to the hotel guests: “They may know the name, but there are no positive connotations like there are for Four Seasons […]” (Dev & Stroock, 2007, p.12). It can be argued that Rosewood cannot compete with the Ritz Carlton or Four Seasons if the senior management intent to transform the Rosewood properties into standardized hotel-chain properties since both Ritz Carlton and Four Seasons are far bigger and have a world known brand reputation.
From a cost perspective, corporate branding can be relatively expensive to implement properly. Not only will it be expensive to execute and create brand recognition of the Rosewood brand throughout all properties, especially taken into consideration the low recognition level it has, but also due to the necessary brand incorporation with the hotel amenities like brochures, linens, pillows, bathrobes, towels, souvenirs etc. The corporate branding strategy will cost an extra investment in marketing of $1.000.000 annually (Dev & Stroock, 2007). The new branding will include expenses in replacing the current hotel logo, homepage changes, corporate services, corporate language, corporate design, etc.
Rosewood may experience a loss of commitment from the individual hotel managers who have up to now been able to act as entrepreneurs as they have had a great deal of autonomy and control over their hotels' brand and operations, and they may feel a loss of ownership within the corporate brand (Dev & Stroock, 2007).
Alternatives
Besides corporate and individual branding there exist two other kinds of branding:
Multi-branding is essentially the process of branding two or more widely similar and competing products by a firm under different brands. In the case of Rosewood, this would eliminate the local managers’ decision-making powers in terms of branding and the senior managers would thus have the responsibility of branding all properties individually. This approach would lower multi-property visits and might also create a less local inspired environment, as it cannot be expected that the senior managers would understand the local culture and character from their office in Texas, as the local managers might. This might deprive Rosewoods of its strongest competitive advantage, Sense of Place, and limit their market share (O'Neill & Mattila, 2009).
Multi-product branding is where a company uses one name (Rosewood) for all its products. This approach would possibly alienate loyal guests at well-established properties as they would not associate themselves with the new standardized brand that would lack uniqueness and local character because they essentially all would be the same. This might also diminish the value of each property, as they would not be considered special and deprive Rosewood of its strongest competitive advantage, Sense of Place, over hotel chains as Ritz Carlton and Four Seasons. This approach might also make local hotel managers feel threatened in their autonomy and might make them more inclined to promote their own hotel (O'Neill & Mattila, 2009).
Q3. Customer Lifetime Value
The guest retention rate when the corporate brand strategy is executed is estimated to be 21.67% compared to the individual branded strategy of only 16.67%, this is an increase of 30%. Additionally, the move to corporate branding will increase the net present value (NPV) of the CLTV from approximately $379 to $461. The NPV is different than the CLTV infinite lifetime calculation in that the NPV considers the average marketing expenses per guest whereas the CLTV does not. However, the NPV does not consider the average guest retention rate while the CLTV does (Atrill, 2009). Based on the increase in customer CLTV as well as the increase in retention rate the net profit is estimated to increase by $9 million which alone is a strong argument however a holistic approach taking all considerations and issues into account is necessary.
It can be suggested that customer equity is an effective way to value Rosewood as the long-term profitability is closely related to customer loyalty. As an example, a sensitivity analysis was performed on average number of visits per year per guest. If this number is reduced from 1.3 to 1.0 due to the Rosewood corporate branding strategy, the CLTV is reduced to $406.
With this in mind, it should be mentioned that though Rosewood assumes the number of multi-property guest will increase to 10% and thus causes the average number of visits per year per guest to increase from 1.2 to 1.3 it might not be so (Dev & Stroock, 2007). It needs to be taken into consideration that existing guests might be lost during the transformation since guests are emotionally attached to the current individual properties due to their relatively strong brand position. It can thus be argued that the decrease in guests might lead to a continuous average number of visits per year per guest on 1.2.
The amount of multi-property guest stays is anticipated to double, from 5% to 10%. However, it should be noticed that the multi property guest rate will increase over time rather than instantly. It can be assumed that the Rosewood management should not expect to get a rate above e.g. the Four Seasons Hotels (9% in 2000) or the Orient-Express Hotels (5% - 10% in 2002) in the near future as they are both established corporate hotels in the industry (Dev & Stroock, 2007).
Q4. & 5. A smooth transformation
Rosewood should approach the corporate branding strategy with caution as some stakeholders value the importance of differentiation greatly including the Sense of Place philosophy that reflects the local character and culture of each property (Dev & Stroock, 2007). Employees might be concerned that the transformation to a corporate branding strategy will destroy the uniqueness and individuality of each property. If this is not taken into consideration, but instead ignored, it might put the guest retention rate at risk.
This gives Rosewood an opportunity to include its Sense of Place philosophy into their corporate brand strategy and thus differentiating its properties from traditional corporate luxury hotels like The Four Seasons and Ritz-Carlton whose uniformity is a part of their brand experience and uses the multi-product branding strategy (explained previously). Rosewood has to ensure that it provides the same level service across all hotels, but at the same time allowing each property to cater to the local character and culture (i.e. Sense of Place). This might be a very difficult balancing act, and Rosewood should be very conscious when they implement the corporate branding strategy (O'Neill & Mattila, 2009).
Personality
Before making any step towards developing the corporate brand, Rosewood needs to reinforce the personality of the brand and readapt it to the new corporate image. There exist a great deal of evidence that suggest that consumers have a clear perception of what type of person a specific brand would be if they would come to life (Chernatony et al., 2011). E.g. The Four Seasons might be regarded as an elderly man wearing expensive suits that live a life characterized by routines and repetition, someone very reliable but who rarely surprise. Conversely, Rosewood might be viewed as a smart modern person who follow trends and adapt to the environment he is in. He likewise wears expensive clothe but might surprise in regards to exactly what (Kayaman & Arasli, 2007).
Brand values
Values are powerful forces influencing the behaviour of guests. Chernatony (2011, p.137) defines values as: “[…] a lasting belief that a particular type of behaviour, for example being honest or courageous […] is worth striving for”. Value-added brands offer more benefits than competitors’ brands and for that reason a premium price can be charged. Value-added brands do not succeed only through functional distinction. A strong image or emotional set of value can be equally powerful competitive advantages (Chernatony et al., 2011).
Various studies have confirmed that the success of a brand depends on its ability to provide functional and emotional values to the customers. In order to better comprehend the value of Rosewood’s brand and its contribution, it might be useful to refer to Sheath’s explanation of the five consumption values (Chernatony et al., 2011):
Figure 1 - How values affect brand choice (Chernatony et al., 2011, p.140)
Functional value reflects the value a guest perceives from the Rosewoods functional capability (Chernatony et al., 2011). This would be Rosewood’s ability to enhance a property’s value by creating unique, one-of-a-kind properties with a small ultra-luxury residential style that distinguishes it from other chain-like luxury competitors (Dev & Stroock, 2007, p.2).
The Emotional value is the brands ability to arouse particular feelings. Rosewood has been very successful to do so with its Sense of Place philosophy (Chernatony et al., 2011). The unwillingness to implement a corporate branding strategy from various guests can be seen as an effect of the success of emotional value that Rosewood has created for itself.
Rosewood’s constant strive towards perfection by commitment, ambitions and hard work (Dubé & Renaghan, 1999, p.2) reflects its Social values and association with a specific type of guests which have the same ideals. If implementing the new corporate brand strategy, it is important to maintain the same social values of the brand as guests to some degree might be buying the Rosewood values and brand to symbolise and assert prestige and status more than anything else. This is also referred to as conspicuous consumption and is likewise apparent in regards to the emotional values.
The symbolic value of brands operates in a repeated process. People form ideas about the symbolic meanings of a brand from e.g. advertising. The symbolic interpretation of brands varies according to the type of person the meaning is thus not the same throughout the target market. Furthermore, the symbolic values of a brand give consumers more self-confidence and act as a guide to understand other people.
Epistemic value is the utility a guest perceives when trying a new brand. E.g. if a guest by curiosity tries a Rosewood property just to experience what it might be like, furthermore, it should be noted that at these points Rosewood has the opportunity to convince competitors’ guests to shift to Rosewood hotels.
The Conditional value reflects the perceived worth from a brand in a specific situation. This is not relevant since the Rosewood hotel should be considered a great experience and a first class hotel at any time and not just under specific circumstances.
Shared values
Individual properties of Rosewood might have slightly different values which if implementing the Rosewood corporate brand strategy will mean that one set of values needs to be established. If senior management were to dictate the new corporate brand values to their staff, this might not only constrict growth, but could create internal tension as a result of the degrees of value misalignment (Chernatony, 2002).
The successful corporate branding of Rosewood should be characterized by participative approaches whereby senior management provide guidance about their corporate brand's values, but find mechanisms to engage employees in debates about their values to encourage a common agreement. According to Chernatony (2002, p.119) “employees are not passive participants who absorb management edicts and pass these on to customers. Rather they interpret messages, become inspired by particular visions and create a brand atmosphere as they work with external stakeholders”.
Defining and enacting a corporate brand
In order to successfully implement a corporate brand to the properties of Rosewood it can be suggested to use Chernatony’s (2002) model: Defining and enacting a corporate brand. The model describes the process of defining, conceptualizing and running a corporate brand. The first four stages of the model have to do with creating the corporate brand concept:
Vision
The first of these is the brand vision, which consists of the future environment a brand wishes to bring about, its purpose and its core values.
The future environment and purpose aspects of the vision provide indications about the promised brand experience. Rosewood should build their corporate brand on a well-developed corporate identity to provide a clear vision which should have a justified set of internal core values. From the core values of the vision, guidelines are provided about the functional and emotional values (explained previously). The challenge for each of Rosewoods property-managers is to find ways of interpreting the core values for their employees, ensuring specific employee attitude, behaviour and sense of belonging as well as making certain that they understand the potential implications of their behaviour (Kayaman & Arasli, 2007).
Culture
Interacting with the vision for the corporate brand is the organization's culture, which according to Chernatony (2002) can be conceptualized in terms of artefacts (paintings, posters, art etc.), values and mental models. The artefacts surrounding employees reminds them clues about the values underpinning the corporate brand. E.g. “Thus in an office environment where each office has a notable amount of glass, there would be an inference among staff that one of the brand's values is transparency about all information” (Chernatony, 2002, p.121).
Objectives
Rosewood needs to transform their vision into concrete objectives for the brand with the use of a brand planning document (Chernatony et al., 2011). It should include clear statements regarding individual brand objectives clarifying the criteria that the brand name must satisfy (O'Neill & Mattila, 2009).
Brand-sphere
Also known as the five forces influencing brand potential (Chernatony et al., 2011) consists of five parts which combined determines the level brand potential:
Corporation
Businesses such as 3M and Microsoft have shown how brand and corporate culture are closely interlinked and affect each other. Rosewood’s brand mission should focus on its core values which should be backed up by its corporate culture. The culture of a business strongly influences its brand. Therefore, Rosewood should consider the possible changes if they implement the corporate branding strategy since it can alter the culture and employee performance dramatically (Chernatony et al., 2011). Rosewood needs to identify what its distinctive brand competences are and how well brand and culture match each other before a potential transformation since this will be critical for brand success.
Distributors
A sound brand strategy cannot be formulated without regard for suppliers and vice versa as both parties rely on each other for a successful long-term brand profit evolved around mutual support. Furthermore, Rosewood should be aware of the strengths and weaknesses of each supplier and consider the implications of suppliers’ longer-term objectives, and their strategy to achieve them. When working with a supplier, Rosewood should take into account whether it is striving to offer a good value or high quality proposition to the guests (Kayaman & Arasli, 2007). It is vital that Rosewood picks suppliers that strive for high quality as it can be claimed that it will be far worse to e.g. serve food of lower quality than to charge a higher price. Rosewood needs to consider what would be the ideal characteristics for distributors of its brand and how well the current distributors match these criteria (Chernatony et al., 2011).
Consumers
To some consumers, buying is a process of problem solving. However for guests at Rosewood it can be expected that the purchase decision has a lot more meaning than just problem solving. The extent of the buying process varies according to purchasers' characteristics, experience and the products being bought (Chernatony et al., 2011). Brands offer guests a mean of minimizing information search and evaluation. When recognizing a brand name which has been supported by continual marketing activity, guests can use this as a rapid mean of interrogating memory and if sufficient relevant information can be recalled, only minimal effort is needed to make a purchase decision (O'Neill & Mattila, 2009).
As a consequence of this, Rosewood should question whether they are presenting guests with a few high quality pieces of information, or whether they are bombarding guests with large quantities of information that ultimately only causes confusion. Success depends on understanding the way guests interact with the Rosewood brand and employ company resources to match these needs (Chernatony et al., 2011).
Competitors
Brands are rarely chosen without being compared against others. Although several brand owners benchmark themselves against competition, it often appears that managers misjudge their key competitors (Chernatony et al., 2011). If the transformation is undertaken, Rosewood should carry out interviews with current and potential guests to identify those brands that are considered similar. Once critical competitors have been selected, they need to assess the objectives and strategies of these hotels as well as fully understand their brand positioning’s and personalities.
Research has shown that services with a bigger market share yield better returns than those with a smaller market share and businesses with strong brands are better in gaining market share than those without strong brands (Chernatony et al., 2011).
Microenvironment
Rosewood should examine their macro-environments repeatedly to identify upcoming opportunities and threats. In essence the challenge is to comprehend how the political, environmental, social, economic and technological environments might affect the brand (Chernatony et al., 2011).
The brand concept
From these four notions (vision, culture, objectives and brand-sphere) are the brand concept created which is then enacted through the behaviour of staff and the systems that support their interactions with guests (O'Neill & Mattila, 2009).
Employees
Branding among service businesses is essential since it cannot be assessed on tangible attributes. Services are intangible and heterogenic, and inconsistency occurs of service quality due to involvement of guests and the inconsistency of emotions and mood among employees. Furthermore, the production and consumption of services happens simultaneously and since it is perishable, the guests have nothing but the memory to take home which is often why souvenirs are common in service businesses. Brand development should be performed by all employees of Rosewood and should contain a thorough analysis of all aspects of interactions between guests and the company (O'Neill & Mattila, 2009).
Employees are Rosewood’s most important assets since they represent the business in the guests’ eyes and are often the only point of contact. Employees can positively enhance the perception guests have of a service quality and their morale and mood might thus influence the guest satisfaction of Rosewood (Chiang, 2007). A well devised branding strategy can produce pride among employees thus making them even more committed to work hard and do their part in delivering a good service and thus developing and supporting the brand values. All the goodwill generated by each of the individual Rosewood properties is connected through the corporate branding, thus giving all other properties benefits from the hard work each property do (Chernatony et al., 2011).
Reservation system
A significant aspect in Rosewood's corporate brand strategy is the implementation of a new central reservation system, which transfers all guest information onto one mutually accessible database accessible for all properties. This enables each property to acquire a description of any guest that has already visited a Rosewood property including his expectations, preferences and requests (Chernatony et al., 2011).
Stakeholders & monitoring
By regularly monitoring stakeholder satisfaction and any gaps between the claimed and delivered brand promise reviews can be initiated to satisfy the corporate brand objectives and create greater stakeholder satisfaction (Chernatony et al., 2011).
Q6. What would you advice?
It can be advised that Rosewood should employ a corporate brand strategy. Given the concerns above, it might be best to start building the corporate brand as a series of “partnerships”, subtly incorporating the corporate name into each existing brand name, e.g. The Mansion on Turtle Creek by Rosewood. By doing so it can be assumed that loyal guests still will be able to relate to each original property brand while recognizing Rosewood as the overall business brand, thereby encouraging guests to visit other Rosewood properties.
The objectives of the corporate branding strategy should be to increase the Rosewood brand awareness among existing and new customers and increase the multi-property guest rate while at the same time retaining the Sense of Place philosophy and service at each location. Rosewood must not lose its competitive advantage. Each property must remain closely connected to its location.
Before Rosewood start to develop a corporate brand, it needs to reinforce its personality by re-adapting it to the new corporate image. It is vital that Rosewood forms a strong vision that is supported by a set of functional and especially emotional core values that all employees and guests can relate to. Furthermore, Rosewood needs to establish a clear set of objectives from its vision with the use of a brand planning document. In order to make the transformation shift and successful it is of high importance that the employees and other stakeholder are involved in the process.
A qualitative analysis confirms that Rosewood should implement the proposed corporate branding strategy, among other things, due to an estimated increase in CLTV and NPV. However qualitative analysis’ indicates that Rosewood’s competitive advantage lies in its hotel’s individuality and the Sense of Place philosophy.
Thus, the challenge for Rosewood is how far they can push the corporate branding strategy without undercutting the distinctiveness of each individually branded hotel.
Bibliography
Atrill, P. (2009). Financial Management for decision makers (5th ed.). London: Prentice Hall.
Chernatony, L. d. (2002). Would a Brand Smell any Sweeter by a Corporate Name? Corporate Reputation Review, 5(2 and 3), 114-132.
Chernatony, L., McDonald, M., & Wallace, E. (2011). Creating powerful brands (4th ed.). London: Elsevier.
Chiang, L. C. (2007). Managing Change of Hotel Brand Name: Mangerial Roles and Employees' Concerns. Asia Pacific Journal of Tourism Research, 12(1), 19-32.
Dev, C. S., & Stroock, L. M. (2007, June 15). Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value (2087). Brief Cases - Harvard Business Publishing.
Dubé, L., & Renaghan, L. (1999). Strategic approaches to lodgeing excellence. Cornell University, 16-26.
Kayaman, R., & Arasli, H. (2007). Customer based brand equity: evidence from the hotel industry. Managing Service Quality, 17(1), 92-109.
Kim, H., & Kim, W. G. (2005). The relationship between brand equity and firms' performnce in luxury hotels and chain restaurants. Tourism Management, 26, 549-560.
O'Neill, J. W., & Mattila, A. S. (2009). Hotel Brand Strategy. Cornell University, 51, 27-34.
Figure 2 - Defining and enacting a corporate brand (Chernatony, 2002, p.120)
<<<<<<<<<<<<<<<<<<<<<<<<
<<<<<<<<<<<<
by
christianrolighed (student)
