TEAM COOPER BLACK

Canyon Ranch Case Study

Case Study #1
Andrew Denchick, Rich Brady, Renee Urrutia, Brent Thorson, Darius Bovain 1/15/2011

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Contents Executive Summary..................................................................................................................... 3 Background ................................................................................................................................. 4 Identification of Issues ................................................................................................................ 7 Analysis..................................................................................................................................... 10 Recommendations .................................................................................................................... 10 References ................................................................................................................................ 14 Appendix .................................................................................................................................. 14

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Executive Summary Canyon Ranch Health Resorts was founded in the United States, in 1979, and became a leader in the health resort and spa industry. Although it has enjoyed a successful run as the gold standard in the industry, Canyon Ranch has experienced increased competition from industry competition and substitute luxury opportunities. In addition, it has undergone a variety of changes as evidenced by its growth, to include additional facilities, and the business process, organizational, and technology challenges that occur with expansion and multiple location properties. This case study focuses on the issues raised in Canyon Ranch in 2004. These issues include redundant paperwork for the customer, paper based waiting list, partial and incomplete customer tracking systems, booking process not streamlined, limited marketing strategy, decentralized IT systems, industry and substitute competition, high employee to customer ratio, high program coordinator turnover, no point of sale system, and lack of formal recognition or reward program. The reasons behind these issues are analyzed separately and independently, in order to understand where they arise and what actions can be taken to correct them. Recommendations are proposed that will address the issues observed in this case study. Recommendations include the need to benchmark their top site and implement best practices at other sites, reward card incentive tracking, advertising partnerships increase but still selective, adding true CRM system, cost benefit analysis of program coordinator pay, interactive website virtual tours, personalized site once in system (POS), leveraging CRM to exploit male popular growth, I pads for program coordinators, adjust business processes to incorporate new CRM and also competitive info tracker, and a system to allow both Guestware and current CLS system to talk then implement new CRM system.The recommendations proposed will allow Canyon Ranch to maintain its position as an industry leader.

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Background Canyon Ranch (CR) was founded in 1979 by Enid and Mel Zuckerman and evolved to become a leader in the health resort and spa industry. As it grew, it aimed to remain true to its original vision, to be an experience that can influence the quality of your life, from the moment you arrive to long after you return home. Its mission aims to inspire people to make a commitment to healthy living, turning hopes and intentions into the highest enjoyment of life. To accomplish its mission and vision, CR looked to provide a uniquely attentive experience through employee excellence, life skill and wellness education, and an integrative-care model, to include the components of health and healing, spa, and fitness services, combined with professional medical consultation and an astonishing array of client services. CR entered the luxury resort and spa industry with its destination resort in Tucson, Arizona and added an additional destination resort at the Berkshires, in Lenox, Massachusetts in 1989. Both are divided into three revenue-generating departments: Health and Healing, Hotel, and Spa. Central to CR s mission is their Health and Healing component combined with medical and health care professionals, showing the fastest growth and offering potential synergies to other departments, yet contributing the least to CR s profitability (due to high commissions paid to health and healing professionals), behind the Hotel and Spa, respectively. A wide array of services are furnished, as evidenced at the Berkshires location, which offers more than 230 different servicesin their Spa and Health and Healing departments alone. CR added SpaClubs to complement its destination resorts. They are an abbreviated experience as compared to the resorts and serve to provide their clients with a touch of Canyon Ranch designed to introduce customers to the brand. The first SpaClub launched in 2000 at the Venetian Resort, in Las Vegas, Nevada, followed by one at the Gaylord Palms Resort and Convention Center, in Kissimmee, Florida, in 2002, and a location in 2004 on the Queen Mary II cruise ship. The SpaClubs supply spa, fitness, and salon services, but lacked the strong

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health and healing components offered by the destination resorts. These locations are designed to serve the needs of the guests at the properties on which they are housed. CR executives hoped the SpaClubs would act as feeders for their destination resorts. In 2002, the Zuckerman family established the Canyon Ranch Institute, a non-profit organization whose mission is to educate, inspire and empower every person to prevent disease and embrace a life of wellness. CR offered premier customer service with a 2.5:1 staff to guest ratio, and recruited people who exhibited excellence in their fields of expertise, exemplary professional qualifications, and the right personality fit for the company s culture, to include an outgoing personality, friendliness, and genuine excitement for the job. Their program coordinators interfacedthe most with their guests, playing the roles of counselor and concierge. They introduce and ease the guests into the environment, connect with them, and are responsible for their scheduling and making appropriate recommendations, as well as guiding them through the enormous array of services. This was an important and stressful position that was not highly paid and experienced high turnover. CR s breathtaking variety of services and its Health and Healing department have differentiated it from many of its competitors. Together with its outstanding customer service and the totality of all that is available under one roof, CR has been able to command rates 25 to 30% higher than almost all other destination spas. Although location has been cited as a major determinant for clients in their decision to choose spa service purchases, CR s history and reputation has attracted a significant number of spa clients who are exposed to the health and healing element as part of the package purchased. While most of CR s competitors have either a high spa component or high health and healing component, an emerging trend was developing in the industry that was threatening to infringe on CR s unique value proposition. A convergence between medical and spa services was observed, as day spas were teaming up with a wide variety of medical

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professionals, and medical professionals were beginning to offer spa treatments. In addition, CR experiences competition from substitute high-priced purchases, such as a home remodel or cruise, as such purchases are made with the same discretionary income a potential customer would spend on the CR experience. Unfortunately, CR was finding both aspects of competition difficult to analyze. Information technology at CR has served solely as a support function for its many operational systems. The IT department has evolved from one manager, one programmer, and one or two tech-support people in 1996, to twenty professionals headed by a corporate IT director. This growth has been due to the role of IT becoming more strategic; however, CR has had difficulty with aligning its current systems with its business strategy and processes and was seeing some turnover in its senior management. CR has a decentralized IT infrastructure with the destination resorts and SpaClubs working independently of each other. Their Computerized Lodging Systems (CLS), a legacy application system written in BASIC from 1986, is central to the infrastructure. CR owns the source code to CLS, making it easily customizable, yet it remains inadequate, despite its sixteen version updates. CLSis responsible for accounting and payroll and has a comprehensive scheduling system and generates utilization reports for its spa and health and healing services, efficiently processes transactions, and acts as the primary source for guest data, to include detailed service transactions; however, much of the guest information is recorded in free-form text and is not easily analyzed by automated software, the guest history prior to 1999 is questionable and incomplete, and waiting lists for popular services and activities are still recorded on paper. The Berkshires location implemented Guestware, a guest preference data collection and incident tracking software application. While it has the potential to derive more value from its customer relationships, it does not integrate or communicate with CLS. Although the manager on duty is supposed to reconcile the Guestware data with the appropriate CLS data, it rarely occurs. In addition, there is no point-ofsale (POS) software in their restaurants or salons, thus, purchases were not itemized or independently tracked. Ultimately,top management and operational

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personnel hoped to realize the value of IT in the organization through business intelligence and decision-support functionalities to answer operational questions, but the current systems are lack these capabilities. The Berkshire location represented CR s best practices and yet fails in capturing the full potential from IT, customer data and relationships. In 2004, CR continued to enjoy a leadership position in the luxury destination resort and spa industry due to its exceptional breadth and depth of offerings, its integrated portfolio of treatments in its spa, fitness, and health and healing departments, and premier guest attention, and was looking forward to additional growth,while maintaining the integrity and character of the CR experience, and sustaining its competitive advantage and industry position in the face of increasing competition within the industry and from substitutes. Management looked to extend the brand by integrating its products, improve business unit performance and customer service, increase their customer knowledge, create loyalty, cross-sell its offerings, and continue to better customize and personalize the CR experience. Although their IT capabilities have advanced, they lacked decision making functionality and system integration and information access remained a challenge. They are considering implementing customer relationship management and business intelligence systems as an answer to their issues.

Identification of Issues Redundancy One issue that CR faces is redundantcommunication and paperwork for its customers. The guest booking process begins with a phone call to the property communicating theirinterest in visiting the location. Three weeks prior to the scheduled stay,the customeris required to call, once again, to speak with the pre-booking agent, to discuss personal background information and the goals of their stay. Once they arrive at the location, they meet with a program coordinator,who consultswith the guests about

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their pre-booked services and requires them to fill out a health questionnaire. The questionnaire asks similar questions to the questions asked by the program coordinator pre-booking agent because of a lack of communication between the booking and program coordinators. Once the guests arrive at their activity, they must again discuss the applicable details of their health history. Paper-Based Scheduling System For popularactivities and services, program coordinators must add guest namesto paper-based waiting lists. The guests must sign up on a paper based system to reserve their space for popular services and activities already included in their stay such as: fitness classes, outdoor sports and lectures. A serious problem with this type of system is the inability to efficiently track these activities and services to get a more complete view of guest preferences and interests. In addition, if lists need to be changed or updated due to unforeseen circumstances or a change in a guest s schedule, they may not represent correct or real-time information. Limited Marketing Strategy CR s principal marketing strategy is word-of-mouth. They accomplish this through direct communicationand selectivepartnerships with high profile companies, such as Williams-Sonoma. This strategy does not allow for CR to take full advantage of peripheral and emerging markets, such as the current interest being shown by the aging male baby boomer segment. Because CR possesses systems that poorly track guest purchases from their salon(a key revenue generating department), such as those that would be captured by a point-of-sale system, they are unable to target market to their customers and thus lose out on an opportunity to profit from additional potential sales.Although CR has instituted a centennial membership program, it is very generic and lacks a formal reward or recognition program.In addition, their websitehas a static format not representative of the CR experience. A more dynamic and innovative marketing strategy may entice potential clients to spend their discretionary income more easily, thereby shortening sales lead times.

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Inadequate IT Systems A serious problem that faces CR is its decentralized IT system. CR lacks a common IT platform within each division in the organization, causing an absence of continuity that makes it difficult for senior management to discuss in any detail,with each other, each location due to the lack of standard designations between properties.Their two IT systems, CLS and Guestware,have served primarily as a support function and not part of an overall IT and business strategy. An integrated and centralized IT system has not been achieved at this time, resulting in a piecemeal patchwork of systems that do not communicate with each other and are incomplete in capturing and leveraging information. In addition,the CLS system is a legacy system and despite its multiple updates, it does not adequately serve the functionality requirements necessary to save it from obsolescence. In addition, there is no POS system in either of the aforementioned systems. The absence of a POS system negatively impacts their beauty salon and restaurants, as they can neither track and manage their inventory with accuracy, nor capture product sale information that would aid them in better marketing and serving their customers needs.The company has compiled a significant amount of data on guest stays; however, they have no useful way of leveraging this data to provide value to their customers or company. Industry and Substitute Competition There is a convergence between medical, health and wellness, and spa services within the industry. This convergence is encroaching on the unique customer value proposition of CR. In addition, they are now competing with other large luxury purchase substitutesthat are not industry specific, such as a trip to Europe or a cruise.CR s management is having a difficult time determining the extent of these trends in competition and how it impacts their business. Labor Issues The program coordinatorposition has a 50% turnover rate, and 20% who train for the position do not complete the program. The program coordinator lacks readily accessible and real time information about the guests. This has a negative effect on the

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transition of the guest from the program coordinator to the other department employees, as applicable information is either unavailable or is simply not passed on.

Analysis Without a point-of-sale system to track and itemize customer sales, CR has no way to accurately track and maintain inventory levels, thereby leading to possible waste and loss of revenue. Recommendations * CR s implementation of an IT-strategy was seen as slower than the market, which could have been done at a faster pace by conducting seminars throughout the organization which could have generated flow of ideas to efficiently capture data right from the top-level management to the low- level frontline managers. *CR s female customers were seen to be more, and males were relatively less. In that case CR canoffer special packages and advertising strategy to attract more male customers. *POS system implementation combined with a lean inventory management model * CR s marketing strategy was poor, so it definitely has scope to leverage it, through internet etc, which can be accomplished by essentially hiring an outside consultant *Additional marketing and premier customer care through post visit follow-up phone calls and token gift sending to thank them for choosing CR and notify them of new products and services of interest *Incorporation of reward programs (Delta Skymiles Card)can also be used to attract new customers and retain existing ones. * In order to evaluate their services CR can conduct more formalized customer feedback sessions, questioners where customers can evaluate the existing services and also give their suggestions and request new customized services. * CRM on whole could be improved at CR by collecting valuable data, and linking it together to main database, to which all the systems of the company were connected. This can help achieve information that is of strategic importance to the company.

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* CR could also improve their website to make it more interactive, user name and password then recommendations for new services and types of previous service with whom performed them also. * The recruitment process of CR needs to focus more on the skills of the prospective employees, their way of thinking to fit with the culture of CR, and special personal skills. * A gap-analysis must be performed prior to implementing a full CRM system which can be useful for: -Identifying the gaps in the organization in terms of knowledge management.

- D e c i d i n g w h i c h o n e and exercising a feasible and appropriate CRM systems, -Monitoring the growth and effectiveness of CRM system implemented.

Top seven CRM software benefits 1. Increased revenue and profits -- Finding the right CRM software that matches companies' strategies and objectives allows management to develop a plan for increasing sales and profits for the long term. CRM software makes sales data and forecast information all immediately accessible and permits decision-makers to accurately study revenue and expenses to decide where to cut costs, decide how much inventory to stock, and determine what discounts may be allowed. 2. Improved capture of sales leads -- When companies generate a large amount of leads, they can then increase their sales and revenues. With an automated workflow system that includes set timers, CRM software enables the sales team to view leads on the computer screen and then see those leads disappear when they become customers. In addition, CRM software creates specific sales territories so that the sales team can manage their areas via CRM generated reports that give complete, concise information. 3. Flexibility through scalability -- Scalability is an especially important factor for expanding small-and medium-sized businesses who wish to develop their customer offerings in the near future, but don't wish to outlay a great deal of money for their

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CRM software solution. Many CRM solutions, like SalesProCRM offer a package that requires no software installation on the user's computer and gives new users the confidence to slowly build their system to match their needs.

Other CRM vendors allow smaller companies to rent licenses and to then have that vendor manage and maintain their CRM solution, which leaves small companies free to perform other day-to-day tasks. Once the business gains more customers and wishes to expand their CRM capabilities, the CRM vendor can offer the company user licenses, which require yearly maintenance fees, but give the company complete autonomy from the CRM vendor. Having a license may give the company a greater sense of security, since vital customer data is now only housed in their IP network.

Some CRM software solutions for small businesses use web-based solutions to share data with other applications such as Microsoft Outlook and ACT! which helps these companies integrate a CRM solution into their business plan, while lessening their administrative time. 4. Improved customer service -- The CRM software should include access to centralized customer data as well as e-mail templates that allows CRM associates to quickly key in on important customer details and communicate effectively with those customers when they need assistance with their services or products. This customer information has been captured from either point-of-sale (POS) systems or through sales and purchase data. 5. Increased cross-selling and up-selling opportunities for existing customers Businesses make money when they keep their customers through loyalty, more than by depleting their resources trying to find new customers. With "A-list" sales leads in hand from call centers, surveys, and other inquires, along with the existing customer data, customer service reps or the sales team can offer expanded services to their customers. 6. Accessible decision-driving information -- When the CRM software solution contains a competitor tracking function, management and the sales team can access these reports to identify trends, measure and forecast sales, track sales processes, and evaluate their own business performance. The CRM software also includes access to important resources such as brochures, white papers, and competitor reports. 7. Improved customer profiling and target marketing -- In order to know customers and serve their needs, the CRM software system must be able to capture

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customer details like present accounts, pending orders, and payment history. The centralized database is also integral for customer profiling and for predicting what services that customer may need in the future. Making customers count and stay The concept of CRM has existed in the business world for a long time, but in recent years CRM use has grown because of better technology access and database integration. Companies should investigate CRM solutions to keep their existing customers and serve their unique needs. If companies focus on delivering exceptional service that is tailored for these customers, then, they will build loyalty, which will in turn build revenue. Finding the right CRM solution is an investment for the company and the company's executives need to wholeheartedly support the new CRM solution. This solution must fit within the company's objectives and staff must be trained, or the CRM solution will go to waste if sales leads aren't captured correctly, or if additional customer windows of the CRM software aren't accessed by the right people in a timely fashion. Although somewhat costly, businesses know that when they lose a customer due to inefficiency or delays, they will lose revenue and potential revenue when that upset customer tells ten or more associates of his or her negative experience. A CRM solution used by a trained staff with the company's goals in mind will promote shorter sales cycles, reduce administrative costs, require less time to track down information, improve reporting and give quicker issue turnaround time, increase sales closing rates, and improve customer retention. As a result, CRM software solutions allow companies to escape revenue plateaus by capturing new customers, retaining existing ones, and by better managing their business.

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References http://www.crm-software-guide.com/benefits-of-crm-software.htm 1) Lynda Applegate, Robert Austin and Warren McFarlan, Corporate Information Systems Strategy and Management: Text and Cases, seventh edition, McGraw-Hill Irwin, 2007. 2) 3) http://www.canyonranch.com/inspiration/mission/ http://www.canyonranch.com/history/

Appendix Porter s Five Forces of Canyon Ranch???? HA SWOT analysis was performed to get a clear picture of CR. Its analysis helps in predicting and directing the possible efficient approaches that the organization can opt, to take a leap from the current state to a more competitive state.

Strengths: *Market leader in the business *Top management is aware and identified the potential strategic benefits of IT. *Guestware application system was considered to be a step above in the ITinfrastructure which proved to be very helpful in gathering customer preference information. *Strong and loyal customer-base. *Large variety of services and offerings compared to competitors. *Mission to not only pamper but positively influence their clients lifestyles outside of the CR experience *Their premier customer service allows them to command rates 25-30% higher than competition

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Weaknesses: *CR as an organization was divided into 2 main divisions that made management of CRM systems and data management challenging and difficult. *Inadequate IT systems *Poor data-mining. *CLS- legacy system was used in organisational functioning which caused difficulties for new application (CRM) to integrate with them *Lack of in-house training for the employees.

Opportunities: *Redesigned business processes that take advantage of IT-enabled systems and assist employees improving their job performance and job satisfaction *To enjoy remaining the Gold Standard in the industry so as to continue to market themselves as the best. *Cross selling and corporate partnerships *Capturing the growing male segment desiring services such as those offered by CR *Leveraging IT by aligning its role with the CR business strategy to enhance the customer experience and drive future profitability Threats: *Increasing competition and duplication of services from rivals and other industries offering similar services *Competitors offering similar services at much lower price. *Analysis of the competition was difficult. *Competition from high priced luxury purchases outside the industry *Competition may be marketing to market segments that are not being captured by current marketing strategy

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