Rosewood Hotel Case Analysis----Branding Strategy

Han Zhao
MBA 671

Q1: Briefly define the following – Individual Brand Strategy, Corporate Brand Strategy, and
Customer Lifetime Value. Explain the strategic value of these concepts.

Individual Brand Strategy

Individual brand strategy is the marketing strategy of giving each product in a portfolio its own
unique brand name. In this type of branding strategy, each product has its own unique brand
image and identity which can cause advantages. It differentiates from different levels of
customers’ needs. Individual brands can be classified by target markets with different location,
culture, history, and so on. This facilitates the positioning of each product, by allowing a firm to
position its brands differently and to distinguish its products. Comparing to a corporate branding,
individual branding prominently focus on a firm’s product image instead of the firm itself. This
can be a key to marketing that a firm’s different products do not interact with each other. Each
product can create a trademark which may have a chance to be developed to an intangible asset.
Like the relationship between Philip Morris and Marlboro, the best way of reducing negative
impacts of Philip Morris from smoking bans is that not showing up in Marlboro’s
advertisements.

Corporate Brand Strategy

Corporate branding is the practice of using a company's name as a product brand name. Like
when someone says Hershey, you think of chocolates. With a corporate strategy, a corporate
image can be thought of as the associations in the consumer’s memory to the company making
the product or service as a whole. It facilitates new product acceptance because potential buyers
are already familiar with the name. Corporate branding can result in significant economies of
scope since one advertising campaign can be used for several products. As with individual
brands, a corporate brand may evoke a strong association with consumers to a product attribute,
which may cause product-related attributes and benefits. However, this strategy may hinder the
creation of distinct brand images or identities for different products that an overarching corporate
brand reduces the ability to position a brand with an individual identity, and may conceal
different products' unique characteristics. Corporate brand strategy usually requires a high
quality standard that contains innovative features. It is an attempt to use corporate brand equity
to create product brand recognition.

Customer Lifetime Value

Customer lifetime value in marketing is the net present value of the cash flows that you will
realize on the average customer during a given number of years. The use of customer lifetime
value as a marketing metric tends to place greater emphasis on customer service and long-term
customer satisfaction, rather than on maximizing short-term sales. Generally, CLV is typically
used to identify profitable customers and to develop strategies to target customers. In the
Rosewood Case, the CLV presents how much money Rosewood can invest to retain an existing
customer.
Q2: Why is Rosewood considering a new brand strategy?

Rosewood is considering a new brand strategy, because the individual branding strategy is not
responding their objectives any more. For nearly 25 years Rosewood had built a global
reputation for its ability to enhance a property’s value by creating a unique experience, with a
small ultra-luxury style that differentiated it from other chain-like luxury competitors. However,
guests are not making the connection between individual properties and others Rosewood Hotels
& Resorts properties. Rosewood brand was muted, not very well known but it was not clear what
is the best corporate branding strategy without destroying the value of each individually branded
hotel and losing a customer.
Competing with other hotel properties, the Rosewood has only 5% of cross-selling rates, which
is not only one of the lowest in the industry of individual branded hotels (5%-10%) but also
compare with corporate branded hotels. (10%-15%). If Rosewood aims to remain competitive,
they will have to grow. The individual strategy limits Rosewood only a subset of the luxury
market with saying that “those sophisticated customers who value the distinctive, exclusive
‘collection’ hotel”. Whereas research suggested that the vast majority customers within the
luxury hotel market valued the corporate-branded hotel. Therefore the current brand positioning
substantially limits Rosewood’s market. Hence, a new branding strategy proposing an increased
customer profitability and lifetime value is needed.
Rosewood Hotel & Resorts is considering a new brand strategy mainly because of the
following reasons:-Poor brand awareness due to individually branded hotels
-Difficulty competing with other luxury hotel chains that used a consistent brand among all
their offerings
-Increasing competition in the “luxury hotel” segment was complicating the positioning of
Rosewood hotel collection
-The “individual brand” strategy they used failed to create customers that seek the
Rosewood properties in more than one location (only 5% of guests had stayed in more than
one rosewood property vs 10% in corporate branded luxury chains)
-They theorized that the customer lifetime value using their current strategy (“individual
brand”) was lower than if they used a corporate branding strategy

Even though there was some reasons to keep their current branding strategy such as the
fact that under the collection branding each hotel has its own brand equity and in the case
of problems in one of the hotels this wouldn’t harm the reputation of the others, the
prospect of growing their average number of visits per guest per year from 1.2 to 1.3
through the use of a corporate branding strategy was appealing enough to seriously
consider changing.

Q3: With respect to the Rosewood situation, what are the pros and cons of moving from an
individual brand strategy to a corporate brand strategy?

Pros Cons
Increasing brand recognition Additional marketing investment
Increasing sales Loss of the “sense of lace” and “one-of-a-
 kind”.
Increasing cross-selling rate and Alienating certain existing guests.
multiproperty return visit rate

To move into a corporate brand strategy, it helps increase guests awareness and knowledge about
the Rosewood brand name. With the improvement of being recognized by customers, the number
of other properties visited by one guest will grow. A known corporate brand name will
encourage hotel guests to stay at some of other Rosewood hotels. “Rosewood’s new president
and CEO, John Scott is considering a new strategy to boost the company’s growth.” To generate
a growth is the initial purpose of Rosewood, but a current individual brand strategy only provide
5% cross-selling rate. Comparatively, a corporate brand strategy will increase the number of
guests’ visits and retained guests which directly affects Rosewood’s sales revenues that matches
the goal of a profit company. Not only will increase in the sales, a corporate branding builds up
the company’s image. 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. Rosewood wants to compete with
the corporate and individual branded luxury hotels. As individual branded company, is hard to
compete with the corporate brands which benefit from cross-property usage.
While there are numerous benefits of moving to a corporate branding, strategy may hinder the
creation of distinct brand images or identities for different products. A corporate strategy could
unintentionally devalue the uniqueness of each hotel if the corporate brand overpowers current
individuality. Rosewood’s new branding may lose the identity of a unique, one-of-a-kind,
experience that is highly differentiated from other corporate companies. To keep the brand
promised, corporate brand strategy requires brand based performance consistency across
portfolio. It will be hard to ensure that each hotel that Rosewood owns keeps reflecting the local
culture. As time goes by, Rosewood will face a change of overall company’s culture. Also,
Incorporating as Rosewood properties may alienate some existing investor relationships such as
those who reside at the Carlyle in New York, who’ve already shown reluctance to the new
branding strategy.
Moreover, a marketing and operational investment of 1 million per year will be spent to
implement the corporate branding identity. The CEO has to make sure if the profit made by the
change will cover the extra cost or not.

Q4: With respect to the Rosewood situation, discuss the impact of corporate branding on
customer lifetime value. (See Appendix attached)

Ultimately, Scott the CEO of Rosewood needs to convince the company that greater Customer
Lifetime Value will outweigh the marketing and operational expenditure associated with
promoting a new branding.
Looking at the anticipated number of making a change to corporate branding, the number of
repeat guests will grow up from 19,169 to 24,919, and the number of multi-property stay guests
will increase from 5,750 to 11,500 which is about to double. The retention rate also rises up
from 16.67% to 21.67% with the new strategic change.
However, there is an average increase of $8.70 per guest due to new marketing expense which
offsets the gross profit. Although extra spending will be made by change, the expected cash flow
from customer is still higher than the cash flow without change. By calculating the net present
value of customer lifetime value with and without implementing corporate strategy, it can be
found that in 6 years, the total NPV of CLTV with change exceed the total NPV of CLTV
without change of an amount of $8,909,750. As we know, if NPV is positive the acquisition, the
spending is a wise investment. The more the amount exceeds the more profitable outcome it will
be. Then we conclude that with corporate branding, Rosewood will gain $8,909,750 more than
staying the individual branding. The corporate brand strategy will positively affects Rosewood’s
revenue and will also lead to a higher level of brand recognition.
Despite the revenue benefit, the company should also realize that the anticipated number of guest
visits, retention rate, discount rate and growth rate may adjust due to many reasons, like
economic depression. This is to say, there are many risks of making such a big change of
branding strategy.

Q5: Assuming the individual hotel managers are against the corporate brand strategy initiative,
how would you gain their commitment to the change should it be made?

In the case, managers feel threatened in their autonomy to manage the properties, so they are
more inclined to promote just their own individual hotel brands, particularly if they have a strong
brand. By gain their commitment to accept new strategy change, there are two main things have
to be considered. To be straight forward, money and rights are benefits expected by managers. I
would like to show them the analysis of CLTV which interprets that promoting new strategy
generates greater revenues. This calculation will be a compelling financial argument to convince
managers. The company’s marketing department should provide a future plan about the
implementation of corporate brand strategy. The CEO’s commitment to managers and employees
is also very important. Rosewood has to face a big problem of rebuilding an emotional
connection with all Rosewood properties. It also needs to create a healthy and energetic
atmosphere of the company. In this case, individual managers will not feel to be threatened, and
they may turn to be actively support the new strategy.
Instead of moving directly to the new branding strategy, I would recommend to merge the
Rosewood brand with its properties’ identities smoothly by a long-term programming. This is a
necessary concern for those managers or resistances who have a pertinacious and conservative
bigotry against the new strategy. It also helps to keep each property’s existing clients. By adding
a Rosewood brand name before each property’s name, like the Hilton Garden Inn, Rosewood can
think of an opposite way by adding Rosewood after a property’s name, like The Mansion on
Turtle Creek, Rosewood. Thus, Rosewood will achieve the goals of keeping properties’ identities
and increasing Rosewood brand awareness, while using a corporate brand. For those existing
guests, they will still choose to stay in The Mansion on Turtle Creek, and now they know the
hotel is under a Rosewood brand name.
In a word, the CEO and his marketing team have to convert a long-term benefit from new
strategy to an immediate benefit that can be grasped by individual managers.