CASE 3-6 Club Med and the International Consumer It was still raining in New York on May 31, 2014 when Claire Moreau, CMO (chief marketing officer) of Club Med Sales, Inc. (C.M.S.), returned to her office. She sat and went over in her mind the events of the meeting she had just attended. When the bookings for summer 2014 of C.M.S. had gone 4 percent below those of the previous summer, a meeting with C.M.S.'s advertising agency had been called to examine the situation. The advertising agency's answer to the dip in sales was to e-mail a $200 discount coupon for September vacations to people who had been to Club Med in the recent past. Club Med's immediate reaction had been, "Was a discount suitable for the Club Med cus- tomer?" It became clear during the meeting that no specific defini- tion of a Club Med customer existed. No formal market research had yet been done on the American consumer. Did Club Med need to do this research? If so, what kind should be done, and where? What could be done in the short term to help boost sales? Were there other more important issues that should be addressed? HISTORY From its inception as a nonprofit venture in 1950, Club Mditer- rane, C.M.S.'s parent, was a unique enterprise. Shelter for vaca- tioners was furnished in a way never before seen in France. Gilbert Trigano, part-owner of a family tent-making business, rented the required tents to Club Med with no down payment. In 1954, Gilbert Trigano formally joined Club Mditerrane and turned it into a profit-making business. The original concept of the straw hut village was born. It was meant to create a Polynesian, "back-to-nature" atmosphere. The huts were bare of any luxury, and the showers were communal. Outdoor activities were the main focus of daily life. From this type of village came the image that Exhibit 1 Financial Statements, Club Mditerrane S.A. (Millions of Euros) Source: Club Med Annual Report, 2013. Gross income Club Mditerrane had represented to the present day-sun, sea, and sport. Club Mditerrane expanded quickly, often adding one or two resorts per year. In 1956, the first ski resort opened in Switzerland. Club Mditerrane moved into what would become known as the American zone in 1968. However, Europe continued to be its main target. By 2013, Club Med was represented in 40 countries by 66 villages. Financially, Club Mditerrane had been profitable through 2012, but profits took a dip in 2013. (See Exhibit 1.) However, an indication of Club Mditerrane's success was that it had become a household word in France, where it was known simply as "le Club." The Club Med concept was unique. Any package vacation that Club Mditerrane offered had the same basics: a prepaid, fixed- price holiday including airfare, meals (with unlimited wine and beer), sports, sports instruction, and other activities such as a dis- cothque, arts and crafts, classical concerts, and cabaret shows at night. Sports were varied and included pastimes such as archery, snorkeling, deep-sea diving, horseback riding, and yoga, as well as standard favorites like swimming, tennis, sailing, golf, and many others. Vacationers could choose either to take part or not in these activities. The villages also contained other facilities such as a shop, car rental, and an excursions office, which were all within walking distance. Club Med was famous for selecting the best avail- able beach area in every country where it had summer villages. A no-hassle, relaxed atmosphere was created because Club Mditerrane arranged meals and leisure time. Each village staff member (called Gentil Organisateur or GO) had responsibilities in an area such as applied arts, sports, excursions, food, bar, or receptions. There were about 80-100 of these organizers per vil- lage. They would move to a different village every six months. The GOs were encouraged to mix with the vacationers (called GMs 2012 US $1 = 0.778 2013 US $1 = 0.894 1,459 1,408 Gross margins 880 868 62.1% 62.0% Earnings 2 (9) Consolidated EPS 0.02 (0.36) Hotel days spent in zone (winter and summer) in 000s Americas 1,353 1,388 All other zones 6,623 6,367 Average bed occupancy rate Americas 67.8% 66.2% Europe/Africa 70.1% 72.2% Asia Total 64.8% 66.7% 68.7% 69.8% Exhibit 4 Comparative Direct Costs per Completed Response* DATA COLLECTION METHOD 1. Mail survey (costs depend on return rate, incentives, and follow-up procedure) 2. Internet survey (site access, mailing list, follow-up) 3. Telephone interviews APPROXIMATE COST $10-18 $10-18 a. 7-minute interview with head of household in metropolitan area, depending on market chosen $7-15 b. 15-minute interview with small segment of national population from central station $25-35 4. Personal interviews a. 10-minute personal interview in middle-class suburban area (2 callbacks and 10 percent validation) $30-40 b. 40- to 60-minute interview of national probability sample (3 callbacks and 10 percent validation) $50-60 c. Executive (VIP) interviews (1-2 hours) d. One focus group of 15 people (includes analysis and a report on the session) "Including travel and telephone charges, interviewer compensation, training, and direct supervision expenses. $250 $3,000-4,000 When asked for his opinion about the discount idea, Francois said: The advertisements you just showed me, used mostly in the winter, appear to be targeted at an upscale customer. If Club Med is attracting that kind of person, how will they react to a discount on the same holiday they paid full price for last year? I'd worry that they might wonder just who will start coming to Club Med. We might lose this upscale customer and attract another kind. Is that what we want? Furthermore, Claire felt that the present advertising campaign was not aggressive enough and would not attract sales in the short term. Also, September was the end of the season, and Claire ques- tioned waiting so long before attempting to remedy such an imme- diate problem. The agency indicated that it felt Club Med was overreacting and that business would pick up. "Don't worry; our plan will work," the agency replied. It also suggested that bookings would increase if the agency sweetened the sales opportunities for the travel agents. Claire then tested this assumption on the agency personnel: You seem sure that the Club Med customer will rush to the villages because of a $200 discount. But, who is the Club Med customer? Taken aback, the agency admitted that, without any recent for- mal market research, it could not accurately describe the Club Med customer. This answer strengthened Francois's resolve to examine the discount suggestion more closely. She remarked that it would be a good idea to do some market research. The agency agreed. After the meeting, Claire and Francois talked over the poten- tial for market research. Claire encouraged Francois to develop a research proposal, and also to offer other suggestions that would address the problem. Both agreed that, in the short run, it was Preliminary enquiries by Francois the next day provided a list of the different types of research and their associated costs. (See Exhibit 4.) Francois returned to his hotel and thought through the situa- tion. There were several important questions. What should Club Med do in the short term to improve its bookings? Was a market research study necessary, and, if so, what kind and where? What did they need to know, and what will they do with the results when they get them? Francois was aware that Club Med Sales had not done formal market research before and that, for results to be used effectively, the project would have to be carefully implemented in the organization. QUESTIONS 1. Describe the Club Med experience for the international consumer. What are the elements of Club Med's unique offering that cross cultural boundaries? 2. Do you think Club Med should perform a market research study for American consumers? If so, come up with a list of questions to ask or issues to explore. What would you like to know, and how would you ask the right questions to get that information? 3. If you answered "Yes" to a research study, what kind of methods (from those listed in Exhibit 4) do you think would be effective in performing the research? 4. Should Club Med offer the $200 Internet "discount cou- pon" to its past customers for the upcoming booking sea- son? What effect do you think it would have? Copyright 1987 by IMD International Institute for Management Development, Lausanne, Switzerland (www.imd.ch). No part of this publication may be reproduced, Provide an overview of the case study with the pertinent facts about the company, the challenges the company is facing, and what the company did to resolve the challenges. List the questions associated with the case study, with your answers below the questions. Write a summary of your findings as a conclusion.