Club Mediterranee Case Study

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Impact of Increased Service Quality

Satisfied customers are a key factor in the success or demise of a business. For Club Med, satisfied customers are an important marketing tool as they promote word of mouth marketing and so consistently improving service quality is essential to Club Meds growth. An industry rule-of-thumb indicates that people returning from a vacation will tell an average of ten other people about their experiences, should these experiences be negative, Club Med risks losing ten streams of potential profit. As net income per guest equates to $48.00 on average, Club Med will lose $480.00 ($48.00 x 10) of potential profit per guest should they leave with a negative image of their vacation. As indicated by the 25% repeat purchase percentage, there is still a lot of room for improvement for Club Med. Some opportunities for improvement are highlighted in Exhibit 12, approximately 238 consumers reported rooms being uncomfortable, 41 consumers reported theft, 190 thought the food was average/poor, and 111 thought bar drinks were overpriced/weak. With the emergence of new competition, boasting about their deluxe rooms, free drinks, and privacy, Club Med needs to focus on upping its service quality in these areas to retain its customers.

Areas of Concern and Recommendations

Some major concerns Club Med faces is of Employee (GO) turnover, mass-market appeal, and Spartan room accommodations with lack of flexibility. Although there is great demand to work for Club Med, 920 employees (2000 x 46%) do not make it past their first season, that puts a drain on company resources as they need to spend more capital training their replacements. To reduce employee turnover, Club Med should offer its employees potential for advancement, from being a GO (gentil organisateaur) to a Village Chief. This will give employees (GOs) something to look forward to instead of being in a stagnant position for the rest of their employment. Club Med has a strong bargaining position in negotiating wages, and although this helps the company reduce its fixed costs, low wages provide little incentive for an employee to stay with the company and even less incentive to work hard. With competition on the rise, GOs will have greater choice in choosing their pay rate. As for Club Med having a mass-marketing scheme, this marketing technique is a dual edged sword. Although Club Med is able to attract a large consumer base because of its broad market appeal it risks losing many of its customers to other specialized organizations. Club Med has an image of offering vacation packages to the budget conscious consumer, with its Spartan rooms that lack basic amenities, Jacques Giraud (CEO of Club Med) would be hard pressed to attract a luxury consumer. Therefore, I would recommend Giraurd to diversify Club Meds product mix to offer premium vacation packages to the luxury consumer, enabling the company to reap profits from all target segments. Lastly, although Club Med focuses on building social interaction between its consumers by only offering single beds and assigning roommates. I would recommend that since (according to Exhibit 9) 48% of Club Meds demographic is married and 40% has children; I would suggest an option to upgrade rooms at an extra cost to allow for double beds or family suites.

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Exhibit 9[pic 5][pic 6]

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