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In my opinion, Paradise Travel should choose 2) aggressive price reduction to previous members and 4) exclusivity for Paradise Partner hotel discounts for their initiatives. With the risk of liquidity and failure to meet certain debt covenants, generating quick cash and control the expense is the most important considerations to choose strategy.
It is more cost effective and efficient to target “previous members” to renew the subscriptions than “new member”. Renewal members were much more profitable than new members. In terms of expense, the COGS associated with a new member is higher than annual COGS associated with renewal. For example, a first-time Premier member cost PT about $120 per year, versus $ 60 for a renewal Premier customer. On the other hand, PT is efficient to broadcast the discount information precisely to attract previous members to renew. PT has the contact information of previous members in the database. Revenue (cash) can quickly be generated when the meaningful discount attracts previous members to renew.
Exclusivity for Paradise Partner hotel discounts is another strategy PT can generate quick revenue. Currently, approximately 25% of Paradise Travel’s member used the PT travel agency, while the remaining 75% used their own personal travel agent or booked directly with hotel. PT gains no agency fees from these 75% member. It would generate significant revenue if PT can transfer these 75% member to use PT agency. However, these 75% members who did not use the PT travel agency were STILL able to receive Paradise Partner hotel discounts if PT did not change current policy to the exclusive policy. Therefore, the exclusivity for Paradise Partner hotel discounts is a necessary strategy to increase the revenue of PT’s agency. Although some of existing members could react against the policy, I believe most of members would change to PT travel agency in order to receive the discount benefit. On the other hand, I think it make sense for exclusive...
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