Entrepreneurship and Innovation: Loyalty App for Sheraton Hotel

This document discusses the business venture of Loyalty App for Sheraton Hotel, its management, legal structure, marketing strategy, competitor analysis, financial analysis, risks and challenges. The Loyalty App intends to enhance customer service and loyalty towards the hotel service at Sheraton by providing rational service to the customer and reward them loyalty points.

Entrepreneurship and Innovation
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Table of Contents
Executive Summary.........................................................................................................................4
Introduction......................................................................................................................................5
Description of the Business Venture of Loyalty..............................................................................5
Management....................................................................................................................................6
Management for Operation..........................................................................................................6
Overall Legal Structure................................................................................................................7
Marketing.........................................................................................................................................8
The Market that is Being Targeted..............................................................................................8
The Strategy for Communication................................................................................................9
Competitor Analysis........................................................................................................................9
New Entrant Threat for Loyalty App...........................................................................................9
Competitive Rivalry of Loyalty App.........................................................................................10
Financial Analysis.........................................................................................................................10
Risk and Challenges......................................................................................................................11
Ineffective Marketing of the App..............................................................................................11
The choice of Mobile Platform..................................................................................................12
Reference List................................................................................................................................13
Appendices....................................................................................................................................15
Appendix 1.................................................................................................................................15
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Executive Summary
The retention of the customers in the hotel industry has been an effective challenge. However,
the new mobile application, ‘Loyalty’ intends to enhance the customer service and loyalty
towards the hotel service at Sheraton. The loyalty app intends to provide rational service to the
customer and reward them loyalty points. This will help them to get an additional discount in the
future and benefits during their stay at the hotel. The company will choose the structure of the
private limited company and effectively manage the marketing between the existing customer
and new potential for the Hotel. The overall return on the investment will be efficient for the
investors as they will get an efficient return on the invested capital. The company will choose
crowdfunding of $ 100,000 for attaining success for the venture. The return on the investment
will be 67 per cent for the venture.
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Introduction
Growth of an enterprise is important in a rational term to improve its market performance and the
overall profitability. The growth is achievable with the effective use of innovation and
entrepreneurship within an organization. Many of the companies are trying to improve the
service and the product range by diversifying the total number with the help of extension service.
Sheraton is one of the finest hotels that is renowned around the world because of its extensive
customer service and dedication towards perfection. It has been determined that the customers
have extensive relationships with the Hotel and the company wants to further enhance the
experience by introducing a new mobile application to improve the loyalty of the existing
customers and enhance their stay in different properties of the company.
The new app will be called, ‘Loyalty’ and it intends to improve the overall experience of the
customer towards the services that are being provided by Sheraton. An effective description of
the new business venture for the new application Loyalty will be discussed, followed by the
structure that will be chosen for the management. On the other hand, it will also take into
consideration of the marketing technique that will be used for the application and how it will
effectively compete with the various other application that is used for enhancing customer
service. An effective understanding will also be done in respect to the financial aspect, the choice
funding that will be chosen for the venture and finally, the Return on Investment for the investors
of the venture.
Description of the Business Venture of Loyalty
In respect of all the industries that are blooming around the globe, it has been determined that the
Hospitality sector is reaching new heights in the international market. The overall growth in
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various hotels has been seen around the world. However, it has been observed that there is an
effective failure in retaining the customers and improving the services towards the existing
customers of a hotel. The competition is rationally huge for the hotels that are providing services
in the premium grade. Thus, to have a competitive advantage, the Sheraton Hotel intends to
launch a loyalty application, which will reward the existing customers of the hotel (Hill and
Alexander, 2017). Retaining the existing customers of a company, there are a better relation and
an increase in the sales of the company product. The application will also provide ease payment
option by simply using the QR code scanner and further provide lucrative deals and offers to the
loyal members during their stay.
The industry average for selling to a new customer range between five to twenty per cent in total.
However, the company able to sell to an existing customer is around seventy per cent in total.
However, the loyalty of a customer is earned and the hotel intends to retain it with their mobile
application. The application tends to provide an additional discount and added benefits to the
members of the hotel. This creates a sense of belonging and comfort in the hotel premise
(Cossío-Silva et al., 2016). The membership will be divided into three levels, which will
distribute the benefits in three aspects. Additional discount to the existing customers enhances
their stay and creates a positive attitude towards the Hotel Service. The overall factor of the
application will improve the customer relation of the hotel and increase the profitability of the
Hotel.
Management
Management for Operation
It has been determined that the operation a company needs to be maintained in an effective
manner to enhance the quality of customer service and improve the reputation of the Hotel. It has
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been determined that the app will have a different level of management for proper management.
There will four app developers for the company and the founder of the application, who was the
head of the information technology will be considered as the only shareholder of the company.
The founder has the vision to improve the performance of the Hotel with proper loyalty rewards
the existing customers and provide them will offers and deals for enhancing the retention of
customers.
Overall Legal Structure
The use of an effective legal structure separates the company owner from the company, which is
also known as an entity. It has been determined that various options are available for a company
during its startup to improve its overall effectiveness in the near future. The company has various
form of structure that can be implemented, which are a sole proprietorship, Limited liability
Company, Partnership Company or a Private Limited company. The right choice of a legal
structure helps the company to address and get a tax advantage. It has been determined that the
legal structure helps a company to prepare for the future and attain its prime objective. The legal
structure of the Loyalty app will be a private limited company as it will benefit the company in a
various way (Steingold and Steingold, 2019).
At first, the company will be able to increase its overall capital requirement, there are not many
issues related to the documentation process and will have effective protection to the owner of the
company. The expenses are quite low for a private company, which intends to improve the
loyalty of the customers. The company will register at the ASIC and get the business number
from the ABN, by incurring a cost of AUD $ 550 and $ 100 respectively. The company will be
liable to pay Goods and service tax when the turnover for the financial year cross seventy five
thousand dollars.
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Marketing
To improve the awareness of the application, an effective understanding of the target market and
the commutation for implementing strategy needs to be effective enough for a company. The
app, ‘Loyalty’ will be able to increase customer retention and improve the customer service by
the use of rational marketing strategy.
The Market that is Being Targeted
The target market is an important factor in marketing. The loyalty program has seen an increase
over the last couple of years, where many hotels have implemented it to enhance customer
relationships around the globe. At first, the customers who are visiting the hotel will be targeted
and the additional discount will be provided to the customers who are loyal and has been using
the hotel service for a long time. The age group that will be targeted is twenty one to sixty five
for the loyalty app. The loyalty card will at first target the UK and the USA market, followed by
the Australian and the Asian market. The rewards at the initial days will be quite large to attain
effective growth in less time (Butscher, 2017). The program will also have referral feature,
which will further elevate the use of the application. Due to the increase in the use of
smartphones, the loyalty program by the different hotel has been growing at an enormous level.
Country Market Size
UK 21 per cent
USA 41 per cent
Table. 1: Target Market for Loyalty App
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The Strategy for Communication
The communication is another major factor that is to be addressed in a proper manner. The use of
social media will be the most effective tool for the hotel to inform and communicate with the
existing and the new potential customers about the new loyalty program that the hotel intends to
provide. Various social media websites will be used for this purpose, which are Twitter,
Facebook and Instagram. Furthermore, the hotel will also provide the application demo at the
hotel to the customers who are visiting for the service (Melewar et al., 2017). There will be
significant use of the google search ads, which will enhance the filter option for the loyalty
program towards the Loyalty App.
Competitor Analysis
A rational understanding of the competitors is quite important as it helps in implementing a
robust strategy for improving the performance of the Loyalty app. In order to understand the
competitors, Porter’s five force has been used effectively to understand the different factors that
would affect the performance of the app in the competitive market of improving customer
service (Carraher, 2018). The factors of competitors are the threat of the new entrant,
substitutional treat, power of the supplier, power of the buyer and rivalry of the competitors
which has been stated in Appendix 1. However, two of the most significant factors, which are
new entry threat and the rivalry competition will be analyzed in this section.
New Entrant Threat for Loyalty App
As stated earlier, every premium hotel is implementing an effective method to retain customer
loyalty by the use of the application which will reward them. The global market has seen a
growth of 42 per cent every year in the market of retaining customer loyalty. There are a large
number of mobile apps, which is either owned by a hotel or third party application for improving
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the loyalty of the customer to the hotel service. The new players are implementing a new and
creative way to attract customer to their service. However, with the use of a diverse factor, the
Loyalty app will maintain its effective growth for rewarding the existing customer with lucrative
offers and discount on their visit to the hotel (Burns and Dewhurst, 2016).
Competitive Rivalry of Loyalty App
The rivalry among the major hotels is inevitable in the hospitality industry as every single one of
them tends to increase their market share in respect to the growing competition. The membership
program has seen an increase in different hotels, which provides different variety of offers to the
customers who visit the hotel frequently and selecting individuals randomly to provide a large
offer for a stipulated time (Grundy, 2006). Some of the rival apps are shopkick, shopbeacon,
leader club and Hiltons reward app. This is the major competitors for the loyalty app, which will
give effective competition. However, as the app is a part of a recognized hotel, which has
worldwide brand recognition, it will be able to set itself out from the competitors and grow
tremendously.
Financial Analysis
For the venture of the Loyalty App, there is a various available option that the company can
choose for meeting its financial need. Some of the most effective ways of financing the venture
are Crowdfunding, IP, venture capital, equity and Angel investors (Mathuva, 2015). The
company will choose crowdfunding to fund the operation cost for the first six months, which is
AUD 100,000. This will target the first fifty customers of the Hotel and intends to earn 3,340
from every customer who uses the application. This included dining and staying at the hotel for a
week.
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Table. 2: Crowdfunding of Loyalty App
Table 2, states the initial cost for the app will be AUD 100,000 during its initial stage of six
months. The estimated income is $ 3,340 from individuals who will be using the membership
offers from the Loyalty App. The total income for fifty members will be $ 167, 000 (3340*50).
This shows an interesting and lucrative investing opportunity for the investors of the app. At first
the Return on the Investment for the first six month will be 67 per cent (167,000-
100,000/100,000) from the invested capital. This shows a derivatively interesting return on the
overall invested capital for the venture in the Loyalty app.
Risk and Challenges
Ineffective Marketing of the App
The marketing of loyalty app plays an important role in attaining growth over time. It has been
determined many application built for enhancing the customer services fails due to poor
marketing and inefficiency to maintain the quality of the product. Due to lack of proper
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6 Months cost for the Loyalty App The Estimated Cost
The Estimated cost for Loyalty App
(The cost include, operation cost such as
designing, coding and marketing the app)
$ 100,000.00
TOTAL $ 1,000,000.00

Marketing, they fail to determine the important aspect that will help in attaining success for the
app (Haider et al., 2019).
The choice of Mobile Platform
The available platform for the ‘Loyalty’ app is divided into three parts, which include windows,
IOS and android. In many cases, the app developers fail to provide the same level of experience
in a different platform, which creates an inequality of the service and the rewards for the
members (Hofacker et al., 2016).
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Reference List
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Butscher, S.A., 2017. The loyalty programme database. In Customer Loyalty Programmes and
Clubs (pp. 126-133). Routledge.
Carraher, S.M., 2018. An examination of an instrument to measure Porter’s Five Forces Model.
In International Journal of Arts & Sciences Conference at Harvard University.
Cossío-Silva, F.J., Revilla-Camacho, M.Á., Vega-Vázquez, M. and Palacios-Florencio, B., 2016.
Value co-creation and customer loyalty. Journal of Business Research, 69(5), pp.1621-1625.
Grundy, T., 2006. Rethinking and reinventing Michael Porter's five forces model. Strategic
Change, 15(5), pp.213-229.
Haider, A.A., Zafar, A., Khalid, A., Majid, A., Abdullah, M.A. and Sarwar, M.B., 2019.
Marketing Management.
Hill, N. and Alexander, J., 2017. The handbook of customer satisfaction and loyalty
measurement. Routledge.
Hofacker, C.F., De Ruyter, K., Lurie, N.H., Manchanda, P. and Donaldson, J., 2016.
Gamification and mobile marketing effectiveness. Journal of Interactive Marketing, 34, pp.25-
36.
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Mathuva, D., 2015. The Influence of working capital management components on corporate
profitability.
Melewar, T.C., Foroudi, P., Gupta, S., Kitchen, P.J. and Foroudi, M.M., 2017. Integrating
identity, strategy and communications for trust, loyalty and commitment. European Journal of
Marketing, 51(3), pp.572-604.
Steingold, F.S. and Steingold, D., 2019. Legal guide for starting & running a small business.
Nolo.
Trade Brains, 2019. Five forces of competitive analysis- What you need to Learn? Supplier’s
Power. [Online] available at: https://tradebrains.in/porters-five-forces-competitive-analysis/
[Accessed On: 25th September, 2019]
Appendices
Appendix 1
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Figure. 1: Porter’s Five Force
(Source: Trade Brains, 2019)
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