Taste of Frankenmuth: A Town in Michigan Thinks About Word-of-Mouth Referral case study presents how word-of-mouth referral is calculated and what data are needed for its calculation.
Roger Hallowell; Abby Hansen
Harvard Business Review (800029-PDF-ENG)
September 02, 1999
Case questions answered:
- What would be the average lifetime value of customers for the businesses in town?
- How would the equation of calculating word-of-mouth look like?
- What data needs to be collected for calculating the value of word of mouth?
- What steps should be taken to promote growth in tourism?
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Case answers for Taste of Frankenmuth: A Town in Michigan Thinks About Word-of-Mouth Referral
This case solution includes an Excel file with calculations.
Summary – Taste of Frankenmuth: A Town in Michigan Thinks About Word-of-Mouth Referral
Frankenmuth is a town in Michigan state. It is currently the number 1 tourist destination in the state with about 3 million annual visitors every year. Visitors mostly considered Frankenmuth for its rich cultural and historical heritage and its Bavarian Culture. Visitors felt safe in Frankenmuth.
The town’s economy mainly depends on restaurants, lodging facilities, retail shops, hotels, etc. There were few major business families that were major contributors to the economy of the town. They considered customer satisfaction to be the first and foremost priority.
Most of the customers from Frankenmuth were satisfied and they were so happy they recommended other people to visit the place. An average person visited Frankenmuth around 1.73 times in a year. A rapid growth in the businesses of the town is happening and Annette Rummel is confused about how to quantify the value of word of mouth to make an investment plan for the betterment of the town to boost the growth. We need to suggest how we will quantify and enhance the word of mouth marketing of the town.
- Frankenmuth was founded in 1845 by 15 Bavarian Lutheran missionaries. The town soon became famous for its rich cultural and linguistic heritage which not only created a sense of cultural cohesion but also work ethic.
- In 1999 Frankenmuth became number 1 tourist destination in Michigan state with around 3 million visitors annually
- It was rich for its German heritage and most of the restaurants and hotels also provided german architectural touches
- The town’s economy depended mainly upon the restaurants, lodging facility, retail shops, and other tourist attractions
- The tourist economy was growing rapidly because of the reputation of the towns safety, cleanliness, restaurants, attitude of business employees, etc
- It had visitors from around 30 countries, but the major business came from people who lived in the 2-hour drive radius from Frankenmuth
- Advertising expenses for businesses in Frankenmuth were minimal as there was a high word of mouth marketing being done by the satisfied customers
Business Scenario in Frankenmuth
- 3 families play a major role in the businesses in Frankenmuth. They were 2 branches of Zehnder’s family and the other was Bronner family
- Also, they believed that rather than getting a bigger pie of the market share they shall increase the pie itself, so they were very collaborative
- One branch of Zehnder family-owned town’s best-known restaurant – Zehnder’s of Frankenmuth, a motel and a golf club
- The second branch owned Bavarian Inn Restaurant and Bavarian Inn Lodge
- Bronners owned the largest Christmas store in the world and people came there from various places to visit the store
- These 3 businesses contributed $90 million of the total $120 million revenue of the town from all the businesses
Zehnder’s of Frankenmuth
- Zehnder’s of Frankenmuth (ZoF) was the 6th largest independent restaurant in the country
- Their revenues came from 65-75% repeat customers
- They didn’t have adequate data about their repeat business
- ZoF had promotions such as the “Birthday Club”, a free birthday meal, and “Frequent Buyer Program” where a coupon worth 10% discount was given on 10 meals
- They believed in