Marketing Cruises in Times of Recession - Dissertation Example

Dissertation Research Proposal Marketing Cruises in Times of Recession The cruise industry is one of the most lucrative industries, which have altered drastically over the years due to changing consumer trend, demand, and external environment. This has greatly impacted cruise companies spanning from North America to Europe. In the UK especially, the passenger population has declined and the industry is hard hit by the current recession. Consumer psychology plays a vital role in the tourism sector especially due to globalization and proliferation of the internet. For this reason, the following study proposes to study how a new approach to marketing could revive the cruise line customers by understanding their behavior, motivation and preferences. The study shall adopt a qualitative approach with survey and focus group discussion as the basis for studying consumers, and theoretical frameworks for interpreting them. Key words: cruise industry, marketing, consumer behavior 1. Introduction 1.1 Background Even though the recession started to hit the economy some time ago, the cruise industry still has an outstanding orderbook of several billions of dollars worth of ships which are due for delivery up until 2012. As soon as this supply is hitting the market combined with deteriorating worldwide consumers, the cruise lines will be desperate to fill there ships at any price. Price wars would further reduce the profit margins and may even make the cruise companies run into losses. In order to conduct an effective marketing strategy in these unforeseeable times the dissertation will need to evaluate passenger psychology and buying behaviour to get an insight into the marketing strategies adopted by cruise lines today. Furthermore there will be a research concerning possible gaps in the marketing strategies as well as an analysis looking for the comparability of the cruise industry to other tourism industries when it comes to marketing mix, customer value and sustainable tourism. This leads the researcher to a conclusive finding of how to market cruises in times of recession. 1.2 Rationale for research While the American cruise industry has had a head start, the European Cruise Council (ECC) claims that Europe recently has become the centre of gravity for the cruise industry of the world with a record of 4 million travelers. The United Kingdom has one of the largest sources of market for European cruises which has a share of 1.3 million passengers for the year 2007 (ETN, 2008). However, with the setting in of global recession, the UK cruise industry has also been hard hit with a fall in travelers overseas as compared to other countries in Europe. Companies which deal with cruise tours have been hard hit with no option but to continue with scheduled tours. Industrialists consider these situations grave, and are of the view that they should shut down supply by canceling bookings. Others, owners of cruise lines such as Carnival, Seatrade, and MSC Cruises especially, are of the view that companies need to continue in order to survive the meltdown (holidayinsider.com, 2009). When the business environment changes, companies should change their approach to management and marketing. This is a tricky business when considering the structure and operation of cruise businesses. By and large the cruise ship industry has been one of the fastest growing industries with a brief history of growth stemming from during 1970s in the North America, even though its origin had been European. The style of service delivery, product, management and plans for tours are different from the usual customer service oriented industries. This is because the nature of the cruise industry is perishable; that is once the cruise is underway the value of the room booked ends. Cruise lines depend entirely on their passengers to generate revenue as well as operation. It is highly demand elastic which makes it one of the most volatile industries in the world. Companies, have to spend months to market and promote their cruise tours in order to secure maximum capacity on the ship. But when the economic climate is uncertain they are hard hit with a decline in number of passengers, loss of revenue, and some even shut down (ETN, 2009). Due to this customer-driven nature of cruise companies, its marketing approach and strategies should focus on customers and their satisfaction. 1.3 Aims and Objectives The researcher proposes a study, which involves the understanding of cruise customers, and how cruise companies can tailor their products and services to meet their customer requirements. The researcher aims to achieve the following objectives: 1. To categorize, study and understand cruise customers including consumer psychology, preferences, motivation and buying behaviors. 2. To understand how cruise companies go about marketing their products and services. 3. To find the gaps which exist between customers and companies including market positioning, niche and delivering customer value 4. To outline a generic marketing strategy for cruise companies to secure future customers The purpose of the above objectives is to communicate to cruise companies so that they can improve on their current deteriorating situation by capitalizing on alternative marketing approaches. 1.4 Justification for the project With an oversupply of the ships and the simultaneous fall in demand, in industry is in the grip of a crisis. It is only prudent to change the marketing strategy when the business environment changes. Cruise companies spend months of preparation, marketing cabins on the cruise ship through extensive campaigns and booking systems in order to secure maximum passenger capacity before they endeavor on tours. Cruise companies need to overhaul their strategies and this requires an insight into the consumer behaviour as well as the current marketing strategy pursued by the cruise companies. This would enable to sustain the industry through the recession. This is the basis for the researchers proposed study. 1.5 Research Questions By using an interpretative approach to research, the researcher proposes the following hypothesis questions as guides. The researcher considers the interpretative methodology best in this case because it would help reach the logical conclusions behind cruise line business frameworks, while the epistemology approach of studying consumers shall form the basis for devising pragmatic marketing strategies. Some of the research questions that the research aims to answer are: I. What are the nature of passenger psychology and buying behavior, which govern the marketing strategies adopted by cruise lines today? II. Is there a gap in these marketing strategies, and if yes, how can cruise companies overcome them to deliver value to their customers? III. Will concepts of marketing mix, customer value, and sustainable tourism apply to cruise industry? 2. Literature Review 2.1 Consumer psychology and cruise marketing Consumers engage in internal and external information searches. They already have a preferred brand in mind before they start information search and this is because of imperfect market information. Ahmed, Johnson, Ling, Fang and Hui (2002) highlight that the country-of-origin (CO) is of particular interest to international marketing researchers because of its impact on product evaluations which influences consumers purchase decisions. Marketing efforts should hence emphasize on a positive CO perception because CO effects are stronger than brand effects. CO provides cues to the customer regarding the quality, dependability and value for money for the product. It also relates to one’s group affiliation like national identity. Consumer’s perception of perceived risk is important because it affects their choice. The authors found this to be true in the case of cruise companies. Klein (2003) is of the view that cruise passengers are different than the usual retail service customers. While they may be on board for different reasons, any negative impression reduces the satisfaction level. The cruise companies tend to overcharge because of the "added services" which at times prohibit passengers from achieving complete satisfaction. This has been corroborated by Issa and Jayawardene (2003) who contend that despite the cruise businesses being the most vibrant, dynamic and the fastest-growing sub-sectors in the tourism industry in the Caribbean, passengers feel overburdened with the add-on expenses. When availing of the all-inclusive cruise vacations the passengers have to be prepared for extra expenditure for drinks, shore excursions, tips, and on newer ships even for premium food and activities. These can add up to hundreds of extra dollars to the prices. Even though the cruise packages are called “all-inclusive” these extras can deter a passenger. The all-inclusive concept is popular but the cruise companies need to ensure that what is not included in clearly spelt out before the passengers make a booking. Thus consumer psychology plays a vital role both before making the booking and even when one is board. 2.2 Cruise marketing strategies A brief literature review indicates that the cruise industry of Europe differs from that of the North American in their culture, entertainment line-up, language, and even marketing approach (cruisemates.com, 2009). This has great implications on the service delivery. Cruise companies in Europe earlier during the 20th century focused on bargain prices for traveling from one point of the world to another. Tour qualities were categorized according to the size of the cabins, menus, and stops they made according to Dickinson and Vladimir (2007). However, as lifestyles, consumer behaviors and cruise ships have changed over the years the demand has also subsequently altered for more elaborate services on board the ship. Ng (2007) conducted a study and found that when the cruise offered is of shorter duration, the turnover increases. Overnight cruises were found to be very popular in the Far East and led to higher turnover. These were popular because passengers got a sampling of what the regular cruises would be. Revenue models were extended to on board sales through the introduction of Casino. Therefore, the cruise companies can look into a different segment – the gaming passengers - in addition to the tourists. Cruise operators sold 30% of the cruise directly while 70% of the bookings came through agents. Agents however require training and education both for the agents and for the consumers. Marketing efforts have to be given by the cruise companies. This study focuses on the sales channels and finds that cruise companies do not enter into contracts for advanced selling. The intermediaries are unable to demonstrate their commitment. The study suggests that both sides have to be willing to be committed to each other which may require investments for a long-term synergy. Cruises as products have to cater to the high expectations of customers in terms of on-board activities, themes, concepts, design, and destinations in order to meet the satisfaction of consumers (Cruise Industry Overview, 2005). Cruise companies, according to Cartwright and Baird (1999) have to devise elaborate marketing strategies to secure their customers such as loyalty clubs, customer surveys, promotion, and pricing strategies. Companies pay particular attention to the customer responses in order to tailor their services and products to their satisfaction such as offer of luxury, ease of travel, entertainment, safety and interesting destination (Cartright & Baird, 1999). 2.3 Customer expectations Unlike other types of holiday products, cruises are highly perishable. A cruise is "a total seagoing holiday package that combines destinations and entertainment in a seamless package" and it does not necessarily be of everyones taste, according to Cartright and Baird (1999). In order to ensure that their products stand out among a small crowd of consumers, cruise companies need to emphasize on the physical appearance (the grandeur of the ship) and marketing communication (capitalizing on the customers interests) (LaBonte, 2008). The literature review thus suggests that during turbulent times the business model needs to be changed. Cruise companies have to change their marketing strategy because there appears to be a gap between customer expectations and service delivery. To reduce the costs for the end consumers, direct selling would eliminate the role of the intermediaries but it needs to be looked into whether it is a viable option from a long-term perspective. Thus, there appears to be a gap in the literature on the current business environment and the corresponding marketing strategy to be adopted by the cruise companies. 3. Research Design 3.1 Purpose of the research and phenomenon The cruise companies are facing turbulent times due to recession. Consumer expectations have evolved over time. The phenomenon under this study will examine how a change in the marketing mix can bridge the gap between customer expectations and the service delivery, thereby making the cruise companies withstand the pressures of the economic environment. This requires an insight into consumer psychology and how they make their decisions. 3.2 Epistemology To carry out the study, the researcher proposes adoption of a qualitative approach, as this is congruent with the research rationale. A qualitative approach helps one to understand, use theories and adapt it to a practical problem solving situation. Theoretical frameworks which are important for setting the structure of the marketing strategies are important for studying consumer behaviors. 3.3 Justification for the chosen method Qualitative study helps to understand the subjective reality of the subject being studied. It enables prolonged contact with the filed of study and has the potential to reveal complexity. Moreover, it enables flexibility in the data collection method as the research process evolves. In this case, since questionnaires would have to be administered, changes to the questions and number of respondents may change as the research progresses. Both primary and secondary data will be collected for the study. For this purpose, the researcher shall use secondary resources such as journals, books, articles online, and magazines to form the theoretical framework upon which primary data shall be studied. 3.4 Research design and instruments Primary data shall include a small sampling of cruise passengers who will form an epistemology study, and help in acquiring information on consumer behavior, preferences and motivation. Survey questionnaires would be administered through email after informed consent has been obtained. Focus group interviews would help the researcher delve into consumer psychology and why they choose cruises for holidays. Focus groups tend to bring out details which individuals may be reluctant to divulge. In groups, people influence and tend to be influenced and hence considered important for this study. This would be held at social clubs after prior appointment has been obtained to interact with certain groups. The researcher however shall, rely on the secondary data for studying companies trend in marketing approach and analysis. This approach the researcher feels is limiting as it will be generic and does not offer other alternative approaches for marketing adopted by some other cruise companies. 3.5 Data Analysis Data analysis would be done through the process of data reduction, data presentation and conclusion drawing. This would be done in case of the literature review concerning the current marketing strategies of the cruise companies. For the responses of the email survey, the answers would be based on the likert scale and hence inferences would be easy to draw. For the focus group small notes would suffice to expand and interpret data. 3.6 Practical and ethical Issues Email survey limit face to face discussions but this would be made up by focus groups. The list of email addresses would be obtained through social media and the respondents would be informed of the purpose of the research. The focus group participants would be assured of anonymity although there are no ethical issues involved in this. No audio recordings would be collected and only some notes made during the interview. Furthermore, as personal friends of the researcher are actually participating in the cruise industry mostly as high officials or Presidents of various cruise lines (e.g. Royal Caribbean Cruise Line, MSC Cruise Line and Delphin Cruise Line) it would help in retaining responders anonymity which is a major concern as well for most participants who volunteer in such discussions. 4. Timetable The following timeline shall be adopted by the researcher for conducting the study. November 2009: Research proposal December 2009: Survey for open discussion, tabulation and result compilation January 2010: Compilation of dissertation Chapter 1 and 2, submission February 2010: Correction of Chapter 1, 2; submission of Chapter 3 and 4. March 2010: Correction of Chapter 3 and 4; submission of 5. April 2010: Review of overall dissertation and submission after correction 4.1 Dissertation Process Chart Time Consumption Chart References Ahmed, Z. U., Johnson, J. P., Ling, C. P., Fang, T. W., & Hui, A. K. (2002) Country-of-Origin and brand effects on consumers evaluation of cruise lines. International marketing Review. 19(3), 279-302 Cartright, R., & Baird, C. (1999) ‘The development and growth of the cruise industry’. Butterworth-Heinemann Ltd. CLIA. (2005) ‘Cruise Industry Overview: Marketing Edition’. Cruise Lines International Association. [Online] Accessed from November 1, 2009 Cruisemates.com. (2009) ‘Cruising Europe’. ETurboNews. [Online] Accessed from November 1, 2009 Dickinson, B., & Vladimir, A. (2007). ‘Selling the sea: an inside look at the cruise industry’. John Wiley & Sons. Eturbonews. (2009) ‘Cruise industry revolves around Europe May 02, 2008. [Online] Accessed from November 1, 2009 Eturbonews. (2009) ‘European tourism takes a beating in 2009’. [Online] Accessed from November 1, 2009 Holidayinsiders.com. (2009) ‘Is the bottom falling out of cruise market?’ [Online] Accessed from November 1, 2009 Issa, J. J., & Jayawardene, C. (2003) The "all-inclusive" concept in the Caribbean. International Journal of Contemporary Hospitality & Management. 15 (3), 167-171 Klein, R. A. (2003) ‘Cruise ship blues: the underside of the cruise ship industry’. New Society Publishers. LaBonte, D. A. (2008) ‘Shiny Objects Marketing: Using Simple Human Instincts to Make Your Brand’. John Wiley & Sons Ng, I. C. L. (2007) Establishing a service channel: a transaction cost analysis of a channel contract between a cruise line and a tour operator. Journal of Services Marketing 21 (1), 4-14 Read More