carnival
TRANSCRIPT
Team II:
Nathan Anderson, Tyler Kealy, Laura Nixon, Chevelle Saragosa, and Samantha Schindler
March 4, 2010
Professor Daniel Baack
Contents Executive Summary .............................................................................................................................................................................. 0 Introduction ............................................................................................................................................................................................. 1 Company Bio ............................................................................................................................................................................................ 1 Product .................................................................................................................................................................................................. 2 Price ........................................................................................................................................................................................................ 3 Promotions .......................................................................................................................................................................................... 3 Place ........................................................................................................................................................................................................ 4
Industry ...................................................................................................................................................................................................... 4 The Environment ................................................................................................................................................................................... 6 Social ...................................................................................................................................................................................................... 6 Economic .............................................................................................................................................................................................. 6 Technology ........................................................................................................................................................................................... 7 Regulatory ............................................................................................................................................................................................ 7 Competitive ......................................................................................................................................................................................... 8
Competition .............................................................................................................................................................................................. 8 SWOT Analysis ........................................................................................................................................................................................ 9 Extrapolation on SWOT .................................................................................................................................................................. 9
Critical Issues ........................................................................................................................................................................................ 10 Critical Issue One ........................................................................................................................................................................... 10 Critical Issue Two .......................................................................................................................................................................... 10 Critical Issue Three ....................................................................................................................................................................... 10
Marketing Objectives ........................................................................................................................................................................ 10 In Accordance with Critical Issue One .................................................................................................................................. 10 In Accordance with Critical Issue Two ................................................................................................................................. 11 In Accordance with Critical Issue Three .............................................................................................................................. 11
Market Segments ................................................................................................................................................................................ 11 College students looking for a convenient vacation with friends ............................................................................. 11 Recent Affluent Retirees ............................................................................................................................................................. 12 Middle to upper class families who are looking for fun for all ages ........................................................................ 12 Organizations looking to get together in a fun environment that allows free expression ............................. 13 Repeat Cruisers ............................................................................................................................................................................... 14 Middle to upper class single persons looking to meet people in a leisurely environment ............................ 14
Target Markets ..................................................................................................................................................................................... 15
College students looking for a convenient vacation with friends ............................................................................. 15 Recent Affluent Retirees ............................................................................................................................................................. 15 Middle to upper class families who are looking for fun for all ages ........................................................................ 16 Repeat Cruisers ............................................................................................................................................................................... 16
Brand Positioning (See Appendices IV, V, and VI for Perceptual/ Positioning Maps) .......................................... 17 Achieving Marketing Objectives ................................................................................................................................................... 17 Product (Goods and/or Services) ................................................................................................................................................ 17 Pricing ...................................................................................................................................................................................................... 19 Place .......................................................................................................................................................................................................... 20 Promotion .............................................................................................................................................................................................. 21 Marketing Track .................................................................................................................................................................................. 24 Conclusion .............................................................................................................................................................................................. 24 Works Cited ........................................................................................................................................................................................... 25 Appendices ............................................................................................................................................................................................ 32 Appendix I: Competition ............................................................................................................................................................. 32 Appendix II: SWOT analysis ...................................................................................................................................................... 33 Appendix III: Age demographics by population ............................................................................................................... 35 Appendix IV: Perceptual map of fitness and excursions ............................................................................................... 36 Appendix V: Perceptual map of quality and value ........................................................................................................... 38 Appendix VI: Perceptual map of retired and budget ...................................................................................................... 39 Appendix VII: Advertising spending for Carnival over the next 12 months ........................................................ 41 Appendix VIII: Product Placement ......................................................................................................................................... 43 Appendix IX: Magazine Ad ......................................................................................................................................................... 44 Appendix X: Magazine and Internet Ad ................................................................................................................................ 45 Appendix XI: Outdoor ad e.g. billboard ad .......................................................................................................................... 46 Appendix XII: Outdoor Ad e.g. Sports Arena ...................................................................................................................... 47 Appendix XII: Marketing Track Discussion ........................................................................................................................ 48 Appendix XIII: Terms ................................................................................................................................................................... 49
Works Cited for Appendices .......................................................................................................................................................... 50
Executive Summary
Attached is an assessment of Carnival Cruise Line’s marketing activities. Carnival Corporation is the leading provider amongst the cruise industry (Cruise Critic). The company is composed of many subsidiaries, its largest being Carnival Cruise.
Ted Arison founded carnival Cruise in 1972 (Cruise Critic). The company had a rocky start, but has since been prosperous, as a result of many different innovations. Carnival’s goal is to provide a fun, simple, and unique travel experience for the masses. This strategy has been profitable thus far; in 2009 the company reported profits of $1.8 billion (Anderson). Despite this prosperity, Carnival has many emerging threats, including other cruise lines and all inclusive hotels and packaged trips. Carnival’s primary competitors within the cruise industry are Royal Caribbean, Norwegian Cruise Line, Disney Cruise Line and Celebrity Cruise.
Carnival’s main strength is the value it offers to consumers; it is the market leader in this category (see Appendix V). Value is determined by dividing the perceived benefits over the cost. Carnival’s focus is to maximize consumer benefits, in order for consumer’s to experience a high sense of value towards the company. To better maximize on these benefits that the company offers, Carnival should fully utilize and promote its core competencies of fun, leisure, competitive pricing, and a spirit for innovation.
There are five environmental forces that impact the ways in which Carnival should be marketed: social, economic, technological, competitive, and regulatory. In addition, a SWOT analysis identifies the strengths, weaknesses, threats, and opportunities that Carnival Cruise and its competitors face. Examining these factors, and relating them to environmental forces, is important upon creating a marketing analysis.
As a result of our analysis of Carnival and the cruising industry as a whole, we determined three primary critical issues and marketing objective for Carnival. First, by the end of this calendar year, Carnival should remove the restrictions that ban 18 to 20 year olds from booking cruises. This would allow these young consumers to book cruises without the accompaniment of an adult of at least 25 years of age. Second, Carnival should use marketing and additional innovation to counteract the “lazy man image” that surrounds the cruise industry. The company can accomplish this through promotions that focus on the adventurousness and high activity levels experienced on Carnival’s cruises. This should be accomplished by 2012. Finally, Carnival should retrofit its boats with the latest green, and work on updating at least half of its fleet by 2015.
These marketing objectives can be met through four specific target markets: college students, affluent retirees, middle to upper class families, and repeat cruisers. These groups are important to Carnivals overall growth due to their size, potential for increased profits, and relationship to the company’s values and capabilities.
Carnival Cruise’s ideal position amongst consumers is as follows: Carnival Cruise hopes to engender the ideas of value, sustainable travel, adventure, fitness, and most importantly, fun across the entire North American market. Carnival can reposition itself by improving the public’s perception of the company’s value of fitness, adventure, activity level, and sustainability amongst its cruises. Through this overall assessment, we were able to create a marketing plan for Carnival; this plan utilizes the marketing mix (product, price, place, and promotion), in correlation with our target markets, to meet our marketing objectives. This will result in the repositioning of Carnival.
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Introduction
Carnival Cruise is currently in the growth stage; this makes maintaining market share and profits
incredibly important. Although Carnival is the market leader in the cruise industry, there are emerging threats in
the environment that jeopardize the company’s current stance. By hiring out team, Carnival will avoid many
encroaching environmental trends, and continue to grow amongst the competitive cruise industry. We
determined our objectives as a result of an in depth analysis of Carnival and the overall market in which it
resides. We understand the necessary changes that have to be made in order for Carnival to remain profitable.
We will make Carnival a more distinct and valuable brand amongst the homogenous cruise industry.
The remainder of this marketing plan is outlined as follows: First, Carnival’s stance in the current
cruising environment will be analyzed and described. This allows for the creation of specific marketing
objectives. Next, potential market segments will be presented, and target markets will be selected. Finally, these
target markets will be used to change Carnival’s overall product, place, price, and means of promotion.
Company Bio Carnival Cruises, owned by Carnival Corp. PLC, is an innovative and “fun” company within the cruise
industry (Cruise Reviews, Carnival Corporation & PLC). Ted Arison partnered with Meshulam Riklis to found
carnival in 1972; today Carnival is the largest cruise line in the industry (Cruise Critic). Carnival Corp. owns
many subsidiaries, which enable it to serve eight million guests annually (Carnival Corporation & PLC). The
Carnival Corporation cruise brands include: Carnival Cruise Lines, the Holland America Line, Princess Cruises,
the Seabourn Cruise Line, P&O Cruises, the Cunard Line and the Ocean Village in the United Kingdom, AIDA
in Germany, Costa Cruises in Southern Europe, Iberocruceros in Spain, and P&O Cruises in Australia.
The company’s central goal is to create a fun atmosphere. Fodor’s claims the company is the originator
of the “fun ship concept” (Cruise Critic, Fodor’s). However, the “fun ship concept” has not always had a
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positive connotation; Cruise Critic reported that Carnival Cruise was once known for having “floating fraternity
parties.” Carnival Cruise’s current mission is as follows: “Carnival Cruise Lines prides itself on delivering fun,
memorable vacations to our guests by offering a wide array of quality cruises which present outstanding value
for the money” (Carnival). This mission statement accurately identifies Carnival’s core competencies and
central values of fun, leisure, competitive pricing, and a spirit for innovation.
Product
The cruise industry has come a long way since its founding, mostly on account of Arison’s innovations.
Arison transformed his floundering company into a successful one, by decreasing both the fuel consumption
and the speed of his ships. He also decreased the number of stops each ship made, in order to save even more
money (Funding Universe). These simple economic changes transformed the entire cruise industry (Funding
Universe). Since the changes enabled passengers to spend more time on the ship, Arison added onboard
entertainment features, such as discos, casinos, movie theaters, and nightclubs. Many cruise lines began to
follow Arison’s lead by adding more features and entertainment on their ship as well (Funding Universe).
Carnival’s ships are renowned for having outstanding décor and constant activities. Carnival Cruise has
also been a consistent winner of Best Entertainment, according to Porthole Reader (Porthole Reader). However,
it seems that the company’s quality in the market has eroded – the company peaked in 1999 when it won nine
awards in the Porthole Reader. By 2009, the company only held four of these awards. The company’s website
tries to skirt over this in its listing of accolades: two out of the eight on its website are dated 1999 (Carnival).
A great example of Carnival’s high quality fun product is exemplified in its room service; not only does
the company offer complementary turn-down services, but the staff even provides wash towels in animal shapes
(Fodor’s). Carnival has also ramped up the food quality - according to Fodor’s, Carnival serves the best food
amongst the mega-cruise industry (Fodor’s). This development has emerged from the addition of the French
master chef, George Blanc to Carnivals leadership team (Fodor’s).
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Carnival Corp currently has 63 operational ships, with more coming via retrofitting updates and new
orders (Cruise Market Watch). Within these ships and routes carnival has some specific offers; they let groups
and organization rent out floors or entire ships for a specific route. The most public—and now cancelled—
targeted venture was the ‘Cougar Cruise,’ which was marketed to older, single women, and younger single men
(Padgett). Despite this failure, having cruises marketed to specific niches in society has been a successful
venture for Carnival (Padgett, CruiseMates).
Price
Carnival is competitively priced in comparison to its competitors. Carnival is also successful at making
more money through fees that accrue from being on the cruise. Fees such as the $10 tipping charge per person
amass daily, along with additional costs, such as alcohol purchases and the 15% automatic tipping fee
(Fodor’s).
Carnival Cruise sells its product on a massive scale; their newest ship weighs over 100,000 pounds and
can accommodate more than 2,000 people. This great size dictates high fixed cost; thus, for Carnival to make
profits, ships have to run at near capacity. This requires remaining rooms to be sold at deep discounts days
before takeoff – a pricing strategy known as yield management pricing. This pricing within the industry makes
direct comparisons difficult, since there are numerous factors that influence the price.
Promotions
To inform consumers about the company’s unique product, Carnival runs national television
advertisements (Morelock). Carnival has been an industry leader in advertising since 1984, when they ran the
first nationally broadcasted cruise ad (Morelock). They continue to make new innovations in the new
millennium. They recently upgraded their website; the company’s enhanced “Funville” website is one of the
cruise industry’s most popular websites. It entices more than five million visits monthly (Kevin Gale).
Carnival has a variety of price guarantees that help reassure the consumer. They have a “110% Best
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Price Guarantee” where consumers have 48 hours to find a cheaper price for the cruise they just purchased.
They also have a “Vacation Guarantee;” consumers have until the first port to decide if they are enjoying
themselves and having fun (Carnival). If they are not enjoying themselves, Carnival Cruise will fly them to the
starting port at the ship’s first stop (Carnival). These promotions help to instill trust and quality amongst the
consumer.
Place
Carnival Cruises are sold through ticket agents, Expedia like websites, over the phone, and through
Carnival’s own website (Carnival, Expedia). The delivering of the product takes place all over the world.
Typically, the port cities are located near interesting destinations, which also tend to be highly populated.
Carnival has 22 “Fun Ships” that go to the Bahamas, the Caribbean, the Mexican Riviera, Alaska, Hawaii,
Panama Canal, Canada and New England. However, this is not always the case - Carnival also offers “cruises to
nowhere” where the sole purpose of the trip is to cruise. Currently, these cruises leave from New York City, NY
and Norfolk, VA (Carnival). All cruises last anywhere from three to fifteen days (Carnival Corporation & PLC).
Industry
At first, the Cruise industry catered to very wealthy clientele; now the $17 billion dollar cruise industry
caters to virtually all walks of life. There are a total of 200 cruise ship companies located in the United States,
with more than 230 ships that travel across the Atlantic and Pacific Oceans, and more than 16 million
passengers a year (First Research). The industry is comprised of a cruising experience that sails large ships to
worldwide ports. There are three cruise categories: contemporary, premium, and luxury. Cruises with a
contemporary layout are usually the least expensive. They consist of seven days on the ship. Premium cruises
usually last two weeks, and are on mid-sized ships. They target an adult audience, and cost more than the
contemporary brand. The luxury cruises are high-priced and emphasize exemplary accommodations, services,
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and exotic destinations. It is important to remember that overlaps in these cruise brands do exist. The demand
for cruises is driven by leisure and spending (First Research). Cruise companies rely heavily on software and IT
systems when it comes to the booking, pricing, inventory, and operations of these ships (Carnival).
Due to the drastic economic changes happening across the globe, cruise pricing has dropped
significantly. Many cruise lines have offered deep discounts, free airfare or shore excursions, and flexible
payment plans to entice business; flexible cancellation policies are also offered in order to attract more
passengers (First Research). Cruise lines also offer rewards programs and deals to returning passengers. Cruises
have the most industry potential during the summer. Passenger ticket sales earn approximately 75 percent of
revenue. Other sources of revenue are earned through casinos, retailer concessions, and onboard purchases.
The cruise industry continues to grow, despite the economic turmoil of 2009. It is the most exciting
growth category in the entire leisure market. Since 1990, the industry has had a 7.4 percent annual growth in
passengers. According to Cruise Lines International Association (CLIA), a total of 13.445 million guests are
projected to have sailed last year (totals through the third quarter, 2009- 9,999,068 passengers, indicate that the
forecast is on track). CLIA forecasts a total of 14.3 million passengers in 2010; this includes 10.7 million from
North America and 3.6 million internationally. This represents a total increase of passengers of 855,000, a 6.4
percent growth.
To increase cruise capacity, companies have three options once their fleet is at capacity; they can build
new ships, buy or restore existing ships, and/or acquire smaller cruise lines. The cruise industry plans on
building at least a dozen new ships each year, starting in 2010, and ending in 2012 (CLIA). Building a new
cruise ship can take up to several years, and cost up to $1 billion. The new ships that are being built are
enhancing their on-board entertainment features. Some of these features include on-board zip lines, spa suites,
natural areas with grass and gardens, aqua parks, amphitheaters, and high-tech cabins.
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The Environment
Social
Carnival Cruise has typically been seen as a vacation resource for older generations. The peak age group
for cruises is 55 to 64. This fact may be the catalyst for the perception of cruising amongst many Americans;
some perceive it to be the “lazy man” vacation, meaning it is simple, generic, and largely inactive (Cruise
Critic). The population of the younger generations is not expected to rise, but the population of older
generations is rising quickly (Zagat). This increase in the number of people in the older generations could result
in more profits for the cruise industry. This could be a result of the discretionary income that seniors have.
One social trend that has the potential to effect sales in the cruise industry is shifting values towards
global warming and the environment. Cruises have the potential of being environment. However, last year the
New York Times ran an article claiming that global warming is “just a drop in the bucket compared to the other
environmental issues involved in cruising” (NYTimes). The prospect of greener technologies is further
discussed in regulation and technology.
Economic
Americans are less likely to spend disposable income in a recession. The Economic Times says,
“Americans are spending less and doing more" (Economic Times). However, this could be beneficial for
Carnival in the long run; potential opportunity remains in the wake of economic downturn. Carnival Cruises can
cost anywhere from $400 to $1,979 a week; these are all-inclusive, meaning meals and entertainment are
included in this price (Carnival). This is a good deal – especially when compared to a modest hotel room that
costs about $90 a night. Also, these hotel vacations do not include the price of meals, airfare, or car rentals.
With the baby boomer generation reaching retirement age, the number of people older than 60 is
expected to triple by 2050. Age trends, like the Generation X baby bust, may lead to market busts; Carnival
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needs to be wary of this risk. Considering the fluctuations in population figures, Carnival should expect natural
fluctuation in sales as well (Reuters).
According to a Zagat poll conducted on cruises, Carnival was voted ‘most appropriate for budget
cruisers.’ Carnival’s cruises are cheaper and more casual in comparison to competitors. In business
considerations, Carnival should take into account the consumers’ value consciousness. Part of maintaining the
image of a value-based cruise liner is not only price and appearance, but also finding ways to efficiently cut
costs (Zagat).
Technology
The threat of disruptive technology is minimized when investments are made in market innovation and
technology. With only one future ship planned, it might be prudent to invest in new types of technology
specifically designed to avoid disruptive technology (Cruise Critic 2). There are also external factors to be
accounted for. While more expensive technology continues to develop, Carnival’s place as a market leader
offers the opportunity to pursue clean technology, and save money through initial technological investments
(EPA).
Regulatory
Since the passing of the Marine Protection, Research, and Sanctuaries Act in 1972, congress has
tightened environmental regulation for maritime vessels. Under no circumstance is a maritime vessel allowed to
dump solid waste at any time. Perhaps in future consideration of both the technological and environmental
factors, Carnival can attract a younger generation of consumers through investments in the green industry (EPA
2).
Another regulatory issue of concern affecting target demographics is the drinking age. Currently, the
legal drinking age in the United States is 21 (Statutes). This is the primary reason for part of Carnival’s age
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restrictions; a passenger under 18 years of age must be accompanied by a passenger who is 25 or older
(Carnival).
Competitive
Currently, Carnival and its subsidiaries hold 55 percent of the US market share in the industry. This
success is primarily due to the demographical climate. Most of this market dominance is a result of a difficult
barrier to entry in the cruise industry, which works strongly in Carnival’s favor. Carnival also utilizes
penetration pricing; this pricing strategy limits competition through low pricing.
Carnival and its subsidiaries operate a total of 63 ships (with a consumer capacity of 126,785 per year),
nearly twice that of Royal Caribbean (the company’s main competitor). In addition, the industry operates 87
cruise liners (Cruise Market Watch). This bodes well for Carnival; with high start-up fees in the cruise industry,
Carnival has the capacity to expand its company.
According to USA Today, the largest competition for cruise companies in general is a more traditional,
inclusive vacation at a particular location or resort. This onshore demand has risen as a result of fears of
additional fees; specifically costs that occur from the purchase of alcoholic beverages, spa services, and shore
excursions. However, even with these additional fees, Cruises are still significantly less expensive than other
forms of vacationing. A more value-based approach would help curtail losses to substitutes offered by the hotel
industry, especially for more economically minded users like seniors and younger cruisers (USA Today).
Competition
Carnival Cruise Lines competes with numerous other cruise liners, the largest of them being Royal
Caribbean. Together, Carnival and Royal Caribbean conduct business in what is mostly an oligopoly, with
control of 82 percent of the national market, and 74 percent of the international market. Other competitors
include Norwegian Cruise Line, Disney Cruise Line, and Celebrity Cruise. For a detailed list of competitors and
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their relationship to Carnival, in regards to how long they have been in the industry, the number and location of
destinations they offer, the number of ships and berths they own, annual sales, target markets, and
differentiating factors, see Appendix I.
SWOT Analysis
Extrapolation on SWOT
Carnival successfully utilizes its strengths to differentiate itself from competitors. For instance, the
company was able to use its large profits to create the first national television advertisement (CruiseMates). In
addition, Carnival has introduced an interactive website called “Funville” (Kevin Herald). The website includes
games and other forms of entertainment. Carnival has additional strengths in the industry, as a result of the
removal of restrictions, the installation of innovative ship route style, and unique forms of onboard
entertainment (Funding Universe).
While the company is able to benefit immensely from its strengths, there are weaknesses that are
currently holding the company back from reaching its full potential. Carnival’s main weakness is its dependence
on the North American market. In 2006, North America accounted for 65% of the company’s total revenues
(Datamonitor, 17). Thus, the company is forced to concentrate its resources primarily in this region.
In addition, Carnival has opportunities that it can utilize to better itself in the minds of its consumers.
Carnival has a large fleet of mega-cruise ships; this grants Carnival the opportunity to use its profits to increase
the quality of its fleet via retrofitting (Cruise Review). In the retrofitting process, the entire ships get overhauled
from the bottom up. By maintaining its modernized image, Carnival can further reinforce its status as a high
quality brand.
External threats should also be taken into consideration. A major threat that Carnival is currently facing
is changes in the environment. As a result, consumer and governmental demands could affect the company at
any given time. Another primary threat to Carnival is the perception that American’s have of the cruising
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industry; most consider it to be the ‘lazy man’s vacation’ (Cruise Critic). This stereotype is extremely
troublesome, especially in a market where 80% of the market has never cruised (CLIA). For a more in depth
analysis of Carnival’s strengths, weaknesses, opportunities, and threats, see Appendix II.
Critical Issues
Critical Issue One
Carnival can use its ability to cater to niches by lowering the booking age on certain ships; this would
make it possible for the age group of 18 to 20 year olds to book cruises without the supervision of a 25 year old.
Then, Carnival could capitalize on the marketing mix to promote to this younger age group.
Critical Issue Two
Through the innovation of Carnivals widespread television commercials, the company could counteract
the “Lazy man image” that surrounds the cruising industry (CruiseMates). Carnival could also do this by
promoting its onboard activities, such as its gymnasiums, and concentrating on the excursions offered by the
company.
Critical Issue Three
Carnival could use its large profits, $1.8 billion for 2009, to update its aging fleet via retrofitting
(Anderson). These updates will primarily be focused on reducing energy consumption via environmental
upgrades; the updates will also help to maintain quality, profit and market dominance.
Marketing Objectives
In Accordance with Critical Issue One
By the end of calendar year, Carnival will remove the age restrictions in regards to booking, becoming
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the leading company in the industry amongst this age group. This would provide for greater profit and growth.
The company’s image in the industry would not be harmed, since Carnival is already known as a youthful, fun
cruise line.
In Accordance with Critical Issue Two
In order to overcome the established ‘lazy man image’ of cruising, Carnival must work with its
marketing department in order to find a way to emphasize its superior recreational amenities (CruiseMates). The
ads will air no later than 2012. This rebranding will help to further expand the cruising market.
In Accordance with Critical Issue Three
By 2015, Carnival should have half of its fleet updated. All ships in the fleet should be equipped with
technologies and amenities that are no more than five years old. This will include profit-gaining luxuries, such
as retrofitting boats with anti-sea sick ball bearings. This strategic advantage will be immensely helpful
amongst the competitive cruise industry.
Market Segments
College students looking for a convenient vacation with friends
The demographic size of college students ranging in age from 18-24 is approximately 18,964,001
(U.S. Census). While not everyone in this market segment can be expected to be interested in taking cruises,
the majority of this segment enjoys partaking in new experiences and having a fun time. For example, during
spring break Carnival Cruises offers a variety of discounts and travel packages that cater to college students
(Carnival). This plays directly into the wants of college students. Therefore, targeting college age students is
justifiable, since the group has both the potential for profit, and the ability to meet the desires of college
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students through onboard and off board activities and excursions. Also, it is noteworthy that this segment in
growing at a rapid rate; from 1997 to 2007 college enrollment grew 26% (IES National Center).
Recent Affluent Retirees
The demographic size of Americans ranging in age from 60 to 64 is 10,805,447 (U.S. Census). This
group is growing at an incredible rate; it has an estimated growth of 42.7 percent from 2004 to 2011 (U.S.
Census). While this entire group is not interested in cruises, the true market of this growing group is amongst
adventure seeking, mobile, quality driven, affluent retirees. They have an aggregate income of $1.9 trillion,
which makes up 27.8% of the entire income of the U.S. (U.S. Census). Eighty percent of this income funnels
into the middle and upper income classes.
This segment of affluent retirees is dispersed relatively evenly across the country (see Appendix III)
(U.S. Census). According to Jennings, this segment wants a fun, active and unique vacation (Jennings,
AARP). In addition, they want safe and convenient vacations. We will identify this group by their distinct age
and by their wealth.
Due to this segment’s size and affluent manner (which consists of a large disposable income),
targeting affluent retirees is justifiable for Carnival. The people that make up this segment also have large
amounts of free time, as well as a desire for new experience.
Middle to upper class families who are looking for fun for all ages
Families with children under 18 make up 23% of the United States’ population, making this group
more than 70 million strong (U.S. Census). This market segment is currently growing in cruise consumption
(CLIA). This size and level of consumption makes families an extremely important segment to the cruise
industry; thus targeting them is justifiable. Amongst this group the specific target market consists of families
of median income and above; this casts a very large net. The average gross family income is $77,928 (U.S.
Census). Focusing on families who value fun, convenience, security, and adventure further narrows this
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segment. It is necessary for cruise lines to differentiate themselves amongst this segment for it is fiercely
competitive. This segment is often looking for kid-friendly services, such as babysitting services and teen
activities. Families are also looking for larger staterooms to accommodate the entire family. Lastly, this
market desires a high food quality, which could cater to all tastes. These are all things that Carnival has the
ability to offer to its consumers. In all, this market should be targeted due to its size, growth and importance to
the industry.
Organizations looking to get together in a fun environment that allows free expression
Carnival has an opportunity to target different identity groups. These groups are interested in
immersing themselves in an atmosphere that is virtually judgment free. For example, in the past the cruise
industry has offered excursions solely for gay and “cougar” cruisers. According to a University of Arizona
study, strong connections between people in these identity groups are declining. The study compared data
from 1985 and 2004, and found that the number of people with whom Americans can discuss matters of
personal importance with has dropped by nearly one-third (ASU).
It is true that Florida has both the largest reported gay population, and is the largest state of residency
for Carnival cruisers (Mintel). However, only .51% of people in the United States identify themselves as gay,
which makes for an overall small market segment (Gay Demographics). Carnival also tried to facilitate a
cougar cruise – which targeted middle-aged women and younger men - but quickly dropped the idea due to
negative press associated with “cougars” (AOL).
Since the market for these groups is limited, there is not a strong justification to target these particular
groups. There is also a lot of risk for Carnival brand with these social poignant groups; these groups would
not fit with Carnival’s typical ‘salt of the earth’ passenger (CruiseMates). Furthermore, targeting these niche
groups would be difficult, and does not match Carnival’s core competencies.
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Repeat Cruisers
In the cruise industry, repeat cruisers are vital; cruise lines expect repeat cruisers and baby boomers to
be the biggest growth markets in 2010 (CLIA). Thirty-seven percent of booking agents do not expect to book
any more new cruisers in 2010 than they normally would in a given year (CLIA). This indicates that there is a
high usage rate amongst repeat cruisers. Currently, it is approximated that 80% of Americans have yet to
cruise (CLIA). If booking agents can decrease this percentage, and turn these new consumers into repeat
cruisers, the cruise industry could prosper and expand dramatically. Thus, Carnival should target repeat
cruisers in order to grow financially. Targeting this segment is in congruence with the 80/20 rule – targeting
repeat cruisers would be beneficial for Carnival.
Middle to upper class single persons looking to meet people in a leisurely environment
The demographic size of the middle to upper class single persons segment is 92 million (US Census).
Although the size of this market is massive, they’re cruise consumption is relatively low (CLIA). Currently,
couples dominate cruise demographics; in addition, there is growth amongst families, extended families, and
friends traveling together. Singles rank 4th as a group in aggregate cruise consumption (CLIA).
We believe this particular segment should not be one of Carnival’s target markets because of its low
consumption level. Therefore, catering to the middle to upper class singles segment would not be the best
approach for Carnival.
-‐ People who reside near cruise ports, which makes going on cruises virtually effortless and convenient.
With the massive growth of the population on the United States’ coasts, cruising is now more accessible
to Americans than ever before. CLIA reports that more than half of Americans are now within driving distance
of one of the 30 ports of embarkation (CLIA). However, this segment has definite disadvantages; other than
residing in similar locations, the people in this segment do not have enough in common to make marketing to
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them a simple task. This would result in a high cost of reaching the segment. So despite the size and streamlined
deliverance of the product to the consumers in this segment, this group should not be targeted by Carnival.
Target Markets
College students looking for a convenient vacation with friends
College students have many needs and wants. College students want to have a nonstop fun experience
and travel across the world – at an affordable cost. They also want to feel safe while they are on their cruise. In
addition, college students want to be able to partake in activities during their time on the ship; for example, they
want facilities such as a state of the art fitness center, a rock-climbing wall, and basketball courts. University
students want to be able to go on a cruise without having to be accompanied by an adult, and to stay in a dorm-
like atmosphere. Another desire of college students is to be able to bring alcohol onboard at embarkation
(Cruise Critic). Lastly, they want tasty, healthy, and delicious food.
Carnival Cruise lines excels in catering to the younger adult audience. This target market would help
Carnival meet our critical issues. Carnival offers a variety of onboard entertainment such as discos, gambling,
pools, and more. The Fantasy-class ship has huge open decks and big dorm-like accommodations, perfect for
the party-all-night crowd (Jones 4). In addition, if Carnival were to lower its booking age from 25, Carnival’s
profits would greatly increase. This increase could help the company build and retrofit its ships. However,
Carnival is known for their “floating fraternity party,” which appeals to a majority of college students (Cruise
Critic). Carnival needs to find a way to market to this target market without strengthening this party image, so
that it can appeal to other markets as well.
Recent Affluent Retirees
The fact that retired people are going back to work demonstrates the restlessness of a whole generation
of baby boomers retiring at a younger age. This groups overall size and growth could provide greater profits to
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Carnival. As stated earlier they are over 10 million of them in America. While there is a lot of competition
amongst this group, they are part of the peak age for cruise consumption, 55-64, making them very important
for Carnival to target (Zagat). This target group is easily marketed to through conventional means because they
still use traditional media sources such as radio and television, which means that Carnival would not have to
find an alternate way to market to this segment.
Middle to upper class families who are looking for fun for all ages
Families are more than 70 million strong, and this segment is growing rapidly (answers.com). Families
want security and a fun experience for their children. The children and families want to be treated well, spoiled
and pampered; they also desire good and varied food. They do not want to be packed into a ship like sardines.
The adults may also value quiet adult only zones. They want many options for their children with kid-friendly
services. Large cabins are a plus, to fit the whole family in one to two staterooms. Targeting this segment meets
the objective of avoiding the “lazy-man” image, since families desire so many activities and excursions for all-
ages
Repeat Cruisers
Repeat cruisers have experienced cruising, and know exactly what they want from their trip. In order for
Carnival to capitalize from repeat cruisers, they need to know what this target market is looking for. Repeat
cruisers want an even better experience than the last cruise they embarked on. Also, many repeat cruisers want
to be treated better than first-time cruises; therefore, most cruise lines offer benefits for repeat cruisers. For
example, Carnival offers discounts and Platinum Sail & Sign cards that give them access to an exclusive
reception on board the ships. This year, Carnival added a Concierge Club for guests who have sailed with them
ten or more times. Perks include priority supper club and spa reservations, priority embarkation, and
complimentary laundry service (Dunham-Potter). Through these perks, Carnival is able to increase the sense of
value and loyalty amongst repeat cruisers. If these repeat cruisers remain loyal to the company, and if Carnival
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is able to attract repeat cruisers from other lines, the company can increase profits. This would help Carnival
reach the marketing objective of increasing its number of ships and being able to retrofit older ships.
Brand Positioning (See Appendices IV, V, and VI for Perceptual/ Positioning Maps)
Carnival Cruise’s ideal position amongst consumers is as follows: Carnival Cruises hopes to engender
the ideas of value, sustainable travel, adventure, fitness, and most importantly, fun across the entire North
American market. Carnival is well positioned amongst the important fun and value component (see Appendices
IV-VI) but there is room for improvement. As a whole, Carnival needs to improve the public’s perception of its
quality of excursions and fitness facilities; this relates to improving the adventure level, activity, and fitness
components of its ideal position. Carnival also needs to reposition itself as a more environmentally friendly
travel option to better cater to the growing green movement of social responsible consumers.
Achieving Marketing Objectives
Carnival’s brand position will help to meet our primary marketing objectives. Our objectives are to
lower the age restrictions on cruising, modernize Carnival’s fleet to be more environmental friendly while
providing more value, and to reinvent the perception of cruising within the American market. Our brand
position will help to facilitate these; specifically, increasing the activity, adventure, fitness, and the sustainable
travel components of our perceptions amongst Americans will directly relate to our implementation of the
objectives.
Product (Goods and/or Services)
In order to increase profits and cater to our target markets, Carnival must focus on addressing our third
critical issue: Carnival should use its large profits, 1.8 billion for 2009, to update its aging fleet via retrofitting
(Anderson). These updates will primarily be focused on reducing energy consumption via environmental
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upgrades; the updates will also help to maintain quality, profit, and market dominance. Changes made in
regards to Carnival’s product also touch on our other critical issues, such as reducing the “lazy-man” image. All
together, these changes will help to increase Carnival’s market dominance in the cruising industry, by further
increasing profits through increased quality in the product.
Carnival’s cabins do not need to by changed. They are currently very spacious, which appeals to the
target markets of families and college students; excess space allows for these target markets to room together in
groups (CruiseMates). Also, Carnival’s food quality is already known as the best amongst its competitors – it is
high quality, and caters to many different tastes (Carnival Cruise Lines). However, Carnival should consider
increasing the size and quality of its current facilities (such as its fitness facilities). This change ties directly to
our second critical issue, since it would help eliminate Carnival’s “lazy man” image. In addition, this is a
change that would appeal to the wants of our target markets. It especially appeals to the desires of college
students and families, who are looking to have a fun time aboard, as well as to repeat cruisers, who are looking
for increased value in their cruising experience. Also, if Carnival were to incorporate more of these innovative
ideas into its renovations, the company would increase its competitive advantages. Carnival could also work to
make its exterior more appealing to consumers, perhaps by adding color. However, Carnival should be careful
to keep the amount of colors to a minimum, as to appeal to all of our target markets (namely retirees) as well.
All of these changes could increase Carnival’s brand equity, since they go beyond just adding a functional
benefit to the consumer.
As a result of the current social trend of valuing the environment, consumers are looking for an
environmentally friendly experience. Statistics have shown that cruise ships emit almost twice the amount of
carbon dioxide as planes emit (Conlin). Since many consumers have to fly to cruise ports, this is a double-
whammy for the environment. There are new forms of technology available that can help reduce the amount of
emissions, which is something Carnival should adopt and explore in accordance to our third critical issue
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(Conlin). Also, competitors are using money to fuel recycling programs and increase green technology in their
ships, which could make Carnival’s image more appealing to all of our target markets, since environmental
conservation has a vast appeal amongst the North American market. This environmentalism would better
Carnival’s overall brand image, since it is related to the wants of today’s consumers. By increasing Carnival’s
overall product, Carnival will be able to reposition its overall image, and better appeal to its market segments.
Pricing
Carnival Cruise lines is the leader in value, according to Zagat; in fact, Carnival was once referred to as
the K-Mart of the cruise industry (Cruise Critic). Carnival utilizes penetration pricing by pricing low, and
discouraging competitive entry. In return, Carnival expects to make its profits over the long run as a result of its
high market share. Carnival has not wavered from this strategy; Carnival still offers low price cruise fares to
attract business. Carnival’s prices contrasts from the industry’s which sells their products at a higher mark-up.
The penetration pricing strategy is functional for Carnival because buyers are price sensitive, and there
are many buyers, allowing for small individual profits to accrue. Additionally, penetration pricing is effective
for Carnival because the company operates under massive economies of scale and experience lead, which lead
to lower production costs. Carnival has recently set up a new payment plan. This plan allows customers to out
their cruise fare in 24 fixed monthly payments. This allows prospective customers who are on a tight budget to
be able to afford a cruise. In addition to the revenue from the boarding ticket, Carnival is successful at earning
profits through fees that accrue from being on the cruise; these fees include tipping, additional services and cost,
and alcohol purchases.
Another pricing strategy utilized by the entire cruise industry is yield management pricing. Under this
pricing structure prices are highly variable by time and availability. This make comparing amongst specific
cruise prices difficult. We have overcome this problem by looking at many different weeks for Carnival’s
primary competitors of Royal Caribbean, Disney Cruise Line, Norwegian, and Celebrity Cruises. In terms of
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pricing, Carnival is generally the cheapest followed by Norwegian Cruise Line, Royal Caribbean, Celebrity
Cruise Line and finally Disney. Our data supports the validity of Carnival’s price leadership amongst the cruise
industry.
Carnival is the least expensive cruise line, and it succeeds as a result of low costs. We recommend
Carnival to continue with this marketing general strategy because it appeals to each of our target markets:
families, college students, retirees, and repeat cruisers. Families are another huge component of the cruise
industry. Carnival’s low pricing strategy appeals to families since it offers affordable vacations. Carnival Cruise
lines is ranked 3rd for best for family cruises (Zagat). By setting affordable prices that provide genuine value,
Carnival can also allure the college students market. Carnival Cruise line excels at pricing low, which makes it
affordable for college students to take a cruise. In addition, repeat cruisers are essential to the cruise industry.
Since Carnival’s pricing strategy is so low, this appeals to the repeat cruiser, since it allows them to cruise more
than once. Overall, Carnival does an exemplary job enticing repeat cruiser to embark on its cruises (Cruise
Critic). In relation to retirees, Carnival’s pricing strategy makes it affordable for retirees to attend a cruise.
Retirees are looking to enjoy their freedom by going on a cruise that they can afford in association with their
disposable income.
In review, we feel Carnival should continue to utilize its profitable penetration pricing strategy; they
should continue to set their prices below the industries. Carnival could improve its pricing strategy by
marginally raising its prices so to increase profits while not losing it low-cost differentiation.
Place
Carnival Cruises are sold through an indirect channel; consumers have to go through multiple channels
to get their final product –a cruise. The primary means for purchase is either though online booking or travel
agents. However, Carnival Cruises can increase the reach of the intermediaries by specifically increasing the
number of booking agents. A surprising trend surfaced in 2007; offline bookings increased 31percent, and
21 | P a g e
online bookings decreased 62 percent (Tedeshi). As a result of this decrease in online booking, the chairman
and CEO Micky Arison said “In times like this, more than ever, we need a strong distribute system and we need
folks [travel agents] out there selling the cruise concepts” (Schaal). Thus, instead of focusing solely on online
distribution, Carnival should focus on making sales through travel agencies.
Generations X and Y are responsible for 33 percent of travel agents sales (ASTA). These younger
generations understand the quality these services can provide to the travel experience. We feel Carnival may
want to look into opening up travel agencies on university campuses, in order to appeal directly to these
generations. This would make it convenient for younger students to book convenient, fun vacations.
Forty-three percent of travel agency’s consumers are baby boomers (ASTA). This generation likes the
personal connections made with the agents, which results in assurance of the consumer. In addition, informed
agents can tell our future travelers about our fun services and fleet updates. In regards to booking cruises, we
suggest opening up more agencies to capitalize on the sudden growth within the industry. We feel these new
locations should target university campuses and retirement communities.
Currently, Carnival Cruise is working on bettering their customer service within the transportation to
and from the exit ports. We are suggesting combining with select companies, such as Holiday Inn, Hertz, and
Southwest to get our travelers to the ports of call. The booking of cruises is about 85 percent of all travel
agencies business (ASTA). By booking with bundling, families and repeat cruisers can have an individualized
experience.
Promotion
Carnival should utilize many different promotional factors to properly enhance its business profitability.
Carnival is trying to position itself with the ideas of value, sustainable travel, activity, security, convenience,
adventure, fitness, and most importantly, fun across the entire North American market.
To accomplish this marketing position amongst consumers, Carnival should put particular focus on its
22 | P a g e
weak points (sustainability, adventurousness and fitness), as well as its strengths (fun and value). These primary
points will be made throughout many forms of advertisings through clear simple messages. These messages will
all contain the word “fun” in bold red font. The messages should also convey the ideas of creating desire,
excitement and fun, which are all part of Carnivals integrated marketing communications.
Our team is going to advertise this message across many mediums. We plan to run commercial ads,
magazines ads, Internet ads, and outdoor ads across America. In addition, we will use product placement in
television and movies, and outdoor ads. Combined, these medians will result in a large reach, and frequency
amongst consumers. Over the next 12 months, we are going to utilize all-you-can-afford budgeting to compete
within the competitive nature of the cruise industry. We believe this technique is necessary in order to
strengthen brand equity, since it will differentiate Carnival amongst the relatively homogenous mega cruise
industry.
We choose these four advertising techniques for a variety of specific reasons. Commercial ads are
appealing because they allow the company to communicate to all of our target markets. Good commercial
advertising vehicles include the Olympics and other sporting events, which will help to better position Carnival
as an active experience. We plan on advertising in many different magazines, some geared toward the
affluent—Time and GQ—and others towards younger generations. Specifically, we plan on exploiting the
repeat cruise market through travel magazines like Outside Mag, Coastal Living, Travel & Leisure, Budget
Travel, and Conde Nast Travel. Additionally we feel online advertising via Google, Facebook, NYtimes, and
travel websites to be a productive use of Carnival’s capital. These forms allows Carnival to reach consumers
interested in cruising, and target our specific target markets; for instance, college students can be marketed to
through Facebook, retirees through NYtimes, and repeat cruisers through travel websites. Finally, Carnival
plans to exploit outdoor ads to further promote its new position. This will help reach adventurous people
through sporting events, families through marketing at zoos, and the general public through billboards. We
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anticipate that all this advertising will cost $355.199 million (see Appendix VII for more information.) While
this cost is significant, Carnival’s profits for 2008 were as well: $1.8 billion (Anderson).
Some potential advertisements, which are centered around these ideas, can be found in Appendices VII-
XII. For instance, in one ad, (Appendix VII) we have placed Carnival in the distant background of the show
LOST; we feel that this will build the idea of adventurousness amongst viewers, since LOST is based in an
exotic and unknown place in the world. To help build the perception of Carnival being sustainable, we will
reference our new efforts and recent changes we have made in the business. We will also promote our ships and
explore creating a ‘green’ series ship; this will help us promote Carnival’s sustainable objective (see Appendix
X for a promotion for the green ship series.) Another ad that helps to counteract the ‘lazy man’ image amongst
cruisers is seen in our third ad (Appendix XII.) In this outdoor ad, located in the Boston Celtic’s stadium, we
see an athletic basketball player going in for a slam-dunk.
We also believe that sales promotions can be a crucial business generator during out 12-month
promotional blitz. To help stimulate demand Carnival will offer rebates for first time cruisers - this will
hopefully help stimulate demand amongst the 80% of America who have never cruised; specifically we predict
this rebate will have a large affect on the demand from retirees, families, and college students, due to their
budget focus. Additionally, we will offer a more comprehensive loyalty program to further stimulate the repeat
cruising market (target market). Carnival should also maintain its product and price guarantees to engender trust
and quality.
In the sample ads provided, note that all but the product placement ad feature Carnival’s logo, red
lettering, and a mention of fun and/or happiness. This is not a coincidence - we have made all these strategic
decisions to form a cohesive and integrated marketing communications plan that promotes our central themes
and promotes growth in regards to our target markets.
All of these promotions will significantly hinder Carnival’s short-term profitability, but over the long
24 | P a g e
term we believe these short terms cost will be well worth the financial hit. Finally, if these ventures are
successful, Carnival will have a higher brand quality, which Carnival could then play to if the company decides
to raise prices.
Marketing Track Please reference the attached excel sheet for a developed Market Track and appendix XII for discussions
on the plan itself. We have made this plan and schedule very straight forward. From our understanding of
Carnival we know they can achieve these tangible goals within these time frames. We will measure if the Track
was successful primarily by surveying the public. From these surveys we will determine if our position in the
eyes of consumers was positively changed.
Conclusion We believe Carnival to be a great company; but, it is not perfect. From our in depth analysis we found
three primary areas for change; we believe these changes will significantly increase profits. To increase profit
and market share Carnival should lower the age restrictions on cruising, modernize Carnival’s fleet to be more
environmental friendly while providing more value, and reinvent the perception of cruising within the American
market. These are our marketing objectives for Carnival. We have created a formulated marketing mix plan to
accomplish these goals and further garner business. We know our plan is best for Carnival because of our
expertise of marketing, knowledge of the company and impartial relationship with Carnival. In review, from the
purchase of our ideas and services Carnival will have the tools necessary to sustain it competitive advantages
well into the future.
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