How Cunard Line Ltd can adapt its marketing strategy and corporate objectives to increase profits

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Answered by: Caroline, An Expert in the Marketing - Planning and Strategy Category
Cunard Line, Ltd

Managing Integrated Marketing Communications

Situation Analysis

Corporate Mission and Objective

Cunard Line has moved away from its original marketing strategy and corporate objectives of providing travel services and has adapted to a new role, that of providing luxury vacations. Destinations, however, are still part of the service that the company offers. There seems to be some blurring as to the company mission as, on the one hand, they are providing high class, luxury cruising in a 4-star environment, but on the other hand, they are also providing less formal, and somewhat less expensive 4-star cruising. The dilemma facing the marketing executive is formulating an integrated marketing strategy that can be successful for each product, if possible.



Business Unit Analysis

Cunard is providing four separate products, three of which are somewhat similar in terms of which target markets they are aimed at and which pricing strategies should be employed. The QE2 provides 5-star cruising along with the ultra deluxe cruising offered by the ships Saga fjord, and Vista fjord. Five-star yacht-like cruising is also offered aboard the Sea Goddess I and Sea Goddess II. In addition, Cunard offers 4-star cruising aboard its less formal Cunard Countess and Cunard Princess ships. The disadvantages of offering this last product is that competition exists from other cruise lines who are marketing a less sophisticated image and who can afford to offer discount cruises aboard their 4-star ships. It is hard for Cunard to compete in this arena and to offer budget cruises while maintaining their quality image.

Buyer Analysis



The typical profile of a passenger on a Cunard ship is well-educated and married. For the luxury cruises consumers tend to be older, over 55, and very wealthy. They are demanding a luxury item and are willing to pay a high price. The effect of pricing will have a big effect on sales for this group. Lower prices may imply a less than luxury quality product and will not attract the wealthier consumer. Price points for luxury cruises are elastic, lower prices may decrease sales. However, as far as environmental issues are concerned, the demand for luxury cruises is inelastic. Even if the economy falters, there will still be a small percentage of people who will be willing to pay high prices for a luxury item such as a cruise aboard the QE2. Regarding the four-star ships, consumers are younger with lower incomes. This group may be responsive to price change and if a budget price is offered they may be more inclined to purchase a cruise. This product is also elastic but in the opposite way, lower prices may increase sales. The demand for this product is also elastic in the event of a failing economy. If people in this target market are suffering from a decreased income, they may be less inclined to purchase a cruise, particularly one that is offered by a more expensive line such as Cunard.

Competitor Analysis

In the 5-star cruising market, Cunard has the advantage over competitors. They have been in the business for 150 years and have established a brand that is strongly associated with luxury and quality. However, in the 4-star market, there is increasing competition from mass market cruise lines; for instance, Carnival Cruise Line was expected to spend $40 million to promote its “Fun Ships” brand in 1992.

Target Market Strategy

The mass market cruise lines are targeting a different target market than Cunard for its 4-star cruises. They are targeting younger couples, perhaps those with children, if the example of Carnival’s “Fun Ships” is used as an example. By providing cheaper cruises, they will be more successful in filling capacity than Cunard. They are focusing on different demographics and are not attempting to target the high-end client. Cunard will not gain market share from the mass market cruise lines unless they attempt to target similar markets. Doing so, however, will damage their high-end image and may result in revenue losses for their 5-star cruises.

Marketing Planning

Cunard would benefit from an analysis of its products to determine if these fit the long term strategy for the company. It may be the case that integrating strategic marketing and tactical marketing does not fit the image of Cunard and is not suitable for their long term strategy. The existing strategy of competing at both the 5-star level and the 4-star level is not successful. Cunard faces a limited budget for marketing and employing the GE model to focus on one product where Cunard has competitive advantage might be beneficial.

Positioning Strategy

Cunard Line’s 5-star luxury cruises, using the BCG Model, can be described as a “cash cow”l. High end cruises are experiencing relatively little market growth but they claim a very high percentage of market share, due to Cunard’s brand name. Cunard should position itself to focus on this area and not to try to compete with other cruise lines with other products. This will waste marketing resources and will have a negative effect on the Cunard brand name.

Marketing Mix

The products offered by Cunard have reached maturity in the product life cycle and are in decline. At this stage, Cunard should examine the marketing mix and make notable changes if the company is to continue to be profitable. Cunard is currently experiencing declining sales. The company has to discount cruises to reach capacity on their ships in an effort to remain profitable, and their 4-star cruises are being threatened by competitors.

The product mix is serving to distort the high end brand image of Cunard as they are offering discount cruises in addition to high end luxury vacations.

The prices remain high which helps with the image of quality for 5-star cruises, but is not competitive with other cruise line companies at the 4-star level.

Channels of distribution are mixed. Cheaper advertising offering budget cruises are appearing in newspapers while expensive glossy high end ads are appearing in magazines such as “Town and Country”. These mixed marketing messages are having a negative effect on Cunard’s brand image.

Problem Statement

How can Cunard Line change its marketing strategy and marketing mix to improve profits and continue to have the image of the most luxurious cruise line offering the highest quality in cruise vacations?

Decision Statement

Develop a long term strategy for Cunard. Change the marketing mix to achieve long term goals. Concentrate on one product. Sell off the less profitable products (4-star less formal ships). Focus on the marketing strategy and resources

Identification of Alternatives

Develop a new integrated marketing campaign that encompasses both strategic marketing and tactical marketing

Develop a long term strategy for Cunard and change the marketing mix to achieve the long term goals. This can be done by concentrating on one product, selling off the less profitable products, and focusing on the marketing strategy and resources.

Criteria

Effect on Cunard’s high end image

Profits

Competition

Long Term Goals

Analysis of Alternatives

Develop new integrated marketing campaign that encompasses both strategic marketing and tactical marketing

Designing a marketing campaign that can achieve both strategic and tactical goals - one that will maintain and even improve the Cunard quality brand image whilst also offering last minute budget cruises - is an impossible task. Each marketing strategy will have a negative effect on the other. Either a brand has a high end image or it has a budget image.

Similarly, having a separate marketing manager design a marketing campaign for each ship is further distorting the image of Cunard. The company is a strong one with a long history and advertisements should be strong and consistent in conveying that message.

Develop a long term strategy for Cunard and change the marketing mix to achieve the long term goals. This can be done by concentrating on one product, selling off the less profitable products, and focusing on the marketing strategy and resources.

Cunard is confusing its long term and short term goals. The long term goal for Cunard should be to maintain and improve its quality brand image and to continue to offer high end cruises. In the short term, Cunard is instead attempting to compete with other cruise lines for the 4-star market. This may help profits in the short term but they will not be able to compete in the long term and in doing so, the company is damaging its quality image.

Cunard should reorient its marketing strategy to be in alignment with the long term goal. This involves phasing out weak items where they will not be able to compete, 4-star cruises. They should reduce their advertising and focus on the high end market. Newspaper ads should be discontinued. Ads should be consistent, for example, the QE2 ads and ads for the other 5-star ships are of high quality and should appear in magazines aimed at the target market. Doing this will reduce their mass media advertising by 50%, as strategic marketing will be continued, and tactical marketing will be dropped. Direct mail should be continued and even increased as this gives a personal touch to the clients and improves customer opinion of Cunard. It is important, therefore to continue to make use of companies who can provide consumer information, historic, demographic and profiling, so that Cunard is able to provide marketing materials that are tailored to the needs and profiles of potential customers.

Budget cruises should be stopped and only full price cruises offered. This will maintain the luxury brand image. Prices should not be dropped as the demand for luxury cruises with Cunard is fairly inelastic.

Focusing on the 5-star cruises only will allow Cunard to use additional resources to continue to offer the highest quality accommodations. Their marketing strategy can be centralized and costs lowered as there will no longer be a need for a separate marketing manager for each ship.

Recommendation

My recommendation for Cunard is to sell off the 4-star ships to competitors. Trying to compete with them will not be successful in the long term. To do this they would have to cut prices which would ruin their brand image.

Develop a long term strategy for Cunard concentrate on one high end product, 5-star luxury cruising. Cunard has the advantage here over competitors with an established international luxury image and experience in selling and providing luxury cruises. Cunard will experience little competition in this market if they continue to have consistent strategic marketing in the right distribution channels.

These recommendations will provide a narrower focus for Cunard, additional resources, and achievable marketing strategy and corporate objectives.

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