Cunard Line, Ltd.

BY Group 1
Aakriti Singh
Archit Jain
Chahana Jhakar
Mridul Behl
Prashasti Mishra
Sonali Rout
CASE BACKGROUND

The case is concerned with the challenges in the economic environment to balance the
strategic need and resources for image-building for the ships and with the tactical need and
resources to continue to obtain passengers for individual ships and cruises.

Cunard Line, Ltd had been in the cruise and steamship business since 1840 and was a
subsidiary of Trafalgar House. Currently Cunard was in luxury vacation business. Its on-
board service and recreation made the service appealing.

Cunard offered cruising on seven ships. Luxury (5-star) category:- Queen Elizabeth 2,
Sagafjord, Vistafjord, Sea Goddess I, Sea Goddess II; Premium ( 4-Star) category- Cunard
Countess and Cunard Princess

The total Cruise industry: was worth 4 million boardings per year .Luxury segment: (5-star)
accounted for approximately 8% having; 5 out of total of 10 were Cunard luxury ships.
Cunard has about 50% market shares in that segment. Cunard cruise ships consistently
achieved approximately 90% occupancy. Of all 65% of passengers pay full list price. But
then the industrial capacity was exceeding demand so as a consequence, discounting and
price promotion became prevalent.

There was a shared belief throughout the firm that excellence and elegance should dominate
all the undertakings. Marketing Communications Mission was to develop and maintain
Cunard image and to support each of the ships planning managers in their marketing
activities and reach a state where occupancy is 100%

For this a budget of $20 million was decided of which half was strategic (building brand) and
the other half for tactical marketing (creating demand). There came a trend towards more
promotional marketing activities. The communication elements were broken into parts:
Direct mail- 25%, Mass media advertising- 35%(of which 70% strategic, 30% tactical but in
1991-92 was almost 50-50),Brochures and Travel Agent Co-operative Spending- 35% ,
Public relations and promotional activities- 5%.

Integrated Marketing Communications was considered important.’Sale-oriented’ advertising

and promotion(mostly in newspapers and direct mail efforts) was done due to pressure
because of recession. The challenge was to balance the tactical and the strategic measures.
One of the promotional activities was the one day sales and direct mail in order to ‘close the
sale.

Leslie(VP for corporate and marketing communications of Cunard Line Ltd.) is also
concerned about the upcoming reorganization within the company. The ships were grouped
according to the type of cruise or of kind of service required so that focus is on particular
target market with specific concept and message. But at the same time there is dilemma about
the proposed organization.
 Senior executive at Cunard suggested the firm to achieve integrated marketing
communication along several dimensions and one of them was that there was a need to
achieve a consistent look and message between strategic and tactical marketing
communication. There was pressure to create more sales oriented advertising and promotion
with the newspaper and direct mail efforts. This was because of worldwide recession in
1990s and more aggressive promotional efforts by the competition. Hence Cunard should go
for tactical advertising in times of difficult economic and competitive conditions. In difficult
times already there is cost crunching, if they will spend their money on building brand the
time lag between brand building promotion and the effect of that promotion in terms of
revenue would be large so it would not be profitable for the firm.

Newspapers were used as tactical marketing technique and were used to create short term
sales. Direct mailing was another tactical approach but it also maintained the feel of the
magazine advertisement.

In better economic times there should be emphasis on both modes of promotion

simultaneously as it is an umbrella brand so brand building promotion activities were
important and tactical were important so that the firm can get short term sales and hence
generate profit. But a little more emphasis should be given on strategic promotion because
it’s the brand which sells at the end of the day.

Recommendations to Cunard
The proposed organisation such as grouping ships according to the type of cuisine or kind of
service offered may be opposing the very idea of the umbrella marketing strategy Cunard was
following. Regardless of what ship was being promoted it was desirable to have a ‘family’
visual impact. But with this new arrangement of resources the customer perception could
more be towards individual product rather than the Cunard leading to further dilution of
brand.

Thus to maintain a balance in the focus of marketing communications between the overall
Cunard identity and image, and identity and image of individual ships following are the
recommendations:

(1)Avoid individual sales promotion:

The umbrella brand “CUNARD” should be promoted rather than individual ships so that the
image of the brand is maintained and to tell about the individual ships further under that
brand highlight the picture of individual ships could be shown and the expenses charged
accordingly
(2)Changes to the budget:

Out of $20 million more than fifty percent should be allotted to strategic marketing for
instance 70% unlike the current ratio of 50-50 shared between the strategic and tactical so as
to establish the elegant brand image.

(3)Positioning:

The positioning of this umbrella brand can be such that it includes all the target customers of
the individual ships as well as maintain its brand image. There are two target segments here
a) people over the age of 55 years and in 3-5% of top income group and the other 45 years of
age and above and in upper 20-25% of the income group. So that tagline for the brand can be
‘A national brand that starts from being reasonably priced’!

(4)Strong Brand Equity:

Leveraging strong brand equity makes good economic sense, but not because it saves money
in the short term. Continuing to invest in brand marketing rather than giving in to
recessionary pressure to cut spend and cut prices is a clever long term strategy. Being brave
enough to invest in brand now will pay handsome dividends when we come out of the
downturn.

(5) Business Card Magnet:

Since it is evident customers who have already been to a 5 star cruise ship are the ones who
are more likely to go for in future they can be distributed business magnet cards that can
easily be placed on refrigerator etc so that next time they wish to take a board the ‘brand’ is
the share of mind.

The brand has an image of elegance and enjoys high recognition. In the business of luxury
cruise line it has differentiated itself on the basis of services rather than destinations.
Cunard’s target group comprises of high income individuals (top 25%) in the age group of 45
and above. These are affluent, educated and usually married people with high disposable
income. While devising the integrated marketing communications program, the marketers at
Cunard should keep in mind their target market and that the promotion should support the
image the company boasts of in the minds of its customers

The objectives of Cunard’s integrated market communication are to:

 Develop and maintain the Cunard image.

 Support individual ships’ planning managers in their marketing activities.
 Create a demand and ensure close to 100% occupancy.

The approach the company takes has to be the right mix of various communication tools. This
would comprise of:

 Advertising
 Personal selling
  Sales promotion
 Sponsorship

The best approach for Cunard that has worked so far is the direct marketing approach.
Herein the company targets the existing customers and those recommended by them as
potential customers. This requires robust database maintenance as company needs to keep in
touch with the prospects at all times. As the target audience is the crème de la crème, they
need to create personalised experience even before they are on the cruise. This is done to
develop awareness, interest and motivation among the target group. It is also the most
persuasive of all marketing communication mechanism used by companies. Another
advantage is that message is personalised and circulation is limited so it also helps in cutting
costs. Only those who are really interested and can afford the cruise are contacted through the
company.

On the con side of this approach is that the cost per potential customer is high.

The company already advertises through newspaper, magazines etc. It should continue with
that with high emphasis on strategic component with slight push towards tactical.

Sales promotion should not be used aggressively as using that for 5 star cruises would
dissolve the image of the company. So discounted prices and freebies are not recommended
to maintain the position and elite image the company commands. The company can associate
itself with other companies like sponsoring events conducted travel magazines, fashion
shows, charity balls etc.

Implications of the success of the “one-day sale” for Cunard

Cunard is basically a luxury brand, targeted at the high-end consumers. Its brand image is a
result of years of diligence and consistent stress on quality and offering of differentiated
services. This carefully nurtured image of the brand has created a sense of exquisiteness
around its products and services. Hence although this short-term offering was a great success,
repeated use of such offerings may induce some sort of negativity in the minds of potential
and existing consumers towards the brand. There maybe a perceived notion of the company’s
shift from the emphasis of quality, which might have led to such tactical marketing policies to
attract more customers. Hence in the long run it can adversely affect the brand image of the
company.

Organizational changes effect on marketing communications

Earlier each ship had been marketed by a marketing planning executive. The individual had
responsibilities similar to those of a product manager with one individual managing one ship.
The responsibilities included the revenues, pricing, marketing efforts and the gross margins. -
But the actual development and the execution of advertising programs was done by the
marketing communications staff .A different organisational alignment was considered. The
ships were divided into four groups in accordance to type of cruise or services offered. Each
group will target a particular market and have a distinctive appeal. Within each of these
groups would be an executive responsible for both strategically and tactical marketing
planning on behalf of the ships within the group. The objective of the proposed organization
structure was that each business group would be able to focus its resources on a particular
target market with a specific product concept and message. Also it would assist travel agents
to know each ship distinctively. But the organisation change could dilute the overall brand
Cunard further as this new arrangement will develop the consumer’s knowledge and attitude
toward the individual product rather than toward Cunard. There would be less central control
over the specifics of marketing communications as profit responsibility will be centred on
these new groups. Also it will be also difficult to maintain the integration of marketing
communications among the products and across various media

Prioritizing the challenges facing Leslie at the close of the case

Leslie is facing many varied challenges in the current scenario, due to tectonic change that
seems to be sweeping the shipping industry. One of important concerns is the image overhaul
that Cunard needs to undergo in order to stay with the times and attract more and varied
customers and boost short-term sales. It needs to move away from its high brow image to a
more action oriented one and at the same time maintain its perceived high affluence, high
quality , ultimate luxury image. This should be the first priority for Leslie.

The second most important task that is staring Leslie in the face is the impending
organizational overhaul within the company. This would mean reorganization of the
marketing communication around various types of cruise or kind of service offered. Till now
the marketing communication was individual to each ship but now the ships are going to be
grouped together under various heading describing the group. The dilemma here is whether
such a grouping might lead to image dilution of the ships as till now they have been marketed
separately and have their own individual image in the consumers mind.

The third on the list should be budgeting, it is important as the ships need to be paying for the
kind of promotion they get during this corporate wide marketing effort from the kind of
volumes it generates. There is a requirement of a defensible and rational formula to undertake
such a budgeting concern.