CELEBRITY CRUISES INC.
Cruise industry is fraught with many challenges like any other industry but since a cruise trip is hard to explain and can only be experienced, the challenge of selling cruise vacations becomes even more gigantic. For this reason and some others cruise industry is effectively divided into three classes namely Luxury, Mass and Premium. This classification helps customers get an idea of the kind of experience they would have on board and what should they be expecting. Celebrity cruises Inc. falls in the premium class which has some of the amenities of the more luxurious cruises while retaining some mass features like offering low-cost facilities that could make experience look and feel more luxurious. Dietmar Wertanzl is the vice president of operations at Celebrity Cruises Inc. And he wants to expand customer base and improve profit margins and thus wonders if he should move the operations to mass market or if he should simply offer better customer service with more offers to expand the customer base and hence improve profit margins. While it is the mass and premium sectors that typically have the highest market share, the gap in share is enormous (Ref. table 1) which may prompt a cruise company to enter the mass segment.
BACKGROUND:
The Cruise industry is growing rapidly with more players and better services entering the industry. This means tougher competition which has pushed each cruise company to find ways it can become unique and hence customer's preferred liner for cruise trips (Plowman, 2006). CC thus joined hands with Royal Caribbean in 1997 and this led to higher profits and a bigger fleet. CC was all about spirit while RC was all about adventure and hence the two liners maintained separate identities. However despite the merger working well, CC saw decline in net income from 1999 to 2001 which could be accounted to many factors including rising costs and lower differentiation.
PROBLEM STATEMENT:
With competition getter fiercer in the cruise industry, Celebrity cruises needs to decide if it will stay in the premium sector or move to mass market where profit margins are broader. CC also needs to find other ways of improving profits if it chose to stay in the premium sector. ANALYSIS
Cruise industry is not what it used to be when Celebrity cruises Inc. started its operations back in 1989. Things were much different then since there were few players in the market and people had just been warming up to the idea of a cruise vacation. Celebrity chose to find a niche for itself by positioning itself carefully between the luxury and the mass sectors. It found that they could be luxurious while at the same time maintain some mass market features to make operations more cost effective and open to a wider customer base. (Ward, 2006)
All this worked fine until the turn of the century when things began heating up in the cruise industry and it appeared that one had to compete real hard to stay ahead of the competition by offering more value for money along with great customer service. The growth in demand for cruise trips has also forced cruise ship companies to look for ways to improve and upgrade thus cashing in on the growing interest in cruise vacations. (Ref. Table 2)
Celebrity Cruises Inc. achieved this by consistently improving cruise experience through variety of measures including 150 offerings of food and wine, offering all fresh food, adding some low cost valye enhancing features like star gazing etc. All this has been appreciated but the VP knows that profits could be significantly improved if the company moved to mass market since then they could save more on costs and did not have to worry about maintain a certain guest-staff ratio.
But if that option was ignored, VP wondered what others measures could be taken to gain more loyal customers who would choose Celebrity each time they planned a cruise trip and how the whole experience could be made better for each customer without raising the costs too much.
Celebrity already had a loyalty program in place that offered repeat customers additional benefits like access to parties, vouchers and some wine seminars. All this seemed to work as more and more people were joining the loyalty program. The company had also planned to introduce Concierge class that would offer some additional services like higher quality soaps and fluffy towels at nominal additional price. However the firm was still not sure if...
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