Cruise Lines Should Target Their Most Profitable Customers

[Huddler]

Watching the Peter Greenberg special on cruising tonight on CNBC got me to thinking about the cruise line business. I know that each line has "loyalty" programs that encourage repeat business by offering various incentives. And that makes alot of sense to me. But do they really want to target all repeat customers equally? Why dont they target their most profitable customers more than others? For example, my wife and I dont just get a cabin and then tighten up the purse strings. We burn through cash onboard like a drunken sailor on shore leave. We drink several drinks every day of the cruise, and then get a bottle of wine with dinner. I would wager that our drinking bill is in the top 5% of all passengers. Speaking of wagering, we gamble alot of money every day of the cruise in the casino. We book at least half our excursions through the cruise line. We eat at all of the specialty restaraunts. We buy pictures and souveneers. And although we dont get the biggest suite, we always get a veranda cabin.

 

In other words, we are the type customers who spend money once we get on board. The kind of customer who the cruise line really covets: the one's who can make the difference between a cruise just breaking even or making a substantial profit. So, as a "profitable" repeat customer, why should I be treated just like the tightwad who brings their own booze, doesnt gamble, doesnt go on the ships excursions, and is basically tighter than a crabs ass in cold water once on board? Sure, the cruise line needs to fill every cabin and they need every warm body they can get to achieve 100% capacity. But they need my warm body more than the miserly old curmudgeon. So, since I am more lucrative than the average cruiser, why not target me like a lazer beam and offer me greater incentives?

 

The closest thing I can compare it to is comps that Vegas casino's give to "high rollers". Those gamblers who are most profitable to the casino are targeted with all sorts of incentives to come back and gamble more. The more you gamble i.e the more profitable you are to the casino, the more comps you get. And real frankly, the more times that the casino will reach out to you to get you to come back. Either through your host calling you monthly like mine do, direct mailings, etc. I wonder if cruise lines analyze the value a particular customer has to them. And why they dont reach out to their most "valuable" customers with "comps" or deeper discounts on the cabins? Just a thought and I would like to hear others opinions.

[LHT28]

Doesn't Carnival & RCCL offer big incentives to repeat cruisers?

[hondorner]

...In other words, we are the type customers who spend money once we get on board. The kind of customer who the cruise line really covets: the one's who can make the difference between a cruise just breaking even or making a substantial profit. So, as a "profitable" repeat customer, why should I be treated just like the tightwad who brings their own booze, doesnt gamble, doesnt go on the ships excursions, and is basically tighter than a crabs ass in cold water once on board?.

Sorry, I gotta ask, the way you spend money, why do you care? You'll probably go, anyway. Why should they offer you an incentive? I, on the other hand, am one of the crabs in cold water, so it really, really matters to me whether I save 75 cents, and I may pass up the sailing without the incentive. The incentive has more -- well, incentive for me. So, where should they spend it?

 

Besides, if thjey give you a thousand dollar incentive against your thousand dollar bar bill, you will end up being less valuable to them than me with my one $40 bottle of wine they would lose if I didn't go. OK, that's a stretch, but you get my point...

[StanandJim]

Huddler-

 

From your mouth to Gods' Ear, our bar bills must resemble yours.

 

Of course, Cruise lines do watch what we spend aboard the ships, which is one of the big reasons why they switched to a cashless system in the very early 1970's.

 

So far, however, the only change that they have made, using that data, is the virtual elimination of the single occupancy cabin.

 

When the accountants finally had a means to track spending habits accurately, the Cruise Lines were so appalled at how little a single traveler typically spent, that the single cabin effectively became a dinosaur.

 

Did you know that a single person sharing a double room with a stranger will spend more money than a single in a room alone? Perhaps they go out for a drink in the lounge just to get away from the room-mate??

 

Anyway, the lines certainly spend a lot of effort to track and categorize our spending habits, it seems only a matter of time before they begin to reward the high end players.

 

Just hope that it happens before the revolution!

[Bruin Steve]

All cruise lines target certain customers...In fact, they target all potential customers...But it would be really complicated to track every expenditure and market differently based on those factors...

 

You may think you're spending a lot of money on certain things...but you really have little idea what others spend...or how profitable they are to the cruise line...The profit margin on drinks may be larger than the profit margin on shore excursions...the profit margin on some gift shop purchases are larger than on others...It may take your buying a whole lot of drinks, despite the profit margin, to make up for someone else's gift shop watch purchase...

 

Most cruise line loyalty programs are based merely on number of cruises, though some now add extra credits for suites or longer cruises...

 

But, though they are nice little bonuses, the really good customer doesn't book cruises based on the loyalty programs--they base it on the value of the cruise itself--the way the cruise line trats ALL of its guests based solely on the fact that they buy the cruise...

 

For me, I could not care less about the repeat customer perks--though I don't turn them down--I cruise for the value of the cruise itself...for the itinerary, the ship, the food, the service, the entertainment, the activities, the accommodations...The loyalty club perks are WAY down the line...

 

But ALL of the cruise lines market to me...I've been on seven different cruise lines and a repeat customer on most of them...I'm on all of their mailing lists...and even without the prior business, they'd probably market to me due to my profession, the neighborhood I live in, my professional and social organizations, my publication subscriptions, etc. The cruise lines know who to market to...

 

Now, one interesting note regarding Oceania's marketing:

I was speaking with my Travel Agent this morning...The subject was a certain "deal" that was offered by Oceania to a certain special group...I asked her if she got good deals due to being a travel agent...

 

She told me yes, on most lines, but that she only got the offers about thirty days from sailing...so it was difficult to make air arrangements or to plan ahead...So, when she recently went with family on an Alaska cruise, she paid full fare because she had to be able to plan it...

 

She told me that certain cruise lines offer her some excellent deals--some as low as just paying the port taxes and fees...And a lot of those deals are on the "premium" lines...She specializes in premium line bookings and told me about 70% of her bookings are on Crystal and Crystal treats her extremely well...BUT Oceania doesn't...They don't offer her any deals for her to cruise personally at all...

 

Rather puzzling as she has the sort of clientele that could easily be directed to Oceania...She books me on Oceania because I specifically request it...but she really doesn't book a lot of Oceania...

 

Seems to me that if Oceania is really sailing with a lot of empty cabins right now...marketing a deal to a travel agent like mine would probably result in more bookings down the road--since her clients--the premium line regulars--are, in this economy, likely Oceania cruisers...

 

They would probably be better off marketing to influential travel agents who could direct the "good" customers to them than trying to track who the high profit margin cruisers are...

 

As far as individual cruisers go, they are best off first targeting cruisers...then doing a better job at marketing those shore excursions and drinks and such......

 

Besides, hopefully the customers who are smuggling teir own drinks and being cheap as to what they purchase on board are NOT the cruisers who are on Oceania...Those folks in the greatest numbers--in my experience--are on CARNIVAL...

[Huddler]

Doesn't Carnival & RCCL offer big incentives to repeat cruisers?

Yes, I am fairly certain that most if not all lines have incentives for repeat customers. But I am speaking of differieniating between repeat customers who are "profitable" and those who are not. And then targeting the "valuable" customers in very direct ways in order to do whatever possible to get them back onboard.

[Huddler]

Sorry, I gotta ask, the way you spend money, why do you care? You'll probably go, anyway. Why should they offer you an incentive? I, on the other hand, am one of the crabs in cold water, so it really, really matters to me whether I save 75 cents, and I may pass up the sailing without the incentive. The incentive has more -- well, incentive for me. So, where should they spend it?

 

Besides, if thjey give you a thousand dollar incentive against your thousand dollar bar bill, you will end up being less valuable to them than me with my one $40 bottle of wine they would lose if I didn't go. OK, that's a stretch, but you get my point...

Well, my average bet per hand in blackjack in Vegas is ~$350 per hand, so according to your logic: why do I care if I can free rooms, airfare, food, show tickets? I absolutely care about getting comps and they definitely entice me to come back to that casino and play again. Along with my hosts who develop a personal relationship with me and other people that the casino wants to spend money on just so they will return to their casino rather than going to another. Gaming is a competitive industry, just like the cruise industry, and they want all the business they can get. But they are willing to spend money to get "rollers" in there because we make them alot more money than a 100 penny slot players. So, why shouldnt the cruise lines do something extra for people who have a history of being extremely profitable for the company? And you are correct, I will probably go cruising again anyway regardless if I am offered anything over and above what is available to the general public. But I might go on a different line. And, real frankly, thats the point: they need to get people like me on their ship rather than risk me taking my lucrative business to one of their competitors.

 

Let me say that I am looking at this thing through a business perspective. On a personal level, I dont think the cruise line "owes" me anything extra for my spending habits. But as an on-going business concern, shouldnt they try to maximize the profitability of every cruise? The more "high value" customers they have on board, theoretically, the more money each particular cruise will make. For example, if they have a cruise chock full of "valuable" customers like me that spend money onboard, the odds of that cruise being profitable go way up. If they only have tight fisted cruisers who spend virtual nothing once onboard, that particular cruise will be "under water, pardon the pun. Those cruisers cost the cruise line money by not spending and also taking the cabin of a potentially profitable customer. And as was pointed out on Peter Greenberg's show, they have "target sales goals" on every facet of the cruise from liquor, to excursions, to specialty restaraunts, etc. They can track the profitability of that particular cruise within seconds of it ending, because they know their fixed costs, the occupancy rate, and the exact amount spent on that cruise.

 

They already track EXACTLY what you spend on each cruise. You get an itemized statement at the end of the cruise with all of your purchases. They could simply collate that data and sort by the cruisers who are above a certain threshold expediture level, and then target them "personally" with deals that they dont offer to the general public. And by personally, I mean have folks who act sort of like "casino hosts" who reach out to these "high value" customers on a regular basis. Rather than just including them on the "mass mailings" and email distro lists, you establish a personal relationship with these customers. And give them deeper discounts on your cabins that simply arent available to the "low value" customers.

 

Lets face it, all cruise lines do a good job at something or they wouldnt be in business. And they all have extreme competition in their particular market segment. In these difficult economic times, wouldnt it make sense to target and incent those cruisers within your segment who can absolutely make the difference between red and black ink? The key is you have to get the high value customer on board. Just get a bunch of those people onboard and you assure yourself a profitable cruise. Reward people based on the value they bring the company rather than treat him just like the person who you dont make any money on. Again, just something that I was thinking about and not sure it even makes sense but I do find it an interesting marketing concept.

[ORV]

Well, my average bet per hand in blackjack in Vegas is ~$350 per hand, so according to your logic: why do I care if I can free rooms, airfare, food, show tickets? I absolutely care about getting comps and they definitely entice me to come back to that casino and play again. Along with my hosts who develop a personal relationship with me and other people that the casino wants to spend money on just so they will return to their casino rather than going to another. Gaming is a competitive industry, just like the cruise industry, and they want all the business they can get. But they are willing to spend money to get "rollers" in there because we make them alot more money than a 100 penny slot players. So, why shouldnt the cruise lines do something extra for people who have a history of being extremely profitable for the company? And you are correct, I will probably go cruising again anyway regardless if I am offered anything over and above what is available to the general public. But I might go on a different line. And, real frankly, thats the point: they need to get people like me on their ship rather than risk me taking my lucrative business to one of their competitors.

 

Let me say that I am looking at this thing through a business perspective. On a personal level, I dont think the cruise line "owes" me anything extra for my spending habits. But as an on-going business concern, shouldnt they try to maximize the profitability of every cruise? The more "high value" customers they have on board, theoretically, the more money each particular cruise will make. For example, if they have a cruise chock full of "valuable" customers like me that spend money onboard, the odds of that cruise being profitable go way up. If they only have tight fisted cruisers who spend virtual nothing once onboard, that particular cruise will be "under water, pardon the pun. Those cruisers cost the cruise line money by not spending and also taking the cabin of a potentially profitable customer. And as was pointed out on Peter Greenberg's show, they have "target sales goals" on every facet of the cruise from liquor, to excursions, to specialty restaraunts, etc. They can track the profitability of that particular cruise within seconds of it ending, because they know their fixed costs, the occupancy rate, and the exact amount spent on that cruise.

 

They already track EXACTLY what you spend on each cruise. You get an itemized statement at the end of the cruise with all of your purchases. They could simply collate that data and sort by the cruisers who are above a certain threshold expediture level, and then target them "personally" with deals that they dont offer to the general public. And by personally, I mean have folks who act sort of like "casino hosts" who reach out to these "high value" customers on a regular basis. Rather than just including them on the "mass mailings" and email distro lists, you establish a personal relationship with these customers. And give them deeper discounts on your cabins that simply arent available to the "low value" customers.

 

Lets face it, all cruise lines do a good job at something or they wouldnt be in business. And they all have extreme competition in their particular market segment. In these difficult economic times, wouldnt it make sense to target and incent those cruisers within your segment who can absolutely make the difference between red and black ink? The key is you have to get the high value customer on board. Just get a bunch of those people onboard and you assure yourself a profitable cruise. Reward people based on the value they bring the company rather than treat him just like the person who you dont make any money on. Again, just something that I was thinking about and not sure it even makes sense but I do find it an interesting marketing concept.

 

Makes perfect sense to me. Maybe that's why they don't do it, or maybe they do to an extent.

 

Good thread.

[hondorner]

Here's another aspect -- if you target only high spenders, who is going to take the cabins in the lower categories?

 

I think Oceania has been so successful precisely because they attract such a mixture of passengers. It appears to me they don't attempt to maximize the spending of the passengers like other cruise lines. They get a decent price for their product, sail with mostly full ships (at least prior to this economic meltdown) and offer value that other cruise lines do not.

 

Other cruise lines would rather stay at sea to maximize the spending; Oceania's most popular cruises are so port intensive they don't offer the passengers much time to spend. The casino is tiny and even so, has never been even half full when I have been aboard. Fully half of the passengers eat dinner and go to bed. They don't push drinks like the other lines, there is no photographer on board, they don't charge for alternative dining, they give away cappuccinos to everyone -- the list goes on and on. I didn't see the CNBC program, but I'm willing to bet that much of what they presented does not apply to Oceania.

 

Their profit model has been so successful in the past, their marketing strategy does not surprise me. I think they have someone who is highly tuned to the market and will adjust to the current situation and continue their success, if in a more limited way, and be poised to grow when the market does improve.

[Veronica13]

Yes, I am fairly certain that most if not all lines have incentives for repeat customers. But I am speaking of differieniating between repeat customers who are "profitable" and those who are not. And then targeting the "valuable" customers in very direct ways in order to do whatever possible to get them back onboard.

 

I totally agree with you. I also spend a ton of money on board. I'll match my bar tab against yours anyday.:p I travel alone and average $1500 per 7 days of sailing for "on boards"

 

What do we care? Because the people who smuggle as much booze as they can on board, play penny slots (if at all), don't drink or only try to get "free" drinks and really can't AFFORD to cruise change the ambience of the trip.

[ShopperfiendTO]

What about the possibility that the "high value" clients prefer to not get the attention that you suggest they should receive? Just because they spend big, it doesn't mean that they want to be treated like celebreties.

 

Although I guess that issue could be easily rectified after the first coddling, which the client can simply advise that if this marketing behavior continues, they will cruise elsewhere.

 

Also, I believe that some lines contract out their services so that they receive only a cut of the revenue received. I understand that Oceania does this for the alcohol and the spa? If so, then maybe most of the booze money you spend mostly goes to the contractors and very little to Oceania, in contrast to something they run (say, the excursions), so how would you feel if Oceania coddled the high excursion spenders rather than the high booze spenders? Should it make a difference?

[LHT28]

She told me yes, on most lines, but that she only got the offers about thirty days from sailing...so it was difficult to make air arrangements or to plan ahead...So, when she recently went with family on an Alaska cruise, she paid full fare because she had to be able to plan it...

 

Most travel related businesses will offer TA's discounts but they are not going to give you the deep discounts when they can fill the space will full fare paying passengers.

They do have to wait 30 -45 days before sailing depending on the cruise line to apply for the deals

TA can also get good discounts on airfare if the space is there.

Just look at some of the INTERLINE sites

[hondorner]

...What do we care? Because the people who smuggle as much booze as they can on board, play penny slots (if at all), don't drink or only try to get "free" drinks and really can't AFFORD to cruise change the ambience of the trip.

True, but which way?

 

On Oceania, there is no need to smuggle booze, so that doesn't happen. There are many reasons why people don't drink or gamble, and most of them are positive. Anyone who is sailing on Oceania can AFFORD to cruise; your point might be taken for NCL, for example.

 

Spending on board has absolutely nothing to do with whether one can afford to cruise -- I would assume that one's spending habits are much the same whether on board or at home. If not, I think a good case could be made that someone who goes wild with drinking, gambling and spending only while on a cruise ship is not changing the ambiance for the better...

[Huddler]

Here's another aspect -- if you target only high spenders, who is going to take the cabins in the lower categories?

 

I think Oceania has been so successful precisely because they attract such a mixture of passengers. It appears to me they don't attempt to maximize the spending of the passengers like other cruise lines. They get a decent price for their product, sail with mostly full ships (at least prior to this economic meltdown) and offer value that other cruise lines do not.

 

Other cruise lines would rather stay at sea to maximize the spending; Oceania's most popular cruises are so port intensive they don't offer the passengers much time to spend. The casino is tiny and even so, has never been even half full when I have been aboard. Fully half of the passengers eat dinner and go to bed. They don't push drinks like the other lines, there is no photographer on board, they don't charge for alternative dining, they give away cappuccinos to everyone -- the list goes on and on. I didn't see the CNBC program, but I'm willing to bet that much of what they presented does not apply to Oceania.

 

Their profit model has been so successful in the past, their marketing strategy does not surprise me. I think they have someone who is highly tuned to the market and will adjust to the current situation and continue their success, if in a more limited way, and be poised to grow when the market does improve.

I want to apologize as I have apparently not communicated my point very effectively. I am NOT suggesting that they abandon their general mass marketing efforts in favor of targeting only high value customers. Quite the contrary, as they need to continue their existing marketing campaigns particularly those geared toward former passengers. My salient point is, that in addition to this, they should create an additional program that specfically targets their most profitable customers. Just as a casino still needs those thousands of penny slot players, the cruise line simply cannot afford to abandon the low profit cruiser or risk low occupancy rates. But they should at least attempt some sort of extra means in order to continue to secure the business of the customers who bring the most revenue per cruise into the company. Does that make sense?

 

Regarding your other points, if Oceania isnt attempting to maximize profits, then the shareholders should revolt. They are a business and as such they have a fiduciary duty to make as much money as they can for their shareholders. Now with a "specialty" line like Oceania, perhaps fewer opportunities to spend money onboard is effectively offset by higher cabin prices, higher priced extras like excursions, as well as repeat customers as a result of less intrusive sales gimmicks onboard. I dont know. But they absolutely must attempt to maximize profitability by finding the right mix of income streams and pricing.

[Huddler]

True, but which way?

 

On Oceania, there is no need to smuggle booze, so that doesn't happen. There are many reasons why people don't drink or gamble, and most of them are positive. Anyone who is sailing on Oceania can AFFORD to cruise; your point might be taken for NCL, for example.

 

Spending on board has absolutely nothing to do with whether one can afford to cruise -- I would assume that one's spending habits are much the same whether on board or at home. If not, I think a good case could be made that someone who goes wild with drinking, gambling and spending only while on a cruise ship is not changing the ambiance for the better...

Whether someone is a high spender on a cruise is not directly proportional to their ability to spend. I posit that isnt even the issue at hand. What is relevant is does this particular passenger spend beyond a certain threshold as to make them worth diligently persuing by all means necessary to get them back on board so they can spend again.

[Huddler]

I totally agree with you. I also spend a ton of money on board. I'll match my bar tab against yours anyday.:p I travel alone and average $1500 per 7 days of sailing for "on boards"

 

What do we care? Because the people who smuggle as much booze as they can on board, play penny slots (if at all), don't drink or only try to get "free" drinks and really can't AFFORD to cruise change the ambience of the trip.

I DEFINITELY want to party with you!!!:D

[suec12]

Oh dear - I'm afraid I may be an "ambience changer" - I smuggle booze on, I don't gamble, I'll drink any free drink I can score - I was afraid Oceania might be too upscale for me! I'm a penny pincher - my travel is my indulgence. I'll just have to hope the other Oceania travelers can tolerate me.

[Veronica13]

I DEFINITELY want to party with you!!!:D

LOL

That's the whole point of traveling for me....FUN. I can sleep at home.

[Veronica13]

Oh dear - I'm afraid I may be an "ambience changer" - I smuggle booze on, I don't gamble, I'll drink any free drink I can score - I was afraid Oceania might be too upscale for me! I'm a penny pincher - my travel is my indulgence. I'll just have to hope the other Oceania travelers can tolerate me.

 

I think I forgot what board I was on. That train of thought was meant for the Celebrity board. I highly doubt I'll find threads on here about smuggling booze or where can I find the free drinks, do they have penny slots, how can I get out of tipping, how much food can I remove from the ship, etc. that make me CRAZY. :(

[Huddler]

I posted this same topic at the Celebrity board and got a totally different reaction. Wow! Everybody thought I was attacking them for being cheap. What I was doing was looking at various passenger types from the cruiseline perspective. But lots of the Celebrity folks really got upset.

[lcand1923]

Your concept is an interesting one, but I wonder what spending you would want Oceania to include in deciding the High Spender.

 

For example, would you want total dollar on shipboard account?

Or, total dollar on shipboard account + cost of cabin?

Or, total dollar on shipboard account + cost of cabin + cost of airfare booked through Oceania?

 

In other words, what charges are you considering?

 

On our last cruise we had a rather large Medical Center bill. Due to the illness, we did not have our usual bar bill and Shore Excursion bill. BUT, the bill was the highest we have ever had on any cruise.

 

Would we qualify as High Spenders for your theory?

[Veronica13]

I posted this same topic at the Celebrity board and got a totally different reaction. Wow! Everybody thought I was attacking them for being cheap. What I was doing was looking at various passenger types from the cruiseline perspective. But lots of the Celebrity folks really got upset.

 

LOL, yeah, I was following the drama as well. Have too much time on my hands today. You have to remember, a lot of the "Celebrity folks" are BRAND NEW Celebrity migrating up from NCL, Carnival, etc. - so you are certainly going to get a different reaction.

[Veronica13]

For me, just RAISE THE PRICES and keep the quality. When you do that, you will naturally have people with more disposal income on board.

 

Sorry you had to use a cruise medical center. Horrible place! Hope it was minor, but I'm sure the expense wasn't!!

 

I have a vague memory of having the flu many years ago and being charged $10 an aspirin, $100+ for the "exam", etc. Now I bring my own meds for anything I might need.

[LHT28]

So what you are saying

If you have done multiple cruises but do not drink or gamble you should not get any perks compared to someone who has sailed more than once on the same line but spends wildly, drinks & gambles??;)

[Veronica13]

No....

 

Again, I think when the product is priced properly, the rest falls into place.

 

The gambling thing is another story. TRUE high rollers (not me) who regularly gamble over $10K per cruise, should get their free cruises, etc., just like a casino hotel.

 

I gamble under $1K, drink many bottles of champagne, buy the stupid pictures, buy the stupid logo shirts...but they've never suckered me into the art show!! LOL.

 

I tip very generously and privately and believe you get what you pay for!:p