Class 6- Key Notes
Focus on the 4 (P)-Price, promotion, Product, and Place (Framework 9)
Promotion- EXAMPLE CRUISE LINES
Cunard was founded in 1839. Today is a subsidiary of Carnival. In the past, a ship needed to be taken to travel from Europe to the US. So customers went to the port to arrange a deal in order to cross the ocean. The deal could be paying or working in the port/ship or a combination of both.100 years later, many cruise lines exist. Today airlines exist and people fly instead of using the boat to cross the ocean for transportation. This is the S Curve. So using a ship to cross the ocean for transportation purposes is no longer necessary. Cruise lines are now used for leisure and entertainment and these became their core business. Transportation used to be the primary benefit but not anymore. So cruise lines changed their business model to entertain people. Transportation became a secondary thing. Leisure and entertainment became primary benefit. The innovation is changing the message in the market. Instead of transportation, entertainment. 20,000 years ago we had to hunt for our food. Today hunting and fishing is for fun and sports.
Price Point –Cruise lines paid more in commissions than in fuel – Distribution Channel: Travel Agents are necessary. Carnival paid $2.3B in commissions and had revenues of $11.6B. Commissions were 20%. Customers want the service and want someone to take care of them.
20 years ago, Cunard’s budget for promotion was $20M. They split it strategically and tactical. Tactical is short term (or Sales) strategic is long term (or brand building). This was 50% strategic and 50% tactical. However, during recession, this % changed because they needed to generate revenue. So the 50% strategic decreased and 50% tactical increased to generate sales short term. The breakdown of the $20M was: 25% Direct Mail, 35% Mass Media Advertising in magazines and newspaper, 35% brochures and travel agent co-operative spending and 5% Public Relations and Promotional Activities.
Luxury brands never go on sale. Once a customer pays something in