Cruise Industry Loyalty Programmes

Cruise Industry Loyalty Programmes How important are they to cruise passengers?

A Management Project Submitted in Part Fulfilment of the B.A (HONS) Tourism Management Student Number: 0806220 April 2011

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Abstract The cruise industry is the fastest growing sector in tourism worldwide. It has grown by over 15 million passengers in the last thirty years. During that time the cruise companies have increased their fleets to 252 ocean going vessels. Although 45% of the passengers currently are first time cruisers this growth in capacity means cruise companies have to ensure that the current customers keep returning.

The increasing level of competition within the sector means that an increasing emphasis is now placed on customer service, loyalty and retention. An important element of this has been the development of loyalty schemes or past passenger programmes within the cruise sector. Whilst there is an exhaustive list of research focusing on the cruise industry there has been no research into the loyalty programmes as to their effectiveness and relevance to the consumer.

The rationale for this research was to examine cruise loyalty programmes, explore the effectiveness of the programmes, to assess the cruise passengers’ views and to identify their future requirements in these schemes. To achieve this, an online questionnaire survey was carried out using cruise forums and social networks. A total of 468 responses were analysed. By establishing the needs and requirements of passengers, cruise companies can construct their loyalty schemes to be more effective to retain more customers.

The research explored the similarities and differences in the schemes. However, if cruise companies are to compete effectively, they need to develop specific programmes for their line which differentiates them from their competition. They need to adopt new technologies and offer different benefits at different times. This study finally concludes with recommendations for the companies how to design the programmes to gain a more competitive edge for the challenges of the 21st century.

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Acknowledgements I would like to take this opportunity to thank Dr. Andrew Clegg, who has provided me with support and assistance throughout the project. Also I would like to thank him and Dr Jorge Gutic for their encouragement and support during the past three years.

My fellow students are deserving of my gratitude as they have put up with me through those three years particularly Mat Szafert who has been of immense assistance with IT related problems.

I would like to thank those all participants in the survey, without whose help the research project would not have been possible.

Last but not least, I would like to say thanks to my wife, Marian and son, Mark of whom I have been very appreciative of their continued support; their love encouraged me throughout my studies. Thanks to both of them.

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Contents Abstract .......................................................................................................................... 1 Acknowledgements ........................................................................................................ 2 Chapter 1.

1.1

Introduction ............................................................................................... 9

Aims and Objectives ....................................................................................... 10

Chapter 2.

Literature Review .................................................................................... 12

2.1

Introduction .................................................................................................... 12

2.2

The History of the Cruise Industry .................................................................. 12

2.3

Modern Growth of Cruising ............................................................................. 13

2.4

Profile of the Cruise Industry .......................................................................... 14

2.5

Market Segmentation ..................................................................................... 15

2.6

Future Growth potential .................................................................................. 17

2.7

Motivation factors in Cruise holidays .............................................................. 18

2.8

Loyalty Schemes or Programmes ................................................................... 20

2.9

Benefits of Loyalty Schemes .......................................................................... 20

2.10

Cruise Loyalty Programmes ........................................................................... 21

2.11

Earning Mechanisms ...................................................................................... 23

2.12

Levels of Earning Rewards ............................................................................. 24

2.13

Rewards and Benefits .................................................................................... 25

2.14

Drawbacks of Loyalty Schemes...................................................................... 28

Chapter 3.

Methodology............................................................................................ 30

3.1

Introduction .................................................................................................... 30

3.2

Primary Research........................................................................................... 30

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3.3

Survey Design ................................................................................................ 30

3.4

Advantages of Online Surveys ....................................................................... 32

3.5

Limitations of Online Surveys ......................................................................... 32

3.6

Questionnaire Design ..................................................................................... 33

3.7

Questionnaire Introduction ............................................................................. 33

3.8

Demographic Information ............................................................................... 33

3.9

Cruise History and Motivations ....................................................................... 36

3.10

Cruise Loyalty Programmes – Preferences .................................................... 37

3.11

Survey Delivery .............................................................................................. 39

Chapter 4.

Findings and Results ............................................................................... 41

4.1

Introduction .................................................................................................... 41

4.11

Demographic Information ............................................................................... 41

4.2

Cruise History................................................................................................. 44

4.3

Motivations to Cruise ...................................................................................... 47

4.31

Reasons to choose a cruise holiday – Overall survey ..................................... 48

4.32

Reasons to Cruise - Cruise Category ............................................................ 50

4.33

Reasons to Cruise - Royal Caribbean and P&O ............................................ 52

4.4

Past Passenger or Loyalty Programmes ........................................................ 53

4.41

Loyalty Schemes ............................................................................................ 53

4.43

Earning Mechanisms – Cruise Categories ...................................................... 54

4.44

Earning Mechanisms – Royal Caribbean and P&O ........................................ 57

4.5

Rewards and Benefits .................................................................................... 59

4.51

Organisational Choices – Overall survey ........................................................ 59

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4.52

Organisational Choices – Cruise categories ................................................... 60

4.53

Organisational Choices – Royal Caribbean and P&O ..................................... 61

4.6

Experiences – Overall survey ......................................................................... 62

4.61

Experiences – Cruise categories .................................................................... 63

4.62

Experiences – Cruise categories .................................................................... 64

4.7

Complimentary gifts and Services – Overall survey ........................................ 64

4.71

Complimentary gifts and Services – Cruise category ...................................... 65

4.8

On Board Discounts – Overall survey ............................................................. 66

4.81

On Board Discounts – Cruise category........................................................... 66

4.82

On Board Discounts – Royal Caribbean and P&O .......................................... 67

4.9

Types of Rewards – Overall survey ................................................................ 68

4.91

Types of Rewards – Cruise categories ........................................................... 69

4.92

Types of Rewards – Royal Caribbean and P&O ............................................. 69

Chapter 5.

Conclusions and Recommendations ....................................................... 71

5.1

Conclusions.................................................................................................... 71

5.12

Significance of loyalty programmes in the purchasing decision ...................... 71

5.13

Loyalty Schemes ............................................................................................ 72

5.14

Earning Mechanisms ...................................................................................... 72

5.15

Levels of Earning Rewards ............................................................................. 72

5.16

Rewards and Benefits .................................................................................... 73

5.17

Organisational Benefits .................................................................................. 73

5.18

Experiences ................................................................................................... 74

5.19

Complimentary Gifts and services .................................................................. 74

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5.20

On Board Discounts ....................................................................................... 74

5.21

Types of Rewards .......................................................................................... 75

5.2

Recommendations ......................................................................................... 75

5.21

Loyalty Schemes ............................................................................................ 75

5.22

Customer Knowledge ..................................................................................... 76

5.23

Customer Data ............................................................................................... 76

5.24

Marketing ....................................................................................................... 76

5.25

Earning Mechanisms ...................................................................................... 76

5.25

Levels of Earning Rewards ............................................................................. 77

5.26

Rewards and Benefits .................................................................................... 77

5.27

Summary ........................................................................................................ 77

References ................................................................................................................... 78 Appendix 1 - Questionnaire .......................................................................................... 83

List of Tables Table 2.1 North American Cruise Passengers 1970-2005 ............................................ 13 Table 2.2 International Demand for Cruises 1998 to 2008 ............................................ 14 Table 2.3 The Main Cruise Corporations and their Cruise Lines ................................... 15 Table 2.4 Categories of Cruise Lines ............................................................................ 17 Table 2.5 Benefits of Cruising as opposed to other vacations ...................................... 19 Table 2.6 Rewards at Loyalty Programme Top Level ................................................... 22 Table 2.7 Examples of Earning Mechanisms ................................................................ 23 Table 2.8 Examples of Earning Levels.......................................................................... 25 Table 2.9 P&O Reward Scheme ................................................................................... 26 Table 2.10 Royal Caribbean Reward Scheme .............................................................. 27 6

Table 3.1 Cruise Forums - Unique Visitors and Audience ............................................. 31 Table 4.1 Reasons to cruise.. .........................................................................................48

List of Figures Figure 3.1 Demographic Questions in survey ............................................................... 35 Figure 3.2 An example of a Likert scale question ......................................................... 36 Figure 3.3 An example of a forced ranking question ..................................................... 37 Figure 3.4 Question with regard to Earning mechanisms .............................................. 38 Figure 4.1 Genders of Respondents ............................................................................. 41 Figure 4.2 Age of Respondents ................................................................................... 42 Figure 4.3 Nationality of the Respondents ................................................................... 42 Figure 4.4 Household Income of Respondents ............................................................ 43 Figure 4.5 Cruise Line Use-age by respondents ........................................................... 44 Figure 4.6 Number of cruises taken per cruise line ....................................................... 45 Figure 4.7 Category of Cruise Lines with numbers of Cruises Taken ............................ 46 Figure 4.8 Contemporary Cruise Lines – Number of Cruises Taken ............................. 47 Figure 4.9 Reasons for Choice of Cruise – Overall Survey ........................................... 49 Figure 4.10 Reasons for Choice of Cruise – Cruise Category....................................... 51 Figure 4.11 Reasons to Cruise – Royal Caribbean and P&O........................................ 52 Figure 4.12 Earning Mechanism – Overall survey ........................................................ 54 Figure 4.13 Earning Mechanism - Number of Nights cruised – Cruise categories ......... 54 Figure 4.14 Earning Mechanism - Amount Spent on Board – Cruise categories ........... 55 Figure 4.15 Earning Mechanism - Cruise Purchase Price – Cruise categories ............. 56 Figure 4.16 Earning Mechanism - Number of nights cruised and on board spend – Cruise categories ......................................................................................................... 56 Figure 4.17 Earning Mechanism - Number of nights cruised, on board spend and cruise purchase price – Cruise categories .............................................................................. 57 Figure 4.18 Earning Mechanism – Royal Caribbean and P&O ..................................... 58 7

Figure 4.19 Rewards - Organisational Choices – overall survey ................................... 59 Figure 4.20 Rewards - Organisational Choices – Cruise Line Type .............................. 60 Figure 4.21 Rewards- Organisational Choices – Royal Caribbean and P&O ................ 61 Figure 4.22 Experiences – Overall Survey .................................................................... 62 Figure 4.23 Experiences – Cruise categories ............................................................... 63 Figure 4.24 Experiences – Royal Caribbean and P&O ................................................. 64 Figure 4.25 Complimentary Gifts and services – Overall Survey .................................. 64 Figure 4.26 Complimentary Gifts and Services – Cruise categories ............................. 65 Figure 4.27 Complimentary Gifts and Services – Royal Caribbean and P&O ............... 65 Figure 4.28 On Board Discounts – Overall Survey ....................................................... 66 Figure 4.29 On Board Discounts – Cruise categories ................................................... 67 Figure 4.30 On Board Discounts – Royal Caribbean and P&O ..................................... 67 Figure 4.31 Types of Rewards – Overall Survey ........................................................... 68 Figure 4.32 Types of Rewards – Cruise categories ...................................................... 69 Figure 4.33 Type of Reward – Royal Caribbean and P&O ............................................ 69

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Chapter 1.

Introduction

The cruise industry is the fastest growing sector in tourism worldwide (CLIA, 2008).

Since 1970, when an estimated 500,000 passengers took a cruise the number has grown to over 16 million in 2008 (European Cruise Council, 2008). In the United Kingdom the number of cruises taken in 2008 rose to 1.48 million, an 11% increase for two consecutive years (PSA, 2009).The growth worldwide over the last thirty years has been 8.4% (CLIA, 2008).

During that time the cruise companies have increased their fleets to 252 ocean going vessels with a capacity of 428,835 passengers (Cruise Market Watch, 2011). In the next three years there are a further 28 ships on order with an extra capacity of over 65,000 (Ward, 2010). Although 45% of the passengers currently are first time cruisers (CLIA, 2008) this growth in capacity means cruise companies have to ensure that the current customers keep returning.

The increasing level of competition within the sector means that an increasing emphasis is now placed on customer service, loyalty and retention. An important element of this has been the development of loyalty schemes or past passenger programmes within the cruise sector. These schemes have different criteria both in their earning mechanisms and the benefits that are rewarded to their repeat customers.

Whilst there is an exhaustive list of research focusing on the cruise industry including ; economic aspects of cruise tourism (Dwyer and Forsyth, 1998; Vina and Ford, 1998; Henthorne, 2000); identifying different factors influencing cruise decision-making (Petrick, 2004; Duman and Matilla, 2005; Li and Petrick,2008); safety assessment of cruise ships (Lois et al., 2004); different social aspects of cruise tourism such as social space and interaction (Yarnal and Kersetter, 2005); the McDonaldisation of cruise tourism (Weaver, 2005); loyalty to brands and motivation of cruisers (Li, 2010; Hung and 9

Petrick, 2011); there has been no research into the loyalty programmes as to their effectiveness and relevance to the consumer.

1.1

Aims and Objectives

Given the lack of research into this area the core aim of this management project is to assess the importance of loyalty programmes as the main determinant for consumers to choose a cruise company.

The objectives are: 1. To assess the motivations for consumers on an online cruise forum to purchase a cruise holiday and the significance of loyalty programmes in their purchasing decision.

2. To consider the similarities and differences and benefits and earning mechanisms in cruise line loyalty programmes in different cruise lines.

3. To identify the aspects of loyalty programmes which are most important to the consumers.

The project will examine the literature of the cruise sector; its history, modern growth, current profile and its market segmentation and future growth potential. The loyalty schemes that the industry has adopted as part of its customer relationship management programmes will then be assessed against academic theory. Within these schemes the earning mechanisms as well as the benefits and rewards will be considered.

The rationale for this research was to examine cruise loyalty programmes, explore the effectiveness of the programmes, to assess the cruise passengers’ views and to identify their future requirements in these schemes. To achieve this, an online questionnaire survey was carried out using cruise forums and social networks. A total of 468 responses were analysed.

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By establishing the needs and requirements of passengers, cruise companies can construct their loyalty schemes to be more effective to retain more customers. The research explored the similarities and differences in the schemes. These were matched against the six different types of cruise market segments that were identified. These were adventure, budget, classic, contemporary, luxury and ultra luxury. This analysis was conducted understand how these schemes can be improved. Further analysis of two cruise lines within one of the cruise segments was undertaken. Analysis showed that the different cruise sectors and the two lines need different earning mechanisms and benefits.

However, if cruise companies are to compete effectively, they need to develop specific programmes for their line which differentiates them from their competition. They need to adopt new technologies and offer different benefits at different times. This study finally concludes with recommendations for the companies how to design the programmes to gain a more competitive edge for the challenges of the 21st century.

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Chapter 2.

2.1

Literature Review

Introduction

This chapter gives an overview of the cruise sector. This starts by examining the history of cruising, the growth of the modern cruise sector, the market segmentation of the cruise lines and future growth potential of the industry. The future growth of the industry involves attracting new customers but also the retention of customers. Cruise companies have mostly adopted loyalty schemes as part of their customer relationship management programmes. These schemes are then examined with regard to their history, benefits and drawbacks and how they can become more effective. A review of the earning mechanisms and rewards of cruise lines loyalty programmes is conducted, and a discussion of how they can be used effectively to achieve both the interests of the cruise companies and the customers then ensues.

2.2

The History of the Cruise Industry

Cruising started in the early 19th century with the Peninsular Steam Navigation Company, which soon became P&O sailing between England and Spain in 1837 (P&O, 2010). Two years later in 1839, Samuel Cunard was awarded the first British transatlantic steamship mail contract (Cunard, 2010). The business was for trade with passengers as a secondary purpose. This carried on through the 19th century until the mid 1950s (Dickinson and Vladimir, 2008).

In 1958 airlines started the first commercial jet service across the Atlantic. Ocean crossings that took five days could now be achieved in five hours. Within a year more people were crossing the Atlantic by air than by sea. As crossings diminished the modern cruising industry began (Mancini, 2004).

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2.3

Modern Growth of Cruising

As the transatlantic business diminished cruises from Florida to the Caribbean had become established and were growing in popularity. The 1960s witnessed the beginnings of the modern cruise industry. Cruise ship companies concentrated on vacation trips in the Caribbean, and created a “fun ship� image. There was a decrease in the role of ships for transporting people to a particular destination; rather, the emphasis was on the voyage itself (Cruise Line History, 2011).

In 1962 more than a million people crossed the North Atlantic by ship; in 1970 this was down to 250,000 (Ward, 2010). At the same time 500,000 people cruised from North America on vacation trips. The North American market grew over the next thirty five years to over 9million passengers as is shown in Table 2.1.

Table 2.1 North American Cruise Passengers 1970-2005 North American Capacity

Passengers

Capacity ( number of lower berths)

1970

500,000

n/a

1975

690,000

n/a

1980

1,431,000

40,000

1985

2,152,000

56,771

1990

3,640,000

85,533

1995

4,378,000

105,161

2000

7,214,000

166,201

2005

9,600,000

225,400

(Source: Dickinson and Vladimir, 2008) Cruising gained even more momentum between 1998 and 2008 with the demand from Europe and the rest of the world joining that of North America. In 1998, over 7.5 million passengers cruised with nearly 2.4 million from Europe and the rest of the world. This

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grew to over 16 million passengers in 2008 (European Cruise Council, 2008) with nearly 6 million from Europe and the rest of the world (Table 2.2).

Table 2.2 International Demand for Cruises 1998 to 2008 Region

1998

2003

2004

2005

2006

2007

2008

Million Passengers North America

5.40

8.23

9.14

9.96

10.38

10.45

10.29

Europe

1.71

2.74

2.80

3.16

3.46

4.08

4.50

Rest of the World

0.68

1.05

1.13

1.21

1.29

1.37

1.45

Total

7.79

12.02

13.07

14.33

15.13

15.90

16.24

2.4

(Source: European Cruise Council, 2008)

Profile of the Cruise Industry

The international cruise business has grown at a remarkable rate since 1980, with reports from the Cruise Lines International Association (CLIA) confirming an average growth of 8.4 per cent (CLIA, 2008). This success is attributed particularly to the practices of four companies that dominated the sector throughout the 1990s: Carnival Cruise Lines, Royal Caribbean Cruises, P&O/Princess Cruises and Star Cruises. Minor players are still numerous and many have their own devoted clientele, although the majority of small companies have little impact on the international scene (Douglas et al., 2004).

The industry consists of 75 ocean-going cruise ship operators. However the industry is dominated by a few major players: Carnival Cruise Lines, Celebrity Cruises, Costa Cruises, Cunard Line, Holland America Line, MSC Cruises, Norwegian Cruise Line, P&O Cruises, Royal Caribbean International and Star Cruises. This domination is compounded due to nine of these lines being owned by just three corporations. These are the Carnival Corporation, Royal Caribbean Cruises and Star Cruises Group (Table 2.3).

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Table 2.3 The Main Cruise Corporations and their Cruise Lines Carnival Corporation

Carnival Cruise Lines, Costa Cruises, Cunard Line, Holland America Line, Princess Cruises, AIDA Cruises, Ocean Village (to be phased out in 2010), P&O Cruises, P&O Cruises (Australia), Seabourn Cruise Line and 75% of Spain-based Iberocruceros.

Royal Caribbean Cruises

Azamara Cruises, CDF Croisieres de France, Celebrity Cruises, Pullmantur Cruises, and Royal Caribbean International.

Star Cruises Group

Star Cruises and 50% of Norwegian Cruise Line

(Source: Ward, 2010) The cruise industry’s growth is also reflected in its expanding guest capacity. Nearly 40 new ships were built in the 1980s and during the 1990s, nearly 80 new ships debuted.

By the end of 2009, over 100 new ships were introduced since 2000, with 12 new vessels on the way for 2010 (CLIA, 2008). The total worldwide cruise capacity at the end of 2011 will be 428,835 passengers and 252 ships (Cruise Market Watch, 2011). These numbers will be added to by the end of 2012 because another 28 ships are on order with a further capacity of 65,905 lower berths (Ward, 2010). The growth and consolidation of the industry has resulted in the various cruise line and corporations needing to differentiate their products in order to market the various lines. This has resulted in the use of market segmentation as a key tool to attract customers.

2.5

Market Segmentation

A review of the literature has highlighted that cruise lines can be put into specific categories. There are several authors who provide this type of classification. Dickinson et al. (2008) looking at the North American market suggested that in 2006 there were four categories of cruise lines. These were Contemporary, Premium, Speciality and Luxury.

However as these authors were concentrating on the North American market a more appropriate classification could be that of Younger (2008) who proposed six different 15

categories . As there are now great differences in size both of fleets and ships operated, as well as in type of cruise experience offered, the cruise lines are far more segmented than in the past, with individual brands being refined to appeal to very specific groups/interests. A sample of major lines may be broadly broken down into the following categories: Budget/Informal, Contemporary, Classic, Premium/Luxury, Adventure/Expedition and Ultra Luxury as shown in Table 4 (Younger, 2008).

Budget or informal lines appeal to first time passengers and cater for both families and singles. Thomson holidays, who are one of the biggest mass market travel groups in the United Kingdom, have their own cruise line which is positioned in this sector. Generally the Budget/Informal ships are older and smaller (Younger, 2008). The largest ship operated by Thomson is the Thomson Destiny which carries 1540 passengers (Ward, 2010).

However cruise lines like Carnival, Royal Caribbean and P&O are positioned in the Contemporary sector. Lines in this sector are more upscale whilst still being more informal (Younger, 2008). These lines operate bigger and newer ships which offer lots of excitement and action. Oasis of the Seas, which is owned by Royal Caribbean, operates in this sector and carries over 6,000 passengers (Ward, 2010).

Another sector identified is Classic. The passengers usually enjoy more traditional cruising with smaller groups of people and the itinerary of the cruise is as important as the choice of the ship. Fred Olsen operates four ships in this category with passenger capacity between 800 and 1300 (Ward, 2010). Alternatively for those looking for the unusual and the hard to reach will find the Adventure/Expedition category more to their taste. The lines that offer this type of cruise use small ships and attract experienced, active and affluent passengers.

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Passengers who expect a very high degree of comfort and a full range of modern facilities in traditional surroundings, whilst still experiencing exciting itineraries may well choose Premium/Luxury lines such as Cunard, Celebrity or Holland America (Younger, 2008). Cunard operate the famous Queen Mary II, Queen Elizabeth and Queen Victoria (Ward, 2010). Even more luxurious is the Ultra Luxury sector. The passengers are prepared to pay for the best in service, fine dining and surroundings (Table 2.4).

Table 2.4 Categories of Cruise Lines Category

Lines

Budget/Informal

Easy Cruise, Island, Ocean Village, Star Cruises, Thomson

Contemporary

AIDA, Carnival, Costa, MSC, NCL, P&O, Princess, Royal Caribbean

Classic

Classic International, Fred Olsen, Louis, Page & Moy, Saga

Premium/Luxury

Celebrity, Cunard, Holland America

Adventure/

Ultra Luxury

African Safari, Azamara, Celebrity Expedition, Hurtigruten, Lindblad, Noble Caledonia, Spirit of Adventure, Swan Hellenic, Transocean, Voyages of Discovery Crystal, Oceania, Hapag Lloyd’s Europa, Hebridean International, Regent Seven Seas, Seadream, Silversea, Seabourn, Windstar,

(Source: Younger, 2008) Even though there are many different segments as shown above, due to the growth of industry there is a need to fill the present as well as the future capacity. This requires both attracting new customers as well as retaining the current market. The future growth potential needs to be investigated.

2.6

Future Growth potential

Market research conducted by the Cruise Line International Association shows that the cruise market potential is strong. Over the next three years, over 50 million North Americans indicate intent to cruise (CLIA, 2008). Their data also suggests that the majority of first-time cruisers plan to take another cruise within the next two year; the majority of frequent cruisers plan to cruise again within the next year (Dickinson et al., 2008).

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In order to fulfil that potential cruise lines must keep their current customers satisfied as well as attracting new business. The knowledge of customers and their motivations is necessary for marketing departments to ensure that the correct advertising and marketing techniques are used to fill the capacity. An understanding of customer motivations for cruising is a critical part of that process.

2.7

Motivation factors in Cruise holidays

Travel motivation has been studied extensively (e.g. Dann, 1977; Crompton, 1979; Iso-Ahola, 1982; Kim and Chalip, 2004) but little effort has been paid to studying this in the wider context of cruise tourism; despite research on the economic aspects of cruising, factors influencing cruise decision-making, safety assessment of cruise ships, and social aspects of cruising tourism including the McDonaldisation of cruise tourism (Hung and Petrick, 2011). Hung et al. (2011) identify six different motivational categories; escape/relaxation, exploration and evaluation of self, social recognition/prestige, socialisation/bonding, novelty/thrill and learning/discovery.

Similarly the CLIA (2008) have identified motives derived from the perceived benefits of cruising. When comparing the benefits of cruising to other vacations (much/somewhat better), past cruisers considered that cruises were better for the chance to visit several vacation areas (73%); relaxation (63%); being pampered (62%); indulging in fine dining (62%); and the value for money (53%) (Table 2.5).

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Table 2.5 Benefits of Cruising as opposed to other vacations (% age much better/somewhat better) Percentage Chance to visit Several Vacation Areas

73

Relax? Get away from it all

63

Explore Vacation Area/Return Later

62

Fine Dining

62

Being pampered

62

Offers Something for Everyone

59

Hassle-free

58

Variety of Activities

58

Luxurious

58

Easy to Plan and Arrange

57

Unique and Different

56

High Quality Entertainment

55

Good Value for Money

53

Fun Vacation

53

Exciting and Adventurous

53

Reliable

49

Good Vacation for Whole Family

46

Makes Me Feel Special - Rich and Famous

46

Romantic Getaway

46

Safe

45

Cultural Learning Experience

40

Comfortable Accommodations

38

Good Activities for Children

35

Participate in Sports that you enjoy

22

(Source: CLIA, 2008)

While the identification of motivational factors is of importance to marketing departments, they are equally important to the success of customer retention programmes, and especially the development of loyalty programmes in the cruise sector.

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2.8

Loyalty Schemes or Programmes

Fundamentally a loyalty programme is a scheme that offers delayed or immediate incremental rewards to customers for their cumulative patronage (Buttle, 2009), and are now commonplace across the wider service sector, most notably within the airline and hotel sectors. These schemes have been in existence since the mid 19th century.

Recent schemes have developed since American Airlines launched its frequent flyer programme in 1981 (Buttle, 1996). This scheme was introduced as the airline had a surplus of empty seats. The scheme rewarded frequent flyers with reward miles that could be collected and exchanged for free travel.

2.9

Benefits of Loyalty Schemes

The cruise industry has been drawn to loyalty schemes because of the inherent benefits they can deliver as drivers for customer retention. Hamilton et al. (1995) identify that it is more profitable to keep existing customers than to constantly be seeking new customers to replace them. Reichheld et al. (1990) also argued that companies can boost profits by almost 100% by retaining just 5% more of their customers. More recent research by Gupta et al. (2004) suggests that customer retention is five times as effective as cutting costs. Helgeson (2006) agrees that if loyalty can be generated profitability is increased.

The reasons that regular customers are more profitable are that they place frequent orders and they usually cost less to serve. They also tend to buy more and because they are satisfied they may sometimes pay premium price. Another benefit is that retaining customers makes it difficult for competitors to increase a market or increase their share. Furthermore satisfied customers often refer new customers to the supplier at no extra cost; and the cost of acquiring and serving new customers can be substantial (Peck et al., 1999).

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Loyalty schemes also generate customer data. The purchases can be recorded and analysed. The personal data that is usually recorded when the customer joins the scheme can be used to analyse socio-economic profiles. This information can be used to personalise offers to the customer (Rowley, 2005). So for the cruise industry these schemes are an important management tool.

2.10

Cruise Loyalty Programmes

Most cruise lines have a past passenger programme or loyalty scheme for passengers who sail more than one cruise on the same line. Most of the programmes have a few things in common. They start after the first cruise and offer a "repeat cruisers club only" onboard reception with free drinks. Every member gets a subscription to the cruise line's magazine and receives inside news and special offers by mail or email. Beyond that, loyalty programmes vary a great deal between cruise lines, especially at the more advanced levels (Cruisemates, 2011). These include rewards from priority embarkation on Costa; 8 hours internet time on Cunard; 10% discount on all on board purchases on P&O; dinner with the captain on MSC; and free cruises on Carnival and Royal Caribbean (Table 2.6).

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Table 2.6 Rewards at Loyalty Programme Top Level Carnival

After 25 cruises - shipboard credit worth 25% of cost of cruise After 50 - shipboard credit worth 50% of cost of cruise After 75 - shipboard credit worth 75% of cost of cruise After 100 - complimentary cruise up to eight days in length to Alaska, Mexican Riviera or Caribbean

Costa 13,001 points and 3 cruises in past 3 years

Preferential boarding, VIP waiting room at ports , priority in luggage delivery to cabin Bathroom kit, towelling robe and slippers in the cabin Special Cocktail with the Captain and souvenir photograph 30 Euros worth of chips in Casino, 15 euro voucher for photo-shop, 30 euro voucher for Wellness centre Preferential disembarkation, privileged disembarkation for excursions

Cunard

Priority disembarkation, priority luggage delivery

15 voyages or

8 hours Internet Time Plan, Preferred on board sales appointments

150 days

A complimentary lunch at Todd English

Disney

Priority boarding check-in

After 10th Cruise

Special surprise and experiences such as behind the scenes tours

Holland America

One complimentary dinner at Palo restaurant A 50% discount on speciality restaurant surcharges, wine packages, and all mini bar purchases

200 Cruise credits

A Diamond membership pin, dedicated member contact at shore side Wold Club Desk

A complimentary wine tasting session, complimentary laundry and pressing services Priority disembarkation, priority tender, priority check-in Early notifications of shore excursions available for pre-booking A complimentary one-year subscription to Travel+ Leisure or Food & Wine magazine

MSC After 50 cruises

20% off cruise price, best upgrade available Discounts - 30% on laundry services, 20% on photographs and excursions, 15% on spa treatments Preferential tender disembarkation, preferential disembarkation Complimentary champagne with strawberries and chocolate, bathrobes and slippers Dinner with the captain

NCL

Complimentary Laundry service

After 14th cruise

Complimentary Dinner and wine in Le Bistro Complimentary Behind the Scenes ship tour

P&O

10% on board discount

150 nights

Exclusive event during cruise Dedicated check-in, and priority embarkation at Southampton Welcome Gift

Princess

Priority disembarkation, priority tender embarkation

Over 16 cruises

Shoe Polishing Service, complimentary laundry and cleaning service Complimentary Mini Bar set up according to individual specification, canapes on formal nights

or over 151 nights Royal Caribbean

Complimentary afternoon tea served in stateroom, complimentary wine tasting event Complimentary 7 night cruise in a Balcony stateroom for 100 and 150 credits Complimentary 7 night cruise in a Junior suite stateroom for 200,250 and 300 cruise credits

22

2.11

Earning Mechanisms

A key feature of all loyalty programmes is the nature of the earning mechanism adopted, which varies considerably by different cruise lines and the parent company. In most companies the numbers of nights or cruises are used as the base criteria (Table 2.7).

However Costa and MSC use both cruise nights but also the amount spent on board as criteria. Holland America goes one step further than this by adding double credits if a suite is booked. This reflects the total amount that the customer is worth financially to the company. The companies that only use cruise nights or individual cruises as their criteria are ignoring the customer who spends substantially on board contrasting to McCall (2010) who suggests that managers should use actual spending as one of the criteria to earn rewards.

Table 2.7 Examples of Earning Mechanisms Cruise Line

Earning Mechanism

Carnival Costa

Per Cruise 100 points for every day on cruise plus 40 points for every 52 euro spent on board

Cunard Holland America Line P&O Cruises Princess Cruises Royal Caribbean International Celebrity

Per Voyage 1 cruise credit per day or $300 dollars per day spend or double credits for booking a suite 10 points per night If you cruise with sister companies Princess or Ocean Village 5 points per night Cruise or Cruise days Per Night 1 point per cruise, 1 extra point for 12 nights or longer, 1 point extra for booking a suite

Disney Cruise Lines

Per Cruise

MSC

1 point per night, plus 1 point for every 200 euro or dollars spent on board

NCL

Per Cruise

Fred Olsen

Per Night

Azamara Club Cruises

1 credit for voyage of up to 11 nights, 1 additional credit for voyages 12 nights or over 1 additional credit for booking a suite

23

2.12

Levels of Earning Rewards

Apart from the earning mechanisms the different cruise lines use tiers of earnings to determine different levels of rewards. These tiers are called by different names quite often using precious metals such as Gold, Silver and Bronze but as can be seen by Table 2.8 lack flexibility. McCall (2010) suggests that managers need to offer smaller and more spontaneous rewards between the major milestones to encourage continual customer loyalty and deter switching. Sneed (quoted in Berman, 2006, p.136) states that the largest cited reason for quitting a loyalty scheme was the time it took to accumulate enough points to earn a reward.

Carnival has only two tiers and requires 10 cruises to get to the top, NCL gets you to level two after five cruises and to the top tier after 15 cruises. The benefits at NCL include everything Carnival promises and much more. Royal Caribbean is similar to NCL, but with more levels and more cruises required to get to the top.

24

Table 2.8 Examples of Earning Levels Cruise Line

Level 1 After 1

Carnival

2000 points After 1

Cunard

voyage

Holland America Line P&O Cruises

After 1 cruise 0-500 points 1-5 cruise or

Princess Cruises

50 cruise nights

Royal Caribbean International

After 1 cruise After 1

Celebrity

Disney Cruise Lines

cruise

After 1

NCL

Milestones after 25/50/75/100 cruises 5001+ points

13001 + points

7 voyages or 70

15 voyages or 150

days

days

30 cruise credits

75 cruise credits

200 cruise credits

501-1500 points

1501+ points

6-15 cruises or

16+ cruises or

51-150 cruise nights

151+ cruise nights

After 5 cruises

After 10 cruises

5-9 credits

After 10 credits

After 5 cruises

After 10 cruises

22-42 points

Over 42 points

After 5 cruises

After 9 cruises

2001-5000 points 2 voyages or 20 days

cruises

Fred Olsen

1-30 points

31-100 points

Over 100 points

Azamara Club Cruises

1-4 credits

5-9 credits

10+ credits

2.13

After 24 completed cruises

st

1-21 points

MSC

Between

Level 4

st

credit After 1

Level 3

After 10 sailings

sailing

Costa

Level 2

Rewards and Benefits

A review of cruise websites, conducted as part of secondary research, discovered that amongst the twenty nine companies that were examined there were over 500 different benefits offered. The benefits were then organised, by the researcher, into different categories. These were basic, experience, organisational, on board discounts, complimentary and discounts off the cruise price.

25

P&O have a very simple reward scheme with only 11 items spread over 3 earning levels. After the first cruise passengers are entitled to a dedicated loyalty manager, a quarterly magazine, 5% on board discount and discounts on a selection of cruises. Once the member has earned 501 points they will be invited to a cocktail party and receive 7.5% discount. The top level is reached when 1501 points have been earned and the rewards are an exclusive event on board, priority embarkation at Southampton and 10% discount (Table 2.9).

Table 2.9 P&O Reward Scheme P & O Cruises - Portunus Club - 10 points per night Level 1 - 0-500 points, Level 2 - Up to 1500 points, Level 3 - 1501+ points Level Dedicated loyalty manager

1

Magazine

1

Portunus Club Party

2

Exclusive event during cruise

3

Dedicated check-in at Southampton

3

Priority embarkation in Southampton

3

Complimentary

Welcome Gift

3

On Board Discount

5% on board discount

1

7.5% on board discount

2

10% on board discount

3

Discount on a selection of cruises

1

Basic Experience Organisational

Cruise Discount

(Source: Adapted from P&O, 2011)

Royal Caribbean’s scheme is more complicated with over 39 rewards with experiences such as backstage tours, meals with senior officers and exclusive events; organisational benefits such as priority seating in the theatre, preferred seating in dining rooms and priority disembarkation; complimentary gifts and bathrobe use; stateroom upgrades and even complimentary cruises after 100 cruises (Table 2.10).

26

Table 2.10 Royal Caribbean Reward Scheme Royal Caribbean - Crown and Anchor Society - per cruise Level 1 - after 1 completed Cruise, Level 2 - After 5 Completed Cruises Basic

Level 3 - After 10 completed Cruise Credits Level 4 - After 24 completed Cruises Advance Notice of Special Offers

Experience

Organisational

Complimentary

On Board Discount Cruise Discount

1

Member cruises

1

Matching Celebrity Cruises Captains Club Benefits

2

Platinum Signature lapel pin

2

Diamond Signature lapel pin

3

Access to your favourite Captain's or Cruise Director's sailing schedule

4

Diamond Plus signature lapel pin

4

Membership card and luggage tag

4

Invitation to Welcome Back Party

1

Platinum Event

2

Diamond Lounge

3

Exclusive Nightly Diamond and Diamond Plus Event

3

Behind the scenes entertainment tour Meal with an officer on cruises of 7 nights or longer for members with 49 or more cruise credits Behind the scenes tours

3

Concierge lounge access

4

Priority Check-In

2

Private departure lounge with continental breakfast

2

Priority waiting list for shore excursions/spa services

3

Priority departure from Ship

3

Priority waiting list seating in main dining room

3

Priority seating at theatre, ice-shows and Aqua theatre events

4

Preferred location and table size seating arrangements in main dining room

4

Bathrobes for use on board

2

Amenity delivered to stateroom

3

Daily Breakfast with Speciality coffees

3

Milestone Gift after 20 cruises

3

Milestone Gift after 30,40 and 50 cruises and every 10 cruise after

4

Personalised amenity, additional for 49 cruises, another for 74 cruises or more Upgraded bathroom amenities for 49 or more cruise credits, additional amenities for 74 cruises

4

Ultimate Value Booklet with onboard offers

4 4

4 1

Onboard booking bonus

1

Extra Cruise Credits for Suites

1

An extra cruise credit for 12-night or longer cruise or cruise tour

1

Discounts on balcony and suite staterooms

2

Complimentary stateroom upgrades

4

Single supplement reduced to 150% for 49 or more cruise credits

4

Complimentary 7 night cruise in a Balcony stateroom for 100 and 150 cruises Complimentary 7 night cruise in a Junior suite stateroom for 200,250 and 300 cruises

4 4

(Source: Royal Caribbean, 2011)

27

2.14

Drawbacks of Loyalty Schemes

Loyalty schemes are not without critics due to their costs and effectiveness. Retail schemes can reward customers with a cash rebate or vouchers equivalent to 1 per cent of purchases (Buttle, 2009). There may also be a significant investment in technology to support the scheme. Supermarket operator Safeway dropped its UK loyalty programme, which had been costing about ÂŁ30 million annually. Shell is reported to have spent up to ÂŁ40 million to develop its smart card scheme (Dignam cited in Buttle, 2009, p.269).

The cost of some rewards can be excessive and need to be changed but that has further problems. A cruise forum (Cruise Critic, 2010) reported that when Royal Caribbean changed which announced in March 2009 that Diamond members (those who have been on 10 to 24 cruises with RCI) would no longer have special access to the concierge lounge and its affiliated concierge services or the previously offered nightly happy hour. Members were outraged, and though Royal Caribbean offered a compromise, once-loyal cruisers have posted on the forum’s message boards and elsewhere that they were rethinking their loyalty.

From the results of this analysis it can be seen that the some rewards are low cost such as organisational benefits and some of the experiences. Others such as the complimentary gifts and some of the experiences have a cost. The discounts offered on board have a perceived cost but can attract more use of facilities or products and could actually add to the profits of the company. Similarly the discount on the price of the cruise could be less than that offered to travel agencies. However the free cruises on offer at the top end of the system can be costly when passengers reach the necessary milestones.

28

There is no evidence of cross selling or working with other partners, in the cruise loyalty schemes, to earn or spend credits which both Berman (2006) and McCall (2010) suggest. These partnerships develop both partners and increase their value to the consumers. Tesco uses its large database to not only cross sell its own products but also works with other partners like E.on, the energy providers (Tesco, 2011).

Cruise lines also have to be aware that if there is no differentiation between their schemes that if they are not cautious loyalty schemes may simply raise the cost of doing business and if competitors respond with similar schemes the final outcome may be no more than a minor tactical advantage (Uncles, 1994). Similarly critics claim that schemes have become less distinctive and value-adding as many operators operate me-too programmes (Reed cited in Buttle, 2009, p.270).

The rapid growth of the cruise industry and the future ship building programme necessitates the cruise companies to not only attract new business but also to retain the current customers. Loyalty schemes have been adopted as part of the customer retention management strategies. The earning mechanisms, reward levels and benefits vary across the different cruise lines and cruise categories. The benefits can be classified into different types; basic, organisational, experiences, complimentary gifts and services, on board discounts and cruise price discounts. These will all be examined in this project as to the preference of cruisers and as to their effectiveness.

29

Chapter 3.

3.1

Methodology

Introduction

The aim the management project is to assess the importance of loyalty programmes as the main determinant for consumers to choose a cruise company. The objectives are to assess the motivations for consumers to purchase a cruise holiday and the significance of loyalty programmes in their purchasing decision; to consider the similarities, differences, benefits and earning mechanisms in cruise line loyalty programmes in the different cruise lines; and to identify the aspects of loyalty programmes which are most important to the consumers.

This chapter will examine these objectives using primary research. This will be conducted through an online questionnaire. This questionnaire will analyse motivations, the personal cruise history and the aspects of loyalty programmes that the respondents prefer. The design and delivery of the survey will also be discussed as well as any limitations in this research. The results of this survey will then be analysed using statistical software.

3.2

Primary Research

There are several methods that can be used for primary research. These include faceto-face interviews, telephone interviews, focus groups, postal questionnaires, e-mail and the World Wide Web. However as the aim of the management project is about the cruise industry it is necessary to establish how and where to get this information.

3.3

Survey Design

The population for this survey will be people that have used cruise companies. The size of this population is difficult to assess but as there were over 16 million passengers in 2008 (European Cruise Council, 2008) the total population would exceed this.

30

A population may be defined as the set of individuals, items or data from which a sample is taken. These can be staff in an organisation, members of a group or the users of a product (Horn, 2009). As all the population are not accessible a sampling frame of those that can be contacted is required. In this case the frame will be defined as people who have used cruise lines and are also members of online cruise forums or use social media such as Facebook, Twitter or blogs. In order for the data to be meaningful a sample size of 400 will be required as this will have a margin of error of 5% (Horn, 2009, p.188).

Cruise forums were investigated to assess the area of the world that they covered. After assessing the content and analysing the audience by the posts on the forum to discover this and to ascertain the numbers of unique visitors that accessed these websites. The unique visitors to a website were discovered by using a website analytic tool (Compete, 2011). The websites examined were Cruise Critic, Cruise Mates, Cruise.co.uk and Cruising Talk (Table 3.1).

Table 3.1 Cruise Forums - Unique Visitors and Audience Forums

Unique Visitors per month

Audience (predominantly)

Cruise co.uk

5000

British

Cruise Mates.com

101000

American

Cruising Talk.com

2080

American

Cruise Critic.com

686000

American

Cruise Critic.co.uk

14500

British

(Source: Compete, 2011) After examination of on-line cruise forums Cruise Critic (Cruise Critic, 2010) was seen as a productive source for research as this site was visited by over 500,000 unique visitors in one month. This site is based in the USA but also has a British based site. As a contingency plan Facebook was investigated and there are twenty different cruise related pages on that network. Twitter was also considered. On this there were over seventy cruise related pages.

31

3.4

Advantages of Online Surveys

Online surveys have several advantages. Firstly using the internet provides access to groups and individuals who would be difficult or impossible to reach through other channels (Garton et al. Cited in Wright, 2005). Secondly, Internet-based survey research may save time for researchers. Online surveys allow a researcher to reach thousands of people with common characteristics in a short amount of time, despite possibly being separated by great geographic distances (Bachman et al. cited in Wright, 2005). A further advantage is that data which is collected can be easily exported into a format that can be read by SSPS, Access or other statistical software.

3.5

Limitations of Online Surveys

There are however disadvantages to this form of research. Firstly the respondents may not be honest about their ages and household incomes. It is not possible to verify this as the survey is confidential and there is no record of who completed the questionnaire (Wright, 2005). Secondly when conducting online research, investigators can encounter problems as regards sampling. For example, relatively little may be known about the characteristics of people in online communities, aside from some basic demographic variables, and even this information may be questionable (Dilman cited in Wright, 2005).

Wright (2005) suggests that in any given internet community, there are some individuals who are more likely than others to complete an online survey. Some of the users of the forum will not answer surveys due to the fact that they have been desensitised because some online forums use this information for commercial purposes. These limitations however are outweighed by the advantages expressed above and due to the size of the sample anticipated in this survey these factors will be diminished. As the style of survey was established the correct design of questionnaire was required.

32

3.6

Questionnaire Design

The structure of the questionnaire is linked to the research objectives. It needs to establish the motivations to purchase a cruise holiday and examine which aspects of loyalty schemes are preferred as well as determining how important these schemes are in the decision making process. It is designed in three parts which are linked to these objectives. The first part is to establish demographic information such as age, gender and household income. The next group of questions are related to the cruise history and motives for cruising of the participant. Finally a set of questions related to the participants choices for what they consider to be the most important aspects of loyalty programmes.

3.7

Questionnaire Introduction

A short introduction to the survey was designed. According to Horn (2009) questionnaires should contain a short introduction to the survey that states what is being researched and why the respondents help is being requested. It should also include the timescale for completion, the approximate time to complete it, information on confidentiality, how the results are used and the researcher’s contact details. The questionnaire front page was designed accordingly. (Appendix 1)

3.8

Demographic Information

The first part of the questionnaire is designed to capture demographic information such as age, gender, employment status and household income which will be used as the base for the analysis once the data collected has been processed. These questions will be important in allowing explanations of other data which will be collected (Horn, 2009).

An example of this may be that an older person with higher income will choose a different option from someone from a different age and income group.

33

Closed questions with a list from which one item can be chosen are used in this section.

The data analysis of closed questions is considerably easier than that of open questions that could have numerous responses. A drawback of this form of question is that the available responses are limited however this can be overcome by adding the category “Other” and “Please specify” (Horn, 2009, p.120).

The initial questions are with regard to the age, gender, employment status and household income of the participant. The question with regard to age is seen to be sensitive to some people so the opportunity to not specify is included. Another question relates to the nationality of the participant. In the case of nationality the most likely nations were chosen. However there but there is an opportunity for other responses to this question with another category added – which is other. The respondents were then able to write their nationality. All these demographic factors could have a bearing on choices that the respondents make with regard to their motivations and preferences (see Figure 3.1)

34

Figure 3.1 Demographic Questions in survey

35

3.9

Cruise History and Motivations

In the second part of the questionnaire the aim was to investigate the cruising history of the participants and the reasons that motivated them to cruise. An opportunity was also taken to match their original motivations to cruise against the experiences of their last cruise. A mixture of closed questions in list form, grids applying Likert scales and forced ranking were used in this section (Figure 3.2). A Likert scale allows a participant to provide feedback that is slightly more expansive than a simple close-ended question, but that is much easier to quantify than a completely open-ended response (Parnaby, 2006).

Figure 3.2 An example of a Likert scale question

Open questions are also used as the closed questions provide possible answers to the questions and this could be a drawback as the available responses are limited (Horn, 2009).

The other type of question used in this section is forced ranking. Ranking questions are best to use when all the choices listed should be ranked according to a level of specification (e.g. level of importance). If you have a question which needs the respondents to indicate what items are the “most important” to “least important,” then a

36

ranking question can be set up (Waddington, 2000). Forced ranking ensures that the respondent puts all items in order (Figure 3.3).

Figure 3.3 An example of a forced ranking question

3.10

Cruise Loyalty Programmes – Preferences

The third part of the survey was designed to examine the preferences of the participants with regard to the loyalty programme earning mechanisms and benefits that were established from focussing on the secondary research of the cruise line websites described in the literature review. There were two aims in this investigation. The first was to establish the various types of earning mechanisms that passengers use to earn their rewards whether they are by amount of cruises taken, number of nights cruised or the amount of money spent. The second aim was to understand the types of rewards that the cruise companies are offering and to endeavour to discover similarities and also the differences in these programmes.

37

Initially the questions were designed to investigate the loyalty scheme or schemes to which the respondents belonged and why they were loyal to that particular programme.

These were followed by questions which were based on the information generated from the secondary research. These started with a question with regard to the earning mechanism that they preferred to earn their reward points (Figure 3.4).

Figure 3.4 Question with regard to Earning mechanisms

Other questions followed that examined the preferences with regard to the rewards preferred following the categories that were established in the secondary research (see chapter 2). These were basic, complimentary, experience, organisational, on board discounts and overall cruise purchase price discounts. The final question required the style of benefit to be chosen in order of preference.

38

3.11

Survey Delivery

The data was collected electronically. It was intended to use Bristol Online Survey which is a tool that is used by the University of Chichester and is available to all students.

However it was not possible to set up forced ranking questions on this tool. The software allowed the respondent to place all the items in the question at the same value whereas the survey required the respondent to put their preferences in order.

Other online survey tools were investigated. These were Survey Monkey, Google survey and Survey Galaxy. As the survey galaxy site enabled all types of questions required in this survey it was chosen even though there was a cost of approximately ÂŁ50.

A pilot survey was undertaken to ensure that the tool achieved all requirements. Apart from the question types it was required that only one participant per computer could answer the survey to ensure that no individual could answer more than once and thereby skewing the results. Another reason for the pilot was to download some results to ensure that the data could be accessed as an Excel file that could be used for statistical purposes. The pilot survey of 12 people was carried out in January 2011 and was successful in that it satisfied all the criteria.

The main survey was conducted in February 2011 and there were 532 replies to the survey. Of these 64 had only visited the page and not completed any of the questions.

Therefore 468 had answered the survey and this was over the 400 that had been initially been required to ensure that when analysed using the statistical software a probability of 95% accuracy (Horn, 2009)

The Excel file was downloaded from the Survey Galaxy website. This was then coded.

After the coding the data was analysed. The Excel data was used to provide charts of the demographic information collected in the first part of the questionnaire. This 39

demographic information was then matched with the cruise history and motivations to determine whether there were any trends or comparisons. It was also matched with the reward and benefits preferences.

40

Chapter 4.

4.1

Findings and Results

Introduction

The aim of this chapter is to analyse the data retrieved from the online survey. In order to facilitate a clear analysis the chapter is structured around four sections; initially the demographic information was examined; the cruise experience and motivations of the respondents was then investigated; the reasons that were chosen to cruise and finally the preferences of earning mechanisms and rewards in loyalty programmes were explored. In the final section the data was also compared with cruise market sectors and two cruise lines, Royal Caribbean and P&O, to discover if there were any similarities or differences.

4.11

Demographic Information

As would be expected cruises attract different demographic groups. Of the 466 participants, 248 were female (53.22%) and 218 were male (46.78%) (Figure4.1).

Amongst the respondents 180 were aged between 50 and 59 years (38.63%), 141 were aged between 60 and 74 years (30.26%), 79 were aged between 40 and 49 years (16.95%), 33 were aged between 25 and 39 years (7.08%), 25 were aged over 74 with the remaining 8 respondents either between 19-24 or would not specify (Figure 4.2).

Figure 4.1 Genders of Respondents 260 250 240 Number of 230 People 220 210

248 218

200 Male

Female Gender

41

Figure 4.2 Age of Respondents – expressed as percentages

Over 74 5%

would rather 19-24 25-39 not specify 1% 7% 1% 40-49 17%

60-74 30%

50-59 39%

The nationality of the respondents was predominantly British with 297 respondents and 155 were American (USA) citizens. This represents 63.5% and 33.1% respectively. The remaining 3.4% are 5 Canadians, 2 Germans, 2 Australians and 1 each of Irish, Welsh and Scottish. 4 other were not specified.

Figure 4.3 Nationality of the Respondents – expressed as a percentage

3% 33% American(USA) British

64%

Other

42

The household income of these people was also surveyed. The results of this were that 124 (26.6%) respondents had a household income of between £25,000 and £31,999.

109 had an income of between £60,000 and £119,999 (23.9%). 80 people had an income of between £38,500 and £49,999 (17.7%).

Figure 4.4 Household Income of Respondents expressed as a percentage 30

26.6

25

23.4

20 Percentage 15 of Respondents

17.2 14.4

13.7

10 5

2.1

2.6

0

Household Income

Age, nationality and household income were tested against the variables of choosing the last cruise and all the facets of cruise loyalty schemes and as there were no significant differences than the overall survey results these factors were not researched further in this chapter.

43

4.2

Cruise History

Once the demographic profile had been identified the cruise history of the respondents was then surveyed. Of the 468 people who responded 180 (38.46%) had cruised with Royal Caribbean, 156 (33.33%) with P&O, 109 (23.29%) with Celebrity and 106 (22.65%).with Princess. This reinforces the popularity of cruising and repeat cruising therefore highlights the importance of retention and loyalty.

Figure 4.5 Cruise Line Use-age by respondents Azmara Cruise Lines Carnival Cruise Line Celebrity Cruises Costa Cruises Crystal Cruises Cunard Disney Cruise Line Fred Olsen Holland America MSC Cruise NCL Lines Ocean Village Oceania P&O Cruises Princess Cruises Regent Seven Seas Royal Caribbean Silversea Thomson Cruises Voyages of Discovery Yachts of Seabourn

7 67 109 34 4 83 13 72 35 31 81 25 3 156 106 9 180 3 37 9 11 0

50

100

150

Number of people who have cruised with each line

44

200

The total number of cruises taken in the survey was 4,789 which was just over 10 cruises per person on average. Royal Caribbean was used 1103 (23.03%) times, P&O 1079 (22.53%) times, Princess 513 (10.71%) and Fred Olsen 201 (9.21%) (Figure 4.6).

This indicates that customer retention is high and strengthens the importance of loyalty to these cruise lines.

Figure 4.6 Number of cruises taken per cruise line Azmara Cruise Lines Carnival Celebrity Costa Crystal Cunard Disney Cruise Line Fred Olsen Holland America MSC NCL Cruise Lines Ocean Village Oceania Other P&O Cruises Princess Cruises Regent Seven Seas Royal Caribbean Silversea Thomson Cruises Voyages of Discovery Yachts of Seabourn

11 131 285 82 3 393 18 441 98 99 183 53 3 79 1079 513 39 1103 9 110 15 42 0

200

400

600

800

1000

Total Number of Cruises taken

As discussed in chapter 2 there are six categories of cruise line; budget; contemporary; classic; premium/luxury; ultra luxury and adventure. These categories are used to target different market sectors (Younger, 2008). Of the total of 4612 cruises, 3208 (69.56%) were taken in the Contemporary sector. 678 (14.7%) in the Premium/Luxury sector and 441 (9.56%) in the Classic sector (see Figure 4.7). The contemporary sector is more 45

1200

popular than the rest as the biggest cruise lines with the largest ships operate in this segment.

Figure 4.7 Category of Cruise Lines with numbers of Cruises Taken 96

Ultra Luxury

678

Premium / Luxury Category of Cruise Line

3208

Contemporary 441

Classic 163

Budget

26

Adventure/ Expedition 0

1000

2000

3000

4000

Number of cruise taken

Given the apparent dominance of the contemporary sector in comparison to the other categories, a further analysis was undertaken to discover which cruise lines were most popular (Figure 4.8). This analysis demonstrated that Royal Caribbean with 1103 (30.23%) cruises taken and P&O with 1079(29.57%) were the largest lines used in the survey. As these two companies have totally different rewards and benefits (see chapter 2) these companies need to be examined in more depth.

46

Figure 4.8 Contemporary Cruise Lines – Number of Cruises Taken 1200

1079

1103

1000 800 Number of 600 Cruises Taken 400 200

131

82

0 Carnival Costa Cruise Cruises Line

4.3

513

441

99

18 Disney Cruise Line

Fred Olsen

MSC

183

NCL

Princess Cruises

P&O Royal Cruises Caribbean

Contemporary Cruise Lines

Motivations to Cruise

Having examined the demographic profiles of the respondents and their choice of cruise lines, the motivations of the respondents to pick a cruise holiday were examined. These were matched against the CLIA survey in chapter 2. As the question was slightly different in emphasis because the CLIA survey was asking how cruising rated against other holidays whereas in this research the factors that motivated cruisers to choose a cruise holiday were measured. However the results were very high in this survey with good value for money (95%) being 42% higher, relaxation (93%) which was 40% higher, safe and secure (82%) better by 37% and Fine dining (83%) being 21% higher. The responses from this survey were therefore very positive motivations to take a cruise holiday.

47

Table 4.1 Reasons to cruise

(Survey results-Very important, somewhat important, important expressed as a percentage) (CLIA results - much better, somewhat better expressed as a percentage) Survey

CLIA

Results

Results

Percentage

Percentage

Good Value for Money

95

53

Relaxation

93

63

Fine Dining

83

62

Safe and Secure

82

45

Chance to visit several Vacation areas

78

73

Luxurious Experience

73

58

Being Pampered

72

62

High Quality Entertainment

62

55

Cultural Learning Experience

58

40

Variety of Activities

54

58

Exciting and Adventurous

47

53

Romantic Getaway

35

46

Motives are factors which cause people to act in a particular manner. These lead to intentions or reasons to choose. The motivations of good value for money and the chance to visit several vacation areas is measured against other factors in the next section; the reasons people chose to pick their last cruise holiday.

4.31

Reasons to choose a cruise holiday – Overall survey

These reasons will be examined with regard to the overall survey. They will then be examined with regard to the cruise categories (see chapter 2, Younger, 2008).

Furthermore as two of the contemporary group, Royal Caribbean and P&O have the largest amount of respondents in the survey (see section 4.2) and have totally different 48

reward packages (see chapter 2). Two other groups to be considered are age group and nationality as the different sectors within these variables may have different choices.

The most important reason that the respondents was the destination area and the ports to be visited, followed by the cruise line itself with the price of the cruise being the third in order. Membership of the loyalty scheme is the fifth most important reason that people use to choose their cruise holidays (Figure 4.9).

Figure 4.9 Reasons for Choice of Cruise – Overall Survey

5.19 4.43

4.32

Order of Preference

3.2 2.33 1.53

The Membership Destination of the loyalty area / Ports scheme

Word of Mouth

The Price of the Cruise

Reasons for Choice

49

Prior experience

The Cruise Line

4.32

Reasons to Cruise - Cruise Category

Cruise categories had the same order of choices as the overall survey, however within the different choices there were differing levels of importance per cruise type. When analysing the type of cruise, those people that took adventure holidays put the choice of destination as slightly higher (28%) than the rest of the categories which follows Younger’s (2008) theory. The price of the cruise is obviously important to Budget cruisers (22%) but surprisingly also to the Ultra Luxury passengers (22%). Membership of the loyalty scheme is more important to the contemporary sector (11%) than the rest (Figure 4.10).

50

Figure 4.10 Reasons for Choice of Cruise – Cruise Category 30 26 25

25

24

25

28

Ultra Luxury

25

Luxury 22

20

Contemporary

22 21 21 21

19

20

21 21 20 21

Classic

20

Budget

18 17

Order of 15 Preference

15

Adventure

15 16 16

10

10

11

11 9

8 9

9 7 7

8 7

7

5

0 The Destination area/Ports

The Price of the Cruise

The Cruise Line

Prior experience

Reasons for Choice

51

Membership of the loyalty scheme

Word of Mouth

4.33

Reasons to Cruise - Royal Caribbean and P&O

Of these two the destination area and ports visited was more important to P&O (5.46) passengers than Royal Caribbean (4.85) whereas their customers placed higher importance on the price of the cruise higher. Membership of the loyalty scheme was fifth in priority but Royal Caribbean (2.48) placed more importance on this factor than P&O (1.96). This may relate to the fact that Royal Caribbean members receive more benefits (see chapter 2).

Figure 4.11 Reasons to Cruise – Royal Caribbean and P&O 6 5

5.46

Royal Caribbean

4.85

4.49

4

P&O 4.4 4.48

4.17 3.27 3.27

Order 3 of Preference

2.48

2

1.96

1.49 1.66

1 0 The Destination area/ Ports

Membership of loyalty scheme

Word of Mouth

Price of the Cruise

Prior experience

Cruise Line

Reasons for choice

All the different categories analysed show that membership of the loyalty scheme was chosen as the fifth most important factor in choosing a cruise. Thus loyalty schemes are not the most important determinant in the decision making process.

However there were differences in emphasis in the importance of the choices dependant on the category being analysed so the earning mechanisms and rewards of these schemes must be considered.

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4.4

Past Passenger or Loyalty Programmes

This section will firstly examine the membership of these schemes. Then there will be consideration to earning mechanisms and benefits with regard to the overall survey, different categories of cruise lines (see chapter 2, Younger, 2008), two different cruise lines – Royal Caribbean and P&O (see chapter 2).

4.41

Loyalty Schemes

The respondents were asked how many loyalty schemes that they belonged to. In total 166 only belonged to one scheme, 86 to two, 32 to three, 40 to four, 12 were members of five and 3 people belonged to six schemes. One person also replied that they were members of 6 land based loyalty schemes. This data indicates that as over half of the respondents were members of more than one scheme. This is possibly because the schemes do not differentiate enough from each other as discussed in chapter 2 and that they become me-too programmes (Uncles, 1994; Buttle, 2009).

The examination of the preferences of earning mechanisms and rewards therefore becomes more significant for the management project.

4.42

Earning Mechanisms – Overall survey

The different cruise companies have different earning mechanisms for their passengers to earn their rewards (see chapter 2). In the overall survey the participants preferred the number of nights cruised as the most popular option for earning credits for the loyalty scheme (2.5). The next most popular option was the nights cruised but coupled with on board spend (1.95); this was followed by the cruise purchase price (1.77) and then the nights, on board spend and cruise purchase price was next in popularity (1.71) (Figure 4.12).

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Figure 4.12 Earning Mechanism – Overall survey 3 2.5

2.5

2

1.95

1.77

Order of Preference 1.5

1.71

1.24

1 0.5 0 Number of nights cruised

4.43

Amount spent Cruise Number of Number of on board purchase price nights cruised nights cruised, and on board on board spend spend and cruise purchase price Type of Earning Mechanism

Earning Mechanisms – Cruise Categories

Within the cruise line categories, number of nights cruised is more important to the ultra luxury passengers than the rest (Figure 4.13).

Figure 4.13 Earning Mechanism - Number of Nights cruised – Cruise categories Budget 4.8 4.6 4.4

All

Contemporary

4.2 4 3.8 3.6 Adventure

Luxury

Classic

Ultra Luxury

54

The amount spent on board is more important to the adventure sector than the others. Ultra luxury passengers see this factor as the least important within the cruise types (Figure 4.14).

Figure 4.14 Earning Mechanism - Amount Spent on Board – Cruise categories

All

Budget 3 2.5 2 1.5 1 0.5 0

Adventure

Contemporary

Luxury

Classic

Ultra Luxury

All sectors apart from Ultra Luxury place higher importance on the cruise purchase price as the earning mechanism (Figure 4.15).

55

Figure 4.15 Earning Mechanism - Cruise Purchase Price – Cruise categories Budget 3.00 2.50 2.00

All

Contemporary

1.50 1.00 0.50 0.00 Adventure

Luxury

Classic

Ultra Luxury

The number of nights cruised coupled with on board spend was least popular with the adventure sector whilst the remaining types were similar in the amount of importance that they placed on this earning mechanism (Figure 4.16).

Figure 4.16 Earning Mechanism - Number of nights cruised and on board spend – Cruise categories

All

Budget 3.5 3 2.5 2 1.5 1 0.5 0

Adventure

Contemporary

Luxury

Classic

Ultra Luxury

56

The Ultra Luxury passengers chose the total of number of nights cruised, on board spend and cruise purchase price as their most important opposed to the other sectors. As these people are paying the highest average prices for these cruises this would probably be the reason (Figure 4.17).

Figure 4.17 Earning Mechanism - Number of nights cruised, on board spend and cruise purchase price – Cruise categories Budget 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00

All

Contemporary

Adventure

Luxury

Classic

4.44

Ultra Luxury

Earning Mechanisms – Royal Caribbean and P&O

The two cruise lines also had differences in preference for earning mechanisms.

Royal Caribbean preferred the number of nights cruised as a mechanism with the number of nights cruised coupled with on board spend was their next choice. P&O picked the number of nights cruised as their most important but cruise purchase price was the next in their order (Figure 4.18).

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Figure 4.18 Earning Mechanism – Royal Caribbean and P&O 4.5 4

4.21

3.88

Royal Caribbean

3.5 2.84

3 Order 2.5 of Preference 2

P&O

3.13

3.3

3.08 2.65

2.94

2 1.96

1.5 1 0.5 0 Number of Amount spent Cruise Number of Number of nights cruised on board purchase price nights cruised nights cruised, and on board on board spend spend and cruise purchase price Earning Mechanism

The different groups all preferred the number of nights cruised as there earning mechanism. As was seen in chapter 2 the different cruise lines have different mechanisms. The option of the nights coupled with on board spend and cruise purchase price is the most fair for the individuals and also more profitable for the cruise line as it may increase spend (McCall, 2010).

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4.5

Rewards and Benefits

In chapter 2 it was discussed that there were several types of benefits; basic; organisational; experience; complimentary; on board discount and discount on cruise purchase price. Apart from basic which is common to all lines the preferences for these rewards are discussed in this section

4.51

Organisational Choices – Overall survey

One of the categories of rewards and benefits is organisational, where the line will organise a service at no cost. As the cost of reward schemes need to be kept under control this is a good benefit for the cruise companies (see chapter 2). In the overall survey most people preferred an upgrade of stateroom or cabin (5.09) compared to the other choices. This was followed by priority embarkation and disembarkation (4.53) (Figure4.19).

Figure 4.19 Rewards - Organisational Choices – overall survey 6 5 4 Order of Preference 3

5.09 4.53 3.42

3.23 2.12

2

2.61

1 0 Priority Guaranteed VIP Lounges Stateroom or Priority seating Priority tender embarkation dining times for embarkation Cabin at theatre and boarding and and speciality and Upgrades events disembarkation restaurant disembarkation reservations

Organisational Choices

59

4.52

Organisational Choices – Cruise categories

Whilst the cruise line categories all chose stateroom upgrades as the most important choice Ultra Luxury (4.0) passengers were shown to prefer guaranteed dining times and speciality restaurant reservations as compared to the rest. This group thought that priority embarkation/disembarkation was least important compared to the rest (Figure 4.20). This is probably due to the fact that these passengers cruise on smaller ships, so embarkation and disembarkation are not as chaotic as in the other sectors (see chapter 2).

Figure 4.20 Rewards - Organisational Choices – Cruise Line Type 7 6

Ultra Luxury

Luxury

Contemporary

Classic

Budget

Adventure

5

Order 4 of Preference 3 2 1 0 Priority embarkation

Guaranteed dining times

VIP Lounges

Stateroom or Priority seating Priority tender Cabin boarding Upgrades

Organisational Choices

60

4.53

Organisational Choices – Royal Caribbean and P&O

Royal Caribbean and P&O passengers also preferred stateroom upgrades. On the least important choices priority seating in the dining room and priority tender boarding, Royal Caribbean passengers had a larger preference than P&O (Figure 4.21).

Figure 4.21 Rewards- Organisational Choices – Royal Caribbean and P&O 6.00 Royal Caribbean 5.00

4.46

P&O

4.58

4.00

3.51 3.48

Order 3.00 of Preference

3.03

5.05

5.28

3.33 2.34

2.00

2.62 2.05

2.28

1.00 0.00 Priority embarkation

Guaranteed dining times

VIP Lounges

Stateroom or Priority seating Priority tender Cabin boarding Upgrades

Organisational Choices

When asked if there were any other organisational rewards that would be preferred one passenger suggested access to the captain and senior officers. Another thought that there should be priority booking of staterooms when cruise were first announced.

Organisational benefits are relatively cost free, however stateroom upgrades would only be available if those staterooms had not been sold.

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4.6

Experiences – Overall survey

The most preferred choice of experiences was a happy hour two to three hours a week followed by back stage tours and a welcome back lunch (Figure 4.22).

Figure 4.22 Experiences – Overall Survey 4 3.5 3 2.5 Order of 2 Preference 1.5 1 0.5 0

3.23

3.09

2.85

3.52

2.32

Back stage tours Invitation to the Dinner with senior Welcome back to the bridge, special cocktail officers lunch entertainment party areas or galley

Type of Experience Reward

62

Happy hour 2-3 times a week

4.61

Experiences – Cruise categories

In the cruise categories the happy hour was also the most popular particularly in the budget sector. A difference is noted in this sector that the welcome back lunch is second most important predominantly amongst the classic passengers who also prefer the cocktail party (Figure 4.23).

Figure 4.23 Experiences – Cruise categories 4.5 4 3.5 3 Order 2.5 of Preference 2

Ultra Luxury Luxury Contemporary

1.5

Classic

1

Budget

0.5

Adventure

0 Back stage tours

Cocktail party

Dinner with Welcome back Happy hour senior officers lunch

Type of Experience

63

4.62

Experiences – Cruise categories

In the case of Royal Caribbean and P&O the happy hour was also the most important with Royal Caribbean passengers preferring this to P&O. These passengers also preferred the back stage tours whereas P&O respondents preferred the welcome back lunch, special cocktail party and senior officers’ dinner (Figure 4.24).

Figure 4.24 Experiences – Royal Caribbean and P&O 4.5 4 3.5 3 Order 2.5 of 2 Preference 1.5 1 0.5 0

Royal Caribbean

Back stage tours

P&O

Special cocktail Senior officers Welcome back party Dinner lunch

Happy hour

Types of Experience

4.7

Complimentary gifts and Services – Overall survey

The most important preference in this category was wine, champagne or fruit in the stateroom followed next by a complimentary wash and fold laundry service and then a gift.

Figure 4.25 Complimentary Gifts and services – Overall Survey 4.5 4 3.5 3 2.5 Order of Preference 2 1.5 1 0.5 0

4.11

3.39

2.77

2.67

2.06

Wine, champagne or fruit in the stateroom or cabin

Free spa vouchers

A Free chips for Complimentary complimentary the casino wash and fold gift laundry service

Type of Complimentary Reward

64

4.71

Complimentary gifts and Services – Cruise category

In the cruise category sector this was similar except that Adventure passengers rated the laundry service far and above the rest. This may be due to the on shore activities that these passengers participate in. Another difference that showed was that Ultra luxury guests preferred free spa vouchers as their most important choice (Figure 4.26).

Figure 4.26 Complimentary Gifts and Services – Cruise categories 6 Ultra Luxury Luxury Contemporary Classic Budget Adventure

5 Order 4 of 3 Preference 2 1 0 Wine, champagne or fruit

4.72

Spa vouchers

A gift

Casino chips

Laundry service

Type of Complimentary Reward

Complimentary gifts and Services – Royal Caribbean and P&O

When examining the two individual cruise lines there were no major differences with the overall survey except that the least important choice of casino chips was preferred by Royal Caribbean passengers when compared to P&O (Figure 4.27).

Figure 4.27 Complimentary Gifts and Services – Royal Caribbean and P&O 4.5 4 3.5 Order 3 of 2.5 Preference 2 1.5 1 0.5 0

Royal Caribbean

Spa vouchers

Free casino chips Type of Complimentary Reward

65

A gift

P&O

Complimentary laundry service

Amongst the other complimentary offers that the respondents wished to be included were the following: complimentary bathrobe use-age: a speciality dining voucher: free internet use-age: free formal photograph: flowers in the cabin: free canapés before dinner and free extra luggage allowance on flights.

4.8

On Board Discounts – Overall survey

When asked which on board discounts the participants in the survey chose the bar as most important, followed by excursions and speciality restaurants (Figure 4.28).

Figure 4.28 On Board Discounts – Overall Survey 4.5 4

3.97 3.55

3.4

3.5 3

2.39

2.5 Order of Preference 2

1.69

1.5 1 0.5 0 Bar

Speciality restaurants

Health and Fitness

Excursions

Photographs

Type of On Board Discount Rewards

4.81

On Board Discounts – Cruise category

Within the cruise category sector, Ultra luxury passengers would prefer shore excursion discounts and bar discounts appear is very low in their preferences. Bar discounts are very important to budget and contemporary passengers, but adventure guests prefer the speciality restaurant discount (Figure 4.29).

66

Figure 4.29 On Board Discounts – Cruise categories 6 5

Ultra Luxury

4 Order of 3 Preference

Luxury

2

Budget

Contemporary Classic Adventure

1 0 Bar

Speciality restaurants

Health and Fitness

Excursions Photographs

On Board Discounts

4.82

On Board Discounts – Royal Caribbean and P&O

P&O passengers follow the overall survey but have a bigger preference for excursions than Royal Caribbean passengers. Those customers also prefer the bar first but then like speciality restaurant discounts (Figure 4.30).

Figure 4.30 On Board Discounts – Royal Caribbean and P&O 4.5

4.18 4.19

4

Royal Caribbean 3.47

3.5

P&O 3.26

3.22

3.6

3

2.43 2.38

Order 2.5 of Preference 2

1.66 1.61

1.5 1 0.5 0 Bar

Speciality restaurants

Health and Fitness

Excursions

Types of Onboard Discounts

67

Photographs

Other discounts that the respondents would like to be included in a loyalty scheme are in the shops; internet; and laundry.

4.9

Types of Rewards – Overall survey

The type of reward was then examined in order of preference. In the overall survey the respondents chose discount on the cruise price as the most important followed by on board discounts, then complimentary gifts and services. Next in the order of choice were experiences and organisational benefits (Figure 4.31). The financial benefits are therefore more popular.

Figure 4.31 Types of Rewards – Overall Survey 5 4.5 4 3.5 3 Order of 2.5 Preference 2 1.5 1 0.5 0

4.5 3.79 3.09 1.56

Organisational

2.07

Experiences

Complimentary Type of Reward

68

On Board discounts

Discount on the Cruise price

4.91

Types of Rewards – Cruise categories

The cruise categories results were similar but adventure cruisers placed experiences over complimentary factors (Figure 4.32).

Figure 4.32 Types of Rewards – Cruise categories 6 5

Ultra Luxury Luxury

4

Contemporary

Order 3 of Preference 2

Classic Budget Adventure

1 0 Organisational Experiences Complimentary

On Board discounts

Types of Rewards

4.92

Discount on the Cruise price

Types of Rewards – Royal Caribbean and P&O

The two cruise lines were similar to the overall survey but Royal Caribbean guests showed a greater preference for complimentary gifts and service as opposed to P&O (Figure 4.33).

Figure 4.33 Type of Reward – Royal Caribbean and P&O 5 4.5 4 3.5 3 Order 2.5 of Preference 2 1.5 1 0.5 0

Royal Caribbean

P&O 3.34

1.35

1.63

Organisational

3.8 3.9

4.48 4.49

3.01

2.03 1.98

Experiences

Complimentary Types of Rewards

69

On Board discounts

Discount on the Cruise price

Having conducted the analysis of the data and summarised the findings in each section, these results need to be considered. The many different responses to the questionnaire by different groups show that the cruise types, income groups and nationalities have differing preferences and requirements. These need to be collated and thought out in the next chapter and a conclusion reached. Following the conclusion recommendations will be made.

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Chapter 5.

5.1

Conclusions and Recommendations

Conclusions

The research objectives of this management project were to assess the motivations for consumers on an online cruise forum to purchase a cruise holiday and the significance of loyalty programmes in their purchasing decision; to consider the similarities and differences and benefits and earning mechanisms in cruise line loyalty programmes in different cruise lines and to identify the aspects of loyalty programmes which are most important to the consumers.

5.12

Significance of loyalty programmes in the purchasing decision

Motivations to cruise were examined in chapter 2 and these motivations were analysed in the survey and were found to be better than those researched by CLIA (2008). However this may be due to the audience being surveyed. Once the motivations were established an examination of reasons to pick a cruise took place.

The primary reason that the respondents chose a cruise holiday were the choice of destination area or ports to be visited which demonstrated the sense of adventure of the participants. The next most important choice was the price of the cruise.

Discounting was a main theme that the respondents chose when examining the loyalty programmes in depth. So price sensitivity was shown to be significant to the customers. Membership of the loyalty scheme was fifth in the choices. The participants liked their experiences with the programmes but showed in their answers that membership of the schemes was not the main determinant in their choice of cruise holiday.

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5.13

Loyalty Schemes

Nevertheless the other objectives of the management project were to consider the similarities and differences and benefits and earning mechanisms in cruise line loyalty programmes in different cruise lines; and to identify the aspects of loyalty programmes which are most important to the consumers.

5.14

Earning Mechanisms

There were different types of earning mechanism in the cruise lines examined. These were earned either by the day or night; cruise or voyage; or by per day and taking on board spend into account; or even by taking into account the day, the on board spend as well as extra credit for booking a suite (see chapter 2, Table 2.6). The survey results show that the most popular choice was the number of night cruised followed by the number of nights cruised and on board spend. The different sectors of cruise categories and the two individual cruise lines concurred with the overall survey albeit with different levels of importance. This may be because that is the norm in their scheme. The earning mechanism that best reflects the worth to the cruise line is the number of nights cruised, on board spend and cruise purchase price. As is suggested by McCall (2010) (see chapter 2) actual spending should be one of the criteria to earn rewards. This can be regarded to be fair as someone who cruises a lot but does not spend on board is not necessarily as profitable to the cruise line as a passenger who spends significantly more whilst spending less days at sea.

5.15

Levels of Earning Rewards

Each cruise line uses different tiers of earnings to determine different levels of rewards (see chapter 2). Most have a maximum of three levels. These levels are inflexible and there need to have smaller rewards between the levels to keep interest and loyalty as McCall (2010) proposes. In the survey 54% of the respondents belonged to more than one scheme so their interest possibly needs to stimulated. If 72

more levels were introduced, and passengers could earn rewards at quicker intervals there might be less switching.

5.16

Rewards and Benefits

Research of the cruise line websites showed over 500 benefits offered by the various lines. These benefits were then organised into different categories which were basic; organisational; experiences; complimentary gifts and services; on board discount and discount on the cruise price (see chapter 2). Cruise lines use these categories in their schemes in different ways and in different amounts. Royal Caribbean uses all the categories with more than 39 rewards whereas P&O has only 11 benefits. These benefits were then examined as to cruise passengers preferences. As the basic rewards were mainly the administrative function of management of the scheme these were not investigated.

5.17

Organisational Benefits

The first reward to be examined was organisational benefits. These benefits have the advantage of being relatively cost free which will keep down the cost of the scheme (see chapter 2). The survey found that the upgrade of staterooms was the most popular choice. This can only be organised if these cabins have not been booked so the cruise line does not lose income. The next most popular choice of priority embarkation and disembarkation can be organised. However as the numbers participating need to be considered, the level of reward should be taken into account.

Other benefits such as guaranteed dining times and other priority bookings should be included as part of the mix in a loyalty scheme.

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5.18

Experiences

Similarly experiences should be mainly without cost. The happy hour three times a week which was the most important choice in the survey does incur a cost, which will however be duty free. If the event is scheduled at strategic times of the day, the cost can be kept to a minimum. Another method of controlling this cost could be to restrict the products in the offer. The costs of welcome back lunch and dinner with the senior officers would only entail the cost of wine and drinks, again duty free. Consideration of this reward should again be linked with levels. Backstage tours would involve organisation and little cost but numbers participating should be considered with this reward.

5.19

Complimentary Gifts and services

Complimentary gifts can incur costs as is the case with the most popular choice in the survey which was wine, champagne, or fruit in the cabin. However the perceived cost to the guest is not necessarily the cost to the company especially in the case of alcohol which will be duty free. Other gifts also incur a cost but strategic alliances with other companies as suggested in chapter 2 could be a source of these gifts (McCall, 2010). Services, however should incur little cost provided the time required for the service is established and organised. Other rewards such as casino chips and spa vouchers are incentives to the guests to visit these facilities and may encourage further use-age and therefore should also be included in the mix.

5.20

On Board Discounts

Equally on board discounts can be used as incentives for passengers to use facilities when these facilities are being underused such as port days, or early in the day or late at night. The most popular choice of bar discounts can be achieved in conjunction with the happy hour discussed above. Other discounts in the restaurants and health and fitness can be used to stimulate further use-age.

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5.21

Types of Rewards

The respondents to the survey preferred the financial rewards such as cruise discounts, on board discounts and complimentary gifts and services to experiences and organisational benefits. As discussed in chapter 2 loyalty programmes can be expensive to operate but by using the right rewards at the right times these costs can be kept under control. The levels of earning these rewards are currently relatively inflexible and have too large intervals between the tiers. The rewards across the different lines are extensive but more choice needs to be offered in some. An example of this is seen at P&O (see chapter 2).

However the cruise lines have the ability and technology to organise their schemes in a better fashion in order to differentiate and satisfy their customers. The earning levels, tiers and rewards can all be revitalised. These will be shown in the recommendations which follow.

5.2

Recommendations

5.21

Loyalty Schemes

Although there was little evidence that loyalty schemes were a main determinant in the reasons for choosing a cruise holiday, there were indications that the schemes need attention. Whilst there appears to be differentiation in the programmes there are over half of the respondents that hold two or more memberships (see chapter 4).

This indicates that there is not a great deal of loyalty within that group. The rewards that these people receive do not offer enough value to keep them loyal (Uncles, 1994; Buttle, 2009).

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5.22

Customer Knowledge

This potential lack of loyalty suggests the need for cruise companies to know more about their customers. The customers should be regularly surveyed as to their needs. The companies need to hold forums, individual interviews and website discussions to listen to and understand their customers. Results have highlighted that customers have different requirements as is shown in chapter 4 with regard to cruise categories.

5.23

Customer Data

As discussed in chapter 2 loyalty schemes also generate customer data. As all passengers use swipe cards to gain access to their cabins as well as to use on board for purchases data on these purchases can be captured. This data produced should be used to identify their needs more effectively. Programmes can then be produced for individuals. Benefits could be then tailored for individuals (Rowley, 2005).

5.24

Marketing

Differentiation between the lines must be more defined. The programmes need to reflect the needs and requirements of its target market. This will help to avoid Commodisation as marketing managers never copy the marketing mix of the competition then neither should the loyalty programme (see chapter 2, McCall, 2010).

5.25

Earning Mechanisms

The earning mechanisms need to include actual spending as well as nights spent on board. This will reflect the value of the customer to the cruise line (see chapter 2, McCall, 2010). It will also cater to consumers’ desire for fairness. One answer to this problem could be to have tiers which offer one level of benefits for nights spent on board. These benefits could be mainly organisational and experience based with small discounts as well. Another level of benefits could be based around on board 76

spend and price paid for the cruise. These rewards could be more attractive financially as an inducement for customers to spend more .

5.25

Levels of Earning Rewards

The levels of tiers need to be more flexible. There are often too big steps between levels and these should be addressed to avoid customers switching to other programmes (see chapter 2, Berman, 2006). One answer to this could be the use of some small inexpensive reward such as a back stage tour. This could be either communicated in advance of the consumer’s next cruise or as a surprise once on board.

5.26

Rewards and Benefits

There should be a broad set of rewards to cater to the passenger’s desire for choice.

This should include organisational benefits, experiences, on board discounts, complimentary gifts and services as well as discounts of future cruises. Care should be taken when discounting as this could unintentionally convert loyal customers to price sensitive ones. New technology could be used to communicate these rewards.

As ships technology has now become more advanced, products like FourSquare and I phone could be used for that purpose. Instant rewards are also possible.

5.27

Summary

The industry has been the fastest growing sector in tourism worldwide (CLIA, 2008).

However to sustain that growth, current passengers need to return. From the evidence of this project the respondents are generally happy with their cruise lines.

However the loyalty schemes do need transforming to ensure that they are reacting to customers’ needs and requirements. As the industry becomes more competitive the differentiation between the schemes will become more necessary and different mixes of offers delivered in different ways will be required.

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Kim, N. and Chalip, L. (2004) Why travel to the FIFA World Cup? Effects of motives, background, interest, and constraints, Tourism Management Vol. 25, No. 6, pp 695707 Li, X. (2010) . Loyalty regardless of brands? Examining three non-performance effects on brand loyalty in a tourism context, Journal of Travel Research, Vol. 49, No. 3, pp.323-336 Li, X. and Petrick, J. (2008). Examining the antecedents of brand loyalty from an investment model perspective. Journal of Travel Research, Vol. 47, pp. 25-34 Lois, P., Wang, J., Wall, A. and Ruxton, T. (2004), Formal safety assessment of cruise ships, Tourism Management, Vol.25, No. 1, pp 93-109 Mancini, M (2004) Cruising: a Guide to the Cruise Line Industry, Clifton Park, NY: Delmar Learning

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McCall, M., Voorhees, C. And Calantone, R. (2010), Building Customer Loyalty: Ten Guiding Principles for Designing an Effective Customer Reward Program, Cornell Hospitality Reports, Vol 10 No 9 P&O, (2011) (online) available at http://www.pocruises.com/Cruise-Experience/Portunus-Club accessed on January 13th 2011 Parnaby, P. (2006), (online), Evaluation through Surveys, Available at http://www.idea.org/blog/2006/04/01/evaluation-through-surveys accessed on 23rd March 2011 Passenger Shipping Association, (2010), Passenger Shipping Association & Association of Cruise Experts, Annual Report 2008/2009 (online) Available from Passenger Shipping Association at http://www.the-psa.co.uk/downloads/psa_ar2008_2009.pdf (Accessed 12th September 2010 Peck, H., Payne, A., Christopher, M. and Clark, M. (1999) Relationship Marketing, Oxford: Butterworth-Heinemann.

Petrick, J. (2004). The role of quality, value and satisfaction in predicting cruise passengers’ behavioural intentions, Journal of Travel Research, Vol. 42, pp.397-407 Reichheld, F.F. and Sasser, W.E. (1990), “Zero defections”, Harvard Business Review, Vol. 68 No. 5, pp.105-111 Royal Caribbean, (2011) (online) available at http://www.royalcaribbean.co.uk/cas/homeLoggedout.do?snav=1&cS=NAVBAR&pna v=6 Accessed on January 15th 2011 Rowley, J. (2005) Building brand webs: Customer relationship management through the Tesco Clubcard loyalty scheme, International Journal of Retail & Distribution Management, Vol. 33. No. 3 pp 194 – 206

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Survey Galaxy, (2011), (online), Available at http://www.surveygalaxy.com accessed from January 15th 2011 Tesco (2011), (online) Collect Points available at http://www.tesco.com/clubcard/clubcard/collecting.asp accessed on 15th April 2011 Uncles, M. (1994) Do Your Customers Need a Loyalty Scheme? Journal of Targeting, Measurement and Analysis for Marketing, Vol.2 No.4 pp 335-350 Vina, L. and Ford, J. (1998) Logistic regression analysis of cruise vacation market potential: demographic and trip attribute perception factors, Journal of Travel Research, Vol.39, pp. 406-410 Waddington, H. (2000) (online) Types of survey questions Available at http://s3.amazonaws.com/SurveyMonkeyFiles/SmartSurvey.pdf accessed on March 23rd 2011 Ward, D. (2010), Complete Guide to Cruising & Cruise Ships 2010, London: Berlitz Publishing Wright, K. (2005), (online), Researching Internet-Based Populations: Advantages and Disadvantages of Online Survey Research, Online Questionnaire Authoring Software Packages, and Web Survey Services Available at http://jcmc.indiana.edu/vol10/issue3/wright.html accessed on January 23rd 2011 Yarnal, C. and Kersetter, D., (2005). Casting off: an exploration of cruise ship space, group tour behaviour, and social interaction. Journal of Travel Research, Vol. 43, pp.

368-379 Younger, J. (2008) (online) Linking to the Cruise Industry, Tourism Insights available at http://www.insights.org.uk/articleitem.aspx?title=Linking+to+the+Cruise+Industry accessed on December 11th 2010

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Appendix 1 - Questionnaire

I am a Tourism Management student at the University of Chichester, and I am currently compiling a survey about cruise lines past passenger or loyalty programmes. I would be very grateful if I could ask you for 10 minutes of your time to take part in this survey. The survey consists of a short questionnaire.

Your participation is completely voluntary, so you are free to terminate your participation at any time. All data collected in this survey will be held anonymously and securely. No personal data is asked for or retained. Cookies, personal data stored by your Web browser, are not used in this survey.

If you are less than 18 years old, please do not answer the questionnaire and leave this website as your answers will be disregarded.

The information collected for this survey is for academic research purposes only, and will not be passed to any other organisation. The project will be completed by April 2011 and a copy of the results will be made available to you if required.

By completing and returning the questionnaire you consent to participate on it, and agree to allow your information to be used solely for the purposes stated here. If you have any questions regarding the research, please feel free to contact my supervisor at the University of Chichester, Dr. Andrew Clegg via Email: A.Clegg@chi.ac.uk

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Section 1 - About You - These questions are for demographic purposes Question 1 - What is your age?

19-24 25-39 40-49 50-59 60-74 Over 74 Would rather not specify

Question 2 - What is your gender?

Male Female

Question 3 - What is your nationality?

American(USA) British Canadian French German Irish Italian Spanish Other Other – please specify..................................................................

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Question 4 - What is your household income? $39k to $49.9k (£25000 to £31999) €30000 to €39999 $50k to $59.9k (£32000 to £38499) €40000 to €46999 $60k to $74.9k (£38500 to £49999) €50000 to €59999 $75k to $99.9k (£50000 to £59999) €60000 to €79999 $100k to $199.9k (£60000 to £119,999) €80000 to €159999 $200k to S299.9k (£120000 to £179,999) €160000 to €230000 $300k + ( £180,000 +) €230000 +

Question 5 - What is your employment status?

Employed Retired Other Other- please specify..............................................................

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Section 2 - About your cruises – these questions are about your past cruises and why you chose them.

Question 6 - How many times have you cruised with any of these cruise lines?

Azamara Cruise Lines

1

Carnival Cruise Line

2

Celebrity Cruises

3

Crystal Cruises

4

Cunard

5

Clipper Cruise Line

6

Costa Cruises

7

Disney Cruise Line

8

Easy Cruise

9

Fred Olsen

10

Holland America

11

Hurtigruten

12

Hapaag Lloyd

13

Louis Cruises

14

MSC

15

NCL

16

Oceania

17

Princess Cruises

18

P&O Cruises

19

Regency Seven Seas

20

Royal Caribbean

21

SeaDream

22

Star Clipper

23

Swan Hellenic

24

Thomson Cruises

25

Viking River Cruises

26

Voyages of Discovery

27

Windstar Cruises

28

Yachts of Seabourn

29

Other

30

Please specify

Question 7 - Which areas have you cruised?

Alaska

1

Baltics

2

Caribbean

4

Eastern Seaboard (USA and Canada)

Hawaii

7

Eastern Mediterranean

British Isles

3

5

Far East

6

8

Western Mediterranean

9

Norwegian Fjords

10

Red Sea

11

South America

12

South Seas

13

Transatlantic

14

World Cruise

15

Other – please specify..................................................................................

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Question 8 - Please rank the importance of the following as to how they influence your choice of cruise holiday Please put in order from 1-6 with 1 being the most important and 6 being the least.

The Destination area of the Cruise and the Ports to be visited Your membership of the past passenger programme/loyalty scheme Word of Mouth The Price of the Cruise Prior experience The Cruise Line

Question 9 - Which cruise line did you last cruise with and what was the destination area? .......................................................................................................................................

Question 10 - Please rate how important the following are when you are deciding on a cruise holiday?

Essential

Very Important

Chance to visit Several Vacation areas Being Pampered Fine Dining Luxurious Experience Relaxation Make New Friends Variety of Activities High Quality Entertainment Exciting and Adventurous 87

Important

Somewhat

Not at all

Not

Important

Important

Applicable

Good Value for Money Romantic Getaway Safe and Secure Cultural Learning Experience

Question 11 - On your last cruise how would you rate the following?

Very Good

Good

Adequate

Poor

Very Poor

Chance to visit Several Vacation areas Being Pampered Fine Dining Luxurious Experience Relaxation Make New Friends Variety of Activities High Quality Entertainment Exciting and Adventurous Good Value for Money Romantic Getaway Safe and Secure Cultural Learning Experience

Question 12 - Would you like to make any comments about your last cruise?

What was good or perhaps not so good? .............................................................................................................................

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Not Applicable

Section 3 – Past Passenger or Loyalty Programmes Most cruise lines have past passenger or loyalty programmes. These questions are designed to discover your preferences with regard to how you earn your rewards and how you would like to use them.

Question 13 - What past passenger programmes or loyalty schemes are you a member of? .......................................................................................................................................

Question 14 - Are you loyal to a particular scheme and why? .......................................................................................................................................

Question 15 - Have you moved to another cruise line scheme and why? .......................................................................................................................................

Question 16 - Which of the following systems would you prefer to use to earn your reward points for your cruise past passenger programme?

Please put in order from 1-5 with 1 being the most important and 5 being the least.

Number of nights cruised Amount spent on board Cruise purchase price Number of nights cruised and on board spend Number of nights cruised, on board spend and cruise purchase price

Question 17 - Have you had any experiences with different loyalty schemes and what were they? ......................................................................................................................................

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Question 18 - Place in order of importance to you which of the following organisational benefits that you would prefer Please put in order from 1-6 with 1 being the most important and 6 being the least.

Priority embarkation and disembarkation Guaranteed dining times and speciality restaurant reservations VIP Lounges for embarkation and disembarkation Stateroom or Cabin Upgrades Priority seating at theatre and events Priority tender boarding

Question 19 - Are there any other organisational rewards that you would prefer? If so please write which below. ................................................................................................................................

Question 20 - Place in order of importance to you which of the following experiences that you would prefer Please put in order from 1-5 with 1 being the most important and 5 being the least.

Back stage tours to the bridge, entertainment areas or galley Invitation to the special cocktail party Dinner with senior officers Welcome back lunch Happy hour 2-3 times a week

Question 21 - Are there any other experiences that you would like included in a rewards programme? Please write them in the box below .......................................................................................................................................

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Question 22 - Place in order of importance to you which of the following complimentary gifts or service you would like Please put in order from 1-5 with 1 being the most important and 5 being the least.

Wine, champagne or fruit in the stateroom or cabin Free spa vouchers A complimentary gift Free chips for the casino Complimentary wash and fold laundry service

Question 23 - Are there any other complimentary offers that you would like included in a reward programme? Please write them below .......................................................................................................................................

Question 24 - Which on board discount would you prefer?

Please put in order from 1-5 with 1 being the most important and 5 being the least.

Bar Speciality restaurants Health and Fitness Excursions Photographs

Question 25 - Are there any other on board discounts that you would like to be included in a loyalty programme? Please write them below .......................................................................................................................................

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Question 26 - Of the following types of rewards which would you prefer?

Please put in order from 1-5 with 1 being the most important and 5 being the least Organisational Experiences Complimentary On Board discounts Discount on the Cruise price

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