Pricing and Promotional Strategies
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The following presentation is one I developed as a class assignment for a recent marketing class. It is an examination of the Royal Caribbean International Cruise Line brand, including their pricing and promotional strategies. Each of the slides are accompanied with detailed speaker notes which help clarify the graphics.
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Pricing and Promotional Strategies
- 11. References Ciriković, E. (2014). Marketing Mix in Tourism. Academic Journal of Interdisciplinary Studies, 3(2), 111-115. doi:10.5901/ajis.2014.v3n2p111 Conrad, A. (2017). Understanding the Marketing Mix: The 4P’s of Marketing. Retrieved from https://blog.capterra.com/understanding-the-marketing- mix-the-4-ps-of-marketing/ Cortiñas, F. (2018). Internal Factors Affecting Price Definition. Retrieved from https://www.coursera.org/lecture/marketing-mix/internal-factors- affecting-price-definition-77zLi Hattangadi, V. (2014). 4 Ps of Tourism Industry. Retrieved from http://drvidyahattangadi.com/4-ps-of-tourism-industry/ Keller, K. (2013). Strategic Brand Management: building, measuring, and managing brand equity (4th ed). Boston, MA: Pearson Publishing M. T. (2016). The 4Ps of Marketing Decoded. Retrieved from https://www.workzone.com/blog/the-4ps-of-marketing/ Ozer and Phillips. (2012). Pricing in the Cruise Line Industry. The Oxford Handbook of Pricing Management, 199-216. Tanner, J. and Raymond, M. A. (2018). Principles of Marketing (Vol. 3). [E-reader version]. Boston, MA. Boston Academic Publishing, Inc.
Editor's Notes
- Pricing and Promotional Strategies Quentin Smith
- Introduction Tourism is an intricate industry involving several stakeholders including governments, hospitality companies, transportation organizations, local citizens, and traveling consumers; all of which contribute to the industry’s growth and decline (Hattangadi, 2014). Like hotels, cruises are a component of the tourism industry, and its surge in popularity connects to the increase in tourism amongst Millennials and Generation X’ers. Ciriković (2014) says the expansion of tourism is forcing relatable organizations to find new methods in achieving their competitive advantage and promoting it. Marketing is serving in a vital role in the evolution of the tourism industry, in turn enhancing the value cruise lines offer. Royal Caribbean International (RCI) is the brand of the world’s largest cruise ship, Symphony of the Seas. In addition to the Symphony of the Seas, there are 25 additional ships in the RCI fleet. The company sails throughout the world, taking their guests to some of the most beautiful and appealing destinations, including Alaska, Australia, and New Zealand, the Panama Canal, and of course the Caribbean. While the brand has become well-known for their ships and destinations, the onboard activities are where the brand truly sets itself apart from the competitors. Those activities include wine tasting, ice skating, zip lining, theatre shows, spa services, youth programs, a skydiving simulator, and culinary classes. RCI’s position in the cruise market share, second to Carnival Cruise Line, can be contributed to its marketing mix – the four Ps.
- The Four Ps RCI’s marketing mix utilizes the brand’s four Ps as the foundation for its strategy and tactics in effectively reaching their target market. Each of these components has a vital role in the success of a brand, yet none of them can work independently. They must all work together for victory to be feasible. The four Ps consist of product, promotion, place, and price. The product is either a tangible good or an intangible service which fulfills a need or desire of a consumer. RCI’s product includes a ticket allow entry onto a specific cruise ship, as well as the services that come with being an RCI cruiser. Promotion is the various methods of bringing awareness to the product and the tactics in persuading the consumers to purchase the brand’s product. Print advertisement, TV media, social media, out-of-home, sponsorships, and partnerships are just a few mediums RCI employs. The place is the distribution channels of the product – where the purchasing of the product occurs. The organization’s website, travel agents, secondary booking websites are all “places” where consumers can purchase an RCI cruise ticket. Price is the amount paid by the consumer for the product. Marketers strategically set the price point to elicit a particular image of the product in the minds of the consumers. RCI makes use of several pricing strategies in providing their product to consumers. Each of the four Ps is important to the growth of a brand’s equity. Together, the items within the marketing mix create value in the minds of the consumer, ensures the perceived value translate into actual returns, provides accessibility of the offering, and helps the brand be relatable to the consumers (M, 2016). A great deal more can be said about each one, but promotion and price and how RCI profits by them will be the focus of this presentation.
- Price As mentioned, the price is what consumers pay for the product or service. This element of the four Ps is the most difficult to establish and is the most important. Ciriković, (2014) explains prices higher than the perceived value of the product can result in a decline in sales, whereas a low price point can minimize profits and diminish the brand’s image. Therefore, RCI must be strategic in how it sets the price point – it is crucial in persuading their consumers to purchase a ticket onto one of their cruise ships. Also, it is an essential way of establishing the brand’s product position. There are numerous factors, internal and external, affecting the establishment of RCI’s price. Cortiñas (2018) explains internal factors include the marketing objectives of the company, organizational constraints, the brand’s marketing mix, and cost structure of the company. External factors influencing the definition of prices include the cost of materials and production, competitor pricing, market fluctuations, the degree of elasticity, plus supply and demand. The challenge becomes establishing a price that is appealing to the target market while still being profitable for the organization (Conrad, 2017). Overcoming these factors to determine a strong price point takes innovation, creativity, and experimentation. It’s crucial for RCI to understand how the price influences consumer's perception of the brand and how it relates to the competition. Also, it is critical for establishing and maintaining the brand’s image by accurately creating pricing strategies to ensure they are competitively priced.
- Pricing Tiers Ahead of adjusting their pricing strategy, RCI must understand what the audience’s perception is of the brand and how it relates to the established price point. Consumers, subconsciously, rank a brand’s perceived quality according to their price (Keller, 2013). Typically, cruisers are willing to pay a higher cost when they recognize a dominant value in the product. That perception comes from the positioning cruise line employs. RCI’s primary competitors are those surrounding it on the graph; Princess Cruises, Celebrity Cruises, MSC Cruises, Norwegian Cruise Line, Holland America Line, and Carnival Cruise Line. For the most part, it, the pricing tier graph shows the higher the cost of a cruise the higher the image perception of the said cruise line. While Carnival Cruise Line’s perceived image is lower than RCI, it has a greater share of the market primarily due to its lower cost. RCI and each of its competitors have similar price points and are relatively the same in image perception – creating an urgency to differentiate the RCI brand from others. Furthermore, consumers see the RCI brand as “Contemporary.” Consumers identify “Contemporary” cruise companies as those with fares, schedules, and itineraries that are perfect for younger adults and families. RCI takes By understanding how their pricing affects the perceived image, RCI can make necessary adjustments to their pricing strategies better aligning their price with the image they want their audience to have of their brand.
- Pricing Strategies Pricing strategies employed by cruise lines have gone under a tremendous amount of transformation over the years. Ozer & Phillips (2012) explains in the 1970s cruise companies published their prices and there was no fluctuation during the booking period. In the 1980s, Ozer & Phillips (2012) says prices became more complex than previous years, and in the 1990s the costs transitioned to more of a dynamic system with an initial base rate and prices adjusting for each cruise. Until recently, RCI allowed and encouraged last minute cruise purchases to fill empty cabins knowing the amount of lost revenue that comes with empty staterooms. This strategy punished those who invested in the RCI brand early and rewarded those who did not – the consumer’s perception of the brand reflected it as much. Now, they are making a statement by not dropping their prices as the departure date nears. Price integrity is serving a vital role in strengthening RCI’s consumer relations and in turn growing the brand’s equity. The organization RCI primarily employs two pricing strategies; promotional pricing and optional product pricing, for the customer’s initial purchase. Secondarily, RCI utilizes captive product pricing for onboard activities, products, and amenities. It’s essential to use pricing strategies to maximize profits while stressing the brand’s value in promoting the product. Keller (2013) states an organization’s pricing strategy controls how consumers identify the pricing, the flexibility of the price, based on the discounts the brand offers. RCI’s use of the promotional pricing strategy is evident in the multiple applications of sales, discounts, and bonus savings. The brand website consistently is offering deals such as 50 percent off second guest cruise ticket, receive up to three hundred dollars to spend on the cruise ship, 30 percent off everything during Black Friday, and kids sail free. This pricing strategy typically is a short-term tactic to encourage new or inconsistent cruisers to purchase with the brand. RCI has sales on a regular basis continually utilizing the promotional pricing strategy to incentivizing passengers to book with RCI over competing for cruise lines throughout the year. The other primary pricing strategy RCI employs is optional product pricing. The utilization of this strategy is evident in the pricing structure for the various staterooms on each of RCI’s cruise ships. Keller (2013, p. 169, para.3) is quoted as saying “different consumers may have different value perceptions and therefore could—and most likely should—receive different prices. Price segmentation sets and adjusts prices for appropriate market segments.” Similar to how Redbox offers regular DVDs at one dollar per day, Blue-ray movies at $1.50 per day, and video games for two dollars per day, RCI offers a tiered pricing system for their staterooms; interior, outside view, balcony, junior suite, family suite, and presidential suite. The organization understands how the presentation of the price influences their customer's perception. Therefore, the brand's website shows prices per day rather than the entire amount for the duration of the cruise. A five-night Western Caribbean cruise costing $219 per day sounds more affordable than $1,095. By breaking the cost down into smaller units, more expensive products can appear to be less expensive, resulting in more sales (Keller, 2013). Regardless of which pricing strategy RCI utilizes, they are working to match the maximum price consumers are willing to pay with the perceived value of the RCI product – value-based pricing. No different than any other differentiator, pricing has an impact on RCI’s brand equity because the established price is a source of meaning and identity. A strong pricing strategy will have a positive effect on RCI’s brand, whereas a weak plan will have the opposite effect. RCI’s usage of the promotional pricing and optional product pricing strategies are having a positive impact on the brand as seen in continued growth over the past several years.
- Promotion Promotion is the most visible of the four Ps. It is how the organization brings awareness to the brand and its offering by supporting the placement of the product, pricing strategy, as well as the product’s image and positioning in the marketplace. Ciriković (2014) states the goal of the promotional mix is to establish a positive product image in the minds of the consumers persuading them to choose the product over the competition. To be successful in promoting the RCI product, marketers must provide the right information at the right time using the most appropriate media to reach and persuade the target market. This combination of mediums includes social media, online and mobile marketing, advertising, personal selling, direct marketing, sales promotions, sponsorships, partnerships, and public relations. Typically, a successful promotional campaign consists of multiple components reaching the consumer from all directions. RCI has recently switched their path primarily towards social media and online with support from tv and print media, as well as sponsorships and partnerships. Also, they rely on personal selling through the RCI sales team, and RCI approved travel agents. Marketers utilize different mediums to communicate the marketing message to the consumer in ways that will be most relevant to them. However, it is up to the marketers to determine what method will reach the audience by avoiding as many distractions as possible. In addition to the noise surround consumers, Tanner and Raymond (2018) explain numerous factors can influence the selection of communication methods. Target market characteristics Product life cycle stage Available budget Consumer behavior Type of offering Laws and regulations Media preference Push versus pull strategy Competitors Availability of media There are numerous advantages in implementing a strong multi-component promotional mix. Advertising is tremendous in building awareness and is effective at reaching a wide audience. Social media allows for a highly interactive consumer and brand relationship, as well as the ability for instant wide-spread information sharing. Sales promotions can stimulate sales quickly by providing targeted incentives for specific products. Sponsorships and partnerships leverage the other brand’s equity. There is no use in having a good product if consumers are not aware of it. Therefore, the promotional mix brings a critical need in ensuring RCI’s marketing mix is effective.
- Primary Promotional Methods RCI chose to restructure their promotional mix recently to focus more on social media and online mediums. The decision to make this transformation is due to the organization’s decision to change their target market to primarily focus on Millennials, whose primary form of communication is through online means. These include six social networks; Facebook, Twitter, YouTube, Tumblr, Pinterest, Instagram; blog, brand website, email, and secondary booking websites. Each of these pieces contributes to the promotional mix in their unique way. Social media allows for an intimate connection between the brand and consumers, bringing the audience into the brand conversation and utilizing them to improve the brand. The brand showcases the ships, destinations, and onboard activities through video and photos with their Facebook, Twitter, and Instagram followers. RCI encourages their fans to interact with the brand, share opinions and experiences with the crew and other cruisers. On their YouTube channel, a person watches a variety of videos giving them a glimpse of what it’s like to be an RCI cruiser. Ciriković (2014) explains nurturing public relations through social networking enriches the brand image and indirectly influences the product’s favorable positioning amongst the audience. By utilizing social media, RCI establishes a public voice and web presence, complimenting other communication methods (Keller, 2013). Also, social media helps the organization in controlling the perception of their brand. RCI’s website has customer booking capabilities, including a virtual tour of a selected cruise ship, enabling consumers to assess the quality and service levels, without leaving their homes. A great deal of cruise related information is shared within the website, allowing the user to learn as much or as little as they like to help them in making cruise associated decisions. Also, to assist customers with multiple ways to contact the company is available on the website. Keller (2013) explains the design of a site is crucial; it can provide a positive or a negative experience. If the customer struggles with the usability of the website, there is a high probability of them choosing a different cruise line – one with an easier to use the site. RCI’s website is nicely organized, easy to use, and full of useful content. Most importantly, users can search and book cruises directly through the brand website. Also, the home page consistently advertises the current promotional sale and provides a clear and simple call to action button to take advantage of the promotion. Not only are websites a tremendous asset to promote a brand’s product, but they can also collect valuable consumer data that are usable for other promotional means such as e-mails. An additional online promotional method includes the brand’s blog where they are regularly informing the audience about new services, ships, and experiences, as well as travel trends and tips. RCI utilizes secondary booking websites, such as Expedia and Priceline, to increase sales and banner ads across strategically targeted sites to raise awareness. Furthermore, the organization takes advantage of their loyalty program, Crown and Anchor Society, to stay in contact with their more seasoned cruisers – regularly emailing relevant information and promotional sales encourage the cruisers to add more points to their membership with another RCI cruise.
- Secondary Promotional Methods Following social media and online means, RCI promotes their offering through a range of methods including tv commercials, print ads, sponsorships, partnerships, press releases, RCI sales team, and RCI approved travel agents. Each of these connects with the target audience uniquely, yet some have a more significant impact than others. RCI has recently launched a new advertising campaign, “Come Seek” in which the brand is working to align the consumer’s perceived image with what the brand desires the image to be in the minds of the audience. Publications bring credibility to the advertising brands. In support of the new campaign, RCI has been running commercials on primetime television. TV advertising provides high coverage and impact, but production costs are high, and viewership is declining. RCI is a sponsor of the consumer-focused FAN2SEA Cruise event focusing some of the most crowd-pleasing pop icons. Also, the organization sponsors Cruise World, a business to business event that brings together travel professionals and supply partners. This component within the promotional mix provides a unique communication opportunity for the brand. Keller (2013) says by a brand becoming a part of a particular moment in a consumer’s life; they will develop a deep connection that will broaden outside of the event. The organization has may the calculated decision to partner with certain brands that will help each company grow their respective brand’s equity. Keller (2013) explains by linking one organization to another in the form of a partnership consumers will assume that a portion of one brand’s image and position may also be valid for the other. RCI is the official cruise line of the New York Knicks and Rangers. The brand is amid a partnership with the World Wildlife Fund to help conserve the oceans. RCI has teamed up with Universal Orland Resort for an exclusive vacation package for RCI cruisers only. Also, the organization has partnered with VISA to provide RCI branded credit cards that give the owner points for every dollar spent, going towards the redemption of a future cruise purchase. Additional components within the promotional mix include a new virtual reality experience in China and 230 “live billboards” in New York City streaming live video from RCI cruise ships. Both methods are to give consumers a glimpse of what it is like to be an RCI cruiser. The key to finding success with a brand’s promotional mix is the right balance of promotional methods. Hattangadi (2014) says an excellent promotional mix consists of personal selling, print and television advertisements, and digital media. The right balance is not the same for all organizations, it different based on the brand’s image, position, goals, and target audience. Regardless of the mix of elements, it is crucial for the items to present a consistent message with coherent visuals.
- Conclusion Taking advantage of cruising’s increase in popularity, RCI is using their four Ps to offer consumers an adventurous and entertaining atmosphere at a comfortable price for middle-income households. Understanding that customers who have a high-value perception of their brand are willing to pay more for additional value, but are confined to a strict budget supports RCI’s promotional pricing and optional product pricing strategies. Sharing the value in these options and the competitive advantage of the cruise line, RCI is promoting the brand through multiple methods, primarily online and through social media. Along with the product and place, RCI has the right balance of the four Ps – vital to the development of a compelling marketing mix leading RCI to success. The integration of the four Ps ensures RCI’s product is visible, in-demand, promoted through the appropriate channels, readily available, and competitively priced (Conrad, 2017). Through each of these, RCI is growing its brand equity. It is vital to continue to strengthen the brand, RCI marketers must regularly revisits each of their four Ps to ensure they effectively support the brand’s image and positioning.
- References Ciriković, E. (2014). Marketing Mix in Tourism. Academic Journal of Interdisciplinary Studies, 3(2), 111-115. doi:10.5901/ajis.2014.v3n2p111 Conrad, A. (2017). Understanding the Marketing Mix: The 4P’s of Marketing. Retrieved from https://blog.capterra.com/understanding-the-marketing-mix-the-4-ps-of-marketing/ Cortiñas, F. (2018). Internal Factors Affecting Price Definition. Retrieved from https://www.coursera.org/lecture/marketing-mix/internal-factors-affecting-price-definition-77zLi Hattangadi, V. (2014). 4 Ps of Tourism Industry. Retrieved from http://drvidyahattangadi.com/4-ps-of-tourism-industry/ Keller, K. (2013). Strategic Brand Management: building, measuring, and managing brand equity (4th ed). Boston, MA: Pearson Publishing M. T. (2016). The 4Ps of Marketing Decoded. Retrieved from https://www.workzone.com/blog/the-4ps-of-marketing/ Ozer and Phillips. (2012). Pricing in the Cruise Line Industry. The Oxford Handbook of Pricing Management, 199-216. Tanner, J. and Raymond, M. A. (2018). Principles of Marketing (Vol. 3). [E-reader version]. Boston, MA. Boston Academic Publishing, Inc.