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Carnival CEO Arnold Donald is not Clint Eastwood, but Donald’s description of how the world’s largest cruise company thinks about its target customers sounded a bit like The Good, the Bad and the Ugly — in Carnival’s case it is the Loyalist, the Newbie and the Switcher.
With 10 global brands, including Carnival Cruise Lines, Holland America and Costa, Carnival reported fiscal first quarter earnings March 25, and readily admitted that although booking volumes are healthy, its pricing has lagged, and the company racked up $15 million in losses.
Donald said “brand perception is most of the way back,” as the Loyalist previously returned to the fold, and people “new to cruise” are “back.”
Although it is unclear to what extent the Newbies are “back” since they are very much a contested target.
Lured by discounts, the Loyalist will “take an extra cruise or two if pricing is lower,” Donald said.
The biggest potential prize are the newbies, the masses of people who have never cruised, and don’t realize the relative bargain of a vacation they can land if they set sail on one of the big ships.
All of the cruise lines are fighting for these Newbies.
“And the new-to-cruise, that’s where all the heavy-duty action has been across all the brands, ours and other cruise company brands…,” Donald said.
Carnival and its rivals are all trying to lure the Newbies, and hopefully convert them into Loyalists.
Donald said Carnival Corp.’s marketing efforts have done much to win over the Loyalist and the Newbie, but the really tough segment to attract are the Switchers.
“And, we are working hard to complete perception recovery among Switchers,” Donald said.
The Switchers are the smallest of the three target groups, but the toughest to win over because you have to give Switchers a good reason to leave Royal Caribbean or Norwegian.
“And so a Switcher by definition is probably going to be last [to win over] because they have a brand they are with, and you are trying to get them to switch,” said Carnival CFO David Bernstein. “And so you need to have perhaps more cause, more rationale for them to switch from a brand they are all in to go to another brand.”
In other words, the Switchers can be fickle, but only if you give them a large enough incentive to abandon a competitor.
Of course, with customers like these, the opposite can be true and the Switchers can just as easily abandon Carnival Cruise Lines or Holland America, and cruise right over to Royal Caribbean if Carnival isn’t careful.
Bernstein chimed in that “any kind of negative noise makes them [the Switchers, that is] more difficult, obviously.”
As Carnival pours millions into TV campaigns and all kinds of other pitches, including wooing travel agents, the cruise line is well aware that there has been an abundance of “noise” over the last two years, and that makes its complete recovery all the more difficult.