Carnival Cruise Lines

Burnishing the Brand

by ROBERT J. KWORTNIK JR.

The case of Carnival Cruise Lines chronicles the com- n July 2005, the 2,974-passenger, 110,000-ton pany’s birth and development as it redefined the Carnival Liberty set sail after being christened by its leisure cruise industry. With a theme of “Fun Ships” I“godmother,” actress Mira Sorvino.2 Built for $500 and low pricing, Carnival appealed to a diverse mar- million, the ship was the twenty-first vessel sailing in ket. Under the pressure of increasing competition, Carnival Cruise Lines’ fleet, giving Carnival more pas- Carnival was challenged to refine its Fun Ships brand senger-carrying capacity than any other cruise line in the without damaging the considerable equity contained world. With 800-plus ocean-view or balcony staterooms, in that brand. In particular, as cruise lines became less differentiated in the customers’ view, Carnival twenty-two lounges and bars, four swimming pools, and sought to set itself apart with upgraded product fea- a spiral waterslide, Carnival Liberty was a far cry from tures, service, and other guest amenities, as well as the Mardi Gras, Carnival’s first ship, which was a con- a more sophisticated brand message. verted transatlantic liner bought in 1972 for $6.5 million. For its part, the Mardi Gras seemed to signal an inauspi- Keywords: branding; brand equity; marketing strategy; cious beginning for Carnival when the ship ran aground cruise industry; Carnival Cruise Lines at the tip of Miami Beach on its inaugural voyage—in full view of gawking vacationers. However, as Carnival We’re perfectly happy to be the Wal-Mart of the cruise lore had it, bartenders poured free drinks (including a industry. new rum cocktail that a creative bartender dubbed a —Terry Thornton, vice president of marketing planning, “Mardi Gras on the Rocks”), passengers had fun, and Carnival Cruise Lines1 the spirit of the “Fun Ships” brand was born.3

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The differences between the Mardi brand demands not only a deep under- Gras and the Carnival Liberty symbolized standing of customers’ needs and wants the metamorphosis of the Carnival brand. but also a clear vision about the brand’s Today’s Carnival was dramatically differ- core meaning and the alignment of myriad ent from the company that cruise industry cues (e.g., product features and marketing pioneer Ted Arison started with second- message) to support this meaning. To hand ships and savvy marketing. While begin the analysis of Carnival’s brand- North American passenger volume dou- management situation, I explore Carnival bled between 1994 and 2004, Carnival’s Cruise Lines’ position within the competi- volume tripled. More than three million tive structure of the cruise industry. I then guests sailed Carnival in 2004, the most describe Carnival’s marketing strategy and in the company’s history, and a figure rep- the evolution of the Carnival brand. resenting nearly one out of every three Finally, I evaluate Carnival’s brand initia- cruisers. For the fiscal year that included tives and discuss implications of manage- 2004, Carnival Corporation and PLC, the ment’s efforts to burnish the brand. parent company of Carnival Cruise Lines, reported record net income of $1.85 bil- The Cruise Industry and lion on revenues of $9.73 billion. Nine of Competitive Structure Carnival’s ships, almost half of the line’s The birth of the modern cruise industry available berths, had been launched since can be traced to the 1960s, in the wake of 2000.4 Through the years, Carnival had the first Boeing 707 flight from New York remained true to its “Fun Ships” brand lin- to Europe in 1958.6 With a rapidly shrink- eage and its goal of providing a good- ing transatlantic passenger base, oppor- quality, affordable vacation to mainstream tunistic shipping companies repositioned travelers. Nevertheless, company execu- their service from transportation to vaca- tives wondered whether it was time to set tion travel. Companies that did not “come a new course for Carnival and, if so, how about” to cruising soon foundered. At the best to burnish the brand without losing same time, lines that led the transition, its essence. such as Princess Cruises (1965), Norwegian This case study examines challenges Caribbean Line (1966; now Norwegian associated with brand management in the Cruise Line [NCL]), Royal Caribbean Cruise hospitality industry by focusing on the Line (1969; now Royal Caribbean Inter- leisure cruise sector and the brand that national [RCI]), and Carnival Cruise Lines dominates the seascape. Despite Carnival (1972), paced the industry. Still, the pas- Cruise Lines’ phenomenal growth and senger base was relatively small. In 1970, success, company executives have designed only 500,000 people took a cruise.7 A a makeover for the brand to enhance brand cruise was an expensive, formal, and rela- equity—the worth of the brand due to cus- tively lengthy vacation—seven to fourteen tomers’ brand knowledge and the effect of days on average—factors that contributed this knowledge on brand marketing and to the product’s snobby image and limited customers’ assessment of brand value.5 appeal. That began to change with the Modifying a successful brand, even if the 1977 launch of The Love Boat TV series, changes are evolutionary, not revolution- when cruising in all its romanticized glory ary, carries the risk of brand confusion, as was popularized to mainstream America. most any cue can communicate meaning Since then, the industry had grown tenfold about a brand. Nurturing an established to more than nine million passengers in

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Exhibit 1: North American Cruise Lines and Brand Positioning Double Market Ships Occupancy Market Share Positioning Carnival Corporation Carnival Cruise Lines 21 47,908 24.2% Contemporary Princess 13 28,820 14.5% Premium Holland America Line 12 16,978 8.6% Premium Costa Cruises (U.S. market) 2 4,224 2.1% Contemporary Cunard Line (U.S.) 2 4,411 2.2% Luxury Windstar Cruises 3 604 0.3% Destination Yachts of Seabourn 3 624 0.3% Luxury Total 56 103,569 52.2% Royal Caribbean International Royal Caribbean 19 44,108 22.3% Contemporary International Celebrity Cruises 9 16,118 8.1% Premium Total 28 60,226 30.4% Star Cruises Norwegian Cruise Line 9 16,734 8.4% Contemporary Orient Lines 1 826 0.4% Destination Total 10 17,560 8.9% Other CLIA-affiliated brands Crystal Cruises 3 2,960 1.5% Luxury Disney Cruise Line 2 3,508 1.8% Contemporary MSC Cruises 3 4,410 2.2% Contemporary Oceania Cruises 3 2,052 1.0% Premium Radisson Seven Seas 5 2,604 1.3% Luxury Cruises Silversea Cruises 4 1,356 0.7% Luxury Total 20 16,890 8.5% Grand Total 114 198,245

Source: Cruise Lines International Association (CLIA), 2005 Cruise Manual (New York: CLIA, 2005). Note: CLIA-member cruise lines comprise approximately 95% of the cruise capacity marketed from North America.

2004—an annual growth rate of 8.2 per- guests and featured exotic itineraries, cent, making it the fastest-growing form of gourmet dining, a relatively formal atmos- leisure travel.8 phere, and attentive personal service. Not The cruise industry was still young and surprisingly, this attracted a refined, afflu- evolving. Whereas luxury brands once ent clientele that was comfortable with held sway (at least in the public’s percep- paying $400 to $900 per person per day. tion), less than 5 percent of current cruise An even smaller segment of the industry capacity served this market (see Exhibit 1).9 was served by destination or specialty cruise With the exception of Cunard’s behemoth lines that sailed, for example, masted sail- Queen Mary 2, luxury lines tended to use ing vessels or replica paddle-wheeler ships smaller ships that carried only a few hundred for river cruises. Roughly one-third of the

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market, often veteran cruisers, sailed the upscale, 150-year-old British line was premium cruise lines. These companies scooped up by the American company offered high-quality service on relatively powered by the Fun Ships. Whereas the large ships that typically accommodated cruise market in the 1970s and 1980s was 2,000 or fewer guests paying $250 to $450 served by thirty brands, by 2005, only ten per person per day. Premium-level cruises brands owned by three corporations con- featured fine dining, a sophisticated atmos- trolled 90 percent of the market. Carnival phere (though less formal than most luxury Corp. emerged as the largest cruise com- cruises), spa facilities, abundant entertain- pany in the world, with at least one brand ment, and a wide mix of destinations. positioned in each of the four main seg- Cruising was dominated by brands that ments. Significantly, Carnival Corp.’s flag- served the “contemporary” segment, a ship brand had developed a formidable clever label used by cruise marketers to cost-leadership competitive strategy that describe the mass market. These cruise lines enabled Carnival to deliver a good-value featured ever-larger ships that accommo- vacation that attracted price-sensitive dated 2,000 to 3,400 guests who paid fares cruisers and still produced profit margins ranging from $150 to $300 per person per in excess of an astonishing 25 percent. day. Although not heavy on personalized Although Carnival’s executives dismissed service, these floating resorts offered an competitive threats from rival RCI, the abundance of good and varied food, plenty two companies had waged a marketing of activities to satisfy travelers’ diverse war for years. (In the past, when Carnival interests (including shopping, gaming, and RCI ships would pass each other, sports, shows, parties, dancing, and movies), RCI’s cruise directors would launch a and itineraries that visited popular vacation broadside: “There goes the Kmart of the destinations. Competition for the contem- Caribbean.”10) One battleground involved porary customer was fierce, particularly an expensive game of one-upmanship with between Carnival and RCI. Carnival exec- industry “hardware,” the ships themselves. utives argued, however, that the real com- The hardware competition became hot petition came from outside the cruise starting in 1988, when RCI launched industry in the form of land-based resorts the first purpose-built cruise “megaship,” and hotels in sightseeing destinations such Sovereign of the Seas, which carried 2,250 as Las Vegas and Orlando. passengers.11 Carnival answered in 1990 The competitive structure in the cruise with the brand’s own megaship, the Fantasy, industry changed dramatically around the the first of eight sister ships, each carrying turn of the twenty-first century. Price wars 2,052 guests and noted for their six-deck- and soft demand decimated the budget high, neon-trimmed grand atriums and spiral sector, with brands such as Regal, Premier, waterslides on the pool deck—both signa- and Commodore—“bottom feeders” with ture Carnival elements. Carnival launched older ships—unable to compete with the the next volley in 1996 with Carnival bigger brands’ new ships and attractive Destiny, the first 100,000-ton cruise ship, prices. Carnival Corp. won a battle with which carried 2,642 guests (though it RCI to gain ownership of Princess Cruises often sailed with 3,000) and featured one in 2003; just five years earlier, Carnival of the largest casinos and spa and fitness Corp. acquired Cunard Line in a move that centers at sea. sent shockwaves through the industry for In 1999, though, RCI trumped the field by its symbolic significance as the venerable, launching the 137,000-ton, 3,114-passenger

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Voyager of the Seas, the first of five ships tasteful than Carnival’s glitzy environment. in the Voyager class. Voyager of the Seas Critics noted, though, that with the Voyager featured amenities such as an ice-skating ships (“rather like a mall with a ship built rink, inline-skating track, a basketball around it”), RCI’s and Carnival’s onboard court, a mini golf course, and a rock- products had become similar.15 climbing wall that traversed the back of Cruise brands also stepped up the com- the ship’s huge funnel. The latter feature petition with new products and services. became a signature element for RCI, one For example, Princess Cruises’ Caribbean that cruisers and travel agents associated Princess sailed in April 2004 with a “Movies with the brand and that was later added to under the Stars” program—the industry’s all the ships in its fleet. RCI also leveraged first outdoor theater, with a poolside, 300- the design attributes of the new ships in square-foot screen. (A Princess executive the award-winning “Get Out There” pro- suggested, “This is our rock-climbing motions campaign launched in 2000. wall.”16) Just one year later, Carnival Featuring the tribal beats of the Iggy Pop answered with “Carnival’s Seaside Theatre” song “Lust for Life,” fast-paced commer- on the Carnival Liberty.17 NCL broke cials showed passengers climbing, run- from the conventional big-ship dining ning, skating, and kayaking—but hardly model in 2000 by introducing the “revolu- cruising. The campaign was intended to tionary” Freestyle Cruising concept, reposition the brand by targeting vacation- which featured open seating in its ships’ ers who had an “explorer” mind-set and dining rooms.18 Instead of the traditional by focusing on active and adventurous requirement that guests choose a dining dimensions of the experience.12 In June time, Freestyle Cruising emulated land- 2006, RCI planned to up the stakes again based resorts by permitting guests to dine by launching the 158,000-ton, 3,600- when and with whom they wanted. One passenger Freedom of the Seas, featuring year later, Carnival answered with Total an “aqua environment” on the top deck of Choice Dining, which retained traditional the ship with a sports pool, a family water fixed-seating dining in the formal restau- playground (with fountains, water can- rants but offered a choice of four rather nons, a lazy river, and a waterfall), a wave than two dining times. This program was pool for surfing, and an adults-only swim- complemented by an array of alternative ming area with hot tubs suspended more dining venues, such as specialty supper than 100 feet above the sea.13 clubs that required a reservation and fee, Competition among cruise brands sushi bars, and twenty-four-hour pizzerias.19 involved far more than building bigger Carnival executives believed that changes ships. Brands jockeyed for position in the in the cruise product and cruise markets consumer’s (and travel agent’s) perceptual had blurred the distinction between brands space. For example, Carnival continued to competing in the contemporary and pre- emphasize its Fun Ships positioning strat- mium market segments. As companies like egy, while RCI attempted to position as a Carnival and RCI continued to innovate and more sophisticated product. A former RCI to improve both product and service, and as executive drew the analogy that the brand premium lines like Princess and Celebrity was in the “wine and cheese” category, increasingly pursued the upper end of the whereas Carnival was in the “beer and mass market by offering more casual vaca- pretzels” category.14 RCI’s ship décor and tion experiences, the markets were converg- overall atmosphere was described as more ing, as were customers’ brand perceptions.

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Carnival’s Marketing Strategy In contrast to the typical cruise cus- Carnival Cruise Lines’ early marketing tomer, the Fun Ships theme attracted a strategy grew out of necessity. The age of relatively young, middle-class clientele. the Mardi Gras made low fares necessary. Carnival offered an entertainment experi- At that time, Carnival did not have a ence, with the industry’s first full casinos, national advertising campaign—in fact, no live music, discos, and wild daytime cruise line did. While the onboard product activities—including belly-flop, beer-chug- was limited during the lean startup years, ging, and hairy-chest contests—that were so were customers’ expectations, because a complete change from the image of the cruise product was still relatively new. cruising as shuffleboard and afternoon Bob Dickinson illustrated, tea. Carnival’s hardware, in particular the new ships built in the 1980s, were visual Years ago, the ship’s gym was small bonanzas, with bright colors and neon and hidden in the bowels of the ship lighting unlike anything before seen in below the water line. You could barely a cruise ship (shocking to some ship find it. But nobody cared back then. traditionalists). If you did a vegetarian selection Carnival pursued first-time cruisers as thirty years ago, nobody would have part of a concerted market-development touched it. They wanted meat and strategy. To communicate the brand message potatoes. Everything today is much more elaborate—the fitness centers, and demystify cruising for the uninitiated, the menus, the activities. If people Carnival crafted marketing communica- want it, we’ll give it to them. tions that articulated the Fun Ships image by showing the ships and their entertain- When Dickinson came on board as ment architecture, as well as by featuring Carnival’s vice president of sales and mar- guests dining, dancing, playing, swim- keting in 1973, he set in motion the Fun ming, sunning, and socializing—having Ships concept that would serve as the fun—at an affordable price. At the heart of brand’s cornerstone. Dickinson adopted the the message was new company spokes- Fun Ships moniker for Carnival after seeing person Kathie Lee Gifford singing, “In the a brochure for the Boheme, which Com- morning, in the evening, Carnival’s got the modore Cruise Lines promoted as the fun...”Carnival’s commercials starring “Happy Ship.” Cruise marketing at the time Gifford in 1984 were the first time a cruise tended to focus on destinations, rather than line advertised on network television. The the ships themselves, and promoted cruis- Carnival-Gifford relationship continued ing as a highbrow, luxurious experience. well into the mid-1990s before giving way Dickinson reasoned that fun was what to ad campaigns that featured the Beach people really sought in a vacation. By pro- Boys’ tune “Fun, Fun, Fun” and the Cyndi moting the Mardi Gras as a fun-ship expe- Lauper hit “Girls Just Want to Have Fun.” rience, Carnival would send a message that The marketing objective remained the was unique in the cruise industry.20 Perhaps same, however: to introduce vacationers to more important, by anchoring the brand cruising and to reinforce the image of with the Fun Ships positioning strategy, Carnival as the essence of fun. Carnival built an unmatched value proposi- “Today’s Carnival,” a label that company tion on the promise of fun—a promise that executives used to underscore changes in would direct the company’s marketing the brand, was different in form, but not strategy for at least the next thirty years. necessarily direction, from the Carnival of

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the past. Carnival’s pricing continued to we offer many opportunities for them lead the industry, with an average price point to sample the product. Our challenge per person per day of about $175, com- really is to get a little more credit for pared with an industry average of $235.21 the product we’re providing. The ships and onboard product were Carnival had a large field-sales force improved.22 Driving this change, accord- who called on travel agents, as well as a ing to Bob Dickinson, was Carnival’s vision: growing direct-sales effort that included “to consistently provide quality cruise vaca- an inbound channel (Carnival.com and tions that exceed the expectations of our 1-800-Carnival) and outbound channel of guests.” However, the marketing depart- Personal Vacation Planners (PVPs) who ment was still charged with not over- followed up on leads obtained through the promising. Instead, Carnival’s marketing inbound channel. PVPs called or e-mailed communications would create reasonable leads to promote cruise sailings that guest expectations—just high enough for Carnival’s revenue managers identified as customers to buy; the product was then having soft demand. However, some designed to deliver more. people at Carnival worried that these “one Dickinson estimated that only 16 percent day only” sales sent the wrong message. of North Americans had ever taken a cruise, Noted one manager, leaving a substantial untapped market of prospective customers. As such, Carnival We are struggling with how we want continued to direct its marketing efforts at to present the brand. This is a lovely stimulating primary demand for cruising vacation, and even though it’s an by converting land vacationers to sea vaca- entry-level product for the cruise tioners. Carnival estimated that half of its industry, it is still expensive relative guests were first-time cruisers, and one- to most vacation products, so we third of repeat cruisers had never sailed don’t want customers to perceive our Carnival before. Dickinson saw this seg- direct marketing as this used-car sales approach. We have been travel ment of repeaters as the low-hanging fruit. agent focused for so long. The direct Because these customers understood access is so new to us. cruising and loved the experience, it was only necessary to talk to them about the Carnival was careful not to be too brand. The challenge, though, was reach- aggressive in its direct-sales efforts, espe- ing these customers with the right mes- cially in marketing to past guests who sage. Terry Thornton, vice president of originally booked through agents. Still, the marketing planning, explained, relationship between Carnival and travel agents had turbulent moments. Some We don’t touch the customer or control agents, in particular the midsized Internet the selling experience directly in most agencies, began to rebate part of their sales transactions—80-percent-plus commission to customers to gain a price come through travel agents. We still advantage in the market—a practice that suffer from the perceptions of when our hardware was not so good and led to channel conflict. Carnival responded when our product had inconsistencies. with an advertised-price policy, which meant Sometimes travel agents don’t sell agents could no longer promote a price with enough frequency to really know lower than Carnival’s advertised price. the difference, or haven’t been aboard Brenda Yester, vice president of revenue one of our ships in years, even though management, commented, “It just became

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dysfunctional and was degrading the Carnival executives pointed to inconsis- brand. There has to be price integrity in tent product quality as one of the blem- the market. Consumers need to shop for a ishes on the brand in the past. Initially, Carnival cruise and not worry about where it was secondhand ships, but even with they’re buying it.” Bob Dickinson added, new ships, service delivery and food qual- “Many travel agents are just order takers; ity were variable. It was not until the they are driven by price.” mid-1990s that Carnival began to focus on Carnival’s target market was broad— people and processes. The “Carnival consumers twenty-five to fifty-four years College” in-house training program was old who made $40,000 or more per year. started to offer crew the opportunity to The average age of Carnival’s customer enhance language and other skills. Hospi- was forty-six—only a few years younger tality training was also introduced to than the industry average.23 Carnival’s encourage crew to treat cruisers as “guests,” marketers believed that the product was not passengers. Terry Thornton provided popular with families, honeymooners, these examples: singles, and seniors—“everyman.” Bob Dickinson argued that demographic seg- We’ve tried to focus training on the mentation was irrelevant for Carnival small things, like greeting guests. If because there was no prototypical Carnival a guest passes a crew member, the customer, except that person who cruised guest should be greeted. He should hear, “Good morning, how are you, to have fun: “If you have a vacation desti- how was your day at shore,” things nation that has a wide bandwidth of like that. When we first started this choice, you’re casting a bigger net, and training, we measured how many you’re going to get more fish.” greetings or similar recognition was offered out of all possible interac- Carnival Cruise Lines’ tions, and it was less than 20 percent. Brand Evolution Today, it’s 65 to 70 percent. Maurice Zarmati, vice president of sales and one of the original employees of Another simple service idea, imple- Carnival Cruise Lines, had seen the brand mented fleetwide in 2002, involved placing evolve considerably: mirrors in the crew areas near the exit doors, along with a sign to “Share a Smile.” The We started Carnival with one old ship. idea was to remind crew to smile when We’ve upgraded the product tremen- interacting with guests. Thornton noted, dously over the years. For example, we “That’s what people want today—to feel serve lobsters on all the ships at least comfortable and to be recognized.” once during a cruise. We put in alter- In 2005, Carnival offered its first native bistro dining, supper clubs, and customer-loyalty program in the form complementary twenty-four-hour cabin of a guest-recognition card. When guests service. Guests can buy premium wine embarked on a Carnival cruise, they received by the glass. Recently, we put duvets in the cabins, which would have been a “Sail & Sign” card that was identifica- unheard of ten years ago. The quality tion for boarding the ship, a cabin key, and of food and service, in our estimation, is a credit card for purchasing almost any- far better than our competitors. Of thing onboard. The new program gave course, fifteen years ago, our product repeat Carnival cruisers a gold Sail & Sign was not at the standard that it is today. card that would offer a way for crew

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members to recognize guests for their enhance Carnival’s brand image. Although patronage and to offer more personalized Carnival’s senior management knew that attention. Bob Dickinson believed that the cruise line would remain a mass- such recognition changed the dynamics of market product, there was a desire try to the guest-crew interaction and provided refine the market—to “push the needle huge “psychic income”—an “emotional up” to a more discerning consumer. Bob stroke” for the guest at little cost. Terry Dickinson remarked, Thornton added, Just as Las Vegas or Orlando have The strategy is to push on the product, redefined themselves, we’ve needed to continually improve it, because to do so, too. In the early days, in as people come back from their product delivery and in perception, cruises, word-of-mouth promotion is we were like Daytona Beach, Spring getting stronger and stronger. People Break at sea: a lot of kids, unchaper- really are enjoying the product. Their oned, anything goes, beer-drinking satisfaction levels are high. They tell contests, things like that. By the mid- their travel agents and tell their 1990s, we reengineered all that. We friends. were the first company in the cruise business to change the drinking age Carnival executives believed that brand from eighteen to twenty-one. We also perceptions lagged reality, despite their required anyone under the age of efforts to persuade consumers and travel twenty-one to share a cabin with agents that “Today’s Carnival” was differ- someone who was at least twenty- ent than the “all-out party” Carnival of the five. Those two actions, coupled with strengthening of our Camp Carnival past. Lingering misperceptions were partly children’s program, created the same a function of the underselling approach of average age of passenger on Carnival, brand promotion. Vicki Freed, senior vice but the nineteen-year-old was replaced president of sales and marketing, joined with a seven-year-old and an early- the Carnival sales team in 1978: thirties set of parents. That was a much deeper market. We used to have travel agents com- plain, “How come Carnival doesn’t By design, the Carnival experience was have shampoo in the bathrooms?” casual and unintimidating rather than This amenity would have been a upscale. Although the ships had sommeliers million-dollar upgrade. We would argue who offered expensive wines, Carnival sold that people come with their own shampoo, but the agents would far more beer, much of it poolside at $14 for say, “Go to any hotel and you’ll a bucket of four bottles. Although some find complementary shampoo!” Well, critics said that the ships were garish, they were right. The customer has the décor was designed to be “different changed—there’s a trading up phe- than people would ever see at home.” nomenon. Now we provide brand- Maintaining consistency of the brand mes- name amenities, and the consumer sage was considered vital to Carnival’s suc- wants brand names now. cess. Terry Thornton explained,

Carnival began to investigate cobranding It’s often misunderstood why we are opportunities for the onboard product, both who we are. And we battle ourselves to enhance the guest experience and to sometimes. We look at our competitors

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and it’s easy to be fooled into think- Ways to Have Fun,” the 2005 campaign ing we should be more like them. And was intended to build the brand by show- then we say, “That’s not who we are. casing product enhancements.24 New print That’s not what got us here. That’s ads targeted such publications as Travel & not what our guests like.” Leisure, Condé Nast Traveler, Vanity Fair, People, and Oprah, marking Carnival’s Bob Dickinson elaborated, first large-scale push into consumer maga- zines (see Exhibit 2). As we build our ships and as we deal with our customers, we try very hard Four television commercials, featuring not to send mixed messages. We try to Bobby Darin’s recording of “Somewhere never use the word gourmet, though Beyond the Sea,” coincided with the print we think our food is as good as or campaign, running on The West Wing, The better than anyone else in our mar- O.C., Law & Order, and The Amazing ket, including companies on the pre- Race, as well as on such cable channels as mium end. Still, we’re trying not to VHI, A&E, the Travel Channel, and the forget our roots. Food Network. The television commercials were softer, subtler, slower paced, Carnival sought to anticipate what and more sophisticated than past Carnival guests wanted in their cruise experience. ads. For example, one spot showed an Even as some things remained constant— older couple having breakfast on the bal- the entertainment, casino gaming, dining cony, playing golf on shore, enjoying a choices, nightclubs, and bars—Carnival massage in the spa, and dancing with wait- also adapted to trends, offering cigar bars, ers in the dining room. In another spot, a karaoke, and even airbrush tattoos. In 2005, young couple jogged on the deck of a Fun Carnival introduced the Presidential Wine Ship, worked out in the fitness center, flew Club and planned to host its first Wine on elevated cables during an adventurous Club cruise later in the year (Dickinson is canopy tour, and sampled a glass of wine at a noted wine collector and connoisseur). the bar. Another spot featured a family and The search for new Fun Ships ideas was an showed a child gliding down a Carnival ongoing process. Still, there was the sense waterslide and a cabin steward placing a within the industry that RCI had grabbed “towel animal” on a bed. Each spot closed Carnival’s wind by launching its adventure- with a male voice-over: “On a Carnival theme Voyager ships. Commented Brenda cruise, at any one moment, there are a mil- Yester, lion ways to have fun. Carnival. The Fun Ships.” Vicki Freed explained the strategy Royal Caribbean has had a great run behind the new campaign as follows: with the “Get Out There” campaign. But it attracts a certain kind of person Our other commercials didn’t really who may not be attracted to Carnival. sell Carnival—they sold the category. The rock-climbing wall is their icon— We’ve always taken the high road at that’s their brand. Our icon is fun— Carnival: We’ll sell the contemporary that’s our brand. category and get our fair share because we’re the big brand. But now Carnival was not daunted, however, as we want to sell Today’s Carnival. And it continued to promote its augmented fun that’s what the new commercials image with the biggest media buy in the hopefully convey—a little more upscale, company’s history. With the slogan “Million the food, the service. It’s important for

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Exhibit 2: Carnival “Million Ways” Mosaic Print Ad—“Yoga”

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us to show that we’re not the Kmart Much of this convergence has occurred of the Caribbean! between the “premium” and “contemporary” sectors of the industry, as premium Carnival’s vice president of marketing ser- brands such as Princess made their prod- vices, Christine Arnholt, who was the uct more accessible to the mass market (in primary contact with the advertising effect, reaching down market), while con- agency that created the campaign, added, temporary brands such as Carnival augmented their product to appeal to more One of the single most difficult things sophisticated travelers (in effect, reaching to do is change perception. Our prod- up market); the result is that the big cruise uct has changed so much! And we brands pursue the same customers. Industry don’t get credit for that in the mar- ketplace. We’ve been incredibly suc- insiders argue that there are clear differ- cessful over the years, but from a ences between the brands, especially within brand standpoint, there are still these the contemporary sector. Whether con- lingering perceptions. Some people sumers (let alone travel agents) accurately hear “Carnival,” and think, oh, that’s perceive meaningful product differences the party ships with all the twenty- is, though, an empirical question that has year-olds. How do you change these received little research attention.26 perceptions? After all, we are the Fun A main challenge to Carnival’s market- Ships. We’ll always be the Fun Ships. leadership position is not imitation but perceptual encroachment on the Fun Ships Author’s Analysis and brand, such as Royal Caribbean’s adventure- Managerial Implications theme rebranding. RCI challenged While the brand stewards at Carnival Carnival’s ownership of the fun concept Cruise Lines cannot relax their efforts, the by defining an RCI version of fun as an brand is in an enviable position. Not only active-adventure vacation. It is also notable is Carnival the world’s most popular—and that the next-generation RCI ship features profitable—cruise line, but the Fun Ships the first water park at sea—a design that brand is well known to consumers and confronts Carnival’s signature waterslide travel agents. At the same time, research both experientially and symbolically. Had by industry analysts at Bear Stearns sug- Carnival been first with a water-park innova- gested that increasing similarity across tion, this would have been an ideal extension brands in the design of new ships and in the of the Fun Ships brand (though Carnival services offered has made it difficult for could imitate RCI’s design innovation). consumers to discern differences between There’s also the threat of consumer the brands.25 Industry innovations—from confusion whenever a brand is reposi- bars of all types (pizza, sushi, ice cream, tioned, even if changes are evolutionary. cappuccino, wine, martini, and cigar) to Carnival’s veteran marketers are well the indoor shopping promenades and pool- aware of the tension faced in developing a deck movie screens—were imitated in one more upscale brand image that matches form or another by competitors, leading to improvements in the product, while trying no real sustainable advantage for the inno- to “never use the word gourmet.” The vator. Indeed, several of Carnival’s signa- Carnival experience may no longer be ture elements, from the showpiece atriums reflected in the beer-chugging contests of to the in-cabin towel animals, are now the early days, but neither may it be commonplace. reflected in such recent initiatives as the

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Presidential Wine Club. Is Carnival burg- stale; competitors innovate; markets evolve; ers or caviar? Bottles of domestic beer or customers’ needs and wants change. flights of premium champagne? Temporary Carnival started as an innovative brand, tattoos or yoga? Does Carnival sound like turning the staid cruise industry on its Cyndi Lauper or like Bobby Darin? head. The company cultivated a youthful Carnival’s leaders contend that the cruise image for two decades, then, like a cruise line can be all of these things because ship making a slow turn, management Carnival’s customers are so diverse. Yet, as began the process of brand maturation by management guides the brand toward a investing in product and service improve- more sophisticated version of fun, the risk ments, changing the drinking age, and ton- of mixed signals and brand confusion ing down the orchestrated revelry. The increases. “Million Ways to Have Fun” campaign Ultimately, a brand’s equity is less said that Carnival had grown up—though a function of the brand itself and more it also said less about what made Carnival a function of the brand’s customers. distinctive. Developing and sustaining a power brand The underlying question for Carnival is about making choices: selecting cus- should be, “Who are our core guests, and tomers to target (and not targeting others), what do they want in a Fun Ship experi- building relationships with the targeted ence?” Company executives want to exclude market(s), and aligning brand meanings virtually no one from the cruise line’s mar- informed by messaging elements (e.g., ket. “Casting a bigger net,” though, creates promotion and pricing) and interactions a challenge because more and different (e.g., product experiences and service customers seek fun in increasingly diverse encounters). High brand equity is achieved ways. Today’s Carnival would benefit when customers say, “This brand is me.” from being more precise in segmenting the Affluent, sophisticated customers might market based on the psychographic of fun. never feel a bond with the Carnival brand, To an extent, RCI is forcing Carnival’s so by upscaling, Carnival risks alienating hand by pursuing “adventurous” vacation- the cruise line’s core market as they say, ers and offering an active, sports type of “Sushi, wine, and yoga? That’s not me.” fun. Carnival might instead pursue vaca- Carnival executives believe that customer tioners who seek pleasure and entertain- brand meanings do not reflect “Today’s ment, or a more relaxing and diversionary Carnival.” But this problem is not just due type of fun that recalls Carnival’s party to lingering perceptions of Carnival’s past; pedigree and ongoing product strengths— it is also due to brand cues in Carnival’s fun in music, dancing, drinking, dining, present, such as direct marketing that tar- gaming, playing, and lounging. Entertain- gets bargain shoppers with “one day only” ment fun is also the joy of watching one’s sales messages. children or grandchildren have fun (i.e., These risks to the Carnival brand, as a theme park/carnival fun on Carnival) or result of change, are arguably less than the knowing that one’s teenager is having fun. more insidious risk posed by no change at Indeed, Carnival’s recent alliance with all. Such “active inertia,” or unyielding Coca-Cola to form Club O2 teen centers commitment to a winning strategy in the (with a “Coke-tail” lounge) is an excellent face of shifts in the marketing environ- example of brand-consistent innovation.28 ment, can threaten even the best brands With a more precise, customer-defined (e.g., McDonald’s).27 Some brands get concept of fun at the center of the Carnival

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brand, management can better determine Endnotes which of the myriad cues embedded in the physical product, service processes, and 1. The interview data upon which this case study is marketing messages are aligned with cus- based were collected in December 2004. In addition to publicly available, secondary data tomers’ meaning of fun and the equity of sources, interviews of forty-five to ninety min- the brand. This demands ongoing market utes in length were conducted with sixteen research to develop a deep understanding Carnival Cruise Lines executives at the com- of those Carnival customers who identify pany’s Miami headquarters before and after my with the brand and active listening to their participating in a four-day product experience aboard the Carnival Fascination. While onboard needs, wants, and desires—in effect, to the Fascination, four of the ship’s officers were place Carnival’s most profitable cruisers at also interviewed. The data record consists of the helm of the Fun Ships brand. This also more than 350 pages of single-spaced interview demands hard decisions about future prod- transcripts, as well as field notes, photographs, uct innovations that will both deliver on and proprietary cruise documents and records the fun and strengthen the image of the provided by the company. 2. Tons refers to gross registered tonnage (GRT), brand. For example, a bar that features the volume of space within the hull of a ship, or drinking games, though perhaps fun to a a ship’s total internal capacity (1 vessel ton = segment of guests, would do little to build 100 cubic feet). Carnival’s brand equity; a bar that features 3. Kristoffer Garin, Devils on the Deep Blue Sea interactive video games and trivia con- (New York: Viking, 2005). 4. Cruise ship passenger capacity is measured by tests, on the other hand, might offer a new the number of lower berths or beds, which is venue for fun that guests would readily typically two per cabin. associate with the brand. 5. See Kevin Lane Keller, “Conceptualizing, Mea- suring, and Managing Customer-based Brand Equity,” Journal of Marketing 57 (January *** 1993): 1-22; and Roland T. Rust, Valarie A. Zeithaml, and Katherine N. Lemon, “Customer- Once the Kmart of the Caribbean, centered Brand Management,” Harvard Business Carnival Cruise Lines has emerged as the Review 82, no. 9 (September 2004): 110-18. dominant brand of the seascape. Like Wal- 6. See Roger Cartright and Carolyn Baird, The Mart in retailing, Carnival’s success can Development and Growth of the Cruise Industry be attributed to an unrelenting focus on (Oxford, UK: Butterworth Heinemann, 1999); customer value through low cost and a fun Douglas Ward, Berlitz Ocean Cruising and Cruise Ships 2005 (London: Berlitz, 2005); and experience. For Carnival to continue to tap Bob Dickinson and Andy Vladimir, Selling the the rich vein of mass-market vacationers Sea: An Inside Look at the Cruise Industry while burnishing the brand to appeal to (New York: John Wiley, 1997). more discerning guests, management will 7. Cruise Lines International Association, Spring have to buck marketing wisdom about the 2005 Industry Overview, http://www.cruising.org/ press/overview/2.cfm. risks of trying to be all things to all people. 8. Ibid.; and Garin, Devils on the Deep Blue Sea. The analysis offered here argues for a 9. The North American cruise market is estimated more focused approach to marketing the to constitute 80 percent of the global cruise mar- Carnival Cruise Lines experience based ket. See Cruise Lines International Association on the idea of entertainment fun—a (CLIA), Five Year Cruise Industry Capacity branding theme that leverages Carnival’s Outlook (New York: CLIA, March 2005); and Mintel International Group Limited, Mintel extant brand image and product strengths Reports: Cruises—US—April 2005 (Mintel while still enabling “A Million Ways to International Group Limited, 2005). Unless Have Fun.” otherwise noted, references to the cruise market

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in this case study refer to the North American 19. “Carnival’s Total Choice Dining—Cruising’s market. Most Comprehensive Dining Program,” July 15, 10. Garin, Devils on the Deep Blue Sea. 2005, Virtual Press Kits, http://www.carnival.com/ 11. Passenger-carrying numbers are calculated as CMS/Articles/dining_virtual2.aspx (accessed basis 2 (double occupancy), given that cruise August 10, 2005). ship cabins typically have two lower berths. 20. Dickinson and Vladimir, Selling the Sea, 32. Because some cabins also feature pull-down 21. Sources: Author’s calculations based on pub- bunks, fold-out sofas, or roll-away beds, maxi- lished Carnival cruise fares and the CLIA 2005 mum ship capacity can exceed by 25% the Cruise Market Profile, available at http://www basis-2 capacity. Cruise lines frequently report .cruising.org. occupancies greater than 100%, a statistic that 22. Ward, Berlitz Ocean Cruising and Cruise Ships. uses the basis-2 capacity. Unless otherwise 23. Industry averages are from CLIA; Carnival noted, the basis-2 ship capacity is used here. averages are from Carnival sources. 12. “Cruise News: Royal Caribbean International 24. Carnival Press Release, “Carnival to Launch New Receives Top Marketing Honor,” http://www Multimillion-dollar Ad Campaign Designed to .cruise411.com/cruise_buzz/feature_article.asp? Convey Product Enhancements,” December 6, article_ID=360 (accessed August 10, 2005). 2004, http://www.carnival.com/CMS/Articles/ 13. Royal Caribbean International press release, new_adcampaign.aspx (accessed August 17, “Freedom Is—Where the Ocean Comes to 2005). Play,” http://www.royalcaribbean.com/pressroom 25. Rebecca Tobin, “Report: Ships Need Brand- (accessed August 3, 2005). aid,” Travel Weekly, June 7, 2004, pp. 1, 58. 14. Dickinson and Vladimir, Selling the Sea, 174. 26. In one of the few published studies that look at 15. Ward, Berlitz Ocean Cruising and Cruise perceptions of brand differences in the cruise Ships, 128. industry, Marti (2005) reports that most cruise cus- 16. Heidi Sarna, “Movie Stars under the Stars: Just tomers could not identify the logos of the major One of New Ship’s Perks,” Travel Weekly, cruise brands. Bruce E. Marti, “Cruise Line Logo April 19, 2004, p. 16. Recognition,” Journal of Travel & Tourism Mar- 17. Carnival Cruise Lines News Release, “New keting 18, no. 1 (2005): 25-31. Carnival Liberty to Feature Massive 270-Square- 27. See Donald N. Sull, “Why Good Companies Go Foot Outdoor TV Screen,” May 20, 2005, http:// Bad,” Harvard Business Review 77, no. 4 (July- carnival.com/CMS/Articles/liberty_led.aspx August 1999): 42-52. (accessed August 3, 2005). 28. “Carnival, Coca-Cola Team Up to Create 18. NCL News, “Norwegian Cruise Line Announces Fleetwide Club O2 Teen Centers Aboard Next-Generation Newbuild Featuring New Fun Ships,” August 4, 2005, http://www.carnival ‘Freestyle Cruising,’” April 14, 2000, http://www .com/CMS/Articles/teen_centers_aspx (accessed .ncl.come/news/pr/pr000414a.html (accessed August 17, 2005). August 10, 2005).

Robert J. Kwortnik Jr. is an assistant professor of marketing at the Cornell University School of Hotel Administration ([email protected]). The author thanks Brenda Yester of Carnival Cruise Lines, for her guidance and support during the development of this case study, as well as Cornell University graduate students Amy Hovis and Osman Khan and assistant professor Gabe Piccoli, for research assistance.

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