Background and Challenge
A leading cruise-style ferry liner had experienced excellent revenue growth during the previous four years, however analysis found that the majority of growth came from increased passenger numbers - while spend per passenger on board remained flat. Concerned it was missing an opportunity to maximize revenue on board, L.E.K. was engaged to develop a new sales strategy with the aim of delivering improved performance in its on-board retail outlets, restaurant and bars over the next five years.
Approach and Recommendations
Working collaboratively with the management team, we conducted a review of the bars, shops and restaurants on-board the client’s ships in order to identify and prioritize opportunities for increased profitability. We focused on four key areas:
- Food and Beverage: With the aim of increasing penetration and spending in the food and beverage locations on-board, we segmented the client’s current offering to address gaps and recommended a broader range of dining opportunities including differing price points and dining concepts.
- Retail: Opportunities were identified through the revision of category strategies, space allocation for certain products and a reduced product range. In particular, our analysis found that certain products pricing were not profit contributors and suggested the client rationalize their product assortment and develop a number of specific rages which were under represented and had been identified as a specific profit contribution alternative.
- Branding environment: In order to take full advantage of the branding opportunities on board, we proposed a number of improvements to the shopping experience such as the use of consistent signage, decluttering of spaces within shops, defining "experience areas" within the perfume and cosmetics sections and utilizing unused space to create "branded" walls.
- Cross Category and Retail Structures: We identified significant cross category initiatives to drive growth. Such initiatives included renewing the brand architecture, aligning the promotional calendar with overall sales and marketing activities, and crucially, enhancing CRM procedures to enable the client to segment customers and predict spend and typical journey behavior using data captured from booking forms. We also redefined the organization structure from buying to on-board retail operations, in order to deliver the benefit identified.
Upon completion of the project, the client had a clear understanding of the changes they needed to make in each identified area and how to implement them. The comprehensive strategic plan delivered by us included specific initiatives such as the implementation of a new promotions and marketing strategy, organizational structural changes, new design formats for the shops, the overall redesign and refurbishment schedule of the ships, and an improved customer service policy.
As a result of employing the tactics recommended by us, the client received significant sustainable benefits, including the ability to forecast returns on investment for the whole strategy and its key components. Following the successful refurbishment of the first ship, the client has already realized financial benefits as both the number of passengers and spend per passenger has increased with the growth set to continue.