With Sophisticated Customer Segmentation, a Travel Company Sets Sail

When a large global travel company set out to launch a cruise line, it enlisted our help in identifying where to play and how to win. To pinpoint both, we developed target customer segments, crafted strong brand positioning, and addressed hardware and software considerations that prepared CruiseCo* for a successful maiden voyage.

Six months prior to this engagement, we conducted a due diligence exercise that helped CruiseCo secure private equity investment. We found that current cruise offerings were undifferentiated and geared to existing customers only; successful market entry would require attracting both return cruisers and new noncruisers alike—and earning both groups’ loyalty.

Navigating the waters

Realizing a significant opportunity to disrupt the cruising industry, CruiseCo embarked on a two-month journey with us to identify its target customer and establish its brand positioning. We began with a survey of about 3,000 consumers to gather critical intelligence about vacationer groups, including their size as well as their values, needs, behaviors, and activity preferences. To augment these user insights, we also interviewed travel agents.

Using the survey results, we worked closely with CruiseCo to identify customer segments and trip types from the nearly $260 billion market. Six customer segments were determined by attitudinal behaviors such as willingness to pay, preference for service, and desire to explore. Factors such as primary traveler age and vacation companions helped shape eight trip types of varying sizes, including “golden excursions” (customers older than 65 who are traveling solo or with friends) and “tots in tow” (families including children under 11).

Which target groups held the most potential for CruiseCo? To find out, we mapped customer segments and trip types on a gameboard and evaluated each group’s potential vacation spending and market share. By short-listing potential targets with nearly $80 billion in total vacation spending, we arrived at a strong hypothesis about where to focus. CruiseCo then validated two priority segments, taking the pulse of would-be cruisers via six focus groups and survey callbacks. We spoke directly with consumers in the core target groups to evaluate their behaviors, cruising history, CruiseCo brand awareness, and expectations of the experience.

Steering to a target

With two priority segments identified, CruiseCo sought a deeper understanding of the broader leisure travel industry, including how competitors were meeting (or not meeting) customers’ needs and where the market was evolving. Deep dives into 15 competitors to unpack their brand positioning and economic models helped to inform CruiseCo’s points of differentiation.

Combined, this comprehensive consumer and market research allowed CruiseCo to size the addressable market as well as its expected share: Our analysis suggested that by pursuing the priority segment, the company’s revenue could exceed the required breakeven, potentially totaling as much as $2.5 billion of a very targeted $7 billion market.

This projection was the green light to address the ship concept and experience, including summarizing design implications—such as the ship’s hardware, cabin design, and onboard amenities and software, including entertainment programming and other elements of the onboard experience. To further develop these concepts, we collaborated with partners such as design firms, branding agencies, and futurists. By the end of our engagement, a clear target audience, brand positioning strategy, and understanding of design considerations gave CruiseCo the confidence to launch its new endeavor with a truly differentiated offering.