Luxury cruising: Silversea says product must always trump price
The perception of revenue managers as purely mathematical types might work in some cases, but that is not the case in the luxury segment
If anybody understands the importance of knowing your customer, it is Luigi De Filippo, SVP Revenue Management & Commercial and Itinerary Planning, Silversea Cruises. De Filippo, a speaker at the upcoming Revenue and Optimisation Growth Summit, Amsterdam, Nov 27-28, learnt this when he joined Silversea Cruises from MSC where he had worked for 13 years. MSC is a fast-growing cruise company dedicated to families and younger folk, and has grown from having three ships to 16 that typically carry between 3,000 and 5,000 passengers. Silversea, on the other hand, where the focus is on ‘ultra luxury’, is a completely different environment, with ships typically carrying between 100 and 600 passengers.
“When I arrived here at Silversea the first thing that I found shocking was that customers sent handwritten letters to comment on pricing and promotions,” he says. But there were more surprises to follow. At MSC, De Filippo was working in a more deregulated environment, and the priority was to get new people on board. But when he started to look at historical bookings, he quickly understood that at Silversea, the lifetime value of the customer was crucial. “The first 100 guests of Silversea had spent between five and six zeros amounts in the last 10 years! That is a huge amount of money,” says De Filippo. What is more, some of the group’s most valued guests – the so-called Venetian Society Members – had spent 2,000 days on board a Silversea ship! “I understood then just how important it was for me to understand the customer. Every time I took an action like a promotion or reduction in price, I had to mitigate any frustration that the guest might feel. For this reason I started working closely with marketing,” he says.
His first lesson in the importance of marketing came from a November cruise that was quite low in terms of occupancy. “People on this cruise had spent a quite large amount of money, and so there was no way we could reduce the price,” he says. To tackle this problem, De Filippo worked closely with the marketing team to create an on board event featuring the award-winning classical artist Andrea Bocelli. “This created a boost in sales and we completely filled ship at a very high price,” he says.
Although it is obviously not possible to invite on board a five-star artist every time there are limited bookings it gave De Filippo the understanding that it is sometimes “important to raise the eyes from excel spreadsheets and investigate customer preferences and approach problems in a more holistic way”.
De Filippo believes there are two clear reasons why marketing and RM must work closely together in the luxury segment.
1. Listening to the customer is something that needs to be done in a highly scientific way, and with outside help. Market surveys, conjoint analysis, a survey-based statistical technique that helps determine how people value the different attributes that make up an individual product or service, and dedicated focus groups are among the techniques used. By doing so, Silversea is able to understand what is truly valuable to customers and what they are prepared to pay.
2. Respecting the niche. In the luxury segment, the role of the OTAs is limited. This is because the group works with niche clients, and heavy discounting doesn’t really work. “Whatever we do in terms of price and promotion, marketing has to create the right narrative,” he stresses.
In the luxury segment, RM professionals with strong research and product experience, such as those from a fast-moving consumer goods environment, are highly sought after
What is clear, is that the customer needs are changing rapidly, especially in the luxury segment, and it is crucial for marketing and RM to work closely together. De Filippo is also seeing a much greater overlap of skillsets. “The cliché is that RM professionals are typically nerdy types, that are exclusively experienced in mathematical algorithms, and come from a strong analytical background,” he explains. However, in the luxury segment, RM professionals with strong research and product experience, such as those from a fast-moving consumer goods environment, are highly sought after. In the marketing department, on the other hand, there is a much greater need for people with analytical skills, who are able to measure ROI in a structured way. “The type of skills required in RM and marketing are overlapping more and more,” he says.
In the luxury segment, the experience is everything, and the demands are changing. “It is no longer sufficient to give people a butler with the best food on board. People also want flexibility, and this requires some personalisation,” De Filippo explains.
In the luxury market, however, personalisation doesn’t necessarily mean price-cutting but it does mean that the choices must be transparent and clear. For example, some people may want a ‘flying cruise’, which includes flights and sometimes the shore experience, whereas others may want to fly with their preferred airline, or plan their own onshore itinerary.
Another factor that is unique to the luxury cruise sector is that very often, on release of a new brochure, the first bookings are made by the most valued clients. “So the typical RM narrative that prices must go up closer to the booking doesn’t necessarily work,” he adds. Although these high-value clients are not completely price inelastic, they are certainly more focused on product than price. It is therefore crucial to clearly define the product and its value at the outset.
Join us at the Revenue and Optimisation Growth Summit, Amsterdam, Nov 26-27 to hear more from Luigi De Filippo, SVP Revenue Management & Commercial and Itinerary Planning, Silversea Cruises, and other leading travel brands and innovators such as Booking.com, Finnair, Louvre Hotels and many more