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Carnival Cruise Lines: Burnishing the BrandRobert J. Kwortnik Jr.Cornell University, rjk34@cornell.edu

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Recommended CitationKwortnik, R. J., Jr. (2006). Carnival Cruise Lines: Burnishing the brand [Electronic version]. Cornell Hotel and RestaurantAdministration Quarterly, 47(3), 286-300. Retrieved [insert date], from Cornell University, School of Hospitality Administration site:http://scholarship.sha.cornell.edu/articles/264/

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Carnival Cruise Lines: Burnishing the Brand

AbstractThe case of Carnival Cruise Lines chronicles the company’s birth and development as it redefined the leisurecruise industry. With a theme of “Fun Ships” and low pricing, Carnival appealed to a diverse market. Underthe pressure of increasing competition, Carnival was challenged to refine its Fun Ships brand withoutdamaging the considerable equity contained in that brand. In particular, as cruise lines became lessdifferentiated in the customers’ view, Carnival sought to set itself apart with upgraded product features,service, and other guest amenities, as well as a more sophisticated brand message.

Keywordsbranding, brand equity, marketing strategy, cruise industry, Carnival Cruise Lines

DisciplinesHospitality Administration and Management

CommentsRequired Publisher Statement© Cornell University. Reprinted with permission. All rights reserved.

This article or chapter is available at The Scholarly Commons: http://scholarship.sha.cornell.edu/articles/264

286 Cornell Hotel and Restaurant Administration Quarterly AUGUST 2006

Carnival CruiseLines

Burnishing the Brand

by ROBERT J. KWORTNIK JR.

© 2006 CORNELL UNIVERSITYDOI: 10.1177/0010880406291258

Volume 47, Issue 3 286-300

The case of Carnival Cruise Lines chronicles the com-pany’s birth and development as it redefined theleisure cruise industry. With a theme of “Fun Ships”and low pricing, Carnival appealed to a diverse mar-ket. Under the pressure of increasing competition,Carnival was challenged to refine its Fun Ships brandwithout damaging the considerable equity containedin that brand. In particular, as cruise lines becameless differentiated in the customers’ view, Carnivalsought to set itself apart with upgraded product fea-tures, service, and other guest amenities, as well asa more sophisticated brand message.

Keywords: branding; brand equity; marketing strategy;cruise industry; Carnival Cruise Lines

We’re perfectly happy to be the Wal-Mart of the cruiseindustry.

—Terry Thornton, vice president of marketing planning,Carnival Cruise Lines1

In July 2005, the 2,974-passenger, 110,000-tonCarnival Liberty set sail after being christened by its“godmother,” actress Mira Sorvino.2 Built for $500

million, the ship was the twenty-first vessel sailing inCarnival Cruise Lines’ fleet, giving Carnival more pas-senger-carrying capacity than any other cruise line in theworld. With 800-plus ocean-view or balcony staterooms,twenty-two lounges and bars, four swimming pools, anda spiral waterslide, Carnival Liberty was a far cry fromthe Mardi Gras, Carnival’s first ship, which was a con-verted transatlantic liner bought in 1972 for $6.5 million.For its part, the Mardi Gras seemed to signal an inauspi-cious beginning for Carnival when the ship ran agroundat the tip of Miami Beach on its inaugural voyage—infull view of gawking vacationers. However, as Carnivallore had it, bartenders poured free drinks (including anew rum cocktail that a creative bartender dubbed a“Mardi Gras on the Rocks”), passengers had fun, andthe spirit of the “Fun Ships” brand was born.3

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The differences between the MardiGras and the Carnival Liberty symbolizedthe metamorphosis of the Carnival brand.Today’s Carnival was dramatically differ-ent from the company that cruise industrypioneer Ted Arison started with second-hand ships and savvy marketing. WhileNorth American passenger volume dou-bled between 1994 and 2004, Carnival’svolume tripled. More than three millionguests sailed Carnival in 2004, the mostin the company’s history, and a figure rep-resenting nearly one out of every threecruisers. For the fiscal year that included2004, Carnival Corporation and PLC, theparent company of Carnival Cruise Lines,reported record net income of $1.85 bil-lion on revenues of $9.73 billion. Nine ofCarnival’s ships, almost half of the line’savailable berths, had been launched since2000.4 Through the years, Carnival hadremained true to its “Fun Ships” brand lin-eage and its goal of providing a good-quality, affordable vacation to mainstreamtravelers. Nevertheless, company execu-tives wondered whether it was time to seta new course for Carnival and, if so, howbest to burnish the brand without losingits essence.

This case study examines challengesassociated with brand management in thehospitality industry by focusing on theleisure cruise sector and the brand thatdominates the seascape. Despite CarnivalCruise Lines’ phenomenal growth andsuccess, company executives have designeda makeover for the brand to enhance brandequity—the worth of the brand due to cus-tomers’ brand knowledge and the effect ofthis knowledge on brand marketing andcustomers’ assessment of brand value.5

Modifying a successful brand, even if thechanges are evolutionary, not revolution-ary, carries the risk of brand confusion, asmost any cue can communicate meaningabout a brand. Nurturing an established

brand demands not only a deep under-standing of customers’ needs and wantsbut also a clear vision about the brand’score meaning and the alignment of myriadcues (e.g., product features and marketingmessage) to support this meaning. Tobegin the analysis of Carnival’s brand-management situation, I explore CarnivalCruise Lines’ position within the competi-tive structure of the cruise industry. I thendescribe Carnival’s marketing strategy andthe evolution of the Carnival brand.Finally, I evaluate Carnival’s brand initia-tives and discuss implications of manage-ment’s efforts to burnish the brand.

The Cruise Industry andCompetitive Structure

The birth of the modern cruise industrycan be traced to the 1960s, in the wake ofthe first Boeing 707 flight from New Yorkto Europe in 1958.6 With a rapidly shrink-ing transatlantic passenger base, oppor-tunistic shipping companies repositionedtheir service from transportation to vaca-tion travel. Companies that did not “comeabout” to cruising soon foundered. At thesame time, lines that led the transition,such as Princess Cruises (1965), NorwegianCaribbean Line (1966; now NorwegianCruise Line [NCL]), Royal Caribbean CruiseLine (1969; now Royal Caribbean Inter-national [RCI]), and Carnival Cruise Lines(1972), paced the industry. Still, the pas-senger base was relatively small. In 1970,only 500,000 people took a cruise.7 Acruise was an expensive, formal, and rela-tively lengthy vacation—seven to fourteendays on average—factors that contributedto the product’s snobby image and limitedappeal. That began to change with the1977 launch of The Love Boat TV series,when cruising in all its romanticized glorywas popularized to mainstream America.Since then, the industry had grown tenfoldto more than nine million passengers in

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2004—an annual growth rate of 8.2 per-cent, making it the fastest-growing form ofleisure travel.8

The cruise industry was still young andevolving. Whereas luxury brands onceheld sway (at least in the public’s percep-tion), less than 5 percent of current cruisecapacity served this market (see Exhibit 1).9

With the exception of Cunard’s behemothQueen Mary 2, luxury lines tended to usesmaller ships that carried only a few hundred

guests and featured exotic itineraries,gourmet dining, a relatively formal atmos-phere, and attentive personal service. Notsurprisingly, this attracted a refined, afflu-ent clientele that was comfortable withpaying $400 to $900 per person per day.An even smaller segment of the industrywas served by destination or specialty cruiselines that sailed, for example, masted sail-ing vessels or replica paddle-wheeler shipsfor river cruises. Roughly one-third of the

Exhibit 1:North American Cruise Lines and Brand Positioning

Double Market Ships Occupancy Market Share Positioning

Carnival CorporationCarnival Cruise Lines 21 47,908 24.2% ContemporaryPrincess 13 28,820 14.5% PremiumHolland America Line 12 16,978 8.6% PremiumCosta Cruises (U.S. market) 2 4,224 2.1% ContemporaryCunard Line (U.S.) 2 4,411 2.2% LuxuryWindstar Cruises 3 604 0.3% DestinationYachts of Seabourn 3 624 0.3% LuxuryTotal 56 103,569 52.2%

Royal Caribbean InternationalRoyal Caribbean 19 44,108 22.3% Contemporary

InternationalCelebrity Cruises 9 16,118 8.1% PremiumTotal 28 60,226 30.4%

Star CruisesNorwegian Cruise Line 9 16,734 8.4% ContemporaryOrient Lines 1 826 0.4% DestinationTotal 10 17,560 8.9%

Other CLIA-affiliated brandsCrystal Cruises 3 2,960 1.5% LuxuryDisney Cruise Line 2 3,508 1.8% ContemporaryMSC Cruises 3 4,410 2.2% ContemporaryOceania Cruises 3 2,052 1.0% PremiumRadisson Seven Seas 5 2,604 1.3% Luxury

CruisesSilversea Cruises 4 1,356 0.7% LuxuryTotal 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.

market, often veteran cruisers, sailed thepremium cruise lines. These companiesoffered high-quality service on relativelylarge ships that typically accommodated2,000 or fewer guests paying $250 to $450per person per day. Premium-level cruisesfeatured fine dining, a sophisticated atmos-phere (though less formal than most luxurycruises), spa facilities, abundant entertain-ment, and a wide mix of destinations.Cruising was dominated by brands thatserved the “contemporary” segment, aclever label used by cruise marketers todescribe the mass market. These cruise linesfeatured ever-larger ships that accommo-dated 2,000 to 3,400 guests who paid faresranging from $150 to $300 per person perday. Although not heavy on personalizedservice, these floating resorts offered anabundance of good and varied food, plentyof activities to satisfy travelers’ diverseinterests (including shopping, gaming,sports, shows, parties, dancing, and movies),and itineraries that visited popular vacationdestinations. Competition for the contem-porary customer was fierce, particularlybetween Carnival and RCI. Carnival exec-utives argued, however, that the real com-petition came from outside the cruiseindustry in the form of land-based resortsand hotels in sightseeing destinations suchas Las Vegas and Orlando.

The competitive structure in the cruiseindustry changed dramatically around theturn of the twenty-first century. Price warsand soft demand decimated the budgetsector, with brands such as Regal, Premier,and Commodore—“bottom feeders” witholder ships—unable to compete with thebigger brands’ new ships and attractiveprices. Carnival Corp. won a battle withRCI to gain ownership of Princess Cruisesin 2003; just five years earlier, CarnivalCorp. acquired Cunard Line in a move thatsent shockwaves through the industry forits symbolic significance as the venerable,

upscale, 150-year-old British line wasscooped up by the American companypowered by the Fun Ships. Whereas thecruise market in the 1970s and 1980s wasserved by thirty brands, by 2005, only tenbrands owned by three corporations con-trolled 90 percent of the market. CarnivalCorp. emerged as the largest cruise com-pany in the world, with at least one brandpositioned in each of the four main seg-ments. Significantly, Carnival Corp.’s flag-ship brand had developed a formidablecost-leadership competitive strategy thatenabled Carnival to deliver a good-valuevacation that attracted price-sensitivecruisers and still produced profit marginsin excess of an astonishing 25 percent.

Although Carnival’s executives dismissedcompetitive threats from rival RCI, thetwo companies had waged a marketingwar for years. (In the past, when Carnivaland RCI ships would pass each other,RCI’s cruise directors would launch abroadside: “There goes the Kmart of theCaribbean.”10) One battleground involvedan expensive game of one-upmanship withindustry “hardware,” the ships themselves.The hardware competition became hotstarting in 1988, when RCI launchedthe first purpose-built cruise “megaship,”Sovereign of the Seas, which carried 2,250passengers.11 Carnival answered in 1990with the brand’s own megaship, the Fantasy,the first of eight sister ships, each carrying2,052 guests and noted for their six-deck-high, neon-trimmed grand atriums and spiralwaterslides on the pool deck—both signa-ture Carnival elements. Carnival launchedthe next volley in 1996 with CarnivalDestiny, the first 100,000-ton cruise ship,which carried 2,642 guests (though itoften sailed with 3,000) and featured oneof the largest casinos and spa and fitnesscenters at sea.

In 1999, though, RCI trumped the field bylaunching the 137,000-ton, 3,114-passenger

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Voyager of the Seas, the first of five shipsin the Voyager class. Voyager of the Seasfeatured amenities such as an ice-skatingrink, inline-skating track, a basketballcourt, a mini golf course, and a rock-climbing wall that traversed the back ofthe ship’s huge funnel. The latter featurebecame a signature element for RCI, onethat cruisers and travel agents associatedwith the brand and that was later added toall the ships in its fleet. RCI also leveragedthe design attributes of the new ships inthe award-winning “Get Out There” pro-motions campaign launched in 2000.Featuring the tribal beats of the Iggy Popsong “Lust for Life,” fast-paced commer-cials showed passengers climbing, run-ning, skating, and kayaking—but hardlycruising. The campaign was intended toreposition the brand by targeting vacation-ers who had an “explorer” mind-set andby focusing on active and adventurousdimensions of the experience.12 In June2006, RCI planned to up the stakes againby launching the 158,000-ton, 3,600-passenger Freedom of the Seas, featuringan “aqua environment” on the top deck ofthe ship with a sports pool, a family waterplayground (with fountains, water can-nons, a lazy river, and a waterfall), a wavepool for surfing, and an adults-only swim-ming area with hot tubs suspended morethan 100 feet above the sea.13

Competition among cruise brandsinvolved far more than building biggerships. Brands jockeyed for position in theconsumer’s (and travel agent’s) perceptualspace. For example, Carnival continued toemphasize its Fun Ships positioning strat-egy, while RCI attempted to position as amore sophisticated product. A former RCIexecutive drew the analogy that the brandwas in the “wine and cheese” category,whereas Carnival was in the “beer andpretzels” category.14 RCI’s ship décor andoverall atmosphere was described as more

tasteful than Carnival’s glitzy environment.Critics noted, though, that with the Voyagerships (“rather like a mall with a ship builtaround it”), RCI’s and Carnival’s onboardproducts had become similar.15

Cruise brands also stepped up the com-petition with new products and services.For example, Princess Cruises’ CaribbeanPrincess sailed in April 2004 with a “Moviesunder the Stars” program—the industry’sfirst outdoor theater, with a poolside, 300-square-foot screen. (A Princess executivesuggested, “This is our rock-climbingwall.”16) Just one year later, Carnivalanswered with “Carnival’s Seaside Theatre”on the Carnival Liberty.17 NCL brokefrom the conventional big-ship diningmodel in 2000 by introducing the “revolu-tionary” Freestyle Cruising concept,which featured open seating in its ships’dining rooms.18 Instead of the traditionalrequirement that guests choose a diningtime, Freestyle Cruising emulated land-based resorts by permitting guests to dinewhen and with whom they wanted. Oneyear later, Carnival answered with TotalChoice Dining, which retained traditionalfixed-seating dining in the formal restau-rants but offered a choice of four ratherthan two dining times. This program wascomplemented by an array of alternativedining venues, such as specialty supperclubs that required a reservation and fee,sushi bars, and twenty-four-hour pizzerias.19

Carnival executives believed that changesin the cruise product and cruise marketshad blurred the distinction between brandscompeting in the contemporary and pre-mium market segments. As companies likeCarnival and RCI continued to innovate andto improve both product and service, and aspremium lines like Princess and Celebrityincreasingly pursued the upper end of themass market by offering more casual vaca-tion experiences, the markets were converg-ing, as were customers’ brand perceptions.

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Carnival’s Marketing StrategyCarnival Cruise Lines’ early marketing

strategy grew out of necessity. The age ofthe Mardi Gras made low fares necessary.At that time, Carnival did not have anational advertising campaign—in fact, nocruise line did. While the onboard productwas limited during the lean startup years,so were customers’ expectations, becausethe cruise product was still relatively new.Bob Dickinson illustrated,

Years ago, the ship’s gym was smalland hidden in the bowels of the shipbelow the water line. You could barelyfind it. But nobody cared back then.If you did a vegetarian selectionthirty years ago, nobody would havetouched it. They wanted meat andpotatoes. Everything today is muchmore elaborate—the fitness centers,the menus, the activities. If peoplewant it, we’ll give it to them.

When Dickinson came on board asCarnival’s vice president of sales and mar-keting in 1973, he set in motion the FunShips concept that would serve as thebrand’s cornerstone. Dickinson adopted theFun Ships moniker for Carnival after seeinga brochure for the Boheme, which Com-modore Cruise Lines promoted as the“Happy Ship.” Cruise marketing at the timetended to focus on destinations, rather thanthe ships themselves, and promoted cruis-ing as a highbrow, luxurious experience.Dickinson reasoned that fun was whatpeople really sought in a vacation. By pro-moting the Mardi Gras as a fun-ship expe-rience, Carnival would send a message thatwas unique in the cruise industry.20 Perhapsmore important, by anchoring the brandwith the Fun Ships positioning strategy,Carnival built an unmatched value proposi-tion on the promise of fun—a promise thatwould direct the company’s marketingstrategy for at least the next thirty years.

In contrast to the typical cruise cus-tomer, the Fun Ships theme attracted arelatively young, middle-class clientele.Carnival offered an entertainment experi-ence, with the industry’s first full casinos,live music, discos, and wild daytimeactivities—including belly-flop, beer-chug-ging, and hairy-chest contests—that werea complete change from the image ofcruising as shuffleboard and afternoontea. Carnival’s hardware, in particular thenew ships built in the 1980s, were visualbonanzas, with bright colors and neonlighting unlike anything before seen ina cruise ship (shocking to some shiptraditionalists).

Carnival pursued first-time cruisers aspart of a concerted market-developmentstrategy. To communicate the brand messageand demystify cruising for the uninitiated,Carnival crafted marketing communica-tions that articulated the Fun Ships imageby showing the ships and their entertain-ment architecture, as well as by featuringguests dining, dancing, playing, swim-ming, sunning, and socializing—havingfun—at an affordable price. At the heart ofthe message was new company spokes-person Kathie Lee Gifford singing, “In themorning, in the evening, Carnival’s got thefun . . .” Carnival’s commercials starringGifford in 1984 were the first time a cruiseline advertised on network television. TheCarnival-Gifford relationship continuedwell into the mid-1990s before giving wayto ad campaigns that featured the BeachBoys’ tune “Fun, Fun, Fun” and the CyndiLauper hit “Girls Just Want to Have Fun.”The marketing objective remained thesame, however: to introduce vacationers tocruising and to reinforce the image ofCarnival as the essence of fun.

“Today’s Carnival,” a label that companyexecutives used to underscore changes inthe brand, was different in form, but notnecessarily direction, from the Carnival of

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the past. Carnival’s pricing continued tolead the industry, with an average price pointper person per day of about $175, com-pared with an industry average of $235.21

The ships and onboard product wereimproved.22 Driving this change, accord-ing to Bob Dickinson, was Carnival’s vision:“to consistently provide quality cruise vaca-tions that exceed the expectations of ourguests.” However, the marketing depart-ment was still charged with not over-promising. Instead, Carnival’s marketingcommunications would create reasonableguest expectations—just high enough forcustomers to buy; the product was thendesigned to deliver more.

Dickinson estimated that only 16 percentof North Americans had ever taken a cruise,leaving a substantial untapped market ofprospective customers. As such, Carnivalcontinued to direct its marketing efforts atstimulating primary demand for cruisingby converting land vacationers to sea vaca-tioners. Carnival estimated that half of itsguests were first-time cruisers, and one-third of repeat cruisers had never sailedCarnival before. Dickinson saw this seg-ment of repeaters as the low-hanging fruit.Because these customers understoodcruising and loved the experience, it wasonly necessary to talk to them about thebrand. The challenge, though, was reach-ing these customers with the right mes-sage. Terry Thornton, vice president ofmarketing planning, explained,

We don’t touch the customer or controlthe selling experience directly in mostsales transactions—80-percent-pluscome through travel agents. We stillsuffer from the perceptions of whenour hardware was not so good andwhen our product had inconsistencies.Sometimes travel agents don’t sellwith enough frequency to really knowthe difference, or haven’t been aboardone of our ships in years, even though

we offer many opportunities for themto sample the product. Our challengereally is to get a little more credit forthe product we’re providing.

Carnival had a large field-sales forcewho called on travel agents, as well as agrowing direct-sales effort that includedan inbound channel (Carnival.com and1-800-Carnival) and outbound channel ofPersonal Vacation Planners (PVPs) whofollowed up on leads obtained through theinbound channel. PVPs called or e-mailedleads to promote cruise sailings thatCarnival’s revenue managers identified ashaving soft demand. However, somepeople at Carnival worried that these “oneday only” sales sent the wrong message.Noted one manager,

We are struggling with how we wantto present the brand. This is a lovelyvacation, and even though it’s anentry-level product for the cruiseindustry, it is still expensive relativeto most vacation products, so wedon’t want customers to perceive ourdirect marketing as this used-carsales approach. We have been travelagent focused for so long. The directaccess is so new to us.

Carnival was careful not to be tooaggressive in its direct-sales efforts, espe-cially in marketing to past guests whooriginally booked through agents. Still, therelationship between Carnival and travelagents had turbulent moments. Someagents, in particular the midsized Internetagencies, began to rebate part of theircommission to customers to gain a priceadvantage in the market—a practice thatled to channel conflict. Carnival respondedwith an advertised-price policy, which meantagents could no longer promote a pricelower than Carnival’s advertised price.Brenda Yester, vice president of revenuemanagement, commented, “It just became

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dysfunctional and was degrading thebrand. There has to be price integrity inthe market. Consumers need to shop for aCarnival cruise and not worry about wherethey’re buying it.” Bob Dickinson added,“Many travel agents are just order takers;they are driven by price.”

Carnival’s target market was broad—consumers twenty-five to fifty-four yearsold who made $40,000 or more per year.The average age of Carnival’s customerwas forty-six—only a few years youngerthan the industry average.23 Carnival’smarketers believed that the product waspopular with families, honeymooners,singles, and seniors—“everyman.” BobDickinson argued that demographic seg-mentation was irrelevant for Carnivalbecause there was no prototypical Carnivalcustomer, except that person who cruisedto have fun: “If you have a vacation desti-nation that has a wide bandwidth ofchoice, you’re casting a bigger net, andyou’re going to get more fish.”

Carnival Cruise Lines’Brand Evolution

Maurice Zarmati, vice president ofsales and one of the original employees ofCarnival Cruise Lines, had seen the brandevolve considerably:

We started Carnival with one old ship.We’ve upgraded the product tremen-dously over the years. For example, weserve lobsters on all the ships at leastonce during a cruise. We put in alter-native bistro dining, supper clubs, andcomplementary twenty-four-hour cabinservice. Guests can buy premium wineby the glass. Recently, we put duvets inthe cabins, which would have beenunheard of ten years ago. The qualityof food and service, in our estimation, isfar better than our competitors. Ofcourse, fifteen years ago, our productwas not at the standard that it is today.

Carnival executives pointed to inconsis-tent product quality as one of the blem-ishes on the brand in the past. Initially,it was secondhand ships, but even withnew ships, service delivery and food qual-ity were variable. It was not until themid-1990s that Carnival began to focus onpeople and processes. The “CarnivalCollege” in-house training program wasstarted to offer crew the opportunity toenhance language and other skills. Hospi-tality training was also introduced toencourage crew to treat cruisers as “guests,”not passengers. Terry Thornton providedthese examples:

We’ve tried to focus training on thesmall things, like greeting guests. Ifa guest passes a crew member, theguest should be greeted. He shouldhear, “Good morning, how are you,how was your day at shore,” thingslike that. When we first started thistraining, we measured how manygreetings or similar recognition wasoffered out of all possible interac-tions, and it was less than 20 percent.Today, it’s 65 to 70 percent.

Another simple service idea, imple-mented fleetwide in 2002, involved placingmirrors in the crew areas near the exit doors,along with a sign to “Share a Smile.” Theidea was to remind crew to smile wheninteracting with guests. Thornton noted,“That’s what people want today—to feelcomfortable and to be recognized.”

In 2005, Carnival offered its firstcustomer-loyalty program in the formof a guest-recognition card. When guestsembarked on a Carnival cruise, they receiveda “Sail & Sign” card that was identifica-tion for boarding the ship, a cabin key, anda credit card for purchasing almost any-thing onboard. The new program gaverepeat Carnival cruisers a gold Sail & Signcard that would offer a way for crew

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members to recognize guests for theirpatronage and to offer more personalizedattention. Bob Dickinson believed thatsuch recognition changed the dynamics ofthe guest-crew interaction and providedhuge “psychic income”—an “emotionalstroke” for the guest at little cost. TerryThornton added,

The strategy is to push on the product,to continually improve it, becauseas people come back from theircruises, word-of-mouth promotion isgetting stronger and stronger. Peoplereally are enjoying the product. Theirsatisfaction levels are high. They telltheir travel agents and tell theirfriends.

Carnival executives believed that brandperceptions lagged reality, despite theirefforts to persuade consumers and travelagents that “Today’s Carnival” was differ-ent than the “all-out party” Carnival of thepast. Lingering misperceptions were partlya function of the underselling approach ofbrand promotion. Vicki Freed, senior vicepresident of sales and marketing, joinedthe Carnival sales team in 1978:

We used to have travel agents com-plain, “How come Carnival doesn’thave shampoo in the bathrooms?”This amenity would have been amillion-dollar upgrade.We would arguethat people come with their ownshampoo, but the agents wouldsay, “Go to any hotel and you’llfind complementary shampoo!” Well,they were right. The customer haschanged—there’s a trading up phe-nomenon. Now we provide brand-name amenities, and the consumerwants brand names now.

Carnival began to investigate cobrandingopportunities for the onboard product, bothto enhance the guest experience and to

enhance Carnival’s brand image. AlthoughCarnival’s senior management knew thatthe cruise line would remain a mass-market product, there was a desire try torefine the market—to “push the needleup” to a more discerning consumer. BobDickinson remarked,

Just as Las Vegas or Orlando haveredefined themselves, we’ve neededto do so, too. In the early days, inproduct delivery and in perception,we were like Daytona Beach, SpringBreak at sea: a lot of kids, unchaper-oned, anything goes, beer-drinkingcontests, things like that. By the mid-1990s, we reengineered all that. Wewere the first company in the cruisebusiness to change the drinking agefrom eighteen to twenty-one. We alsorequired anyone under the age oftwenty-one to share a cabin withsomeone who was at least twenty-five. Those two actions, coupled withstrengthening of our Camp Carnivalchildren’s program, created the sameaverage age of passenger on Carnival,but the nineteen-year-old was replacedwith a seven-year-old and an early-thirties set of parents. That was amuch deeper market.

By design, the Carnival experience wascasual and unintimidating rather thanupscale. Although the ships had sommelierswho offered expensive wines, Carnival soldfar more beer, much of it poolside at $14 fora bucket of four bottles. Although somecritics said that the ships were garish,the décor was designed to be “differentthan people would ever see at home.”Maintaining consistency of the brand mes-sage was considered vital to Carnival’s suc-cess. Terry Thornton explained,

It’s often misunderstood why we arewho we are. And we battle ourselvessometimes. We look at our competitors

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and it’s easy to be fooled into think-ing we should be more like them. Andthen we say, “That’s not who we are.That’s not what got us here. That’snot what our guests like.”

Bob Dickinson elaborated,

As we build our ships and as we dealwith our customers, we try very hardnot to send mixed messages. We try tonever use the word gourmet, thoughwe think our food is as good as orbetter than anyone else in our mar-ket, including companies on the pre-mium end. Still, we’re trying not toforget our roots.

Carnival sought to anticipate whatguests wanted in their cruise experience.Even as some things remained constant—the entertainment, casino gaming, diningchoices, nightclubs, and bars—Carnivalalso adapted to trends, offering cigar bars,karaoke, and even airbrush tattoos. In 2005,Carnival introduced the Presidential WineClub and planned to host its first WineClub cruise later in the year (Dickinson isa noted wine collector and connoisseur).The search for new Fun Ships ideas was anongoing process. Still, there was the sensewithin the industry that RCI had grabbedCarnival’s wind by launching its adventure-theme Voyager ships. Commented BrendaYester,

Royal Caribbean has had a great runwith the “Get Out There” campaign.But it attracts a certain kind of personwho may not be attracted to Carnival.The rock-climbing wall is their icon—that’s their brand. Our icon is fun—that’s our brand.

Carnival was not daunted, however, asit continued to promote its augmented funimage with the biggest media buy in thecompany’s history. With the slogan “Million

Ways to Have Fun,” the 2005 campaignwas intended to build the brand by show-casing product enhancements.24 New printads targeted such publications as Travel &Leisure, Condé Nast Traveler, Vanity Fair,People, and Oprah, marking Carnival’sfirst large-scale push into consumer maga-zines (see Exhibit 2).

Four television commercials, featuringBobby Darin’s recording of “SomewhereBeyond the Sea,” coincided with the printcampaign, running on The West Wing, TheO.C., Law & Order, and The AmazingRace, as well as on such cable channels asVHI, A&E, the Travel Channel, and theFood Network. The television commer-cials were softer, subtler, slower paced,and more sophisticated than past Carnivalads. For example, one spot showed anolder couple having breakfast on the bal-cony, playing golf on shore, enjoying amassage in the spa, and dancing with wait-ers in the dining room. In another spot, ayoung couple jogged on the deck of a FunShip, worked out in the fitness center, flewon elevated cables during an adventurouscanopy tour, and sampled a glass of wine atthe bar. Another spot featured a family andshowed a child gliding down a Carnivalwaterslide and a cabin steward placing a“towel animal” on a bed. Each spot closedwith a male voice-over: “On a Carnivalcruise, at any one moment, there are a mil-lion ways to have fun. Carnival. The FunShips.” Vicki Freed explained the strategybehind the new campaign as follows:

Our other commercials didn’t reallysell Carnival—they sold the category.We’ve always taken the high road atCarnival: We’ll sell the contemporarycategory and get our fair sharebecause we’re the big brand. But nowwe want to sell Today’s Carnival. Andthat’s what the new commercialshopefully convey—a little more upscale,the food, the service. It’s important for

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

us to show that we’re not the Kmartof the Caribbean!

Carnival’s vice president of marketing ser-vices, Christine Arnholt, who was theprimary contact with the advertisingagency that created the campaign, added,

One of the single most difficult thingsto do is change perception. Our prod-uct has changed so much! And wedon’t get credit for that in the mar-ketplace. We’ve been incredibly suc-cessful over the years, but from abrand standpoint, there are still theselingering perceptions. Some peoplehear “Carnival,” and think, oh, that’sthe party ships with all the twenty-year-olds. How do you change theseperceptions? After all, we are the FunShips. We’ll always be the Fun Ships.

Author’s Analysis andManagerial Implications

While the brand stewards at CarnivalCruise Lines cannot relax their efforts, thebrand is in an enviable position. Not onlyis Carnival the world’s most popular—andprofitable—cruise line, but the Fun Shipsbrand is well known to consumers andtravel agents. At the same time, researchby industry analysts at Bear Stearns sug-gested that increasing similarity acrossbrands in the design of new ships and in theservices offered has made it difficult forconsumers to discern differences betweenthe brands.25 Industry innovations—frombars of all types (pizza, sushi, ice cream,cappuccino, wine, martini, and cigar) tothe indoor shopping promenades and pool-deck movie screens—were imitated in oneform or another by competitors, leading tono real sustainable advantage for the inno-vator. Indeed, several of Carnival’s signa-ture elements, from the showpiece atriumsto the in-cabin towel animals, are nowcommonplace.

Much of this convergence has occurredbetween the “premium” and “contempo-rary” sectors of the industry, as premiumbrands such as Princess made their prod-uct more accessible to the mass market (ineffect, reaching down market), while con-temporary brands such as Carnival aug-mented their product to appeal to moresophisticated travelers (in effect, reachingup market); the result is that the big cruisebrands pursue the same customers. Industryinsiders argue that there are clear differ-ences between the brands, especially withinthe contemporary sector. Whether con-sumers (let alone travel agents) accuratelyperceive meaningful product differencesis, though, an empirical question that hasreceived little research attention.26

A main challenge to Carnival’s market-leadership position is not imitation butperceptual encroachment on the Fun Shipsbrand, such as Royal Caribbean’s adventure-theme rebranding. RCI challengedCarnival’s ownership of the fun conceptby defining an RCI version of fun as anactive-adventure vacation. It is also notablethat the next-generation RCI ship featuresthe first water park at sea—a design thatconfronts Carnival’s signature waterslideboth experientially and symbolically. HadCarnival been first with a water-park innova-tion, this would have been an ideal extensionof the Fun Ships brand (though Carnivalcould imitate RCI’s design innovation).

There’s also the threat of consumerconfusion whenever a brand is reposi-tioned, even if changes are evolutionary.Carnival’s veteran marketers are wellaware of the tension faced in developing amore upscale brand image that matchesimprovements in the product, while tryingto “never use the word gourmet.” TheCarnival experience may no longer bereflected in the beer-chugging contests ofthe early days, but neither may it bereflected in such recent initiatives as the

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Presidential Wine Club. Is Carnival burg-ers or caviar? Bottles of domestic beer orflights of premium champagne? Temporarytattoos or yoga? Does Carnival sound likeCyndi Lauper or like Bobby Darin?Carnival’s leaders contend that the cruiseline can be all of these things becauseCarnival’s customers are so diverse. Yet, asmanagement guides the brand toward amore sophisticated version of fun, the riskof mixed signals and brand confusionincreases.

Ultimately, a brand’s equity is lessa function of the brand itself and morea function of the brand’s customers.Developing and sustaining a power brandis about making choices: selecting cus-tomers to target (and not targeting others),building relationships with the targetedmarket(s), and aligning brand meaningsinformed by messaging elements (e.g.,promotion and pricing) and interactions(e.g., product experiences and serviceencounters). High brand equity is achievedwhen customers say, “This brand is me.”Affluent, sophisticated customers mightnever feel a bond with the Carnival brand,so by upscaling, Carnival risks alienatingthe cruise line’s core market as they say,“Sushi, wine, and yoga? That’s not me.”Carnival executives believe that customerbrand meanings do not reflect “Today’sCarnival.” But this problem is not just dueto lingering perceptions of Carnival’s past;it is also due to brand cues in Carnival’spresent, such as direct marketing that tar-gets bargain shoppers with “one day only”sales messages.

These risks to the Carnival brand, as aresult of change, are arguably less than themore insidious risk posed by no change atall. Such “active inertia,” or unyieldingcommitment to a winning strategy in theface of shifts in the marketing environ-ment, can threaten even the best brands(e.g., McDonald’s).27 Some brands get

stale; competitors innovate; markets evolve;customers’ needs and wants change.Carnival started as an innovative brand,turning the staid cruise industry on itshead. The company cultivated a youthfulimage for two decades, then, like a cruiseship making a slow turn, managementbegan the process of brand maturation byinvesting in product and service improve-ments, changing the drinking age, and ton-ing down the orchestrated revelry. The“Million Ways to Have Fun” campaignsaid that Carnival had grown up—thoughit also said less about what made Carnivaldistinctive.

The underlying question for Carnivalshould be, “Who are our core guests, andwhat do they want in a Fun Ship experi-ence?” Company executives want to excludevirtually no one from the cruise line’s mar-ket. “Casting a bigger net,” though, createsa challenge because more and differentcustomers seek fun in increasingly diverseways. Today’s Carnival would benefitfrom being more precise in segmenting themarket based on the psychographic of fun.To an extent, RCI is forcing Carnival’shand by pursuing “adventurous” vacation-ers and offering an active, sports type offun. Carnival might instead pursue vaca-tioners who seek pleasure and entertain-ment, or a more relaxing and diversionarytype of fun that recalls Carnival’s partypedigree and ongoing product strengths—fun in music, dancing, drinking, dining,gaming, playing, and lounging. Entertain-ment fun is also the joy of watching one’schildren or grandchildren have fun (i.e.,theme park/carnival fun on Carnival) orknowing that one’s teenager is having fun.Indeed, Carnival’s recent alliance withCoca-Cola to form Club O2 teen centers(with a “Coke-tail” lounge) is an excellentexample of brand-consistent innovation.28

With a more precise, customer-definedconcept of fun at the center of the Carnival

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brand, management can better determinewhich of the myriad cues embedded in thephysical product, service processes, andmarketing messages are aligned with cus-tomers’ meaning of fun and the equity ofthe brand. This demands ongoing marketresearch to develop a deep understandingof those Carnival customers who identifywith the brand and active listening to theirneeds, wants, and desires—in effect, toplace Carnival’s most profitable cruisers atthe helm of the Fun Ships brand. This alsodemands hard decisions about future prod-uct innovations that will both deliver onthe fun and strengthen the image of thebrand. For example, a bar that featuresdrinking games, though perhaps fun to asegment of guests, would do little to buildCarnival’s brand equity; a bar that featuresinteractive video games and trivia con-tests, on the other hand, might offer a newvenue for fun that guests would readilyassociate with the brand.

***Once the Kmart of the Caribbean,

Carnival Cruise Lines has emerged as thedominant brand of the seascape. Like Wal-Mart in retailing, Carnival’s success canbe attributed to an unrelenting focus oncustomer value through low cost and a funexperience. For Carnival to continue to tapthe rich vein of mass-market vacationerswhile burnishing the brand to appeal tomore discerning guests, management willhave to buck marketing wisdom about therisks of trying to be all things to all people.The analysis offered here argues for amore focused approach to marketing theCarnival Cruise Lines experience basedon the idea of entertainment fun—abranding theme that leverages Carnival’sextant brand image and product strengthswhile still enabling “A Million Ways toHave Fun.”

Endnotes

1. The interview data upon which this case study isbased were collected in December 2004. Inaddition to publicly available, secondary datasources, interviews of forty-five to ninety min-utes in length were conducted with sixteenCarnival Cruise Lines executives at the com-pany’s Miami headquarters before and after myparticipating in a four-day product experienceaboard the Carnival Fascination. While onboardthe Fascination, four of the ship’s officers werealso interviewed. The data record consists ofmore than 350 pages of single-spaced interviewtranscripts, as well as field notes, photographs,and proprietary cruise documents and recordsprovided by the company.

2. Tons refers to gross registered tonnage (GRT),the volume of space within the hull of a ship, ora ship’s total internal capacity (1 vessel ton =100 cubic feet).

3. Kristoffer Garin, Devils on the Deep Blue Sea(New York: Viking, 2005).

4. Cruise ship passenger capacity is measured bythe number of lower berths or beds, which istypically two per cabin.

5. See Kevin Lane Keller, “Conceptualizing, Mea-suring, and Managing Customer-based BrandEquity,” Journal of Marketing 57 (January1993): 1-22; and Roland T. Rust, Valarie A.Zeithaml, and Katherine N. Lemon, “Customer-centered Brand Management,” Harvard BusinessReview 82, no. 9 (September 2004): 110-18.

6. See Roger Cartright and Carolyn Baird, TheDevelopment and Growth of the Cruise Industry(Oxford, UK: Butterworth Heinemann, 1999);Douglas Ward, Berlitz Ocean Cruising andCruise Ships 2005 (London: Berlitz, 2005); andBob Dickinson and Andy Vladimir, Selling theSea: An Inside Look at the Cruise Industry(New York: John Wiley, 1997).

7. Cruise Lines International Association, Spring2005 Industry Overview, http://www.cruising.org/press/overview/2.cfm.

8. Ibid.; and Garin, Devils on the Deep Blue Sea.9. The North American cruise market is estimated

to constitute 80 percent of the global cruise mar-ket. See Cruise Lines International Association(CLIA), Five Year Cruise Industry CapacityOutlook (New York: CLIA, March 2005); andMintel International Group Limited, MintelReports: Cruises—US—April 2005 (MintelInternational Group Limited, 2005). Unlessotherwise noted, references to the cruise market

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in this case study refer to the North Americanmarket.

10. Garin, Devils on the Deep Blue Sea.11. Passenger-carrying numbers are calculated as

basis 2 (double occupancy), given that cruiseship cabins typically have two lower berths.Because some cabins also feature pull-downbunks, fold-out sofas, or roll-away beds, maxi-mum ship capacity can exceed by 25% thebasis-2 capacity. Cruise lines frequently reportoccupancies greater than 100%, a statistic thatuses the basis-2 capacity. Unless otherwisenoted, the basis-2 ship capacity is used here.

12. “Cruise News: Royal Caribbean InternationalReceives Top Marketing Honor,” http://www.cruise411.com/cruise_buzz/feature_article.asp?article_ID=360 (accessed August 10, 2005).

13. Royal Caribbean International press release,“Freedom Is—Where the Ocean Comes toPlay,” http://www.royalcaribbean.com/pressroom(accessed August 3, 2005).

14. Dickinson and Vladimir, Selling the Sea, 174.15. Ward, Berlitz Ocean Cruising and Cruise

Ships, 128.16. Heidi Sarna, “Movie Stars under the Stars: Just

One of New Ship’s Perks,” Travel Weekly,April 19, 2004, p. 16.

17. Carnival Cruise Lines News Release, “NewCarnival Liberty to Feature Massive 270-Square-Foot Outdoor TV Screen,” May 20, 2005, http://carnival.com/CMS/Articles/liberty_led.aspx(accessed August 3, 2005).

18. NCL News, “Norwegian Cruise Line AnnouncesNext-Generation Newbuild Featuring New‘Freestyle Cruising,’” April 14, 2000, http://www.ncl.come/news/pr/pr000414a.html (accessedAugust 10, 2005).

19. “Carnival’s Total Choice Dining—Cruising’sMost Comprehensive Dining Program,” July 15,2005, Virtual Press Kits, http://www.carnival.com/CMS/Articles/dining_virtual2.aspx (accessedAugust 10, 2005).

20. Dickinson and Vladimir, Selling the Sea, 32.21. Sources: Author’s calculations based on pub-

lished Carnival cruise fares and the CLIA 2005Cruise Market Profile, available at http://www.cruising.org.

22. Ward, Berlitz Ocean Cruising and Cruise Ships.23. Industry averages are from CLIA; Carnival

averages are from Carnival sources.24. Carnival Press Release, “Carnival to Launch New

Multimillion-dollar Ad Campaign Designed toConvey Product Enhancements,” December 6,2004, http://www.carnival.com/CMS/Articles/new_adcampaign.aspx (accessed August 17,2005).

25. Rebecca Tobin, “Report: Ships Need Brand-aid,” Travel Weekly, June 7, 2004, pp. 1, 58.

26. In one of the few published studies that look atperceptions of brand differences in the cruiseindustry, Marti (2005) reports that most cruise cus-tomers could not identify the logos of the majorcruise brands. Bruce E. Marti, “Cruise Line LogoRecognition,” Journal of Travel & Tourism Mar-keting 18, no. 1 (2005): 25-31.

27. See Donald N. Sull, “Why Good Companies GoBad,” Harvard Business Review 77, no. 4 (July-August 1999): 42-52.

28. “Carnival, Coca-Cola Team Up to CreateFleetwide Club O2 Teen Centers AboardFun Ships,” August 4, 2005, http://www.carnival.com/CMS/Articles/teen_centers_aspx (accessedAugust 17, 2005).

Robert J. Kwortnik Jr. is an assistant professor of marketing at the Cornell University School of HotelAdministration (rjk34@cornell.edu). The author thanks Brenda Yester of Carnival Cruise Lines, for herguidance and support during the development of this case study, as well as Cornell University graduatestudents Amy Hovis and Osman Khan and assistant professor Gabe Piccoli, for research assistance.