Thomas Cook: Marketing Strategy Essay
Thomas Cook: Marketing Strategy
1.1 Value of the report
This report about the holiday industry and Thomas Cook, aims to answer a number of questions based on and around their marketing strategy. Section one will focus on Thomas Cook’s current situation. Questions which are to be answered include:
a) Identify the hierarchy of strategy within Thomas Cook
b) Estimate the trends in the holiday industry over the past five years c) Analyse and evaluate Thomas Cook’s current marketing strategy and their value creation process Section two of this report is aimed at recommending
alternative marketing strategies for Thomas Cook which could be put in place in order to reach their aims and objectives for the next few years.
1.2 Industry Background
1841 – Thomas Cook arranged the first passenger train in England, eventually taking passengers across Europe and to America (ThomasCook.com). 1950 – Vladimir Raitz offered the first all-inclusive holiday package (Telegraph.co.uk). Late 90’s, UK had four main businesses in the industry:
1. Thomson – 4m passengers
2. Airtours – 2.9m passenger
3. First Choice – 2m passengers
4. Thomas Cook – 1.05m passengers
2004/05 – estimated 64.8 million trips (Office of National Statistics). Internet use allows customers to directly purchase from hotels and flight carriers, allowing the disintermediation of travel agents, leading them to cut the number of packages. Late 2000s – UK recession led to the decline of number of trips and time spent abroad. 11% of trips were between one and three nights. This saw an increase in the number of visits to UK holiday resorts such as Pontins and Butlins, both experienced a double digit growth in bookings in 2009 (Hughes, 2010). 2013 – Survey by Barclay, which included over half of the travel industry, suggested that they expect an increase of customers in 2014, with South America being the main attraction, possibly because of the FIFA World Cup.
1.3 Company Background
Thomas Cook was founded in 1841
Started with passenger trains between cities in England, eventually moved on to trips across Europe and to America. Cook’s son John Cook had been working with him for years, they officially became partners in 1871, changing its name to ‘Thomas Cook & Son’. Company was passed down to John Cook’s three sons after his death. Renamed Thomas Cook & Son Ltd in 1924 after acquiring limited liability Their lack of success led them to sell the business in 1928. Nationalised in 1948 as part of the British Transport Commission. After being sold and bought by a number of investors it changed its name to Thomas Cook Ltd in 1974. 2002 – German company C&N Touristic AG bought the
company and renamed to Thomas Cook AG. 2007 – Thomas Cook AG merged with MyTravel Group plc, renamed itself Thomas Cook Group plc to which it is still called today. Participating in the hospitality and tourism industry where they now offer everything from flights, package holidays, cruises and hotel resorts. 2012 – reported a loss of £590 million, however managing to reduce their debt by over £100 million (ThomasCook.com) Despite of this they are still the second largest travel company in Europe and the UK, behind TUI Travel (CAA, 2014), making them a market leader in the industry.
2.1 Secondary Research
Most research conducted was secondary, I mostly used online sources and textbooks to find information and data about the industry and my chosen company. There were many news articles which addressed issues about the industry and key trends. Thomas Cook publishes annual reports which address multiple issues. They also publish their financial records. On their website they have pages which give the history of the business and key dates in its lifetime.
2.2 Primary Research
I made a simple survey which I handed out to 20 people at Murray Library. Purpose of the survey was to find out where Thomas Cook appeared on a popularity scale and then compare it to official data of the largest travel companies. I listed 10 holiday companies and asked them to rank them from 1 to 10. Results showed Thomas Cook as one of the most popular choices, falling below the fourth choice 3 times. Virgin Holidays was in the top 3 every time except once. However data from the Civil Aviation Authority showed Virgin Holidays to be the 10th largest in the industry.
There were a number of limitations while doing my research. In regards to secondary research I found it hard to find official data in relation to the holiday industry as a whole, market share etc. I also found it hard to find data on other business in the industry. Eg I could find the Virgin Groups data, however couldn’t find any for Virgin Holidays. In regards to my primary research I believe I didn’t ask a large enough pool of people, such as people from different age groups. Also as my sample size was fairly small, therefore the results were limited.
3) Hierarchy of Strategy
The Thomas Cook Groups hierarchy of strategy is pretty straightforward, with the Thomas Cook Group being the corporate brand, and then having a number of SBUs below, followed by the functional departments for each SBU. The Thomas Cook Group also has a number of businesses which they are associated with.
The corporate level of the business is where the values and overall aims for the business come from. They are identified and created at the very top by the executive committee and then sent down to the SBUs and finally the functional levels. In this case the corporate level is the Thomas Cook Group. The Thomas Cook Group prides themselves on having a diverse group of people on the executive committee. Coming from a variety of countries and including people from different business functions allows them to control the business and set appropriate aims, values and culture in relation to the SBU and the business functional areas from the corporate level.
Exceptional service from exceptional people
Succeed as one team – support and trust each other, work as a worldwide team Deliver for our customers – deliver the best possible customer experience Engage each other – energise and inspire each other, bringing new ides Drive for results – have the courage and determination to succeed Act with integrity – maintain the highest ethical standards
These values are expected to be carried out in everyday operations at all levels of the Thomas Cook Group, and therefore aiming to reach excellence in everything they do.
In October 2013, the Thomas Cook Group reviled a new logo and motto which was part of their transformation since bringing in Harriet Green as CEO. The ‘globe logo’ and motto ‘Don’t just book it Thomas Cook it’ was replaced by the ‘sunny heart’ logo and the new motto of ‘Let’s go’. The logo will be used by the group and a number of their SBUs. Harriet Green announced that ‘it isn’t just a logo, it’s a promise’, she added that it will show that ‘everything through our brands is connected at every level ensuring a unification of care for our customers, through every step of their journey with Thomas Cook (Telegraph, 2013).
Thomas Cook is the master brand of the group and so therefore holds the most weight and importance on the groups brand image and reputation. At a business level, Thomas Cook said they wanted to be ‘high tech & high touch’, saying that 70% of travellers want a relationship with their holiday provider that goes beyond just booking and paying. In order to do so Thomas Cook at a business level identified three main values which they would need to focus on: Be Trusted – Trust, consistency and a strong brand are the key factors of customer choice Be Innovative – Continue to improve their online offers with leading digital innovations Be Personal – 50% of travelers fell overwhelmed with the amount of information and choice, 66% of travels want help in picking the right holiday for them (ThomasCook.com)
Thomas Cook introduced the Thomas Cook Business System, where they identified the customers being at the heart of the business and then identified goals which are based around the customers’ needs and wants.
At a business level, Thomas Cook have ensured that everything they do from now, is entirely based on and around making sure the customers gets what they need and expect.
Each functional department will have different aims and objectives; however they all need to work in conjunction in order for the business as a whole to operate efficiently.
The finance department can be seen to be the most important department of a business, because without money and resources, the business wouldn’t be able to operate. New product revenue of £700m by the end of 2015. Save £12m on aircraft costs including fuel and ground handling. Gross Margin improvement of 1.5%
Increase presence online/social media
Promote the ‘sunny heart’
c) Informational Technologies
Be ‘high-tech, high touch’
d) Customer Service
Provide excellent customer service
Ensure customers get perfect trip
e) Human Resource Management
The role of the Human Resource Management department is to recruit and train employees, but also to monitor their progress. Right people who fit the business values Train all employees to work at a high standard
Increase the productivity amongst their airline crew
4) Trends in the Holiday industry
4.1 GDP and Inflation
The industry and the UK in general have had a bumpy ride, with a recession lasting 6 quarters in 2008/09 and then entering a double dip recession for 3 quarters in 2011/12. However data shows that the GDP has been increasing. (Office for National Statistics). This shows potential for the industry and the UK in 2014. In addition to this, the UK’s inflation rate (Consumer Prices Index) fell to 2.0% in December 2013, the first time it has reached the governments set target of 2.0% since November 2009.
4.2 Industry Trends
At the end of 2008, TUI Travels projected trends in the industry for 2009.
They suggested that people were more likely to book an all-inclusive holiday package, adding that it allows people to budget in advance, as their food, drinks and entertainment are included in the price. The suggested a number of destinations which they predicted would be the most popular in 2009. a) Long Haul – Mexico and Florida
b) Mid Haul – Greece, Turkey, Cyprus and Egypt
c) Short Haul – Spain, Italy, the Algarve and Manderia
A number of experts spoke to The Metro (2011) and made predictions for 2011. The Association of Independent Tour Operators suggested that people would visit places that appear ‘off-limits’, adding that destinations such as North Korea, Libya and Iran have seen an increasing in visitors. Adding that ‘a top destination for the year would be Zimbabwe’. Other experts predicted that people will visit the middle-east, but also countries were they ‘can soak up the culture’. Another key trend which was predicted for 2011 was that people would become ‘journey junkies’. Justin Francis said ‘We have seen a 20 per cent year-on-year increase in the number of travelers enquiring about railway journeys’ suggesting that flights were not the only travel method people were interested in. A survey by Thomson (2012) showed that 58% of Brits travelled with their parents over the past year and 38% of them also taking their children along, suggesting that 2012 was a year of third generation family holidays, and predicting that 2013 would follow this pattern. 4.3 Internet
The growth of the internet has allowed customers to search for a holiday in depth and also allows them to access a wider choice and availability of holidays. Research by Thomson and First Choice showed that an average holiday maker will spend 8 hours researching online, with 35% saying they spend over 24 hours online looking for the perfect trip. The research also suggested that Social Media was a huge factor in people decisions on holidays. With 30% saying pictures from friends are a key influence, and 7% saying they ask people on social networks for holiday advice, figures which they predicted would be likely to grow.
5) Thomas Cooks Marketing Strategy and Value Creation Process
5.1 New Logo and Slogan
The new ‘sunny heart’ logo and ‘Let’s go’ slogan was introduced in 2013 and was the start of the companies transformation. The logo is used for the group as well as the SBUs. It was placed on all their fleet, brochures, ads and everything to do with the business. They released TV ads showing the logo and showing customers making heart shapes with their hands. They believe the new logo shows customers that they are putting them at heart.
5.2 Moving Online
Thomas Cook announced their plan to achieve 50% of all their bookings to online; therefore they would develop their online presence. They announced they would be closing 195 stores moving from 1069 to 874 (ThomasCook.com). They have recently introduced a number of new tools which customers can use online. a) Ask & Answer – an interactive tool where customers can talk to travel experts and get information as if they were in a store or on the phone. b) Destination Discovery – a online tool where customers answer a few questions and the tool will recommend and give them holiday packages matching the answers they gave. Thomas Cook stated that they already have strong digital credential and therefore not starting from scratch, claiming to be the first high street travel agent to offer online booking and stating that they had 310m viewers on their website in 2012 (ThomasCook.com) They also stated that they wanted to create an Omni-channel saying that they want to be wherever the customers want us to be. Stating they will have a presence on PC/Laptops, Mobile, Stores, Phone, Destination reps as well as having their own TV channel Thomas Cook TV which is available on Sky and Virgin Media.
They have created a presence in as many ways as they can in order to be able to have an extensive reach to their target audience. They have also started to optimize a mobile website, where customers can and view and book holidays. In addition to this they have developed a tablet application so that they are accessible no matter what type of device a potential customer has access to. Thomas Cook has already established a strong presence on social media sites, having 280,000 likes on Facebook, 59,000 followers on Twitter. Both these sites allow Thomas Cook to have a direct relationship to their customers; it allows them to communicatebinformation as well as holiday ideas and tips on a free platform. In addition to this, these social media sites allows them to communicate with customers, as customers can comment on their pages with any questions or feedback they may have.
The use of sponsorships has had a huge impact on Thomas Cooks public and brand image. For six years they were sponsors of Manchester City F.C, giving them a huge audience, as they are one of the biggest teams in the world. However Manchester City announced the deal would end in 2009 (Manchester City F.C, 2009) They were also one of the main sponsorships of the London Olympics in 2012, which is a huge event, having around 4.0 billion viewers (BBC Sport 2012)
5.4 Value Creation
There are a number of ways in which Thomas Cook creates Value to its customers: Offer customers an integrated, end to end travel experience, reinforced by the strength of the Thomas Cook brands Help make sense of the overwhelming choice of travel products available Differentiate from competitors by offering high level of customer service throughout Offer the assurance of a quality controlled product portfolio and financial security Thomas Cook has ensured that everything they do now is in the best interest of the customers. The development of their online presence and online tools are all focused on making the shopping experience better for the customer.
Value Creation Process
6) Recommended Marketing Strategies
Number one or two in their core markets
Strong customer base, loved and trusted
Strong financial plan in place
Debt of £421m
45% of flights out-house
Internet – increase presence
Increase customer value
Target larger segments
Internet – more competition
6.2 Aims for the upcoming years
Thomas Cook has set itself a number of goals which they which to achieve over the next few years, these include: New product revenue of 700m by end of 2015
UK turnaround of 140m by end of 2014
Maintain strong brand image
Continue to provide excellent customer service
Become ‘high-tech, high touch’
Be everywhere our customers want us to be
The aims of Thomas Cook over the next few years focus on gaining a profit but also providing an excellent level of customer service throughout every level of contact. There are a number of marketing strategies which Thomas Cook could introduce which would help them achieve these goals.
6.3 Marketing Strategy
“Marketing strategy is a market-oriented approach that establishes a profitable market position for an organisation against all forces that determine industry competition” – West et al, 2010
I believe Thomas Cook should introduce an organizational strategy, meaning they aim to achieve their organisation goals while securing and sustaining a competitive advantage in the market. They should do this in conjunction with a growth directional strategy, where they should increase their concentration in the market. Growing vertical should be essential; however horizontal concentration should also be considered as it allows them to increase their target audience and customer base. In addition to this, I believe that Thomas Cook should also adapt a differentiated targeting marketing strategy. They should target a number of segments with different offers and packages. This is because, all their customers have the same holiday preference or financial budget, so they need to find what is right to match a certain customers needs.
6.4 Online Presence
I believe that in order for Thomas Cook to succeed over the next few years and reach the goals they set themselves, the use of the internet and being online is something I think is essential. The internet gives them access to the customers from a variety of mediums. Research by TUI Travels showed that an average UK holiday maker will spend a minimum of 8 hours researching their holiday online, with 35% of those saying they spend over 24 hours in total on their PC, Laptop or Tablet looking for the perfect trip for them (TUI Travels, 2012) These number show that Thomas Cook must ensure that their website provides the essential information customers need, while also providing a high quality of usability. Although Thomas Cook has already introduced a number of interactive tools such as ‘Ask and Answer’ and ‘Destination Discovery’, I believe there are a few things they can do which would improve a customer’s experience on their website.
Micromarketing should be introduced, where they tailor their products and services to meet the needs of a customer. The option to become a member, where it allows a customer to have a personal page should be introduced. Thomas Cook identified one of the key brand values they wanted to build on was ‘Be Personal’, saying that 50% of travelers fell overwhelmed with the amount of information and choice available to them, in addition to this 66% of travels would like help in picking the right holiday for them (ThomasCook.com). The use of a personal page after logging in can ensure that the customers get a personal feel; the page can give recommendation based on the customer’s previous bookings and searches, therefore limiting the amount offered to them, while providing suitable options. This would increase a customer’s satisfaction levels, and could potential move them from zone of defection up to zone of indifference or affection. (Heskett and Sasser et al, 1997).
6.5 Social Media
Social media has become a huge influence on people lives in this day and age. Research by TUI Travels (2012) suggested that 30% of people are influenced by friend’s pictures on Facebook and Twitter when deciding on their next holiday. In addition to this 7% of people said they ask people on social networks for holiday advice. Although Thomas Cook is already set up on Facebook and Twitter, there are opportunities for them to advance their presence. Although they already have 280,000 likes on Facebook, there is still a huge audience on the site which they are not connected with. Facebook reported 1.19 billion monthly active users as of September 30th 2013 (Facebook, Investor Relations). Instagram should also be a social media site they should increase their presence on. Instagram allows user to post pictures for their followers to see. Thomas Cook could post pictures of holiday destination which may influence people decision to go there and book through Thomas Cook. They should link all their social media sites together so that they all integrate with each other, and also promote them on their TV ads, Youtube page, stores and website.
Viral marketing should be something which they should do in order to increase their awareness. Viral ads with known celebritys who people look up to would increase their brand image as people linking the celebrity and brand together, it will also influence them to post it on their social network sites and increase word of mouth about the ad and business. Thomas Cook reported a 15% increase in booking shortly after they released an advert containing ex-footballer Jamie Rednapp. (Fernandez, 2010) 6.6 Customer Relationship Management – Loyalty Cards
Customer Relationship Management is an effective part of a business as it can ensure customer feel rewarded and therefore are influenced and motivated to stay loyal to a company. Thomas Cook doesn’t currently have any CRM programmes in place which would make customers stay entirely loyal to them. The use of a loyalty card where customers can gain points which allow them to get a discount once they reach a certain level is a huge incentive for them to stay loyal to Thomas Cook. Customers see it as a game and feel like they’ve achieved something when they finally reach the target they were setting out for. Similar club card schemes have been proven to be successful, especially Tesco’s. Tesco reported an increase of 15% after the introduction of their loyalty card scheme. Lastly I believe the use of a customer loyalty card will increase a customer’s lifetime value, this is due to the fact that a single customer is more likely to spend more with a business if they feel like they are getting something in return.
6.7 Service as Drama
The Service as Drama theory (Grove and Fisk, 1992, pp. 455–462) suggests that the service industry and drama/theatre both share similar similarities: Stage – The Holiday Destination
Actors – Employees/Representatives
Audience – Customers
They also suggest that in all three must work together and meet with each other in order to create a Service Delivery Experience, whether it is positive or negative.
Thomas Cook must ensure that their holiday packages and employees are at a level which meets the customers’ needs in order to create a positive service delivery experience.
In conclusion I believe that Thomas Cook have a strong marketing strategy in place which I believe will allow them to reach the goals they set themselves for the upcoming years. However I do believe that there are some improvements which they could make which would help push them further closer to their goal. I believe they could take more advantage of social media marketing in order to target different segments of potential customers in the market. Also the addition of a loyalty scheme would reinforce their brand value of being personal and putting the customer at heart. I also believe that they need to push and promote the new ‘sunny heart’ logo so people can easily recognise it when they see it. The use of a known figure in one of their ads again will also help boost their sales and increase their brand reputation. They have set themselves key targets which are achievable, and they already seem to be heading in the right direction to achieve them.
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