The world's only floating Victoria's Secret branded shop on Viking Grace
This article was first published in the Autumn/Winter 2016 issue of International Cruise & Ferry Review. All information was correct at the time of printing, but may since have changed
What key benefits can ferry operators expect from commercial partnerships?
Kaj Takolander, vice president sales and marketing in Finland, Baltics and Russia, Viking Line: Commercial partnerships can deliver efficiency in supply chain logistics, and there are distribution channel benefits through partnering with travel agencies, tour operators, ports and so on. Being able to bundle the trip together with destination programmes, hotels or sightseeing also makes a lot of sense. These partnerships make it easy for consumers who often benefit from better prices, and they enable operators to make a little extra by selling third-party product.
On the marketing side – such as advertising and web optimisation – it can be more cost-efficient to find the expertise you need outside the company than to start building up your own competence. Digitisation is moving so fast that it makes sense to build up different kinds of commercial partnerships with specialist companies.
Kevin George, CEO at Red Funnel Group: As a domestic ferry operator serving an island, commercial partnerships are an essential part of our business strategy which drives revenue by providing important new sales channels. Using local suppliers where economically viable also helps grow the economy of the island.
Simon Johnson, president of Carus Executive Consulting: Commercial relationships enable operators to be more influential and gain a greater share of wallet throughout the customer’s journey – not just while they’re on the ferry. This has been talked about for a while, but digitisation has made it much easier to understand the customer and be more involved in their experience; to give the customer more opportunity to engage with the company earlier in their journey and after the journey ends.
A few years ago, up to 75% of bookings were done through travel agencies, but now ferry companies are able to build a direct relationship with the consumer and generate ideas for the future. That’s important in an industry where many customers use the ferry for tourism and might not return for several years. Building that relationship can encourage them to book their hotel from you even if they’re not using your ferry route.
How much impact do commercial partnerships have on the bottom line?
George: Partnerships impact the bottom line in a number of ways. Firstly, partnerships with accommodation providers, event organisers and attractions provide a really important sales channel. When a customer is planning to visit the island they may start by choosing their accommodation, followed by booking the ferry crossing. Equally the customer may choose to come to a particular event or visit an attraction and then arrange the ferry to get there. Hence the relationships with accommodation providers, event organisers and attractions are very important for us as sales channels. Secondly, where we can select suppliers that are based on the island we are naturally helping the economy of the island to grow. As that happens more people will travel across the Solent, creating a virtuous economic cycle.
Johnson: Many ferry companies will say the impact is not that much, unless they deliver traditional package holidays. But it’s worth persevering because you’re building up that customer journey. This has become significant in other industries, such as airline. If you’ve got a great brand and a database of regular customers then it’s certainly worth seeing how far you can stretch your brand through ancillary offerings like insurance and anything you have in your portfolio that can add value to what you’re selling today.
Takolander: It may not seem like a big impact in the context of the total turnover, but the point is that the bottom line is always positive in such partnerships. If you were to discontinue a partnership that contributes €500,000 to the bottom line, where would you find that amount then?
What types of commercial partnership deliver the most benefits for ferry operators?
George: It depends on the type of ferry operation. For us, serving an island, the relationships with accommodation providers, event organisers and attractions are important sales channels for driving revenue. The use of local suppliers helps grow the economy of the island and is important for the long-term prosperity of the island and, hence, ourselves as a ferry operator.
Takolander: The most important partnerships involve products we can sell and bundle with our own product. Sales channel partnerships with travel agents, tour operators and the like are also important in helping to distribute our product as widely as possible. In addition, good supplier and logistical partnerships – enabling streamlined deliveries and fast, efficient cleaning and laundry services – can deliver significant benefits by minimising the time the ship spends in port.
Johnson: It depends on what your customers are doing and where they go. If the route network is part of a holiday type of end product, it makes sense to look at hotel accommodation and tying up with a hotel supplier. With the technology available today there is no longer a need to contract the hotels and package the holiday. You can simply get suppliers to extend their product to you through an API bolt-on.
What benefits have you seen, or do you expect to see, from your own commercial partnerships?
Takolander: We have the world’s only floating Victoria’s Secret branded shop on Viking Grace. That’s a win-win partnership. For Victoria’s Secret, the sales have been good and the brand exposure is fabulous, and of course we benefit from it because of the exclusivity.
We have also brought together several small, entrepreneurial suppliers of cruelty-free, ecological beauty products from the Nordic region, under our own Local Beauty Heroes umbrella brand. This is a creative solution for building commercial partnerships that reflects the sharing economy. By working with us the companies benefit from a level of exposure that they would not be able to achieve on their own. It gives us a competitive edge because it’s an exclusive arrangement with fabulous partners under our own brand. I think this will set an example for other, similar types of joint endeavours.
George: The fact that we had our new high-speed catamaran, Red Jet 6, built on the Isle of Wight is a perfect example of where a commercial partnership with an island-based shipbuilder, Shemara Refit, has helped grow the economy of the island. The £6 million investment, which could have been placed with any capable shipyard around the world, has created jobs and helped grow the marine manufacturing industry that once thrived on the island. As a result we have a new boat built to world-class standards, that is economically competitive but at the same time has created jobs on the island and been the catalyst for further orders for that shipyard. By helping to grow the economy of the island and create jobs, the propensity for using ferry travel will increase from which we will ultimately benefit.
What advice would you give to ferry operators seeking to enter into commercial partnerships?
Johnson: First, know your customer. Find out what makes them tick, why they are using the ferry and why they are selecting your product. Second, it’s important to get your data right. A lot of companies go into great detail in managing a particular sailing, but they’re not looking at management information that gives them meaningful information to drive things forward. The third thing is to get your structure right: decide what you want to do and get the right skills in. It’s about understanding what you want to do and where you want to go and taking those small steps.
George: Make sure the partnership really drives a bottom line benefit rather than just being a nice thing to do.
Takolander: Be honest with yourself and analyse your own processes very deeply. Build on your strengths and find partners that can add further benefits to those. Identify your weaknesses and what it will take to address them, and look for a commercial partner that can help you so that you can concentrate on your strengths. There are myths in all companies that they have to handle certain elements themselves, but it’s not always so. Healthy analysis is a good way to see whether there is anyone who could do something better, and cheaper, than you could do it yourself.