Company Breakdowns - Cruise Day 3 - Deciding on the business model
This is a 5 part series, to jump to the different parts click below:
Part 1 -Disrupting the Cruise Industry
Part 2 -Finding the biggest opportunity
Part 3 -Deciding on the business model
Part 4 -Designing the offer and customer journey
Part 5 -Designing the Facebook Offer
Okay, now for a shorter, more theoretical post.
This post will focus less on the Cruise industry, and more on breaking down the opportunities that can exist.
As discussed in yesterday’s release, we are looking into the lead generation business. Now, before we proceed forward, we should take a moment to describe what this business is.
Generally lead generation is bringing in new customers to a business. Lead often evokes a sense of sales of B2B businesses, but it can also include consumer facing business.
The primary avenue of lead generation is through advertising. Companies place ads, potential consumers see these ads, and make purchases for the company.
To drive opportunities, there’s 7 different categories where opportunities are:
- Unexpected success / failure in their enterprise
- Gap between what is and could be in a market process, product, or service
- Innovation in a process, product, or service
- Changes in industry structure / market structure
- Changes in mind-set, values, perception, mood or meaning
- New knowledge or a new technology
In breaking the Cruise system down, here is where we believe there is an opportunity for lead generation.
There’s several potential avenues here, but I predict there’s a clear standout. The opportunity that I suspect would be the most impactful is “Changes in mind-set”
What this means is that any shift in values, perception or mood represents an opportunity for companies to grow.
Let’s take a step back now and identify where this could apply for the Cruise industry. I did some quick research on Cruise companies, and it seems like the main issues are surrounding:
- Millennials just don’t resonate with Cruise companies offerings
The current brand of Cruise companies just doesn’t jibe with what millennials are looking for.
The brand of Cruise companies is a family friendly, high relaxation vacation associated with those older in age. However, millennials are looking for a less manufactured experience.
2. Millennials don’t book travel in the same way that Cruise companies sell
In reading the reports for Cruise companies, it seems like there is a large % of cruise company tickets that come from travel agents, or travel companies. This would be in line with the first point, where older consumers are more likely to be using services like travel agents.
So what’s the opportunity?
I think there are is an opportunity here to create a high-end concierge / travel agent service that is geared towards millennials.
One interesting service to build would be a website / portal where you come in not knowing where you want to go. The idea here would be to replicate the travel agent experience, but in the modern day.
Rather than giving the customer the choice on where to go, you can start by running a quick quiz / consumer questionnaire that gives a quick rundown of distinct possibilities for a Vacation. For example:
Would you prefer an adventurous time, or would you prefer something relaxing?
Now how would you make money with a service like this?
There needs to be a relationship with the company in question to get referral fees. In researching current Cruise companies, it seems that some offer affiliate commissions in return for leads.
What this means is for every customer we can send to the cruise company, we get a % of total as revenue. While not the best way to capture value, it allows for a rapid entry into the business to test and validate the idea.
One example of this is offering commissions of ~3% for every lead brought in. At an average cost of ~$2,000, this leaves an income of ~$60-$70 per customer.
Now, let’s try to break down the economics of this to see what the distinct steps for this are.
If we go down the paid marketing route, we need to maintain a CPA of <$50 to make the economics work. This is to ensure that we are making enough money on the website. Based on current trends, it seems like there is an opportunity to drive through traffic during this time. Because of COVID, CPAs for the travel industry are on average hovering around ~$22. This leaves a large head room to make it work.
Now what are the next steps here:
- We have to design the offer and the customer journey. [Day 4]
- We need to break out the design and strategy of the FB offer and ads. [Day 5]
- We have to design a quick layout / the software we will use to host this service. [Day 6]
- Review [Day 7]
One last word to note. We went down the route of paid advertising first. We would go with SEO or blogs with an enormous amount of traffic first. However, that requires a high startup cost and/or high investment in time.
This instead represents a quick/straightforward way to validate if there is an opportunity here.