learning outcomes:
- Critically evaluate the contribution of strategic marketing to the overall strategic management of organisations and the pursuit of sustainable competitive advantage.
- Apply the various strategic marketing frameworks and concepts to the strategic planning process.
- Exercise considered judgement in assigning priorities and determining objectives in specific organisational situations.
- Apply diagnostic and creative skills in the marketing planning, implementation and control processes in a variety of different organisational situations including the service sector and not-for-profit organisations.
Whilst it might not obviously spring to mind as such, a leisure boat company, Birmingham Barge Trips, has been one of the most successful businesses in Birmingham over the last 4 to 5 years. The development of the area around the International Convention Centre has provided growth to a type of business that has been established in the region for many years. Trips along these ancient waterways have come to be part of the revitalizing of canals across the country and the Birmingham and surrounding canal systems have provided significant opportunity for smaller canal barges. Simple trip boats are in the order of 40 feet, but those offering dinner or dinner dances may extend to 60 or 70 feet. Holiday craft can be from 30 to 70 feet, depending on the number of people they can accommodate, and can be rented for between £400 and £850 per week during the holiday season. Birmingham City Council has actively encouraged both the development of the canal network and leisure activities utilising it. There are many additional opportunities as Birmingham lies at the heart of the Midlands Canal Network offering access to the area around the International Convention Centre as well as popular visitor attractions such as Cadbury World and, further afield, the Black Country Museum and Merry Hill. Further afield still, the network extends across the country, allowing access to London and Manchester (see Appendix I). Some of the canals to the North, however, are only designed for 40 and 50 foot boats, and it is impossible for longer boats to use them.
The traditional activities of boat owners have focused round two areas. The first area is the hiring of the narrowboats, typically by the week, for holiday purposes. In this case, no crew is provided and the holidaymakers drive, and sometimes damage (!), the boats themselves. This area is well researched and data is readily available. Britons took some 443,000 boating holidays in 2012, with the market value estimated at £171 million. However, trips in the UK are in long-term decline, partly due to the increase in value of waterside property, leading to an increase in the cost of moorings. In contrast the overseas boat trip market is growing with some 35,000 holidays being taken on overseas inland waterways and 145,000 sailing holidays being taken. The hire market is substantial and the companies operating in it quite large. Birmingham Barge Trips does not currently compete in this market and is smaller than most of the operators in the market; Stratford Court Cruisers for example, had 30 boats which they sold to a private equity company, Ethos.
The other area, and the one in which Birmingham Barge Trips operates, is tourist cruises on passenger narrowboats, generally lasting between two and five hours, around the area local to the boat operator, with the boat owner providing a crew and selling refreshments on board. Longer trips, sometimes involving an overnight stay, are also possible, although this market is relatively much less exploited. In addition there is also a range of other possibilities involving other kinds of entertainment and services on the boats, although various regulations would obviously have to be observed. These activities include combining the trips with dinner, a dinner dance or, for the younger generation, some less sober activities! These areas of business are far less well researched with little reliable data being available. However, it is clear that potential customers include local businesses as well as individuals and families, both those resident in the City and tourists visiting it.
Birmingham Barge Trips is based close to Birmingham City Centre and was set up in 1996 by David Simmonds, who had bought a boat from a friend, initially just for his personal use. His interest had grown into a business, however, and he now has four 70 foot and two 40 foot narrowboats which have been fitted out to provide passengers with drinks and light refreshments as they tour the canals of Birmingham. Each boat costs around £150,000 to buy and fit out. In contrast to boats hired for holidays, which have beds and living accommodation, passenger narrowboats have far more seats and, in most cases, provision for eating and drinking. The business now employs over 30 people, including crew, caterers and cleaners, and takes on an additional 20 temporary staff in the peak tourist season between March and October as well as other temporary staff to cover specific needs.
Staffing is an important consideration for narrowboat operators. Typically skippers are responsible and trustworthy individuals with Boatmaster qualifications: however, they are often called upon to work at weekends and in the evenings, which can be quite demanding. Catering and serving staff are often less well qualified and less disciplined. David finds it worthwhile to invest in training the permanent staff and would also like to be able to have access to trained temporary staff, especially during holiday periods. This is an ongoing challenge for him, especially because the staff have considerable contact with his customers and often chat to them in the course of their trips. Each crew will usually work together and get to know each other during the course of the season but may then be re-assigned for the following season.
Birmingham Barge Trips has traditionally operated only in the part of the network in the immediate vicinity of Birmingham, offering leisure trips to tourists lasting between two and three hours and extending to some two to three miles from the City Centre, although some trips can extend to ten miles from the City Centre and last all day. David advertises the local Birmingham trips as “Birmingham Tradition” and the longer trips, which extend out into the Black Country, as “Black Country Tradition”. Although Birmingham Barge Trips is the largest operator in Birmingham in this particular market, David is convinced that there are further and more profitable opportunities available for his business within the local area. He is looking to expand the business over the next five years.
It is estimated that London accommodated 2.5 million passengers on the River Thames in 2014, and Paris catered for over 7.5 million passengers during the same period. It is estimated, however, that only 130,000 people took trips of various kinds in Birmingham in that period, taking advantage of a more limited range of types of trip and entertainment than in the other cities. The majority of David’s customers are residents of the West Midlands on a day out or visitors to the City.
Birmingham has become an increasingly popular destination for both business and tourism over the last few years – see the Guardian article in Appendix III. Marketing Birmingham’s “Where the World Meets” advertising campaign (Event Industry News 2014) launched in 2013 has supported this upward trend. Marketing Birmingham is a well-resourced and influential organisation, part owned by Birmingham City Council (Local Government Association 2014), that promotes Birmingham as a destination for both business and pleasure. In addition, of course, tourist information is available through a number of organisations, some of which, like Visit Birmingham, provide specific information on activities related to the Birmingham Canals (Visit Birmingham 2014). However, an issue that affects both the inbound tourist market and the propensity of Birmingham residents to travel abroad is that the weakness of the pound against both the US dollar and the Euro since the EU referendum, is making the UK a potentially more attractive destination for overseas visitors and overseas trips less attractive for UK residents. While David noticed a drop in overseas passengers while the pound was strong pre-referendum, he wonders what the effect of the weakened pound will be.
David has experimented with a range of different types of trips and entertainments focusing on his core markets of residents of, and visitors to, Birmingham. Some trips include meals rather than simply light refreshments, and others include an educational element, with a commentator providing information about, for example, the industrial heritage of the canals. David wonders whether these types of trips might be of interest to local businesses or schools. One of David’s boats has been refitted at very considerable cost and now focuses on operating as a “floating restaurant”, providing a wider range of better food and facilities than the other boats. This was in response to the more general trend for more restaurants to be situated within destination venues for leisure. These venues range from retail and leisure complexes through health clubs, cinemas, department stores and other dual purpose venues; at the same time, the decline of the ‘themed’ restaurant or pub, now looked back on as an unsophisticated development of the 1980s and 1990s, has given rise to the converse trend of more individually styled venues. Onboard dining and adventure dining fall into this category of individually styled venues or attractions.
The onboard dining market appears to be growing faster than the standard tours and, being a relatively new attraction, seems to have more profit potential than the traditional trips. David’s venture into it appears to be becoming successful, and is making a comfortable profit for the first time this year and David has heard of some businesses and offices holding their Christmas parties on canal barges. The search for ever more exotic and different party venues has the potential to make, for example, canal dinner dances attractive. David believes that the market for this type of event is likely to be local people and businesses rather than tourists visiting the City.
Whilst David is keen to grow the business, he has made no decisions and is seeking further information and advice. In particular, he has started to sell tickets for trips in a limited way via an internet site and is now considering what other ways of selling tickets via third parties, or working in partnership with them, might be possible.
David also has a number of concerns, however. It seems that the straightforward short tourist trips market is becoming increasingly competitive and profits are falling. He suspects that this may be due to some operators, whose boats had previously been offered in the hire market, now switching to short leisure trips, often offering them at low cost. David faces a dilemma, however. If he continues to run the local trips, he foresees a number of factors that could reduce his profits substantially and limit the growth of the business. On the other hand, to grow his business as he would like requires that he make the right decisions since investing in the wrong areas could endanger the whole of his business. Fortunately, the business has a strong balance sheet because of the significant asset of the barges themselves. On the basis that the business has been established for some considerable time, his bank manager has confidence in David and is prepared to lend him a substantial amount of money as long as he produces a well-justified case that expansion will be successful and the loan repaid. The loan would cover the purchase of new boats, possibly built for specific purposes, as well as increases in ongoing costs, including fuel and licences.
As well as considering the risk inherent in expansion, David is also facing other pressures. Standard licences covered only 8 months of the year, and do not cover the Christmas and New Year period. He had, however, because of the size and reputation of Birmingham Barge Trips, been able to negotiate “Special” licences for 3 of his boats for the whole year. But a related issue that was troubling him was that he had heard rumours of complaints about his trips. Unfortunately, he did not have much detail except that he had overheard some remarks that his trips, especially the “floating restaurant” were, “not very good”: in particular, it appeared that local business people believed that Birmingham Barge Trips did not understand what businesses, as opposed to private individuals, wanted in terms of image and standards of service. On top of this, one of his major competitors, Birmingham Boaters, which only had three boats, had cut its prices. He had also heard that Canal Gourmet, a small startup operation offering intimate dinner dances on single smaller 40ft boat, recently had a complaint lodged against it by canal side homeowners for excessive noise. Canal Gourmet is fully booked Thursday to Tuesday evenings for a 4 hour dinner dance cruise.
