One of the most successful sectors in the travel industry has been cruising. Megalines like Carnival and others are building ever-bigger ships to handle the increased traffic and offer more amenities. There’s no doubt that a good part of the success of the cruise industry is due to offering a product that people want: a low-stress way to visit multiple locations (no packing, unpacking, hotel check-ins, etc.) at a price that is often a better value than land-based hotels and restaurants. One additional key to the success of the cruise business may lie in neuroeconomics.
A few days ago, we talked about how extended warranties have turned into a huge industry in Warranties, Neuromarketing, and Neuroeconomics, despite the fact that the cost of the additional protection often exceeds the expected benefit by a wide margin. The continued success in the extended warranty business may be attributable in part to the way the brain processes risk analysis – a certain outcome of lower value may be chosen over a higher value but variable outcome due to processing the choice in the amygdala rather than the prefrontal cortex (see Why Negative Ads Work: Framing, Emotions, and Irrational Decisions and other posts for more on emotional decision making.) While we are in no way suggesting that selling cruises in any way resembles pushing dubious warranty extensions at the point of sale in an electronics store, there is a bit of similarity in one area: risk avoidance.
Cruises are certainly a low-risk way to visit a series of destinations. First, the availability and cost of lodging is never in doubt – there’s no last minute scramble for a wildly overpriced hotel room, or discovering that the restaurant recommended by the concierge is a budget-buster. When cruising, lodging and meals are paid for up front. In addition, the food is always “free” – the cruiser can select another dessert, hunt for a midnight snack, scarf up a slice of pizza by the pool… all at no additional cost. In addition, the quality of the food is predictable; while perception of cruise food quality may depend one’s gastronomic experience and inclinations, there’s little doubt that the food will be edible and will be replaced quickly if there’s any problem. No risk, no worry.
When they take passengers to unfamiliar ports, cruise ships may minimize perceived risk in other ways – they offer a high level of personal security, and serve as a haven if the particular destination is unpleasant, the weather is problematic, etc. Traveling by ship minimizes the risks of trying to cope in an unfamiliar place where an unfamiliar language is spoken, where merchants may or may not be entirely honest, where the police and legal system may not be bastions of incorruptibility, and so on. Again, the floating world of the cruise ship minimizes perceived risk.
There are a few important cautions in this analysis. First, the important factor is perceived risk. For instance, a few individuals are now fearful of air travel because of terrorists; the fact that air travel remains far safer than auto travel doesn’t diminish the perception of risk for those individuals. Similarly, the fact that a port destination is filled with friendly, honest people who tend to have reasonable English skills may not diminish the concern of some travelers that they would be unable to communicate and would probably be taken advantage of if they were on their own.
Second, not everyone tries to minimize all risks. Cruise vacations may not appeal to some travelers specifically because they provide so much insulation from the local environment. These vacationers may prefer the uncertainty of environments where they can travel on their own, with no fixed schedule to constrain them. Could they have a problem finding a hotel room somewhere? Perhaps… but the odds of success are good, and the downside isn’t perceived to be that serious.
With these caveats, from a neuromarketing standpoint we see continued smooth sailing for the cruise industry. As the world seems to get riskier, the potential for exploiting the emotional aspect of risk minimization will increase.
The cruise lines even do a bit of neuromarketing on the ships. On my last cruise, passengers were offered unlimited soft drinks (bar service is one of the few extra expenses on a cruise) for a payment that worked out to about $4 per day. At a per-drink cost of about $1.50, the offer makes sense for the passenger if he averages three or more sodas per day. I was ready to sign up, but after doing a quick calculation I concluded that due to the nature of the cruise I’d be unlikely to “win” on the deal. It was a port-intensive trip, meaning early-morning departures and late returns – I’m not a Coke-for-breakfast person, and it seemed unlikely that (unless I really worked at justifying the expense!) I’d consume that many soft drinks. Even so, the pull of this “no worry, no extra cost” approach was strong – in the end, I suppose, my prefrontal cortex overruled my amygdala. I purchased a few soft drinks when I wanted to, and spent a tiny fraction of what I would have spent on the “all you can drink” deal. I did see many, many passenger take advantage of the offer – some probably were heavy soft drink consumers who knew they’d benefit over the course of the cruise. Some, perhaps, were the same people who buy the $20 extended warranty for the $80 cordless phone.