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Simon-Kucher Case:
GST Cruise Company
Topic Difficulty Style
Growth strategy Intermediate Real Case, Candidate-led
Pricing (usual style)

Cruise company German Sea Tours (GST) is a successful operator of

international cruises. GST currently offers several cruise trips, lasting between
5 and 24 days. Additional services can be booked on board (e.g. excursions at
each destination, onboard leisure activities). Customers tend to book their
tickets several months in advance. GST has had a long history of revenue
growth, but in the past five years, it showed lower growth rates. Board
members are not sure whether the market, in general, saw lower growth or
whether the problem is specific to GST. GST recognizes that winning new
customers and stimulating existing customers to book their vacations with
GST is crucial for future growth and therefore has always focused on keeping
a close relationship with its (potential) cruise-trip bookers. GST’s chief
commercial officer (CCO) Ms. Brown has hired Simon-Kucher & Partners to
assess the market environment and competitive positioning for cruise ships
and to conduct a subsequent evaluation of potential growth options.

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Comments

The bullet points below describe the actions of the interviewer and a
good candidate in the case study interview process. In these prompts,
“Simon-Kucher” and “the project team” will refer to the candidate.
Hint: As the case study covers several topics, its length may exceed the
typical time allocated to case studies in a single interview. During an
interview day, the interviewer may decide to prioritize the topics in this
case study depending on what the other interviewers focus on during
their interviews. For Preplounge, we decided to provide candidates with
a more extensive case study to ensure they can prepare for different
types of questions. Given the scope of this case study, the interviewer
may – from time to time – guide the interviewee towards the next area
for investigation.

Short Solution

The target of the first phase is to evaluate the overall market

development for cruise trips. A good candidate will first test the board’s
hypothesis of shrinking market shares for GST. The candidate is
expected to ask questions regarding overall market size development
and GST’s revenue development to acquire the information needed.
In the second phase, the candidate should evaluate GST’s competitive
positioning. For this it is crucial to incorporate customer opinions in this
evaluation. A fundamental task is to identify the relevant drivers
determining GST’s competitive positioning.
In the third phase, the candidate should use their findings from the
previous phases to identify and evaluate relevant growth options. The
candidate will be asked to review the offer for a new route; this will
involve prioritizing customer segments and using price elasticities to fine
tune their recommendation on ticket prices.

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 Paragraphs highlighted in green indicate diagrams or tables that can be
shared in the “Case exhibits” section

Paragraphs highlighted in blue can be verbally communicated to the

interviewee

Paragraphs highlighted in orange indicate hints for you how to guide the
interviewee through the case

0. Background

The CCO has requested a project outline explaining how Simon-Kucher &
Partners would address the case.

The candidate proposes their approach. They may decide to take the following
approach:

1. Analyze the overall market environment

2. Determine competitive positioning
3. Assess growth options
4. Present recommendations

The CCO approves Simon-Kucher’s approach and asks the project team to
begin phase 1.

1. Analyze the overall market development

The candidate first assesses whether the board’s hypothesis regarding

revenue development is correct.
To acquire the information needed to make this assessment, the
candidate asks the interviewer about the revenue development of GST
and the overall market over the past five years.

The interviewer may share sources 1 and 2.

Comparing CAGRs is an appropriate methodological approach to

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 evaluate market share development.
By comparing the CAGR for the overall market

and the CAGR for GST

the candidate determines that

the overall market has grown more in revenue than GST has.

If the candidate tries to calculate each of the CAGRs, the interviewer may
provide guidance by informing them an actual calculation of the CAGRs is
not required and that a simple comparison of the first fraction of the CAGRs

is sufficient, i.e. .

The candidate’s first finding (1) is that GST has lost market share to its
competitors over the past five years.
Alternative approach: The candidate compares GST’s market share in
2015 (18.75%) and in 2019 (16.5%).

2. Determine competitive positioning

Finding (1) implies it is very likely that GST has a competitive

disadvantage.
The goal of step 2 is to identify the underlying drivers.

As there are multiple ways to address the topic of competitive advantages

and disadvantages, the interviewer may guide the candidate by
emphasizing that purchase criteria and GST’s underlying performance are
important to the CCO.

There are multiple purchase criteria for cruise trips that the candidate
may think of:
Number of destinations/stops
Cabin types offered
Attractiveness of route
Scope of leisure offers on board
Travel agency’s capabilities
Scope of food and drink offered on board
Ticket price

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 Size of cruise ship
Sustainability
…

The CCO is impressed by Simon-Kucher’s customer-oriented assessment

and shares insights from a recent survey of potential new customers and
existing accounts (source 3).

Based on the survey results, the candidate determines that GST has a
competitive disadvantage in terms of ticket price, scope of leisure offers
on board, travel agencies’ capabilities, and the scope of its food and
drink offer on board. However, the improvement potential for the latter
two drivers can be ignored, as they aren’t as important to customers.
The candidate concludes it’s worthwhile to take a closer look at the
ticket price and scope of leisure offers on board.

3. Assess growth options

Part A – Evaluating customer segments and making initial

recommendations

The CCO is satisfied with the first assessment and informs the Simon-
Kucher project team that GST is currently developing a product
enhancement initiative. One of the objectives of the project is to improve
the scope of leisure offers on board. Since the board members would like to
receive the project results from Simon-Kucher as soon as possible and
would prefer to avoid redundancy with the product enhancement initiative,
the CCO advises Simon-Kucher to prioritize the improvement of the ticket
price.

The CCO mentions that GST is planning to cancel a route where demand
has strongly eroded in the past few years and replace it with a new route
that includes cities that have become popular with travelers recently. The
ship that GST plans to deploy on the new route has a capacity of 990
passengers. As the average fleet utilization is a KPI which investors tend to
give high attention, the utilization on the new cruise route must not fall
below 81.8%. This corresponds to an average of 810 passengers per trip.

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In order to learn more about potential new customers, GST analyzed the
willingness to pay of highly interested GST cruise-trip customers. GST also
classified customers into two segments, “Frequent Travelers” and
“Explorers” (source 4).

The CCO informs Simon-Kucher that GST’s initial idea is to offer a 12-day
cruise trip with a ticket price of €150 per day, which would target Frequent
Travelers. However, she is open to the project team’s suggestions as to
whether a different trip length or pricing would be more suitable.

The candidate recognizes that GST cannot offer the same trip to both
segments, as customers in these segments have different preferences
regarding trip duration. The candidate proceeds to evaluate the
willingness to pay of Explorers and Frequent Travelers, using the prices
stated in source 4.
The expected revenue from Frequent Travelers totals €1,620,000 per
trip (12 days x €150 x 900). In a full year, the ship can conduct 30
cruises, generating €48,600,000 in revenue.

Ships operate up to 365 days per year. The interviewer may advise the
candidate to round down when calculating the number of cruises per year.

The expected revenue from Explorers totals €1,071,000 per trip (7 days
x €170 x 900). In a full year, the ship can conduct 52 cruises, generating
€55,692,000 in revenue.
The candidate concludes that GST should focus on Explorers to optimize
revenue from their new ship.
A very good candidate may instantly state that the Explorer segment is
more profitable because the daily ticket price is 13% higher than for the
Frequent Travelers, while the two other variables (demand, annual
cruise days) are equal.
A very good candidate may suggest offering a mix of 7- and 12-day trips
and pooling the demand of two subsequent trips in one cruise, helping
to drive up utilization to 100%. The interviewer should respond that this
is a very good idea but, for operational reasons, not feasible.

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Part B – Fine tuning the price level recommendation

The Simon-Kucher project leader highlights that the survey tested specific
price points and the respective demand. She asks the team to look into
adjustments to these prices and to determine whether this changes their
recommendation.

The candidate recognizes that, when adjusting pricing, the resulting

volume implications are usually subject to price elasticity effects. The
candidate requests more information on the price elasticities.

The interviewer may share source 5.

A very good candidate concludes that a price elasticity of -2 indicates

there is potential to reduce prices (as the volume effect should make up
for lower price) and an elasticity of -0.5 suggests potential to increase
prices.

Frequent Travelers:

1. To ensure there are at least 810 passengers on board, the price can be

increased until demand drops to 810. This condition is met if the price

increases by a maximum of
2. The new price would therefore be €180, instead of the previous €150.
3. The resulting revenue would total €52,488,000, compared to the

previous €48,600,000.

Explorers:

1. As the maximum capacity is 990, the price can be reduced until demand

reaches this limit. The required price decrease needs to be

2. The new price would therefore be €161.50, instead of the previous €170.
3. The resulting revenue would total €58,198,140, compared to the

previous €55,692,000.

After the candidate successfully calculates the price elasticity for one of the
two segments, the interviewer may skip the calculation for the second

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segment and share the resulting price increase/decrease with the
candidate.

For the Explorers, i.e. the new target segment, the results prove that
GST has a competitive disadvantage in terms of price (which is in line
with the results from the customer survey in section 2 of the case
study). By lowering the price, GST would attract more customers, see an
improvement in customer evaluations of its performance over time, and
increase its market share.
A strong candidate would (qualitatively) address other possibilities for
further, more sophisticated pricing solutions, such as dynamic pricing
based on capacity utilization.
The candidate may also address the abovementioned additional services
on board, such as leisure activities. The segment that contributes the
most ticket revenue will not necessarily be the one that contributes the
highest revenue from onboard activities and excursions.

4. Present recommendations

The CEO of GST joins the meeting with the CCO and Simon-Kucher and
requests a briefing of the assessment in five sentences or less.

The interviewer should make sure the candidate articulates their points
concisely using a top-down communication approach, e.g. “Considering
the market shares of GST, they have indeed been declining over the
past few years despite the revenue growth. The key factors behind this
decline are GST’s ticket prices and the scope of leisure offers on board.
For your new route, you should focus on seven-day trips for customers in
the Explorer segment at a price point of €161.50 per day of the trip. This
would generate €58,198,140 in revenue.”
A strong candidate may also point out that the trip duration, customer
focus, and price point they are proposing would generate €9,598,140
more in revenue per year than GST’s initial plan to launch a 12-day trip
at €150 per day targeted at Frequent Travelers.

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Source 1:

Source 2:

Source 3:

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Source 4:

Source 5:

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