Professional Diploma in Marketing (Level 6)

© The Chartered Institute of Marketing 2015

Case Study

June 2015 and September 2015

Thomas Cook

541 – Delivering Customer Value through Marketing

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Delivering Customer Value through Marketing – Case Study Guidance notes for candidates regarding the prepared analysis The examination is designed to assess knowledge and understanding of the Delivering Customer Value through Marketing syllabus, in the context of the relevant case study. The examiners will be marking candidates’ scripts on the basis of the tasks set. Candidates are advised to pay particular attention to the mark allocation on the examination paper and plan their time accordingly. Candidates should familiarise themselves thoroughly with the case study and be prepared to closely follow the instructions given to them on the examination day. Candidates are advised not to waste valuable time collecting unnecessary data. Case studies are based upon real-life situations and all the information about the chosen organisation is contained within the case study. No useful purpose will be served by contacting companies in the industry and candidates are strictly instructed not to do so, as it may cause unnecessary confusion. As in real life, anomalies may be found in the information provided within this case study. Please state any assumptions, where necessary, when answering tasks. The Chartered Institute of Marketing is not in a position to answer queries on case study data. Candidates are tested on their overall understanding of the case study and its key issues, not on minor details. As part of the preparation for the examination, candidates will need to carry out a detailed analysis of the case study material, ahead of the examination. Candidates will find that the time available during the examination is sufficient to answer all the tasks, but only if detailed analysis has been undertaken beforehand. When compiling their analyses, candidates should only use the information found within the case study, supported by their knowledge and understanding of the syllabus. Candidates are encouraged to use a range of analytical tools and models in order to undertake a thorough investigation of the key aspects of the case study. This will improve their understanding of the case study and the issues faced by the organisation(s) and/or industry sectors to which they relate. Clearly, the analysis required will vary depending on the specific case content, but as a guide, candidates should consider undertaking the following: analysis of the external environment using PESTEL analysis of the competitive environment using Porter’s Five Forces model strategic review using Ansoff’s matrix and/or Porter’s generic strategies stakeholder analysis detailed review/analysis of each of the marketing mix elements product/portfolio analysis, eg, using product life cycle analysis, BCG (Boston Consulting

Group) matrix, GE (General Electric) matrix SERVQUAL SWOT analysis. The copying of pre-prepared ‘group’ answers, including those written by consultants/tutors, or by any third party, is strictly forbidden and will be penalised by failure. The tasks will demand analysis in the examination itself and individually composed answers are required in order to pass.

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Candidates will then need to condense their analysis into a FOUR side summary (four sides of A4 maximum, no smaller than font size 11. The content of tables, models or diagrams must be in a minimum of font size 8). The analysis should be numbered for ease of reference when answering the examination tasks. Candidates must hole-punch their analysis and staple it in the top left hand corner. Candidates must write their CIM membership number and examination centre name in the top right hand corner of each page of the analysis. It should then be attached to the answer booklet on completion of their examination, using the treasury tag provided. Although no marks are awarded for the analysis itself, candidates will be awarded marks for how the analysis is used to answer the tasks set. Candidates are advised not to repeat or copy the analysis summary when answering the tasks. It is important that candidates refer the examiner to the analysis summary, where and when appropriate, when answering the tasks. Candidates are only permitted to take their analysis into the examination room. The invigilator will issue candidates with a clean copy of the case study and examination paper. Candidates are NOT PERMITTED to take in the downloaded case study or any other notes. Candidates may not attach any additional information to their answer book. Any attempt to introduce such additional material will result in the candidate’s submission being declared null and void. The Chartered Institute of Marketing reserves the right not to mark any submission that does not comply with these guidelines.

Important Notice The following data has been based on real-life organisations, but details have been changed for assessment purposes and do not necessarily reflect current management practices of the industries or the views and opinions of The Chartered Institute of Marketing. Figures used in tables may differ as they have been compiled from different sources, using a range of criteria. Details are correct as of October 2014. Candidates are strictly instructed NOT to contact individuals or organisations mentioned in the case study or any other organisations in the industry. Copies of the case study can be downloaded from the CIM student website www.cimlearningzone.co.uk

© The Chartered Institute of Marketing 2015. All rights reserved. This assessment, in full or in part, cannot be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of The Chartered Institute of Marketing.

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DELIVERING CUSTOMER VALUE THROUGH MARKETING

CASE STUDY Preparation In preparation for the examination you will need to analyse the case study material provided, in order to prepare your analysis of the company. You will be given a clean copy of the case study on the day of the examination, but you MUST bring your analysis with you into the examination. Your written analysis MUST NOT exceed FOUR A4 sides and MUST include your CIM membership number on each page. The written analysis MUST be submitted as an appendix on completion of the examination and attached with a treasury tag to your answer book. Role You are a marketing consultant and have been commissioned by the Thomas Cook board to review a number of marketing-related areas, including: marketing communications planning and the use of marketing communications tools channel management branding pricing product management and developing new products applying the marketing mix to deliver customer value and service. The board is keen to maintain a high level of marketing orientation throughout the business in order to retain existing customers and to recruit new customer relationships.

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Thomas Cook The Travel Industry Until the Industrial Revolution in the UK, and the emergence of an affluent middle class with time on its hands and money to spare, travel, especially abroad, was the province of the wealthy. Initially, British working class people chose seaside resorts such as Blackpool, Scarborough, Brighton – places a short train ride away from home. By the 1950s, the package holiday had made foreign holidays commonplace. The market grew rapidly, spreading from European offerings to ever more exotic locations. In 2008, a thriving industry booked 21.7 million overseas holidays from the UK. These included short (up to 3 nights away from home) and long (4 or more nights away) break holidays, long- and short-haul destinations (long haul: 6 or more hours’ flying time; short haul: less than three hours’ flying time), inclusive package holidays (travel and accommodation), as well as elements of independent holidays (flight only or accommodation only). Since 2008, bookings through agents have fallen by 13%, and Mintel projects a further decline of 11% by 2017. Spain retains a 25% share of all foreign holidays, but 21 of the top 50 travel companies have reduced capacity since 2011 as customer demand remains squeezed. Two new entrants have impressive results: Expedia, which demonstrates the explosion of the online travel market, and Virgin Holidays, which scores well consistently, and whose strong British brand conveys confidence. Overall, the holiday spend has been the worst hit part of the customer spending budget in the economic downturn, although getting away still remains a priority. The number of foreign holidays declined by 19% between 2007 and 2011, although holiday expenditure abroad declined by just 10%, suggesting that those who travelled were not so cost conscious. During this period, the number of domestic holidays taken by UK residents rose by 18%. In 2011, the number of foreign holidays rose by 1%, whilst UK holidays rose by 13%. Travel agents, however, benefit little from the domestic market, handling less than 4% bookings in 2011. VisitEngland, the organisation responsible for tourism in England, was given £2 million by the UK government at the end of the 2012 Olympic Games to build on the momentum of the games and encourage domestic tourism. In return for promoting the use of travel agents to book domestic holidays, VisitEngland demands that travel agents vigorously promote these holidays. This presents a significant opportunity to any travel agent that embraces the domestic market. In the past, holiday makers selected holidays from brochures provided by high street travel agencies, whose teams of trained staff managed the booking on their behalf. This gave the customer the comfort of buying a known brand, albeit in a foreign country, backed by the Association of British Travel Agents (ABTA), which reduced the risk of being stranded abroad in the event of things going wrong. Travellers were met at the destination airport and escorted to the hotel by a holiday representative working for the brand they had chosen, who was there to provide advice, access to medical treatment, and anything else required to ensure customers enjoyed their stay. As people became more practised at travel, many no longer needed this level of support, either for booking holidays, or for accessing the culture of the country they were visiting; the more adventurous began to book their own travel and/or accommodation. Online booking facilities have progressed this shift further still. Long-haul bookings especially have declined, and although domestic bookings have increased, this has little effect as overall penetration is low.

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Despite the shift to online booking, Mintel research suggests that, exactly as customers use high street retailers to window shop, before purchasing online, they use these travel agencies for research before booking online, with 10% citing agencies as their preferred information source. The internet is the most important though, with 32.7% of customers preferring to research this way. John Lewis Partnership has bucked the threatened decline of the department store with its combined online and physical store strategy. Personal visits to travel agents have fallen steadily in recent years as internet booking grows in popularity. Counter to this trend, specialist agencies such as Kuoni, which offers exotic long-haul tours, are opening high street locations in a number of John Lewis stores, as well as featuring in the stores’ wedding gift lists. Customer perceived risk is a factor in purchasing travel, so building trust is a large element of marketing for the industry. A 2011 PR Week reputation survey showed Thomas Cook as having the best overall reputation in the industry; nevertheless, few respondents felt that travel companies emphasised trust in relation to their service, with 48% saying operators could promote protection schemes that cover travellers if the operator goes out of business, and 79% wanting to see reliability promoted more vigorously. The market place is highly competitive, and although Thomas Cook holds the largest share, it reported an operating loss of £267 million in financial year 2011, and was forced to renegotiate its finances with banks following deterioration in UK trading. In contrast, TUI, owner of Thomson and First Choice, reported an 18% increase in operating profit to £471 million in financial year 2011. TUI planned expansion of the online business and an overhaul and rebrand of the high street portfolio to ‘Thomson....featuring First Choice’ by the end of 2013. The Advantage Consortium, another competitor has expanded rapidly through partnerships and acquisition, including taking over seven former Thomas Cook branches. Industry Innovation Innovation in the industry has come from a number of companies exploiting digital technologies, including: Virgin Holidays launch of the first augmented reality smartphone app, integrating

smartphones and tablets into the in-store shopping experience.

Advantage Consortium uses QR codes in window displays, encouraging customers to access discounts.

TUI has plans to launch an Apple/Nike/Audi style concept store. NetEffect has launched MyTripWall, a Pinterest style website where agents can promote

products, share ideas and create an ideal holiday. Travel Counsellors has launched an internal social network to share expertise and build a

sense of community. Thomson in 2012 began using Google hangouts to welcome holidaymakers, and also

gave them a dedicated Twitter hashtag to connect with their ‘iadvisor’ to receive information about their destination.

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On the customer side, a popular source of information is Tripadvisor, an online site giving customer reviews and ratings of destinations; it recently launched ‘Friends of Friends’ in collaboration with Facebook, giving online word-of-mouth recommendations. Travel pinboard sites inspired by Pinterest, such as Wanderfly and MyTripWall, allow users to collate images to design their dream holiday and share it with friends and travel agents. Customer segmentation Mintel identifies five discrete segments of shoppers for holidays: Conformists Predominantly young (16-24), biased towards females, urban dwellers. These are the most loyal of all groups, driven by a desire to ‘fit in’. They seek reassurance, make decisions slowly, but are the least concerned about quality and premium products and brands. They are mass market, favour popular brands and derive confidence from them. Using fashionable brands gives them a feeling of being part of the in-crowd. They are also low users of holiday brands. Simply the best This group are also more female, but are older (many aged 55+) with a good proportion of ABs (in higher and intermediate managerial and professional occupations). They worry about image and status, and engage with high prestige brands to counter this. They are regular holiday takers, and are fairly relaxed about price, but are rarely adventurous or innovative in their holiday choices. Shelf Stalkers Predominantly male, many aged 55+, rural dwellers, cautious spenders, see holidays as luxuries, and often favour coach holidays. This group are anxious shoppers, keen to consider every facet of a purchase before committing, although preferring to make up their own minds, and quite individualistic. Habitual shoppers A young group, under 35, predominantly male, many London dwellers; they like the familiar but within their repertoire, they buy on impulse. Price is not a huge concern, although they don’t actively seek out premium products. They do not see themselves as loyal, despite their love for their known brands – these are smaller brands. Individualists This small group are bohemian in tastes, hate conforming, and like to stand out. They rarely consult others regarding their choices, although they enjoy being admired for their style. They act impulsively, enjoy trying new things. This group is often female, aged between 35 and 54, and make more than average use of the larger brands, often selecting less mainstream destinations. Quality and brand loyalty take a second place to innovation. Thomas Cook Company history In 1841 32-year-old cabinet-maker Thomas Cook conceived the idea of using the railways to further social reform, by educating the masses through travel. The first venture carried a group of travellers from Leicester to a meeting in nearby Loughborough. His first commercial journey ran to Liverpool in 1845, and cost 15 shillings for first-class passengers and 10 for second. He published a handbook of the journey – a forerunner of

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the modern holiday brochure. In 1850 Sir Joseph Paxton, architect of the Crystal Palace, the striking new building housing the Great Exhibition of 1851, persuaded Thomas Cook to bring workers from Yorkshire and the Midlands to London for the Exhibition. Thomas Cook transported 150,000 people. European development Thomas Cook continued to expand his British business, but his sights were on Europe; the 1855 Paris International Exhibition provided his opportunity. His first grand circular tour included Brussels, Cologne, the Rhine, Heidelberg, Baden-Baden, Strasbourg and Paris, returning to London via Le Havre or Dieppe. He rapidly expanded by establishing circular tours of Switzerland, with such immediate success that he extended across the Alps. The first Italian tours took place in 1864, when one large group travelled to Florence and central Italy, and another to Rome and Naples. 1865 saw his first shop opening in London. The people who travelled abroad with Thomas Cook were from the growing middle classes and expected better accommodation than his working-class customers. He negotiated competitive room and meal deals with innkeepers and hotel proprietors. His friendship with hoteliers, eager for his business, enabled Thomas Cook to develop two important travel systems: firstly, the hotel coupon, launched in 1868, which travellers could use instead of money to pay for hotel accommodation and meals; the other was his circular note, issued in 1874 and a forerunner of the travellers’ cheque, enabling tourists to obtain local currency in exchange for a paper note issued by Thomas Cook. Worldwide Building on his European successes, Thomas Cook commenced trips to Egypt in 1869, via steamers. The climax of his career came in 1872; with a round-the-world trip, crossing the Atlantic by steamship and the United States by rail. A steamer took them across the Pacific to Japan, China, Singapore, Ceylon and India. From Bombay, they crossed the Indian Ocean and the Red Sea to Cairo, from where the party returned to London. The conducted world tour quickly became an annual event. Thomas Cook’s son John expanded the company internationally. Telegraphy was in its infancy and without telephones or fax machines, communication with other countries was far from easy. John Cook created overseas editions of The Excursionist, the newspaper started by his father in 1851, to inform customers in places around the world about the services he offered. He maintained a continuous stream of correspondence with his offices abroad, checking on their work and complaining if anything went wrong. Thomas Cook & Son Ltd benefited from the post Second World War holiday boom, which saw one million Britons travelling abroad by 1950. The company set up a Business Travel Service and refurbished its holiday camp in Prestatyn, Wales (opened shortly before the outbreak of the war). Thomas Cook & Son Ltd remained the dominant company in the industry, but its pre-eminence was challenged by new travel firms undercutting prices with cheap package deals. In 1965 the company's net profits exceeded £1 million for the first time, but in an increasingly cut-throat marketplace, Thomas Cook began to lag behind its younger rivals.

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Modern Thomas Cook Thomas Cook’s business model is a vertically integrated tour operator, distributing products through in-house retail, internet and call centres that utilise the company’s own airlines. The company slumped to a £317 million operating loss in 2012, triggered by unrest in the Middle East and North Africa affecting its extensive operations in Egypt and Tunisia. The company has since struggled with high debt and the downturn in global travel. In 2012, a £1.4 billion refinancing package gave it a further three years to repay its debts; it was forced to sell and lease back 17 planes. Further cost cutting plans will save £350 million by 2015, through reducing store numbers and focusing on internet sales. It has cut 2,500 UK jobs (16% of its 15,500 staff), and closed 195 of its 1,069 high street stores, due to the economic downturn and to changes in customer purchasing habits. Prior to this, 48% of stores were within a kilometre of another group business, and 23% of that number were on the same street or block. Following this rationalisation, the plan is to maintain the network at its new level. Shares in the group surged 14% in response to its turnaround strategy. In 2012, gross profit margin was in line with the previous year at 22%, with an operating loss of 3.3%. The losses the group has recorded stem from the major overhaul of the company overheads, wiping out the operating profit for the year and transforming it to a loss. Sales of assets raised over £100 million, boosting the balance sheet. Despite its difficulties, Thomas Cook has earned the trust of 23 million customers. Product management/development The company portfolio is divided into three core areas: Mainstream: The core product category is mainstream charter packages, where two or more components of travel, such as flights, hotels and transfers, are bundled together for sale as a single product through various distribution channels. It plans to increase its presence in boutique hotels, city breaks and winter holidays. Independent: Dynamic packaging of travel products offers a number of options for each holiday component, including accommodation, transport and scheduled tours. This gives customers greater flexibility to tailor their holiday to meet their own requirements in terms of destination, duration, variety and quality. Travel-related financial services: The company offers a range of financial services, which are bought by customers alongside their holiday purchases. They include foreign exchange, the Thomas Cook Credit Card, the Thomas Cook Cash Passport (the new generation of travellers' cheques), and a wide range of travel insurance policies. The wholly owned White Horse Insurance Ireland Limited underwrites Thomas Cook's travel insurance, authorised and regulated by the Central Bank of Ireland. General In 2011, Thomas Cook, The Co-operative Travel and Midlands Co-operative formed a joint venture combining their UK high street travel and foreign exchange businesses, creating the UK's largest multi-channel travel retailer. The joint venture has around 1,100 branches across the UK, trading under the Thomas Cook, The Co-operative Travel, Co-op Travel,

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Ilkeston Co-op and Going Places brands. Thomas Cook Airlines operates a fleet of 35 aircraft from 21 regional airports to destinations worldwide. Thomas Cook served 23 million customers in 2012, operating under six geographic customer market segments in 21 countries: The UK segment, including the UK, Ireland, India and the Middle East; Central Europe; West Europe; Northern Europe; North America; and Germany (Condor, the German airline). Publishing Thomas Cook’s leading publishing division offers a comprehensive portfolio of over 300 independently authored travel guidebooks to over 150 worldwide destinations. Branding considerations/value The company operates several leading websites and some of the world's favourite travel brands, including Airtours, Club 18-30, Cresta, Cruise Thomas Cook, Direct Holidays, Elegant Resorts, essentialtravel.co.uk, Flexibletrips, flythomascook.com, Gold Medal, www.hotels4u.com, Manos, www.medhotels.com, Neilson, netflights.com, Panorama, Pure Luxury, Sunset, Swiss Travel Service, Thomas Cook, Thomas Cook Signature, Thomas Cook Sport and Thomas Cook Style. In 2013, it introduced a new ‘sunny heart’ logo and the strapline ’Let’s Go’ to sit across the group’s brands, to reflect its ‘revitalisation’. CEO Harriet Green claims the strategy will help maintain growth. ‘With our systemised approach to business, our products, people and processes and our powerful unified brand, we are confident of delivering significantly more.’ * The new logo replaces the Thomas Cook globe. Also being retired in favour of ‘Let’s Go’ is the tag-line ‘Don’t just book it’, Thomas Cook it.’ Simplifying the brand proposition is a key element in the group’s growth strategy. ‘The heart will appear on the web, in brochures, in our aircraft, in our concept hotels, our other hotels and in our stores: in short, everywhere that our customers connect with us,’ said Harriet Green, Group CEO. †

The company plans to reduce the number of customer-facing online brands and websites to three in the UK and one in Germany. The group’s brands, such as Neckermann in continental Europe, Ving in Sweden, Condor in Germany and Elegant Resorts in the UK, will all connect with the ‘Sunny Heart’ in different ways. The current thirty-plus brands will consolidate to fewer than ten as part of the current rebrand. Use of channels From its traditional twentieth century high street base, Thomas Cook has extended its channels into the following:

* Thomas Cook press release † Thomas Cook press release

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Retail: In most of the Group’s operating segments, retail stores remain a significant distribution channel for mainstream package holidays. Online: Online is an increasingly important channel for the distribution of both mainstream package holidays and independent travel products. Sales centre: Telephone sales centres offer advice to customers as well as taking bookings. A key priority is to become the leading online tour operator, with a digital platform that will host a full portfolio of digital products and services. Thomas Cook's retreat from the high street was not unexpected, given the dominance of the internet in the mainstream travel market. A stronger online Thomas Cook will counterbalance exclusively online travel agents such as Expedia and Hotels.com. Pricing The pricing of holidays has always been complex, due to their perishable nature, and fluctuations in fuel costs, etc. The internet added a layer of complexity to pricing, as online discounts emerged, giving a confusing variation in prices between channels for apparently the same product. In addition, prices are not static; the website states that prices on the website and in emails are not live. Although prices and availability are updated very regularly, holidays, flights and cruises are subject to availability, and prices can change at any time. When customers search the website for a specific holiday, flight or cruise, live availability and price are checked with the tour operator/cruise operator/airline, so changes occur before the final price is confirmed. In addition, selected tour operators and airlines may apply fuel supplements to the price of holidays and travel arrangements, due to increases in fuel costs. These additional charges are included in advertised prices but appear separately on holiday price summaries. A move in 2013 to single pricing across high street and online channels, to combat customer confusion, was welcomed. The same price now applies for package holidays booked online at www.thomascook.com, in-store or via call centres. This applies to its charter brands, such as Thomas Cook, Airtours and Manos. Thomas Cook confirmed that single pricing had been introduced following in-store and online trials, and it would redefine what consumers can expect. But there could still be variations in pricing across channels for components such as flight-only or room-only. Late bookings have always adopted a different pricing approach, to maximise revenues by selling at a discount rather than not using booked capacity on aircraft and in accommodation. Marketing communications For Thomas Cook, marketing communications tools create powerful images and a sense of credibility, confidence and reassurance. Through the use of brand names, unified and recognisable corporate-design elements and well-executed servicescapes, Thomas Cook travel agencies can give visibility and personality to their intangible service offerings. Each communication element is designed to create and promote a distinctive corporate brand. The company communicates with current and prospective customers, and sells specific products. Marketing communications, integrated to support the brand, are essential to a Thomas Cook travel agency's success.

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Thomas Cook plans to increase marketing activity to present a more differentiated and varied product portfolio, as it looks to bolster revenue and reverse the fortunes of its struggling UK business. It wants the 25 independently run but owned companies such as Airtours to account for 50% of its business in the next few years, rising from the current 40%. It also wants to simplify and consolidate its portfolio. It has already axed its Sunset holiday brand, and further brands could be rebranded or consolidated. Neilson Ski holidays, one of the portfolio, was recently sold for £9.5 million, as part of this rationalisation. The TV campaign with actor James Nesbitt will evolve with the brand, but all advertisements have a natural lifecycle. The company wants to increase awareness of its city breaks and flights-only services, and demonstrate choice for all customers’ travel needs – not just summer holidays and package deals. Marketing director Michael Johnson says: ‘Part of our business transformation journey is recognising that there is no single proposition that suits all people, and developing 3 or 4 propositions on our channels to satisfy customers.’ Promoting new products such as city breaks is not a quick fix. Thomas Cook needs to communicate the things that it already does as a business, and simplify the brand structure to find better ways to articulate services, but it will be a two or three year process. The move towards differentiation mirrors rival travel group TUI’s strategy to offer more differentiated and exclusive products. Thomas Cook has the opportunity to launch new online products and services that will be accessible worldwide. Mass-customisation facilitates reaching a wider audience whilst easily personalising Thomas Cook’s products/services according to customers’ wants and needs. Product personalisation will increase customer satisfaction, create higher traffic on the Thomas Cook website and drive sales. Launching products/services online, the company can include detailed information of new services on its website, thus reducing expenses and returning to profit. Graphical images and complementary products, such as recommended services or substitutes, will also give customers choice. Personalised menus and registration systems create a more satisfactory user experience, encouraging customers to browse the website and spend more time reading and watching informative videos. People Staff are vital to success, and the group prides itself on building an effective organisation by engaging and energising all employees, developing key talent and leadership, and recognising and rewarding high performance. An investment of £10.3 million in staff training in 2012 demonstrates its view of recruitment and retention of talent as critical to success. Much is done to engage employees in its future direction; a Group Code of Conduct launched in early 2013 is intended to help employees live and breathe the shared values, so as to be part of Thomas Cook’s sustainable transformation. A range of initiatives help in this regard: annual employee engagement survey quarterly segment employee forums annual European Works Council at least quarterly employee newsletters intranet and email communication and surveys biannual employee and leadership conferences and regular conference calls union meetings as required training, both face to face and e-learning.

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Open communication keeps employees fully informed and involved, especially during the changes. As well as regular communication through the intranet, magazines, newsletters and meetings at all levels of the business, since joining in 2012, Group CEO Harriet Green has visited sites to meet employees in person and invite discussion on the Group’s strategy, goals and progress. These sessions have been filmed and shared across the business. All employees were invited to participate in a confidential My Views survey to share frustrations, highlight opportunities and say what they would do if they were CEO. Over 8,000 employees shared their views, through the survey, the dedicated email address, Group intranet or face-to-face meetings, helping to shape the Group’s long-term strategy. Employees can also engage in discussions through the intranet, which provides facilities for employees to blog and join web chats with management. Regular, open and honest communication from the leadership team remains a priority, to give people clarity on where the organisation is going, the strategy to get there and the part that they can play in delivering success. A new Group intranet, and Group Head of Communications, will further improve internal and external communications. Thomas Cook actively seeks staff views through an annual employee opinion survey, run by an independent third party. In 2012, a response rate of 68% (69% in 2011), gave a Group-wide engagement score of 71% (72% in 2011), described by the independent survey provider as a ‘Very Good’ level of engagement. Against all this, the Transport Salaried Staffs Association, representing employees, said it was ‘shocked and angry’ at the scale of the recent job losses, and this is something the company will need to manage. Induction and initial training All new overseas resort staff receive an eight-day induction, starting on their first day. This UK residential course gives them all the basic skills and behaviours they need as a Thomas Cook representative in resort. They then travel to their resort, where a further 12 days’ on-the-job training allows them to apply that knowledge in the local environment. Development and career progression through ‘STARS’ As well as receiving regular training throughout the season, staff are offered a range of development opportunities. STARS – Senior Training and Recognition Scheme – has three levels, giving staff training opportunities clearly linked to career progression. Recruitment onto STARS is rigorous; staff complete a range of tasks linked to the company’s PROUD values (Pioneering our future, Results oriented, Obsessed with customer service, United as one team, Driving robust decisions). The tasks can be small (such as administering flight transits) or large (like organising a fund-raising event in resort). STARS assists with succession planning, enabling suitable employees to be identified and trained for the next level, helping ensure staff are retained and promoted from within the business and providing a career progression route for staff. Following the STARS programme, managers are eligible for the Overseas Management Development Programme (OMDP), endorsed by the Institute of Leadership and Management. The objectives of the programme include increasing their knowledge of the wider business, and developing management competencies in self and team development.

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Process When high street stores handled all transactions, customers browsed printed brochures and staff searched computer databases to identify suitable travel options. Once a customer had entered a shop, conversion from enquiry to sale was relatively simple. As the business model has shifted to a multi-channel operation, with online playing a significant role, the transaction process has also undergone a transformation. Now, the process is typically driven by the customer searching online, or calling a telephone centre to identify products that meet their requirements; conversion to sale is less certain. The economic downturn has shortened the booking cycle for holidays, with customers holding out for last-minute deals. The company aims for more than half of its holidays to be bought over the internet by the end of its 2015 financial year. 36% of its holidays were booked over the internet in 2013, up from 34% in 2012. E-commerce sites for six key markets are currently being moved into a common platform, while a digital advisory board, comprising external web experts and supporting product innovation and digital recruitment, has been appointed. Beyond the UK, online bookings rose in all Thomas Cook’s markets; web bookings in Scandinavia are now over 70%. Digital innovations include DreamCapture, which takes in-store holiday discussions online, enabling customers to continue to research ideas from home. These strategies complement the reduction in store numbers. Internal processes have also been reviewed, with a greater emphasis on the use of third-party capacity, reducing overheads, and minimising costs; this includes a deal with easyJet, who will operate thousands of seats for Thomas Cook. Such initiatives have cut costs more quickly than planned, halving net debt and creating an operational profit, as the approach to business becomes more systematic. Physical Evidence A high street presence has always been important, but as shoppers change to online booking, Thomas Cook has adapted by launching its ‘store of the future’ as part of its retail travel transformation. New UK stores in Bristol, Stockton-on-Tees, Leeds and Edinburgh are Concept Store locations. The new-generation store refresh showcases the many ways to book through Thomas Cook, enabling visitors to research and book their holiday however they choose – viewing video content streamed throughout the store, completing a booking online using one of the in-store tablets, or receiving assistance from one of the store’s travel experts. The new servicescapes spearhead innovative plans for a ‘Hi-Tech, Hi-Touch’ approach, aimed at providing a complete, end-to-end customer experience, and reinforcing Thomas Cook’s commitment to the high street. The strategy places online, in-store and mobile channels on an equal footing, with price parity across the board. Stores will all be rebranded in a cost-effective manner. Store windows change in October anyway, so the changeover will happen as part of that schedule. To enhance the customer experience, the company has partnered with TV chef James Martin to improve the quality of in-flight meals. It will offer a range of traditional menu items from £6, in a bid to improve the experience holidaymakers have on their aircraft. The aircraft fleet all carry the company logo, ensuring that the brand is seen at international airports. Staff all wear company business dress, in corporate colours.

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Philosophy In addition to the many environmental initiatives within its sustainability plan, the company also works hard to enhance the communities it serves. Thomas Cook had a clear vision when he devised the first package holiday over 160 years ago, that affordable travel could improve working people’s lives. His company was inspired by a strong sense of social justice and moral responsibility. The company is still inspired to deliver its founder’s values, believing they make a tangible difference to customers’ holiday experience and to all the other people whose lives are touched. The company defines Corporate Social Responsibility (CSR) as ‘operating responsibly to minimise negative and enhance positive environmental, social and economic impact: ensuring the long-term sustainability of the business and of the resources on which they depend.’ The nature of the business makes CSR fundamental. The environment and communities in operating destinations are integral to the products the company sells; protecting them is fundamental to the business and to everyone on whom the business depends. In Thomas Cook’s home communities, each market has a responsibility for developing charitable activities. The Thomas Cook Children’s Charity has raised over £3.7 million, to help sick and disadvantaged children in the UK and overseas. Teams in holiday destinations also play a significant role in children’s welfare, and further to the Group-wide child protection policy launched in 2011, the Group has committed to ‘The Code’, the international code of conduct on child protection driven by the travel industry. Sustainability Thomas Cook is built on three pillars of sustainability: economic, environmental and social, all of which are essential for long-term business success. Alongside economic imperatives, the overall sustainability strategy enables the company to create value and strengthen trust in the brands. The 2020 sustainability targets were developed after consulting stakeholder groups; they are ambitious, reflecting key issues and risks across the Group and business segments, which affect markets, people, environment and communities. The drive to embrace the Travelife Sustainability System in owned hotels and the wider supply chain is a long-term programme benefiting customers and suppliers’ businesses. This builds trust, increases efficiency and reduces costs and waste – adding value to the customer experience. The company chooses business partners whose values and ways of working mirror its own. Participation in this scheme encourages best practice worldwide: 228 contracted hotels hold a Travelife award, rising by 71% from the previous year. Although 98% of carbon emissions come from the Group aircraft fleet, its airlines are among the world’s most efficient, due to high load factors, continual investment in fuel efficiencies, pilot training and improved data management. Efforts across all operations to reduce the carbon footprint place the Group in the top quarter of the Carbon Disclosure Project for FTSE companies reporting in 2012.

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Managing Customer Relationships Thomas Cook was founded on the ability to form mutually beneficial relationships with both suppliers and customers, and this tradition continues. A sustainable supply chain can improve customer experience, satisfaction and loyalty, and deliver a stronger brand and reputation. Thomas Cook regards the supply chain as an extension of its own business. Suppliers are the direct providers of goods and services to customers, such as food and accommodation, transport, excursions and cultural activities. The company works closely with suppliers to improve sustainability performance. As many suppliers are local to destinations, they can also help create positive economic impacts for their businesses and communities. Customer service Apart from the customer service team in stores and resorts, dedicated to helping holidaymakers enjoy their stay away, the website provides a quick and easy interface for customers, with a seat booking, ticket printing and information service to assist travellers. It gives information about all onboard services, including shopping, entertainment and the flight menu. There is also a helpful Frequently Asked Questions section, and an active customer community forum moderated by named members (Chris and Paul) of the Thomas Cook team. In addition, the company provides: customer service questionnaires every time a customer travels ongoing customer relations emails/letters/telephone calls social media communications, such as Facebook and Twitter ongoing communications to promote sustainability customer research customer communications, website and literature.

Future developments The new Thomas Cook’s profitable growth strategy focuses on simplification, web innovation and flexible new products and services, enabled by rigorous execution and an integrated IT platform. It builds on a trusted brand with a 171-year heritage. The new strategy is based upon extensive research and analysis, including a comprehensive, in-depth survey measuring the attitudes and changing needs of almost 18,000 travellers, validated against the experiences of many of Thomas Cook’s own customers. One of the main thrusts of the new strategy is to generate an additional £500 million from expansion of City Break and Winter Sun packages, and an increase in room-only and flight-only booking capabilities. The Thomas Cook website (www.thomascookgroup.com) sets out clear growth plans, supported by clear metrics developed to measure and report on progress, with the following measures:

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Financial Year 2015 Targets New product revenue >£500 million Increase Group web penetration to >50% Cost out/profit improvement of £350 million

Financial Year 2015 KPIs Sales increasing at compound annual growth rate >3.5% Underlying gross margin improvement 1.5% UK earnings before interest and tax margin >5% Cash conversion of >60%

The strategy will deliver on-going product and service innovation through four major initiatives: expanding the successful, proven international hotel concepts across markets creating a new portfolio of flexible, trusted, products and services creating a single, consistent, omni-channel gateway for customers to access

personal recommendations regarding the extensive range of products and services all underpinned by the powerful Thomas Cook brand and an integrated IT platform. Implementation will be carefully phased over the next five years, to balance the desire for rapid improvements, where possible, against necessary lead times for major infrastructure projects (for example in relation to concept hotels) and the Group’s investment requirements. Over the next two years, Thomas Cook expects to expand concept hotels, and introduce the first wave of new products, including the scale-up of dynamic packaging capabilities. Web penetration is expected to climb as the single gateway and ancillary propositions develop. Thereafter, the concept expansion will continue, the quality-assured inventory will grow and the single gateway will reach maturity. It is developing a strategy to create profitable growth for the future. The important first steps are to build an effective organisation, to address costs and to leverage brands to build on core products, so that they attract new customers and retain existing relationships.

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Appendix 1 Estimated number of holidays booked via travel agents, 2007-17

Year Worst Case Best Case Central Forecast

(million) (million) (million)

2007 (actual) 21.7 21.7 21.7

2008 (actual) 21.3 21.3 21.3

2009 (actual) 19.4 19.4 19.4

2010 (actual) 19.3 19.3 19.3

2011 (estimated) 19.5 19.5 19.5

2012 (forecasted) 18.6 18.6 18.6

2013 (forecasted) 13.6 22.1 18.3

2014 (forecasted) 12.6 21.9 17.9

2015 (forecasted) 11.3 21.5 17.4

2016 (forecasted) 10.2 21.3 17.0

2017 (forecasted) 9.10 20.9 16.6

Source: Redacted from Mintel, Travel Agents UK, December 2012

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Appendix 2 Estimated number of domestic holidays booked via travel agents, 2007-17

Worst Case Best Case Central Forecast

(million) (million) (million)

2007 (actual) 1.0 1.0 1.0

2008 (actual) 1.5 1.5 1.5

2009 (actual) 1.8 1.8 1.8

2010 (actual) 2.1 2.1 2.1

2011 (estimated) 2.2 2.2 2.2

2012 (forecasted) 2.3 2.3 2.3

2013 (forecasted) 1.8 3.0 2.4

2014 (forecasted) 1.9 3.1 2.5

2015 (forecasted) 1.9 3.2 2.6

2016 (forecasted) 1.9 3.2 2.6

2017 (forecasted) 1.9 3.2 2.6

Source: Redacted from Mintel, Travel Agents UK, December 2012

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Appendix 3 Estimated number of overseas holidays booked via travel agents, 2007-17

Worst Case Best Case Central Forecast

(million) (million) (million)

2007 (actual) 20.7 20.7 20.7

2008 (actual) 19.8 19.8 19.8

2009 (actual) 17.6 17.6 17.6

2010 (actual) 17.2 17.2 17.2

2011 (estimated) 17.3 17.3 17.3

2012 (forecasted) 16.3 16.3 16.3

2013 (forecasted) 11.8 19.1 15.9

2014 (forecasted) 10.7 18.7 15.4

2015 (forecasted) 9.4 18.3 14.9

2016 (forecasted) 8.3 18.0 14.4

2017 (forecasted) 7.2 17.7 14.0

Source: Redacted from Mintel, Travel Agents UK, December 2012

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Appendix 4 Market Share Leading travel agents, by number of retails outlets*, October 2012

*includes ABTA travel shops, other ABTA retail (eg business travel shops and call centres) and other outlets (non-ABTA)

Source: BP Travel Marketing/Company Information/Mintel

1,176

737685

352274

198123 100

46

0

200

400

600

800

1,000

1,200

Reta

il outlets

*

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Appendix 5 Financial performance of Thomas Cook Group PLC, 2010-11

Year ended 30 September 2010 2011 % change

2010-11

Revenue (£m) 8,890 9,809 +10.3

- UK including Ireland, India and Middle East (£m) 3,143 3,255 +3.6

Operating profit (£m) 167 -267 -

- UK including Ireland, India and Middle East (£m) 1 -295 -

Pre-tax profit (£m) 42 -398 -

Source: Company Annual Report/Mintel

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Appendix 6 Brand satisfaction, September 2012 Base: All internet users aged 16+ who have used a brand and expressed an opinion

Thomas

Cook Thomson

Flight Centre

The Co-operative Travel

Virgin Holidays

STA Travel

Hays Travel

Respondents 920 881 133 297 376 132 117

% % % % % % %

Unsatisfactory 2 1 1 1 1 2 3

Poor 4 3 5 4 2 3 4

Average 30 32 29 35 18 35 31

Good 52 49 50 45 46 44 44

Excellent 13 15 17 14 33 17 18

*Please note that the % figures have been rounded up, therefore may not add up to 100%.

Source: Redacted from Mintel, Travel Agents UK, December 2012

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Appendix 7 Attitudes by Travel Agent Brand, September 2012 Base: internet users aged 16+ who have heard of the brand and expressed a view

This chart shows the level of association of each brand surveyed with a set of key performance attributes core to travel agent brands overall. The more significant an attribute is as part of a brand’s image relative to other attributes, the near it will be to that attribute. If a band is between a number of attributes, it is reasonably closely associated with each of these. Source: GMI/Mintel

makes me feel safe

a brand that I trust

offers good value

has great customer

service

socially responsible

cares for the

environment

a brand that is

innovative

has a good reputation

has consistently

high quality

worth paying more for

Thomson Thomas

Cook

Virgin Holidays

Hays Travel The Co-operative

Travel

Flight Centre

STA

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Professional Diploma in Marketing: Grade

Descriptors Level 6 Concept 30% Application 30% Evaluation 30%

Time Management and Presentation

10%

Grade A

This grade is given for work that meets all of the assessment criteria at Diploma level to secure at least 70% and demonstrates a candidate’s ability to:

develop appropriate research strategies for both primary and secondary research

selectively identify valid and relevant information from a wide range of sources for the discipline

manage own learning independently

evidence comprehensive knowledge and understanding of the marketing discipline at Diploma level

synthesise and analyse new and/or abstract information and data in the context of wide ranging problems, using a range of appropriate techniques

engage in effective debate in a professional manner evidencing a comprehensive understanding and application of key principles

produce detailed and coherent arguments in response to well defined and abstract problems using relevant vocational language

express ideas persuasively and with originality, applying appropriate marketing terminology and concepts accurately

apply a wide variety of illustrative examples to underpin findings supported by references to wider reading and learning resources to exemplify points

evaluate findings leading to incisive conclusions and recommendations

produce reliable, valid and incisive conclusions and recommendations, based on research findings and analysis

plan, review and complete work within the specified deadlines/time allocated

an exceptional and professional standard of presentation, format and tone

Grade B

This grade is given for work that meets all of the assessment criteria at Diploma level to secure at least 60% and demonstrates a candidate’s ability to:

develop appropriate research strategies for both primary and secondary research

identify and select valid information from a suitable range of relevant sources for the discipline

manage own learning with minimal guidance

evidence detailed knowledge and understanding of the marketing discipline at Diploma level

analyse new and/or abstract information and data in the context of broadly defined problems, using appropriate techniques

evidence a sound understanding and application of key principles

produce logical arguments in response to a given brief using vocational language correctly

express ideas clearly, applying appropriate marketing terminology and concepts accurately

apply a variety of illustrative examples to underpin findings supported by some references to wider reading and learning resources to exemplify points

evaluate findings leading to informative and reliable conclusions and recommendations

produce reliable and informative conclusions and recommendations, based on research findings and analysis

plan, review and complete work within the specified deadlines/time allocated

a high standard of presentation, format and tone

Grade C

This grade is given for work that meets enough of the assessment criteria at Diploma level to secure at least 50% and demonstrates a candidate’s ability to:

develop an appropriate research strategy for both primary and secondary research

identify and select information using a minimum number of resources for the discipline

manage own learning with support and guidance

evidence a satisfactory level of knowledge and understanding of the marketing discipline at Diploma level

analyse information and data in the context of explicitly defined problems

evidence a basic understanding and application of key principles

produce arguments in response to a given brief using sufficient vocational language

outline ideas and concepts using appropriate marketing terminology

include some illustrative examples to support findings including minimum references to wider reading and learning resources to exemplify points

evaluate findings leading to reliable but limited conclusions

produce reliable but limited conclusions and recommendations based on findings

complete work within the specified deadlines/time allocated

acceptable presentation, format and tone

Grade D

This grade is given for border line work that does not meet enough of the assessment criteria at Diploma level to secure a pass and is within the band 45-49%. This may be due to:

an inability to develop an appropriate research strategy for both primary and secondary research

insufficient sources of information being used to underpin research

an inability to manage own learning effectively

repeating case material rather than evidencing knowledge of the marketing discipline at Diploma level

a lack of detail and argument when analysing information for a specified task

a lack of basic understanding of key principles and limited application

insufficient and/or inappropriate use of marketing terminology to explain ideas

limited development of ideas or concepts

few or no examples to support findings

little or no attempt to evaluate findings

superficial conclusions and recommendations which lack depth

work not being completed within the specified deadlines/time allowed

errors in presentation, format and tone

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