Health Cruises, Inc. is a new company that packages exclusive Crukes to Caribbean Islands. Like conventional cruises, the packages are designed to be fun but this cruises structured to help participants become healthier by breading old habits, such as smoking and overeating. The Miami-based firm was conceived by Susan Isom, 30. a self-styled Innovator and entrepreneur. Prior to this, she had experience promoting a behavior modification clinic capacity of 300 people would sign up for the cruise after the October 1.meda bitz. However, as of November 14 they only had 200 bodied. som and Health Cruises, Inc. faced an mportant decisan. "Here's the station as I see. exploned disturbed Ms. Isom of the Health Cruises board meeting. "We've already paid several hundred thousand to get the cruise roing. plus the weekly cast per passenger, which is maily for road. Cost detailed below: Weekly Cost Par Passerger Isom determined that many people were very concerned about developing good health habits. yet they seemed unable to break away from their old habits because of the pressures of day to day living. She reasoned that they might have much greater success in a pleasant and social supportive environment, where good health habits were fostered. Accordingly, she estabished Health Cruises, Inc., hired 10 consulting psychologists and health specialists to develop a program, and she chartered a ship Dakarest Young, a Miami management consultant, became the chairperson of Health Cruises. Seven of Isom's business associates contributed the initial capital "I see four bosc options: (11 we cancel the cruise and take our losses: 121 we run the Cruse with the 200 and a few more that wil tricke in over the next month (3) we shell some more advertising money and aim to pul in mare people, or 14) we reduce the price of the remonng rooms." At this point. Carolyn Swibon addressed the board: "I've worked out two Dossible advertising campaigns for November 20 5.300 Initial Capital 401.000 Castot Promotion # New Passengers Of this amount, the team placed deposits and/or entered in to non-refundableon-cancellabic contracts for the folowing: The more ambitious campagns detailed below: Cast Promotion New Passengers Advertising Admin, Ship Rental 18.000 250.000 I realize our first attempt was somewhat disappointing, but we're dealing here with a totally new concept, and follow up od might work really well with many who were curious and nterested when they sow our message n the first bitz. Mary Porter, an overweight Denver schoolteacher, has signed up to sail on the maiden voyage, a one week crube to Nassau, departing December 19. Al passengers wil pay an average cabin price for the voyage as follows: Avg, cabin Price 1.900 One thing is absolutely certain sustaa emphasued. "We must act immediately there's any hope of getting more people on board. The dead ine for the Sunday travel sectors is in less than 48 hours. We need to act now becouse no one signs up in carly December for a December 19 soling cate." The most desirable staterooms are priced at over $3.000. Mary learned of the cruise by reading the travel section of her Sunday newspaper on October 18. On that date, the Pittsford and LaRue Advertising Agency placed promotional notices for the cruise in several major medio outlets. Mary was fascinated by the idea of combining therapy sessions with swimming, movies, and an elegant atmosphere. Isom interrupted, shoing her head. "I just don't know what to soy. Our funds are tight and our investors are nervous. I got cals each day. asking me where the 200 passengers are ord won't be casy to squeeze more money out of our investors. If need to ask them for $15.003 - wel. Iust don't know how we're going to be able to justify t." Pittsford and LaRue occount executive Carolyn Swibon originally estimated that the entire boat Chapter 9 - Pricing - Health Cruises Case Questions 1. What is the minimum number of passengers Health Cruises must sign up to break-even? Inote - you must show your break-even calculations $1,900 $225 - $1,675 $401,000 / $1,675 - 239.40 Minimum number of passengers to break-even approximately 240 passengers 2. Should Health Cruises go ahead with the cruise since 200 people have signed up? Discuss why or why not? $1,675 x 200 - $335,000 $335,000 - $401,000 - $66,000 Health Cruises should go ahead with the cruise in any event. If the cruise is cancelled, 5401,000 of the already spent capital would become a total loss. Even if no more passengers would sign up, the loss would only be 566,000 3. The advertising agency has proposed two alternative promotional campaigns to help fill the boat. Which one of these promotional campaigns would you suggest to the board? (Again, show your break-even calculations). 4. Some board members suggested discounting the remaining cabins and running a price promotion. Should Health Cruises consider running a discounted price promotion for the remaining cabins? Discuss why or why not? 5. What other big picture" factors could impact the goo-go decision in addition to the break- even? Health Cruises, Inc. is a new company that packages exclusive Crukes to Caribbean Islands. Like conventional cruises, the packages are designed to be fun but this cruises structured to help participants become healthier by breading old habits, such as smoking and overeating. The Miami-based firm was conceived by Susan Isom, 30. a self-styled Innovator and entrepreneur. Prior to this, she had experience promoting a behavior modification clinic capacity of 300 people would sign up for the cruise after the October 1.meda bitz. However, as of November 14 they only had 200 bodied. som and Health Cruises, Inc. faced an mportant decisan. "Here's the station as I see. exploned disturbed Ms. Isom of the Health Cruises board meeting. "We've already paid several hundred thousand to get the cruise roing. plus the weekly cast per passenger, which is maily for road. Cost detailed below: Weekly Cost Par Passerger Isom determined that many people were very concerned about developing good health habits. yet they seemed unable to break away from their old habits because of the pressures of day to day living. She reasoned that they might have much greater success in a pleasant and social supportive environment, where good health habits were fostered. Accordingly, she estabished Health Cruises, Inc., hired 10 consulting psychologists and health specialists to develop a program, and she chartered a ship Dakarest Young, a Miami management consultant, became the chairperson of Health Cruises. Seven of Isom's business associates contributed the initial capital "I see four bosc options: (11 we cancel the cruise and take our losses: 121 we run the Cruse with the 200 and a few more that wil tricke in over the next month (3) we shell some more advertising money and aim to pul in mare people, or 14) we reduce the price of the remonng rooms." At this point. Carolyn Swibon addressed the board: "I've worked out two Dossible advertising campaigns for November 20 5.300 Initial Capital 401.000 Castot Promotion # New Passengers Of this amount, the team placed deposits and/or entered in to non-refundableon-cancellabic contracts for the folowing: The more ambitious campagns detailed below: Cast Promotion New Passengers Advertising Admin, Ship Rental 18.000 250.000 I realize our first attempt was somewhat disappointing, but we're dealing here with a totally new concept, and follow up od might work really well with many who were curious and nterested when they sow our message n the first bitz. Mary Porter, an overweight Denver schoolteacher, has signed up to sail on the maiden voyage, a one week crube to Nassau, departing December 19. Al passengers wil pay an average cabin price for the voyage as follows: Avg, cabin Price 1.900 One thing is absolutely certain sustaa emphasued. "We must act immediately there's any hope of getting more people on board. The dead ine for the Sunday travel sectors is in less than 48 hours. We need to act now becouse no one signs up in carly December for a December 19 soling cate." The most desirable staterooms are priced at over $3.000. Mary learned of the cruise by reading the travel section of her Sunday newspaper on October 18. On that date, the Pittsford and LaRue Advertising Agency placed promotional notices for the cruise in several major medio outlets. Mary was fascinated by the idea of combining therapy sessions with swimming, movies, and an elegant atmosphere. Isom interrupted, shoing her head. "I just don't know what to soy. Our funds are tight and our investors are nervous. I got cals each day. asking me where the 200 passengers are ord won't be casy to squeeze more money out of our investors. If need to ask them for $15.003 - wel. Iust don't know how we're going to be able to justify t." Pittsford and LaRue occount executive Carolyn Swibon originally estimated that the entire boat Chapter 9 - Pricing - Health Cruises Case Questions 1. What is the minimum number of passengers Health Cruises must sign up to break-even? Inote - you must show your break-even calculations $1,900 $225 - $1,675 $401,000 / $1,675 - 239.40 Minimum number of passengers to break-even approximately 240 passengers 2. Should Health Cruises go ahead with the cruise since 200 people have signed up? Discuss why or why not? $1,675 x 200 - $335,000 $335,000 - $401,000 - $66,000 Health Cruises should go ahead with the cruise in any event. If the cruise is cancelled, 5401,000 of the already spent capital would become a total loss. Even if no more passengers would sign up, the loss would only be 566,000 3. The advertising agency has proposed two alternative promotional campaigns to help fill the boat. Which one of these promotional campaigns would you suggest to the board? (Again, show your break-even calculations). 4. Some board members suggested discounting the remaining cabins and running a price promotion. Should Health Cruises consider running a discounted price promotion for the remaining cabins? Discuss why or why not? 5. What other big picture" factors could impact the goo-go decision in addition to the break- even
