Marketing Case Study

Introduction Magnetic Island, located in North Queensland, is a fast 20 minute catamaran ferry ride from Townsville. Largely a world Heritage-listed national park, the island is home to many species of animal and birdlife and is one of the best places in Australia to see a Koala in the wild. There are approximately 2,500 Koala’s on the island and as one local commented. There are about as many of these unique tree dwellers as there are people residents’. Magnetic Island has 25km of trails and this network of scenic walks combine with the abundant wildlife to make the island a bushwalkers’ and nature lovers’ dream. Overseas tourist visiting Magnetic Island regularly comment on the beauty and tranquility of the island , a scene far removed from island legend that recounts tales of headhunters from Papua New Guinea descending on the island for periodic sprees of vandalism and pillaging. The unspoiled beauty of the island is also not overlooked by locals, as Magnetic Island has long been a favorite day-trip and holiday homes on the island, who enjoy a wide variety of water-based activities, including swimming, boating, fishing, water-skiing, windsurfing, jet-skiing and kayaking. Background Joe and Kim Carroll came to the conclusion that their enthusiasm for water sports and the outdoors should have a considerable bearing on where they lived and worked. With this thought in mind, they decided that Magnetic Island in North Queensland had the attributes that would allow them to take advantage of their love of the outdoors. They were also determined to find a lifestyle business that would help them to exploit their desire for open spaces and capitalize on the growing number of tourists visiting the North Queensland region. The couple did some secondary marketing research that indicated over seven hundred and fifty thousand international tourists visited North Queensland each year and tropical North Queensland was the fourth most visited region in Australia, behind Sydney, Melbourne and the gold Coast. Joe and Kim looked for immediate business opportunities on Magnetic Island that would provide them with a cash flow and they decided to purchase an established ‘bed and breakfast’ that also offered self-contained accommodation, shortly after setting up house and business. The entrepreneurial pair was told that the owner/manager of Magnetic Sea Adventures were searching for competent people to manage his part time business. The business was trading profitably and provided kayak rentals and guided kayak trips. Joe and Kim were certain that they could successfully combine their ‘bed and breakfast’ activities with the part-time kayak business, and they agreed to assume the management responsibilities of Magnetic Sea Adventures. When the Carrolls assumed responsibility of Magnetic sea Adventures, they decided to replace the existing capital stock with new, state-of-art kayaks and supporting equipment. They also based Magnetic Sea Adventures in a highly visible Magnetic Island backpacker’s establishment. However, after a brief tenancy, the Carroll’s decided to relocate Magnetic Sea Adventures. This move simplified the daily management of the two ventures, but the new location was not as visible to potential customers. After two years in operation, the Carrolls also redesigned Magnetic Sea Adventures range of services in a move to better cater to the needs of their customers.

The equipment and services offered by Magnetic Sea Adventures are: 



A range of kayaks for rental including single and double kayaks, catering to both novice and experienced kayakers; kayaks are equipped with flares, radios, maps and dry bags; food and camping gear is also available as required A guided trips ranging from half-day trips of up to three days around the island, including snorkeling at some of the more accessible wrecks dotted around the island.

The promotion of Magnetic Sea Adventures has been very limited and primarily in the form of brochures offered to visitors to the island and those tourists seeking local accommodation on the island while in Townsville. The brochures have also been available in two outdoor retail shops and Magnetic Sea Adventures has been mentioned in a few travel guides. However the Carrolls think that positive word-ofmouth advertising has been the main catalyst in growth of Magnetic Sea Adventures as many of their customers tell their friends about their kayaking adventures in the bays around Magnetic Island. There has also been a steady growth in the number of young people visiting the North Queensland area, a market segment that is very keen on kayaking, and this trend is predicted to continue in the coming years. The Carrolls’ policy has been to offer their customers value for money at their bed and breakfast and they are following the same procedure with the kayaks and services provided by Magnetic Sea Adventures. They know it is necessary to offer competitive prices but feel that they provide superior equipment and services and that their prices should reflect this fact. They also realize that their prices need to be set in accordance with the activities of both direct and indirect competitors and the current conditions in the economy. Initially the Carrolls thought the bulk of their customers would be younger, overseas tourists interested in outdoor and leisure activities. However, through customer surveys they have determined that while approximately 30 per cent of their customers are from overseas, 70 per cent are Australians and many of these are locals from the greater Townsville area. Approximately 50 per cent of all their customers have previous kayaking experience and hire kayaks and equipment for unguided trips. The other 50 per cent are inexperienced and are most likely to take one of the guided trips. The Carrolls have realized that the majority of their customers, regardless of where they come from, want a more exciting and active day out or holiday than what they termed the ‘traditional Queensland visitor ‘ who seems content to just sit in the sun, read a book and relax. Since 2000, some direct competitors have established business on Magnetic Island. One of the main competitors operates a kayak rental located on Nelly Bay. This is a very visible site for potential customers. In addition, it provides direct and immediate access to the water, a convenient take-off point for experienced kayakers and a ready training area for inexperienced customers. More recently, a new competitor has entered the market. A backpacker’s hostel has started renting its own kayaks and equipment to guests. It has not secured a beach location, however, as regulations have made this more difficult with increasing numbers of tourists using the main beach area.

Joe, although very aware of the competition, thinks there is still a solid opportunity for additional kayak business. Magnetic Sea Adventures current capacity is 1,500 rentals each year, averaging six rentals per day when the conditions allow safe kayaking. Joe and Kim are confident they have the ability to expand the business to at least 2,500 rentals each year, and are convinced that with the right planning they can provide the growing number of visitors to Magnetic Island with an exciting kayaking adventure. They are particularly excited by the recent introduction of Virgin Blue’s low –cost airfares to Townsville from the major state capitals. However, they are concerned about the adventures during this period. In addition, further expansion would, in part, depend on the availability of trained staff to act as guides. The Carrolls sold the ‘bed and breakfast’ in early 2003 and now face an additional marketing challenge as they intend to concentrate their resources on Magnetic Sea Adventures. Selling the ‘bed and breakfast’ was a critical step for the couple and they intend to concentrate their resources on Magnetic Sea Adventures and they now need to acquire through understanding of the marketing environment in which Magnetic Sea Adventures operates. Their focus is on the following areas:      

Designing a market management structure that fosters growth Maintaining a strong customer focus Maintaining productive links with suppliers Strengthening relationships with marketing intermediaries Monitoring the actions of competitors Watching and responding to those forces in the macro-environment that is likely to shape opportunities or pose threats to Magnetic Sea Adventures’ future growth.