Authors: Dr. Athanasios Pallis and Dr. Theo Notteboom

Marketing is a core function in seaport management, impacting cash flow, profits, traffic, market share, and the overall image of a port.

1. Ports and Their Customers

Marketing and customer relationship management are among the functions of port authorities that are gaining momentum and are commonly outside their conventional landlord role. The various forms of communication, trade and business development, local community liaison, and customer relationship management are major components of the overall marketing effort. Port authorities are increasingly taking the lead in promoting and marketing the ports under their management, as it leads to additional value creation and business opportunities.

Marketing is the process of defining, developing, communicating, and delivering value to stakeholders depending on distinctive competencies and available services. By adopting a market-driven approach, a port authority offers tailored marketing solutions to each stakeholder in the port community and beyond. Marketing strategies developed by port authorities deal with networks of stakeholders, which are part of three core groups:

1. Business-related stakeholders include shipping lines, shippers, terminal operators, logistics and forwarding companies, and transport service providers. These are market players who affect (and are affected by) the strategies of port authorities to pursue their marketing objectives.
2. Institutional stakeholders interact with port authorities on matters related to policy issues, regulations, legislative interventions, and public interests.
3. Societal groups and local communities are seeking sustainable port growth that generates minimal externalities.

Each stakeholder represents a target for marketing activities, whereas groups of these stakeholders (portfolios of marketing actions) aim towards specific marketing objectives. A successful marketing strategy focuses on identifying the key business relationships through which a port can deliver value to (internal and external) stakeholders, based on its distinctive competencies. When such marketing actions are not practical, ports may face a form of penalty, such as losing a customer or a conflict with the community.

The potential value for stakeholders generated through marketing efforts develops in line with the main functions that a given port authority undertakes, such as landlord, regulator, operator, or community/cluster manager. Following the evaluation of internal strengths, competitors, the business ecosystem, and the community, the endorsed marketing strategies are associated with a portfolio of actions based on the capabilities of the port authority. Port authorities define value propositions through actions that might relate to one or more marketing processes, aiming to:

• Define value. Identifying the needs and positioning the offers.
• Provide value. Product and service development, defining prices, selecting and choosing distribution channels.
• Communicate value. Salesforce messages, promotion, advertising, public relations, and media planning.

Port authorities deal with a multitude of public and private stakeholders, frequently dispersed across a wide geographic area, who exercise a multidirectional influence on their actions. The borderless and global nature of modern supply chains and port cluster evolution has implications for port marketing strategies:

• Bundling of services. It is rare for actors to operate or develop independently within the port cluster. Irrespective of size, bundling operations and clustering activities that face related issues can benefit from a collective action, which is essential for addressing market niche-specific issues.
• Multiple jurisdictions. Although port authorities are physically bound by their territorial jurisdiction, they deal with players in distant and multiple locations. They want to influence their behavior and generate business opportunities. This occurs regardless of any physically limited extension of port operations or the intrinsic normative limitations of port authorities.
• Multiple decision-making. The complex geography of the decision-making chains of stakeholders, such as multinational corporations, may involve interactions with port authorities through multiple decision-making units based in geographically distant locations. The existence of multi-layered decisional units (local offices, national branches, regional and global headquarters) complicates marketing interactions, given diverse representatives within the same multinational corporation.
• Diversity of stakeholders. Marketing refers to actors with diverse cultural backgrounds as well as economic and institutional environments. Port authorities interact with actors with diverse legal natures (public bodies, public companies, private companies, individual citizens, trade associations), interests (private vs. public), geographic location, and strategic ambitions (local, national, international). Such diversity may generate problems of market adaptation and complicate the dialogue with stakeholders.

Thus, marketing efforts developed by port authorities are increasingly complex and require the commitment of specialized and highly qualified managers.

2. Marketing Objectives and Actions

A. A spectrum of marketing strategies

Ports pursue a spectrum of marketing objectives that encompasses five mainstream categories of objectives:

1. Secure additional investments.
2. Enhance additional demand.
3. Explore non-core business opportunities.
4. Build community relations.
5. Enhance institutional dialogue.

The first three refer to business-to-business relations. Another objective resides in business-to-community relationships. The fifth refers to the port’s relations with institutions and regulators. These marketing objectives are mutually linked, whereas marketing actions are often required to support each other for achieving objectives that, despite appearances, are not stand-alone.

With marketing objectives closely interconnected, the interactions developed between port authorities and major stakeholders may have further implications compared to what their geographic and functional positioning might suggest. A port authority may generate cross-fertilization effects that materialize due to the synergies and economies of scope in committing resources and capabilities to marketing actions. At the same time, any given stakeholder might be involved as a co-creator in marketing actions.

The port authority might select from multiple combinations of stakeholders and marketing actions, emphasizing the particularity of their value proposition and market image. With port marketing efforts targeting different market segments and combinations of stakeholders, the marketing actions to be used are complex. The port authority can potentially select any combination as an objective and then serve it through suitable marketing actions, committing core resources, skills, competencies, and physical and financial resources, as well as time constraints. With marketing objectives inextricably linked and marketing actions often supporting one another, cross-fertilization effects can be generated through synergies and economies of scope by committing resources and capabilities to marketing actions.

B. Business-to-business relations

A key marketing objective is to secure suitable financial resources (1) to enhance port competitiveness in a rapidly changing environment. The demand for upgraded and modernized infrastructures and services, as well as the provision of fast and reliable operational performances, is considerable. This is especially true as economies of scale in different port markets, such as the gigantism of container and cruise vessels, result in various dimensions of port operations, leading to more advanced forms of supply chains and logistics. Yet, the mobilization of third parties to invest should not be taken for granted. Marketing strategies are focused on attracting key stakeholders, including investors, logistics firms, and industrial companies, which bring financial, technical, and human resources, as well as potential organizational and managerial capabilities, to ensure high-quality service.

A second primary marketing objective for port authorities is to enhance additional demand (2) for the port. This demand is driven by improved cargo and passenger volumes, facilitated by superior hinterland and maritime connectivity. Given the increasing importance of terminals, with their dynamic and different settings existing within each port. In the case of a landlord framework, port authorities do not have a direct contractual relationship with ocean carriers; they do not undertake stevedoring or other handling operations. Thus, marketing is somewhat mediated by other business players, such as terminal operators and freight forwarders. Nonetheless, their role in attracting demand is relevant, as port authorities often interact with carriers and other stakeholders that affect cargo routing or the deployment of cruise vessels.

The intervention of port authorities aims to trace cargo flows along logistics chains and to undertake multifaceted marketing actions. Primarily, port authorities act as the orchestrator that, through marketing, generates knowledge about the presence of conditions that secure an active business environment, with the availability of services, high levels of efficiency, and lower costs compared to competitors. Given the above, port authority marketing actions are successful if the marketing activities of terminal operators or shipping lines are aligned with each other for value co-creation. A port authority can allocate resources to marketing, but if terminal operators or shipping lines do not perform well, its actions will not yield the expected outcome. This means that the port authority is very dependent on the performance and marketing activities of its customers. For this reason, the selection of reliable terminal operators as concessionaires constitutes a relevant pre-condition for attracting demand.

The objectives of marketing activities by port authorities include capturing new business opportunities (3) in areas beyond their core objectives, which are the handling and serving of cargoes/passengers in the port and adjacent areas. The reference encompasses not only logistics and supply chain integration but also activities such as ship repair or hotel management. Such initiatives are strategically related to the more traditional port authority marketing objectives (secure investment and demand). Still, they take place through comparatively uncommon strategies that leverage the resources and capabilities accumulated in mainstream activities.

C. Develop community relations

Business-to-business marketing coexists with business-to-community objectives, as environmental complexity and spatial issues, such as the proximity of port activities to urban activities, incentivize ports to establish trustworthy relationships with their local stakeholders.

Building solid community liaisons (4) is increasingly necessary for internationalized ports, where the disconnection between global (business-driven) ambitions and local interests becomes critical. Port authorities promote the related port by effectively communicating with the main local community stakeholders. Such promotional activities aim to raise awareness among the population about the beneficial presence of the port, projecting an appropriate image. Marketing activities aim to build consensus and trust among citizens and local economic clusters regarding port planning, thereby securing the satisfactory coexistence and coherent co-development of urban and port areas.

D. Enhance institutional dialogue

Good relationships with public administrations are a fundamental building block for business marketing that, among other benefits, enhances government liaisons (5). These activities stand at the intersection between marketing activities and lobbying. To maintain the pace of port and business development, port authorities must efficiently deal with political and administrative counterparts at various levels to secure funding, influence policy, and avoid regulatory intervention.

Generating balance within a given institutional architecture involves tuning the decisions of public administrators to the evolving needs of private firms. In this regard, vertical and horizontal coordination with public organizations enables effective handling of key issues such as port planning and development, port reform and regulatory implementation, the execution of administrative and business decisions, and the implementation of political actions. Vertical coordination refers to effective institutional dialogue and distribution of competencies between port authorities and public actors. Horizontal coordination, on the other hand, requires a sound and integrated dialogue among port authorities regarding the prioritization of investments and the avoidance of overcapacity concerns in port planning. These dialogues generate lobbying effects, exert political pressure to secure additional funding, mitigate conflicts with the local community, and expedite the approval of key projects.

3. Increasing Customer Loyalty

Despite the best intentions and efforts when developing relationships, customers may experience dissatisfaction with port services and even defect to other competing ports. The main reasons behind this change in port choice are related to inadequate service or the impression of not being treated fairly. Retaining or reclaiming customers can be accomplished through a number of complementary strategies.

A. Communication with customers

Occasionally, surveying customers is essential, preferably through direct verbal communication, to gauge satisfaction levels about the port and determine how the port’s service compares to that of the competition. This form of market research should be approached systematically and regularly to gain a deeper understanding of changes in customer satisfaction levels. Issues to discuss include the degree of satisfaction with the services provided, perceptions of value for money, port efficiency, feedback on the available information provided by the port, particularly through its website, potential port growth as well as changes to customer needs and requirements, feedback on customer service, and in general, the day-to-day issues creating operational challenges.

To further assist with customer communications, some ports have developed a visitation program for the chief executive, board members, and senior managers to meet and gather information with current and prospective customers locally, nationally, and internationally, with the objective of gaining a better understanding of customer requirements.

The formation of port user groups is another effective means of communicating with a broad range of customers. These groups serve as consultative and information-sharing mechanisms to provide feedback and maintain communication between the port and its various stakeholders, including stevedoring companies, tenants, shipping companies, shipping agents, and community groups. Matters discussed at these meetings may include operational and policy issues, infrastructure developments, strategy, and environmental management.

Customer contact personnel are often the first to hear about customer concerns and are better positioned to identify customer needs and issues. They are not only physically or virtually close but may have developed a personal bond with the customer. Recognizing that front-line employees consistently interact with customers and significantly impact customer satisfaction levels underscores the importance of hiring customer-focused staff and providing them with at least basic training in customer service and marketing.

B. Service failure recovery

The true test of commitment to customer satisfaction is how the port responds when mistakes are made or when poor customer service occurs. A complaint may arise if the business fails to fulfill the promises made in its marketing communications. Labor strikes in ports or severe delays due to operational issues are typical events triggering poor customer service. When assessing poor performance, the reality is conditioned by customer perception. Three major types of service failures exist:

• Failures of the core business have occurred because there have been inadequate responses to errors in the service delivery system.
• Poor or no responses to customer needs and requests.
• Unsatisfactory employee behavior includes being abusive, having poor attitudes, exhibiting discriminatory behavior, and failing to consider cultural norms.

A recovery from poor service delivery can even convert frustrated customers into loyal ones. Companies should invest in implementing problem-solving and follow-up service recovery strategies, as both significantly enhance their corporate image. However, the opportunity for service recovery is sometimes missed because employees are not empowered or have insufficient training to address the error promptly and appropriately.

C. Identify potential defectors

Ports can detect potential defectors early in the process with a series of events that are indicative:

• Slower returns of customer approval requests.
• Access to upper-level management decreases.
• The flow of customer data slows down.
• Plans for future work become progressively shorter-term.
• One or more of the products or services are discontinued.
• The volume of business (in terms of TEUs, cargo tonnage, or passenger numbers) is gradually decreasing.

Effective inter-port competition creates opportunities for customers to switch to other ports. In many cases, a triggering event causes a customer to leave, often coinciding with a window of opportunity created in a rival port. When competition levels are low and no alternative ports are available, the customer becomes captive, making defection very difficult.

In the port industry, port executives should invest in research to understand the real reasons why their customers leave or stay. Infrastructure, capacity, price, changing needs, and customer service levels are common reasons.

D. Complaint management and positive communication

Loyal customers tend to be more forgiving of mistakes. Therefore, the port can occasionally make a mistake without losing customers. Receiving customer complaints can be considered positively because they provide an opportunity to address a problem, solve it, and retain customers. Essentially, a customer who complains indicates to the service business that they wish to remain a customer and are willing to give it a second chance. Therefore, ports should have a clear and well-framed structure for lodging complaints. Complaints can be addressed by providing customer feedback surveys and speaking directly with customers to address any concerns they may have. Asking for feedback from the customers is itself a loyalty-generating process.

Furthermore, good complaint management can only be achieved if the service provider uses a formal system to monitor, process, and follow up on customer complaints. This assumes, for instance, a corporate environment in which employees are encouraged to report customer complaints, rather than one in which employees hide complaints because they fear penalization from senior management.

A benefit of retaining highly satisfied customers loyal to the business is that they spread positive word-of-mouth communication (WOM). This factor, along with a critical reputation in the port industry, is a key source of information for new clients. Social media and new communication tools have increased reliance on online information seeking, leading to the growing importance of electronic word-of-mouth or eWOM. If many customers spread positive word-of-mouth communication, the promotion costs to attract new customers are lowered. Customers believe word-of-mouth communication to be less biased and more credible than traditional marketing communications. However, concerns have been raised about the reliability of eWOM due to potential manipulation, disinformation by competitors, and the use of fake online reviews. Negative eWOM can lead to what is referred to as online viral moments, which can seriously undermine a port’s reputation.

E. Usage of exit barriers

One way to give the port authority a chance to respond is to make it difficult for the customer to leave. Erecting a simple barrier to departure allows a port manager to identify the issue and rectify it before the customer leaves. However, trying to lock customers in does not guarantee port loyalty.

A similar outcome can be achieved by utilizing service guarantees and customer service charters to mitigate the challenges of service recovery. Although this may represent a potential cost to the port, service guarantees may increase customer loyalty.

Port authorities confronted with a highly competitive market environment may use concession agreements as a way to secure long-term commitment from terminal operators or consortia between terminal operators and shipping lines. The granting of dedicated terminals combined with favorable port dues and strict throughput guarantees can also reduce the risk of defection.

F. Customer differentiation

Customers do not have an equal value to the port business. Ports become increasingly dependent on external coordination and control by actors who extract a large share of the economic rent produced by ports and are often motivated by creating shareholder value. Given the increasingly footloose character of its traffic, it might be inappropriate for a port to try to keep traffic at any cost. If powerful actors in a specific logistics chain exert significant pressure on a port due to economic rents generated elsewhere in the chain, it may be relevant for the port to opt out of this chain.

Due to changes in the competitive environment, current positioning, and desired target markets, customers should be assessed to ensure they match the stated objectives and value proposition. Segmentation analysis can help distinguish between customers and ensure the port can serve them efficiently, effectively, and, importantly, profitably, thereby creating mutual value.

Port managers can attribute a risk profile to each customer. Certain customers can be very valuable for the port as a whole. Losing them could trigger effects on other customers due to vertical linkages between companies. A feeder company might stop calling because a deepsea vessel is changing its port of call, or due to leader-follower dynamics, where if a leading company leaves a port, some followers in the market may do the same.

A pricing strategy tailored to the individual needs of the customer is a key factor in developing relationships and fostering loyalty, serving as a form of customer differentiation. This implies the economic perspective on port pricing should be complemented by elements from marketing and relationship management linked to the different requirements of each major segment. Chapter 9.4 elaborates further on port pricing principles and strategies.

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Related Topics

• Chapter 4.2 – Port Authorities
• Chapter 4.4 – Port Clusters
• Chapter 5.4 – Port Pricing

References

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• ESPO (2016) Trends in EU Ports Governance 2016. Brussels: ESPO.
• Laxe, F.G. (2010) Port Marketing Strategies and the Challenges of Maritime Globalization. In: Coto-Millán, P., Pesquera, M., Castanedo, J. (eds) Essays on Port Economics. Contributions to Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2425-4_2
• MedCruise (2016) Ports Together. Piraeus, Greece.
• Parola, F., Pallis, A.A., Risitano, M. & Ferretti, M. (2018) “Marketing strategies of port authorities: A multi-dimensional theorisation”, Transportation Research Policy and Practice Part A, 111, 199-212.
• Further references to be added