Loyalty Lab Blog

by David Rosen | SVP Strategy and Channel Management

In February 2007, a series of very, very long tarmac delays (most notably on Jet Blue flights departing JFK) ushered in a new awareness of passengers’ rights for food, functioning lavatories and generally a way off the plane in case of claustrophobic anxiety attack.  Laws were passed, fines were established and now we can count on every substantial delay due to weather, mechanical or other acts of congress being reported in real-time by well-connected bloggers.

Well a few weeks ago, it happened again.  A perfect storm of a blogger with a web cam and, well, a storm.

Virgin America flight 404 from Los Angeles to New York Kennedy (or as we airline geeks would say VX404 from LAX to JFK) departed L.A. on time on Saturday, March 13.  Due to poor weather, the flight was diverted to Stewart International — about 90 minutes north of NY to wait out the storm and get clearance for landing.

Stewart is a small airport, with limited gates, so VX404 was not given a gate, but passengers were allowed to leave if they chose and cases of water were delivered by the ground operations crew.  After several hours, a gate became available and the aircraft docked and deplaned.  When it became clear that JFK would not reopen in the near future, a bus was chartered to bring passengers to New York.

But that’s not the interesting story.  Sitting in first class, utilizing Virgin America’s wifi and “sharing” with his webcam was David Martin, CEO of a social media site that encourages its followers to upload videos or images of what they’re doing “right now.”  A perfect opportunity to promote his site as he experienced another episode of “Torture on the Tarmac.”  (probably of more interest was his cabinmate Carrie Ann Inaba — of ABC’s Dancing with the Stars 

The SF Chron documents the day nicely.

While VX did everything by the book with regard to the ground delay, what they did really well was addressing the blogosphere head on.  Here’s what impresses me:

Virgin actively encourages social media contribution — all of which they monitor and react to.  This allowed them to rapidly see what was happening and respond directly to the blogger.  Virgin America’s CEO, David Cush, personally reached out to Martin.

Next, Virgin leveraged its strong group of loyal travel bloggers to launch a counter attack.  In fact I heard of the events not from the news media, but from Cranky Flier’s Brett Snyder who wrote a blunt rebuttal to any criticism that may have been suggested about the incident.

In the end, Virgin did an outstanding job balancing the open, real-time nature of social media by quickly responding to blogger.  Unlike other airlines that allowed incidents to become Top 40 YouTube hits, Virgin America rapidly, appropriately and professionally dealt with a tough day and an even tougher situation.

by David Rosen | SVP Strategy and Channel Development 

I’ve always been the business traveller that didn’t fit the typical stereotypes.  I never had one of those rolling suitcases, I’m happy sitting in coach (I have short legs), I don’t order bloody mary’s in the morning nor ginger ales ever.  I have always taken care of my own travel plans, down to the very last detail of seat selection, hotel room type and rental car coverage.  I look at the stressed salesmen with their coffee-stained button-down shirts or the conference-calling middle managers with their blu-toothed heads and amdelighted that I’m not one of them.

But there was one group of travellers that I envied.  The ones with clear plastic envelopes with the well-typed, hyper organzied, color-coded, hour-by-hour, location-by-location itineraties.  Wow.  Who can afford that kind of support?  Who has an admin that is that super-focused on keeping his or her boss that prepared?

I do.

It’s called TripIt.  [let's establish right now that this is not a paid endorsement nor are they a client or prospect].  All I do is forward my email confirmations from airlines, hotels and car rentals.  I can add my meetings, restaurants, etc.  My trips build over time with each additional travel partner or appointment.

When I’m ready to go I upload to my Outlook, synch to my Blackberry, forward to my wife and print out the itinerary that I’ve dreamed of since I graduated college.  While we’re all watching how much we spend on travel, while increasingly hotels are booked on hotwire and cars rented on priceline, my itinerary looks as nice as the guy in first class who stays at the Ritz.  And I feel just as important.

by David Rosen | Senior Vice President, Strategy and Channel Development

In the January 9, 2009 issue of the NYT, Your Money columnist Ron Lieber advocates looking to your loyalty programs as a great way to extend your spending and continue to enjoy some of those old-school luxuries that were routine pre-meltdown.

As we used to say in business school, “let me build on Ron’s point:”

1. Don’t be a point hoarder.  Use your rewards, you’ve earned them.  And when award thresholds are met, and rewards are used, you see the value and you likely want more.
2. Treat yourself and your family.  Many of us are cutting back on splurges.  Redeeming your points or miles allows you a guilt-free endulgence and break from self-imposed austerity.
3. Extend your spending.  Generally, some thing free leads to something more.  A free flight often is tied to a hotel.  A retail reward redemption only covers a portion of the purchase price.  The economy is built on the back of consumer spending, so think of your loyalty programs as your personal stimulous bill.
4. Earn more.  Maximize your flight and hotel miles/points with focus; shop online with loyalty partners like MyPoints, American Express or the online malls attached to your other programs; take advantage of double and triple accrual offers from your retail programs.

Marketers have annointed 2009 “The Year of Consumer Loyalty.”  Be sure that you are being reaping the benefits of the relationships that you have with your favorite companies.

by David Rosen | Senior Vice President

I read today a story about Calgary-based WestJet (The “Southwest Airlines of Canada”). 

For many travelers in North America this past week, long lines and crowded planes have been the least of their worries.  The news was filled with reports of people stuck in Seattle and struggling to be rebooked after cancellations in much of the East and Midwest.

Meanwhile, in Canada — in the spirit of the holidays — WestJet went out of its way to provide nearly 5000 stranded customers with free meals, hotel rooms and alternate travel options (including charting aircraft from other airlines).

What WestJet understands is that airline loyalty really has little to do with points or perks.  What truely endears loyalty to a carrier (or any business for that matter) is that unique connection with their customers at times when the effort is most appreciated.

by David Rosen | Senior Vice President

OK, I am a frequent flyer junkie.  Since college when I traversed the country to get to school and every subsequent job, I have been that guy.  I am no longer ashamed about my obsession — rather feel cleansed of my guilt since I’ve admitted this to myself, family, friends and co-workers.

[note to self, one day do a blog entry on some of my bizarre FFP obsessive, compulsive behaviors.]

Yesterday Virgin America (by partnering with Loyalty Lab) launched to the public the major missing piece of their frequent flyer program, Elevate – the ability to redeem the points that guests have earned by flying the airline.  Why the wait – it has been over a year since the airline launched.  The answer is Virgin America (VX in airline geek code) has what is assuredly the most innovative and consumer-friendly loyalty program in the airline space.

If you read the business travel columnists in the NY Times and WSJ, you know that the legacy carriers’ programs are regularly skewered for their:

• Increasing difficulty of finding reward-eligible seats
• Brutal black-out periods
• Non-alignment of customer revenue with miles/points earned
• Declining value per mile

Virgin America rejected the basic assumptions of their competition with a program that:

• Ties earning to revenue.  Not miles, but points.  The more you pay, the more you earn
• Makes every seat available for redemption on every flight
• Guests can easily and seamlessly toggle between points and dollars within the same session

Essentially, points become a currency that guests can use as they choose.  If flights are more expensive in dollars, they’ll likely be more expensive in points.  This keeps the economics of the program — both earning and burning — squarely aligned with VX profitability and fairer and more logical for Virgin’s guests. 

There’s a lot more behind the scenes.  The technology employed to deliver both what is presented to Virgin’s guests and the tools provided to VX’s loyalty marketers pushed Loyalty Lab’s technology team to new heights of creativity, design, implementation and quality.

We congratulate the Virgin America and Loyalty Lab teams for a powerful partnership and great times to come.

by David Rosen | Senior Vice President 

This falls into the category of “do I really still care.”  Today Delta announced that it was adding a third tier for both domestic and international frequent travel redemption which allow its member access to “the last seat.” 

OK, let’s review.  Airlines actually make money by selling frequent flyer miles to banks, hotels, large corporations, mortgage lenders — and we’ve been soaking them up for years.  In the process, balances have grown though available seat capacity for award seats has remained flat.  Essentially a supply-demand imbalance.  So, what logically happens?  Prices go up.  Delta’s new pricing allows its members to book any available seat on any open flight — this is equivalent to paying full-fare, last minute rates.  United has been doing this for years — it’s called “premium” and is priced at 50,000 versus a much harder to get “saver” ticket at 25,000.

So, Delta one-upped them and boosted the price by 10,000 miles.  How soon will the others respond?  Is this the beginning of the end?

Here’s a suggestion…  Price frequent flyer seats based on what the flight costs.  It’s fair, it’s easy to understand and it makes sense for the carriers.  Stay tuned — there has got to be someone thinking like this.

by David Rosen | Senior Vice-President

Like many Americans, my family and I look forward to the summer as a chance to get away from home and enjoy a well-deserved vacation. 

Given my fascination (obsession?) with loyalty programs in general, and travel programs in particular, I blindly embrace all hotel, car, air — and even train frequency programs that I come across — often without regard for my privacy and the sanctity of my hotmail inbox.

Why?  For the most part joining travel company’s guest programs yields a better experience — well at least that is the true test of value.  As I’ve opined in the past, I’ve pretty much given up on redeeming the points/miles/stays that I’ve earned, but have come to expect a higher degree of service and general consideration when I travel.

So, planning our trips this summer, I joined two more programs (I think this brings me past the 50 mark just in the travel space — I still keep my Western Airlines TravelPassII card handy just in case).  The first was Loews-First.  From a customer experience standpoint, this program rocks.  Easy to join, relevant fields — including questions tied exclusively to member benefits and preferences (which treat do I want when I check in?  What newspaper do I want in the morning) — what a great way to introduce me to the benefits before I’m even a member.  Submit and I have a number.

I get on the phone to book the room (I want them to match the rate that I found on Hotels.com) and the number is already in the system and the agent has all of my contact and preference information.  And to my “surprise and delight,” I’m already a “Gold” member which includes a free upgrade upon reservation.

Clearly, a well designed and executed program.

Next, I joined Amtrak’s Guest Rewards Program.  OK, I’m not a big rail traveler, I live in California but am headed to New England this summer.  Unfortunately, the program lacks connection to the larger Amtrak experience.  I had to replicate my registration on both sites, I’m receiving emails from both entities and I’m uncertain how I will benefit from the program — but again, truth in advertising, I’m in infrequent rail passenger, so I’m not the definitive source for measuring perceived value.

Bottom line, good lessons for any loyalty program design:

• Keep registration simple and relevant
• Ask profiling questions that communicate the program value while gaining real marketing insights
• Use registration as the first chance to reward – Give something for the Get
• Be fast, be connected, be multi-channel
• Use the program as the primary touchpoint between associates and best customers/guests/members

by David Rosen | Senior Vice President

I didn’t complain when domestic roundtrip travel rewards went from 20,000 to 25,000.  I didn’t complain when it became virtually impossible to fly on saver fares to Hawaii or Europe.  I didn’t compain when my United threshold bonuses were removed.  I didn’t compain when the 500 mile bonuses for using the easy check in kiosk or booking online were eliminated.

You see, I fundamentally understood how cost pressures, liability pressures, bankruptcy pressures were all contributing to lowering the perceived value of airline frequent flyer programs.  And I certainly understand that airlines no longer have to give an incentive for using the web or touching the screen at the airport.  I think we’ve all figured out those tasks by now.

But, now I hear that US Airways is removing the elite accrual bonus.  Now I’m mad.  Part of keeping me placated about the other hits to the programs was my inflated accrual rate.  Who cares if it’s 25% more miles to fly, I’m earning twice as many miles!

Will others follow suit?  Since American launched Advantage more than 25 years ago, there has been lock-step lemming behavior with every positive and negative program change.  I’m not optomistic.

by Joshua Tretakoff | VP, Account Management

We often get clients who want to spice up their program a bit, or perhaps are looking for some “best practices” in the world of loyalty marketing. Anecdotally, one of the most common areas our clients reference are frequent flyer programs; after all, they are one of the most familiar and explicit programs out there today. Well, good news: the presentations from this year’s Frequent Flyer Program Conference are all online, and available for download for you to review. Some good ones, including ones on the financial considerations of a loyalty program and importance of the variety of rewards offered.

Of course, you didn’t get the air miles for flying back and forth to the conference’s location in Istanbul, but at least we can all enjoy the information!

By Mark H. Goldstein | CEO

For those who still can’t find a new plasma screen or the time to take a trip to Tahiti, have travel loyalty programs got something for you! Seems it’s getting to harder to please all of those top-tier customers at Starwood and the company has had to get creative in conjuring up the dream rewards. In the case of one couple, it was a meeting with John Travolta. The downside to all of this success is that loyalty programs have had to tighten up reward redemptions, making the good stuff harder to get. But then again, a dinner with Gisele just might be worth a few extra points!