Posts Tagged ‘delta’

Southwest Airlines Profits from Free Bags

Tuesday, January 12th, 2010

southwest bags

My friend Matt Carcieri is one of the key leaders at P&G charged with helping the company move to “Purpose-Based Branding.” If you haven’t read about this before, the central idea is that brands must turn their equities and marketing toward the pursuit of higher-level goals. In his book on the topic, It’s Not What You Sell, It’s What You Stand For, Roy Spence writes that brands must challenge themselves to wholeheartedly focus on this purpose for existence. At P&G, people such as Matt Carcieri and Jim Stengel helped Pampers, for example, shift toward a Purpose of improving babies’ development. Over the holidays, Matt shared a story of how Southwest Airlines—one of the central case studies in Spence’s book—is continuing to profit from its purpose.

In his book, Spence tells the story of how Southwest Airlines rose to leadership in the late 1970s and 1980s on the heels of the government’s deregulation of the airline industry. As the skies opened up to new competitors, Southwest took an underdog mentality up against the big, entrenched, oligopolistic players such as American, Pan Am, and TWA. The company’s entire employee base embraced the underdog label, and rallied around their Purpose:  to democratize air travel. This mentality drove the company to embrace shorter, point-to-point flights, enabled it to expand without unionization, and even showed in the high-quality, high-fun flight attendants and pilots. Southwest was not just another airline; it was a company on a mission to make flying more affordable and accessible. Today, Southwest is just behind Delta in total market capitalization, and did it without major mergers or dips into bankruptcy. The company was profitable again in 2008, while Delta felt a 40% net loss.

Based on Southwest’s purpose, it is no surprise that the company decided not to go along with the rest of the industry crowd and add baggage fees to the price of a ticket. According to its CEO, Gary Kelly, Southwest was giving up $300 million in revenue by not simply joining its competitors in charging a fee that fliers hate, but can do little about. But the underdog, democratic blood still pumps through Southwest’s veins, and it bucked the trend and risked angering shareholders by just saying “no.”

What’s more, Southwest saw the opportunity to promote the hell out of its commitment to “Bags Fly Free.” Baggage fees can add up to $100 per flight per person, so Southwest’s television commercials and print ads tout their fundamental competitive difference. The ads feature smiling Southwest employees talking about how much they love bags—itself an example of a strong, purpose-driven culture.

The results? Well, Southwest claims that it has captured an additional 1% of the market because of its lack of baggage fees so far. That translates to $800 million to $900 million in additional revenue. Yep, as much as three times more revenue than baggage fees would generate. And please don’t forget how this meaningful marketing choice adds to the brand equity and loyalty of travelers. We all feel a great deal of anger for airlines that use their market power to gouge us on fare prices and continually pull back on service quality. But with Southwest, we have a hero in an otherwise villainous business. This very visible issue around baggage fees further cements the good and evil brands in the business, and translates into more sales for Southwest over time.

Thanks to its strong, guiding brand purpose, and its ability to make meaningful marketing decisions, Southwest continues to be the bright spot of success in an industry that continues to look at its customers as cattle. My only problem with Southwest is that it still hasn’t come to free Cincinnati from the oppressive shackles of Delta!

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Posted in airlines, purpose | 5 Comments »

How the Starwood iPhone App Pressures Delta

Friday, July 17th, 2009

Over the weekend I somehow discovered that the Starwood Preferred Guest program was now offering a free iPhone app. In less than five minutes I had Googled it for a review, downloaded the app, input my membership number, and was checking out this cool new marketing service from one of my favorite hotel chains. My next thought: Why does my regular airline, Delta, not have an iPhone app yet? A great service by Starwood also made me feel worse about my airline, a company not even in the same business category! This reaction is an example of how great customer service and meaningful marketing in one category puts pressure on every business to improve.

My friend and colleague, Jonathan Richman, recently referenced this idea on his blog, Dose of Digital. It’s an idea that I share often with clients as we try to help them navigate the sea of digital choices and choose which services to offer and competitors to benchmark. This idea that customer-service expectations are rising across categories first sprung up in my mind when I read an Accenture survey from November 2008 of the customer-service attitudes of 4,000 respondents. It found that 31% said their customer-service expectations are higher than a year ago, and 52% said their expectations are up from five years ago. That’s an incredible increase in a short period of time, and it shows the path of the economy of today and tomorrow: As competition increases, service and value will increase, and people will expect these improvements to continue across every industry. The more we give them, the more they expect.

I believe this idea manifests itself in several divergent categories. My favorite example comes from Domino’s Pizza. In January 2008 it launched an online Pizza Tracker that shows an estimate of the step-by-step process of making the pizza you order online. Some laughed at the idea, but Domino’s felt it was necessary because a significant number of people call back to ask how their orders are progressing (before the 30 minutes, mind you). While others laughed, Domino’s racked up its millionth user of the tool before six months. Why? Well, I believe that people have become used to viewing the progress of their online orders from services such as UPS and FedEx. These two companies have great package tracking systems that millions of people have used. So the consumer’s expectation is that if these orders can be tracked, why can’t my pizza?

Other examples abound. A few years ago Facebook and Twitter started allowing mobile updates on information as trivial as when a friend updated his status or uploaded a photo, but banks and airlines were much slower to provide mobile updates for important information such as low balances and canceled flights. Another example is the increase in self-checkout lanes at retail stores. I firmly believe that they have rapidly expanded because customers are used to self-checkout online at e-commerce stores, and expect similar freedom in the offline world.

Our agency has seen this recently with our work on the Vicks brand. Just weeks before we launched our first online cold-and-flu tracking tool, Google came out with its own flu-trends tool, which grabbed the media spotlight before we did. So now CPG brands are competing with Google? That’s a pretty huge challenge!

But that’s reality. And on my other personal blog, The Challenge Dividend, you can read many, many stories of how Challenge Drives Improvement. (Warning: It’s not been updated in a few months as I’m focused on this blog and book.)

I believe that the many increasing examples of Marketing with Meaning will start setting a very high bar for businesses across every industry. Consumers will gravitate quickly toward those brands that provide value through marketing, and increasingly punish the brands that continue to interrupt and annoy them.

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Posted in Applications, customer service | 3 Comments »

Takeaways from the Ad Age Digital Conference #aadigi

Friday, April 10th, 2009

For the third time in the last four weeks, I had the chance to attend a marketing conference this week. I’m usually not this frequent of a conference attendee, but I have been fortunate enough to tie multiple objectives together with each trip. Naturally, one of those multiple objectives is to unearth insights that I can share with you, dear readers, in this space. So I’ve risen at 5 a.m. on a Friday to tirelessly record my takeaways from the very insightful Ad Age Digital Conference in NYC. As with my previous blog summaries of the Economist and iMedia conferences, I share the most memorable points from the speakers who stood out most in my mind. Enjoy!

Fred Wilson, Partner, Union Square Ventures

We started the day not with a marketing mind, but rather with a venture capitalist who sees significant opportunities in the “chaos scenario” that is the field of advertising today. Wilson focused his presentation on the concept of “earned media.” Earned media is the antithesis of paid media, and happens when brands do something valuable or useful that itself attracts attention, rather than relying on CPMs and GRPs. Wilson presented a few examples of brands that are winning here. One example he shared is “Men With Cramps,” a humorous “mockumentary” created for the ThermaCare brand’s menstrual SKU. Our agency actually helped put that together for the brand two years ago, and it won an Effie last year.

My favorite story was the example of a business in L.A. called Kogi; it is a few trucks that drive around the city, park every so often, announce their locations via Twitter, and collect dozens of customers at each stop for their killer cuisine. The marketing plan involves the owners and operators blogging and tweeting their life experiences as they run the operation throughout the city. It’s winning because of a combination of great product (spicy Korean barbecue is novel), a unique and valuable service (traveling restaurant you can track around town), and an open, social brand that people can personally connect with. To me, this is the only model of brand building that will increasingly survive and advance.

Fred tossed out a few other valuable tidbits. He mentioned that CareerBuilder’s Monk-E-Mail viral earned 300 million users who spent 8 minutes each on the site and cost only $250,000 to build. That’s less than the production cost of an average 30-second ad, and got huge results without the multimillion-dollar media buy to go along with it. He suggested that this was a key change of the “earned media” model: less money to media, but likely more time and money toward getting a killer idea. Wilson talked about how he had read data that suggests “clicks from social media convert at 2x to 4x that of paid search,” which makes sense. He ended with examples of the kinds of companies he is investing in within the advertising space; his first question in reviewing a business model is: “Is there some kind of valuable service being provided?” I couldn’t think of a better fit with Marketing with Meaning. You can check out Fred’s presentation on his blog.

Josh Weiss, Managing Director, Delta.com/Self-Service/CRM

On a panel about how technology changes your company, Weiss provides some interesting perspective. First, he shared the good news that Wi-Fi will be available on the entire Delta fleet by the end of 2009. In terms of marketing, he shared the story of how Delta was close to putting open consumer comments on the front page of its website redesign as a way to visibly show that it is a new kind of company, post-bankruptcy. But after much debate at the highest levels of the company they admitted that they were not quite ready for it, and instead launched a separate site, blog.delta.com. It’s a good admission and probably the right call for now. Weiss also admitted the challenge of deciding which mobile platform to design for; he shared that he personally has an iPhone and BlackBerry. Each phone has different benefits, and the fact that he has both is proof that no single option is prevailing.

Bob Kraut, VP of Marketing Communications, Pizza Hut

Who knew that Pizza Hut was taking digital so seriously? Well, with nearly a billion dollars in online orders, it now has to. Kraut shared the experience of his company seeing these sales spike, and increasingly shifting pizzahut.com from a branded vehicle into its largest single “store.” I enjoyed hearing that the company has moved from trying to have a “sticky” home page that keeps people around as long as possible toward a “slippery” page that gets online orderers in and out quickly. Kraut has found that people ordering online are higher income, less price sensitive, and very picky about the right to choose. Kraut also told the story of Pizza Hut’s recent April Fools’ prank, in which it leaked plans to change its name to “Pasta Hut.” The effort earned a lot of buzz and Pizza Hut was a Top 10 in Google Trends (a very interesting new media gauge of success in itself).

Steve Rubel, SVP, Director of Insights, Edelman Digital

Rubel hosted a panel on “What’s Next, Before It’s Too Late.” To be honest, I didn’t hear any breakthroughs from the panel, but Rubel provides some good quotes. He called Second Life “digital marketing’s Vietnam War.” Rubel also captured a key insight, that most brands that edge into social media are only doing it in support of a limited-time creative campaign. He said that “social media is like soylent green; it’s made out of people,” and called on brand marketers to personally get in the social media space on an ongoing basis. The recent Skittles story, for example, was less effective as a one-time stunt, and missed the opportunity to forge a relationship.

Mark Sapir, VP of Marketing for Sports & Entertainment, Topps

Sapir revived many memories of collecting, sorting, and trading baseball cards as a kid. He shared the story of how Topps is evolving its entire approach to a new generation. Baseball cards used to be the main way that kids connected with athletes; at a time when there was no TV or stats in the sports sections of the newspaper, the baseball card was the only way for a kid to really “see” the players. Fast-forward a few decades and kids can watch SportsCenter 24-7 and look up live stats online. So Topps needed a new way to stay relevant and add value; in other words, it needed Marketing with Meaning. So the company has launched ToppsTown.com, which essentially mirrors the Webkinz model. A special code in each card allows kids to unlock virtual cards on the site. Once there they can view their collection, trade with people, read real-time stats, and play games. In the early days of the site and new baseball season, ToppsTown already has 200,000 members.

Simon Clift, CMO, Unilever

Clift had one of the most-discussed presentations of the two-day event with Wednesday morning’s keynote address. I was most pleasantly surprised by his story of Greenpeace protests against the company’s use of palm oil from rain forests. The group created a viral video mocking the company’s “Onslaught” viral video with its own version called “Onslaught(er),” which showed the effects of deforestation. Clift admitted that his company needed to listen and respond to the protests, and ended up working with Greenpeace on a plan to develop more sustainable sources. I believe it took remarkable emotional intelligence for Unilever to partner with the group after a fairly unfair campaign.

I also enjoyed hearing Clift talk about how smaller efforts seem to be more successful in this world of connected consumers and social media. He threw out three of my favorite quotes of the event, all of which point to a new way of approaching marketing: with less media-budget bang and more meaning:

  • “It is possible to become famous on a dollar and a dream. Imagine what’s possible to do with our brands and our resources.”
  • “We may be ahead of some of our competitors. But we’re most definitely behind consumers.”
  • “I’m convinced fat media budgets help make people lazy, and we’ve thought about [whether we] should cut media budgets on some specific projects in order to force people to come up with better ideas.”

Joe Rospars, Founding Partner, Blue State Digital, and Former New Media Director, Obama for America

The story of Team Obama’s success with social media has been told many times in many places, but I still pulled a few new takeaways from Joe’s interview on stage. I found it interesting to hear that a key early decision in the campaign was to create a specific New Media team that was separated from the IT group. Traditionally campaigns had lumped digital marketing into IT, but this separate group helped elevate the discipline, and the team had its own seat at the strategy table. I also learned something new about the power of small donations; it seems that many of the 3 million people who donated gave around $5 each. The campaign looked at small donors less for their actual gift, but more as a way key to binding them personally to the brand. This reminds me of why we participate in the General Mills Box Tops for Education program at my children’s school, where I am president of the board; these box tops add up to only a small amount each year, but every time parents cut one out and bring it in they are building a stronger bond with us. But these small donors did add up for Obama: The 3 million online donors ended up making 6.5 million donations that totaled a half-billion dollars.

Sheryl Sandberg, COO, Facebook

I’ve had a love-hate relationship with Facebook over the past few years. I love the service as a user but hate the overpromises on its advertising platform, which is literally invisible to users. But Sheryl Sandberg earned more love with her fascinating story of how the service is improving people’s social networks in a session titled, “How Many Friends Can You Have?” She broke down various types of networks that people have as follows:

  • Our brains can handle about 150 personal relationships at any one time, which is called Dunbar’s number.
  • Most people know 500 to 5,000 people.
  • Facebook members have 120 friends on average.
  • The majority of our communication is with 10 people on average.
  • We have a close support network of only two to three people.

Sandberg claims that digital technology, especially Facebook, is creating a new concept called the active social network. She defined this as people who: (1) you know something about what they are up to lately; and (2) you communicate with them somewhat regularly. She claimed that Facebook is proven to double the size of people’s active social networks.

She went on to describe the four types of relationships that people have on Facebook: friends, family, coworkers, and “public profiles” (brands and celebrities); and she shared the three distinct types of communication on Facebook: inbox, chat, and wall-to-wall.

Overall, it was interesting to see that Facebook is really getting scientific about its study of human social interaction. It suggests to me that the company aims to become much more meaningful, rather than just waiting to cash out on a new ad model and IPO. In fact, I was blown away that Sandberg admitted that Facebook has realized that traditional banner ads will not work for the firm or advertisers. Rather, they must create marketing that fits with the core idea of the social network itself. Sandberg ended with the example of Honda’s “give a heart” program, which got 1.5 million interactions and 100 million impressions in four days.

Lucas Watson, Global Team Leader, Digital Business Strategy, P&G

I’ve gotten to know Lucas well over the years that we have worked with him at P&G, so it was great to see him represent the world’s largest advertiser on the digital stage. On a panel about “Redefining the Media Mix,” Lucas suggested that the key for brands is not to choose a cutting-edge media innovation first (i.e., “let’s do something on Twitter”), but rather to start with a killer idea, and then see where all kinds of media, both old and new, can make it come to life. He also had a good suggestion for brands thinking about social media: The key is to create a “social media framework” early in the form of a good database that you communicate with regularly. Then, when your idea is ready to go, the network is available for your launch.

So, overall, another good conference where I’ve learned a few new tricks to apply to our clients’ businesses and our Marketing with Meaning concept. My next blogging/tweeting conference will be at the Mobile Commerce Summit in Las Vegas June 3. I’ll be presenting a workshop on mobile+financial services. See you there!

(Here are some of the best Ad Age articles on the event.)

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Posted in Conferences, Uncategorized | 5 Comments »

Delta Makes Me Smile (again)

Wednesday, September 24th, 2008

A few weeks ago I wrote about a great experience with Delta, in which the airline noticed that I was stuck in the middle seat on a Monday morning and rewarded me with an apology and a few bonus miles. This week, I was again pleasantly surprised with a nice charitable tie-in to the Breast Cancer Research Foundation.

I received an email from Delta inviting me to register for a promotion in which 250 miles would go to both me and the Breast Cancer Research Foundation if I simply booked a flight or checked in online at Delta.com. In terms of meaning, this provides value to me on two levels. First, I’m definitely a mile collector, and I like the chance to add a few to the bank for future free tickets. We call this Solution marketing.

But this goes further to add the benefit of helping me, in a small way, improve the lives of others by sending miles to this worthy cause. All I have to do is print a boarding pass online, so it’s little effort and a nice reward. It makes me feel a little better about myself.

And this is where the marketing benefits kick in for Delta. The brand benefits by linking the benefit to an action that builds Delta’s business. It might sell a couple more tickets, and also saves on costs by getting people to check in online. Shifting habits might lead to long-term benefits for Delta.

Another long-term benefit is the boost to the brand equity. Smart cause tie-ins like this make customers feel better about giving their business to Delta.

Finally, thanks to its loyalty program and ability to track customers through extensive data on each interaction, Delta can get ROI results for even modest promotions like this, and it can start personalizing the offers that it provides to individual members. Delta might find that it is more meaningful for me to receive cause-related offers, resulting in greater efficiency and results.

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Posted in Achievement, Cause Related | No Comments »

Delta Makes Me Smile

Friday, August 1st, 2008

I have spent a lot of time with Delta Airlines lately. Most people would consider that a bad thing. I’ve been on the road quite a bit this year, and already hit the Gold Medallion level of 50,000 miles with just barely half of the year gone by. Flying has become more expensive and more troublesome over the years. But the more I travel lately, the more I’ve been surprised and delighted by Delta and the meaningful services it is bringing to me along the way.

My most recent positive experiences came this week after a trip to NYC. First, I was supposed to fly up Sunday night for a Monday meeting. On the way to the airport, I got a cell phone call from Delta notifying me that my flight had been canceled. The automated voice went on to say I was automatically booked on a flight the following morning, and I received a follow-up email with the information. This is a great service, and a real difference from how the airline world worked just a few months ago. At Delta.com, you can specify how you want to be alerted to changes in flights. It’s great, meaningful marketing – but also something we have come to expect. After all, when a service like Facebook can alert me by SMS when a friend uploads a new photo, I expect Delta to alert me on something as important as a flight change.

My flight the next morning was fine, but somewhat uncomfortable since I was stuck in a middle seat because of the flight cancellation. The next day, however, I received the message above in my email inbox.  As you can see, it is a very personalized note titled “A Cure for a Case of the Mondays,” which goes on to apologize that a Gold Medallion member like me had to be wedged into the middle seat. The note goes on to credit me with 500 Skymiles for my discomfort.

I really can’t remember the last time a loyalty program was so aware of my situation and eager to keep me happy. I am so used to expecting so little – especially from airlines that have a monopoly-like lock on my travel – that this automated effort made my day.

Delta seems to be making some impressive strides toward meaningful marketing in recent months. Aside from my experiences, Joseph Jaffe has a great post about how Delta is connecting with people through a very active Twitter account. Delta has a fairly active blog up that takes readers “under the wing” to “share stories on ideas, changes and our people.” The blog even links to competitors like Southwest in its blogroll. Heck, even Delta’s flight safety videos are drawing attention.

I’m not sure why it took so long for Delta to better utilize its Skymiles loyalty program, or to put a personal face on its brand through social media. Maybe it’s the rising cost of oil and the fact that Delta increasingly has to fight for flyers. It could also be improved software, and even better management.

Whatever the reason, Delta is working some magic on this frequent flyer. I feel like Delta values my business and is on my side as I fly around the world trying to make a living. When I have a choice, it will be Delta all the way, as I feel like the more I fly with the brand, the more it will repay me with great service and other rewards. Meanwhile, I tend to give Delta more benefit of the doubt when it cancels my flight or moves to merge with Northwest. And in this specific flight above, Delta’s great service leads to this positive blog post on a site that is getting as many as 100 visitors per day (thanks, dear readers!). That drives further positive word-of-mouth and stronger search rankings.

And in this specific case of the “middle seat,” all it really took was for someone to write a new rule into the existing loyalty marketing database that Delta has had for decades. All it took was someone to notice and care – which is all we really want as human beings.

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Posted in Loyalty Program | 2 Comments »