Archives for posts with tag: customer loyalty

Not to rehash previous posts in their entirety, but I once more take the approach that marketing is the process of getting your product to and into the market—a larger discipline that includes R&D, sales, and customer care, not just promotion and advertising. Marketing also includes pricing and margin optimization, which can often mean needing to reinvent or reposition existing products with a new spin.

To be successful, marketing needs to take the customer’s side—to paraphrase a saying that has popped up at the top of my LinkedIn feed for the past week, marketing needs to listen to learn, not just listen to answer. What is the psychological driver that causes product adoption? Yes, a need is surely a driver, but among myriad choices, what differences matter to whom?

Therefore, both customer satisfaction and customer loyalty are critical measures of marketing’s success. However, satisfaction ≠ loyalty. You can have extremely satisfied customers, but if they buy based on price, and you raise your prices, they may not stay loyal. Thus, loyalty measured in price elasticity is an important metric to track.

Which brings me to Delta Airlines’ brilliant decision to revamp its frequent flyer loyalty program, and start rewarding travelers based on how much they spend, not on how far they travel. This shift has received tremendously negative attention in the press, I’m guessing because muckraking is fun, and business acumen is not required to write a compelling story.

Let’s first cite a different example. Grocery retailers reward their worst customers the best—those who spend the least get the quickest lines. But those who spend the most need to queue up in long lines while the ice cream is melting in their shopping carts. Grocery retailers are well advised to treat “high rollers” just as well, if not better than the “quickies.” The tactics supporting this strategy would be quite simple to implement.

Delta has grasped this. To date, like all airline loyalty programs, bargain shopping has been the most efficient way to maximize the value of a frequent traveler loyalty program—in fact, infrequent travelers are rewarded the best, needing just a few cheap cross-country flights to earn the right to a free flight. Those who need to travel last-minute, and thus pay the most, get no additional benefits. Their ice cream is melting.

Instead, Delta will be re-programming travelers’ mindsets from spend-less-get-more to spend-more-get-more. Bargain hunting will die a quick death with those who want to maximize the value of their loyalty program membership. And Delta’s profits will soar. They may lose some travelers, so revenues may stay flat, but margins will be better. Less work = more money; employees and stockholders love this!

And I even question the loss of travelers. Most airports have one anchor airline, maybe two. But in the end you need to get to where you are traveling in the most efficient and expeditious manner, regardless of who you want to be loyal to. My own attempt to switch from US Airways to United Airlines—because I desperately want to stay with the Star Alliance loyalty program after US Airways merges with American Airlines’ One World loyalty program—has been an utter failure, because US Airways dominates PHX, and can get me to most destinations more quickly.

I bet that’s what Delta is counting on: increased happiness from its best customers (those who spend the most, most frequently), and the inability of the least good customers to make serious changes to their travel needs, while still giving them the ability to earn the same level of rewards they are used to (by simply spending more).

That’s pretty damn good marketing—the process of getting your product into the market at a higher profit margin, while offering the disenfranchised the opportunity to stay engaged.

One way I generate interest in our product, and start conversations with business decision-makers, is to sponsor and exhibit at high-level but intimate industry events. There I hold a contest to generate awareness of our company and move conversations along.

It’s a true contest—not a drawing—and the top two best participants each wins a prize (it pays to come in second!). We often receive praise for how realistically the contest mimics a high-risk issue the industry is currently experiencing, and how much fun it is to participate. People like the prize, too.

The prize is, and has been for a long time, the current version of an Apple iPad. I’ve been doing this since the iPad first came out (even awarding one a few weeks before it became available commercially). People love them…and I love people.

In the past twelve months alone I’ve placed orders for 24 iPads—24 winners!

After the event, once back home, I place separate orders via Apple’s online store, and have the iPads shipped directly to the winners. Everyone’s happy: the winners get their prizes, we generate goodwill and possibly enter into sales cycles, and even Apple makes money off our success. What could possibly go wrong?

Today’s order got canceled by Apple. This one really hurts, as an existing customer won the iPad. You see, after you’ve become a customer of ours, we still like you.

The automated cancellation email stated the following:

Apple is unable to fulfill orders that exceed the quantity limit per customer, or that ship to an international, freight forwarder, or an APO/AFO address.

Since my recipient is located in Texas, and I was shipping to the street address of the business, I was rather curious to find out what the violation was. After calling Apple, I’ve learned that I am a channel violator. I’ve placed too many orders (at full price, mind you), and the current order will not be un-canceled and shipped.

I am too good a customer.

Dave Stuart, Apple Business Representative, tells me that Apple will not sell me iPads if I wish to give them away as prizes, but they will sell me gift cards at the same value (and would I like to purchase one?).

I’ve been cut off.

Just you wait until they find out that I’ve gamed the system (unknowingly). Last October I placed an order for an iPad as a gift for my wife. I used my personal credit card, which has a different billing address than the corporate credit card. But I’m still the same violator. I just told my wife I probably wasn’t permitted to give her that gift, and she’s none too pleased…

Just like US Airways (see post), Apple punishes its good customers.

Marketers listen up: There has got to be a better way!