The Mega Event wrapped up last week in Montreal with the first annual presentation of the Mega Awards honoring the best in airline frequent flyer programs (FFP) and a second day of presentations that covered social media, coalition marketing, and a keynote which unveiled the term “Trustability” from Don Peppers.

Mega Awards were conceived to recognize marketing campaign and product development excellence in the airline industry covering Loyalty, Social Media, and Ancillary Revenue.Freddie Laker hosted the awards evening. A founder of Sapient Nitro and son of legendary airline innovator Sir Freddie Laker, he was so entertaining that an ESPY hosting gig might be in his future.

You’ll have to visit the Mega Awards web site for all the details, but here are three highlights that stood out for me:

Best Merchandising Product
Wessco International won top honors here for creating a co-branded offer that bundled a $10 off $30 coupon for Bed Bath and Beyond with a blanket and neck pillow package sold on board American Airlines. With airlines fracturing the flight experience and turning each piece into a revenue opportunity, passengers need a little incentive to play the game. American Airlines trialed the BBB coupon on its flights and sold over 200,000 units in 6 months, creating ancillary revenue for AA while giving travelers more coupon value than the cost of the blanket and neck pillow kit.

Best in Airline Social Media
Air New Zealand created its AirPoints Fairy as a flighty persona that listens to customers and often grant their wishes – all through the AirPoint Fairy’s Twitter account. There was lots of innovation in this category with Lufthansa’s MySkyStatus allowing people to stay connected within their networks during travel and Volaris and airBaltic using Facebook pages to deliver messages about special fares and generate big chunks of incremental revenue. ANZ leveraged its program to set it apart from competition and illustrated how social media could be used to drive tangible results.

Best in Airline Loyalty
A tough category to judge with many worthy entrants, Velocity, the loyalty program of Virgin Blue, came out a winner. Locked in a dog-fight with rival Qantas, Virgin Blue had 60 days to create and execute a campaign to protect its frequent flyer base in light of market changes impacting how banks would allow consumers to use their credit card rewards points.

The promotion was multi-faceted and included an immediate 25% bonus point award to transfer points to Velocity as well as the chance to win 25 million points – the biggest rewards based prize ever offered in Australia. 25 million points equated to a chance to go into space on the highly publicised Virgin Galactic space ship.

Using the creative premise that Velocity was offering ‘average Joes’ the chance to go into space the campaign told the story from the “civilian” side and that of a disgruntled astronaut. The fictitious astronaut, Sgt Major Scott Petersen, protested in a YouTube video that “space is not for amateurs” and circulated petitions via Facebook pleading for support against “this crazy Velocity promotion that will let mere amateurs go into space”.

The promotion achieved the overall goal of shifting a key segment of bank card point collectors to the Velocity program and notched a 1605% increase in points transfers compared to a non-campaign period.  Points transferred per day increased by over 850% compared to a non-campaign period and approximately 400,000 visitors were attracted to the micro-website.

All costs accounted for, the promotion returned an outstanding 10:1 ROI, enough maybe to even pacify that angry astronaut.

I don’t usually include conference reports as posts in Loyalty Truth, but the quality of content shared by key persons in the airline / banking / loyalty industries during the first day of the Mega Event was so strong that I make an exception.

Rupert Duchesne, President Groupe Aeroplan kicked off the day by talking about – what else ? – The Future of Loyalty.  He noted 3 key trends that in his opinion, will define the business going forward:

1. Duchesne borrowed from an article written earlier this year by Google Chief Economist Hal Varian and stated that the Rise of the “Datarati” would define the winners among operators of frequent flyer programs (FFP). In simple terms, he made clear that the companies which use the data they have collected effectively to drive marketing efforts will come out on top. We agree here in Loyalty Truth.
2. Credit card rewards programs will continue to be under pressure. With the passage of CardAct 2009, the Code of Conduct in Canada, and the looming Durbin Amendment, life as a credit card marketer will continue to be challenging in 2011 and beyond.
3. There will be an Evolution of how Best Customers are defined. Companies will go beyond the typical Recency, Frequency, Monetary Value equation and add Social Influence (using things like a Klout score). Duchesne cited ShopKick and Social Rewards as examples of outfits that are bringing this idea to market.

Lance Blockley, Managing Director Edgar Dunn & Company contrasted Co-branded credit card offers linking “direct” to FFP programs and those credit card offers that consolidate multiple travel awards rather than linking with just one airline, offering up some insightful distinctions between the two models.

The panel discussing “Lessons from the recession” was a pleasure for me to moderate as we had 4 stellar panelists with Air Jamaica and Virgin America represented. Dr. Ricardo Pilon explained how airlines need to refocus their objectives and think about the holistic nature of customer loyalty to meet future challenges. Brett Billick, Virgin America emphasized that airlines should keep the focus on the product, not on the loyalty program itself. Angela Brissett-Martin, Air Jamaica offered a great case study of how the airline reached out to their highest tier flyers to make sure they stayed “on board” during the recent merger with Caribbean Air. Jef Harris added that airlines have to balance their ancillary revenue strategies with overall loyalty strategy.

A panel discussing the new IFRIC 13 standards for managing liability from FFP’s brought new perspective to a subject many would prefer to avoid. Instead of thinking of the value of unredeemed mileage as “liability”, Mikund Srinivasan from Emirates / Skywards suggested that we consider the money socked away to be a current asset that can be used to fund program improvements. Mike Hemsey, President Kobie Marketing, preferred the term “deferred revenue” and reminded delegates that high redemption equates to strong engagement and strong incremental revenue growth.

The day wrapped up with Simon Hickey, CEO Qantas FFP, who talked about how the airline formed its coalition style program and the results it has generated. Earlier in the day, Duchesne had stated that Loyalty was important as Qantas had registered all of its profit last year from two sources: its FFP and low cost carrier, so you knew that Hickey’s story would be a good one.

During the presentation, Hickey announced the airline’s new iPhone app and emphasized that Customer Engagement was key to future success. He wrapped up by predicting that Loyalty would be “the growth industry of the next decade”.

I think I have to agree!

Steven Slater is a blogger’s dream. For anyone looking for that quirky story to opine about, Mr. Slater provided a remarkable set of actions that will earn him a bit more than 15 minutes of fame. In fact, I’ll bet the incident that took place this week on Jet Blue flight 1052 from Pittsburgh to JFK will be cited in serious business circles over the next year as some form of turning point in improving the commercial airline travel experience.

Let’s be clear. It is not acceptable for a customer facing employee, whether flight attendant, service write-up person, or cashier to lose control and address others with anger and profanity. The world is a frustrating place but my Dad used to remind me “the veneer of civilization is paper thin”. In other words, we have to maintain control no matter the circumstances.

On the other hand, flying commercially is becoming more tortuous by the day. The restrictions that the airlines deem necessary negatively impact the flight experience and, rather than the intended compliance, are bringing out the worst in many people.

It seems the more travelers are charged for things that used to be free and the less freedoms we enjoy in flight, the more rebellious that paying customers seem to become. Our sense of entitlement is being threatened and we don’t like it. The offending passenger on Mr. Slater’s flight, by all reports, was truly offensive and anyone of us that endures business travel can attest to the selfish, rude, and flat out ignorant behaviour displayed by many passengers these days.

Toddlers learn quickly that ignoring rules and responding with extreme petulance draws further punishment. Mr. Slater executed his own version of a smack down and essentially threw his entire flight into “time out”. Not good, but he certainly delivered his message.

In my opinion, the airlines could defuse frustration for all parties on board simply through improved communications.

I have always wondered if using my cell phone in flight “really” impacts flight operations. Now it seems that placing your mobile device in airplane mode is not enough as we are constantly reminded to “turn everything with an on/off switch into the off position”. I guess Apple wasted its time designing that feature for its iPhone.  Posting simple explanations of policies that impact passengers would go a long way to soothing flyer nerves.

The biggest opportunity for airlines to create goodwill with their customers is to make compliance with TSA’s Secure Flight Program a breeze. If you are not familiar with the requirements of Secure Flight, read here.

I have received notice of my need to comply from several airlines via emails and in newsletters. JetBlue published a link in an email addressing the topic but I challenge you to find further reference to the topic on their website. Delta currently requires passengers to change the name of their SkyMiles accounts in writing and to provide “legal documents” as support.

I’d rather send them my legal name that matches my passport and redeem 10,000 miles for them to make the change, not that they would ever consider making it this easy.

Neither prosecuting Mr. Slater nor further clamping down on passengers will yield good results for the airlines as a group. Giving more thought to communicating the reasons behind in-flight requirements and making it easy for loyal frequent flyers to comply with new TSA regulations would not only serve as damage control, but represent steps towards restoring civility in commercial air travel.

There’s an App for all this: it’s called social media. Why don’t the airlines considering using it to communicate with their valued customers?

I am often asked where to go to learn more about Loyalty Marketing. Until Mark Johnson and his crew launched Loyalty 360, it was difficult to provide a useful answer.  There are occasional tracks presented at the annual DMA event and Colloquy continues to deliver its Loyalty Marketing Workshop in conjunction with the DMA, but for up-to-date industry specific information, the choices narrowed.

One new entrant that should be worth attending is the Cards & Payments Loyalty Conference slated for 2 December in New York.

If you’re looking for airline specific information on Loyalty Marketing, I’d suggest that you become involved with Airline Information, the brainchild of Christopher Staab and Roger Williams. Both of these gentleman have deep roots in the airline business and, through their conferences, are not afraid to tackle the tougher issues of ancillary revenues, frequent flyer programs, and cobrand credit & debit card partnerships.

One of the bigger topics in discussion these days is how the need for development of ancillary revenues can conflict with cost savings. Considering that a mainstay of frequent flyer programs has been the cobranded credit card, it is controversial that the airlines eagerly accept $billions earned from co-branded credit cards while mounting protest to the amount they pay in merchant fees. Edgar Dunn & Company and ARC estimate that the airline industry faces annual cost of U$1.5 billion for the privilege of accepting credit card payments or approximately U$12 per ticket, so the magnitude of the issue is clear.

You can take part in the debate by attending one or both of AI’s conferences in the coming weeks. First up is the FFP-ARAC “Mega-Event” to be held 22-23 October in Los Angeles.  This conference has a decidedly strong marketing bias while the Airline & Travel Payments Summit, planned for 2-3 December in Miami will address payment and revenue issues as well as related marketing topics.

If you can’t wait for either conference and want to stay on top of industry issues, you can also visit Roger Williams’ Load Factor blog.

I recently attended an AI Networking Cocktail in Miami and hosted Evan Liu of Spirit Airlines as he talked about the role of Free Spirit for the carrier and future plans for development. These events are well organized and attended and I encourage you to give AI some mind share if you are interested in the airline industry.

AI has been specifically looking into the development of cobranded airline debit cards as a compromise solution between ancillary revenue and cost savings.  Delta Air Lines recently introduced a SkyMiles co-brand debit card in association with SunTrust Bank, and considering the economics of the debit card, you might ask why and how can issuers/airlines support the value proposition of giving away frequent flyer miles on debit card purchases.

AI was looking for the same answers and recently published results of 31 airlines surveyed in their latest “45 Second Survey on Cobrand Loyalty Debit Cards”. They found that only 37.9% of airlines had previously looked at the benefits of issuing a cobrand debit card while over 55% consider debit cards as a “steady or significant” source of growth for ticket purchase. Today only 5% of airlines surveyed offer a cobranded debit card, though 48% responded that they were “very interested” in pursuing co-branded debit cards.

To navigate safely through the storms of commercial aviation and take part in the rebirth of frequent flyer programs, stay in touch with AI.

6am Miami International Airport: Oil prices are near record highs and American Airlines grounded a slew of MD80’s last week due to maintenance shortcomings. Regardless, my flight is full and standbys number more than 40. The slug of people around the check-in area makes me feel late, though I am not. Another passenger asks what group is boarding. “Must be open to everyone” is my reply but quickly we hear that only Executive Platinum and Group 1 are invited to board. The crowding of the gate does not make sense, but then again we’re in Miami…

The Middle Seat is one of my favorite columns in the Wall Street Journal (it often addresses frequent flyer programs and loyalty programs) but not my preferred seat while experiencing travel first hand. With nearly 3 hours of flight time and gawking tourists on each shoulder, I am relegated to catch up on my reading. Only a Cirque de Soleil performer would dare boot up the laptop under these circumstances.

10am DFW Airport: The cabbie is unsure of how to find the Westin Stonebriar Hotel. When I refer to the “Westin”, he asks “It’s a hotel, right?” I give him the phone number and he obtains directions.

Since the Westin was booked for the conference I am attending, I guide the cabbie to the nearby Comfort Suites where Corporate Travel has booked me. Arriving at the desk, I observe literature on hand describing Choice Privileges and realize that it might be the only hotel loyalty program that I have yet to join. Before I can complete the application, the friendly desk clerk provides a bit of local knowledge, suggesting that I will save significant bucks by renting a car instead of cabbing it during my stay. Budget is the recommended choice and I am lucky to be offered a ride to the nearby office.

Pulling up in front of Walmart, my driver tells me that we have arrived. My quizzical look prompts her to tell me that the Budget office is inside the store. This is what I call winning “eyeballs” brick and mortar style. Just as web sites were judged by their ability to capture eyeballs during Web 1.0, Walmart is apparently the catalyst to build audience for nearly any business to succeed – at least in the sprawling suburbs of North Dallas.

After signing my rental agreement, I ask the counter person for directions to the Westin. “It’s a hotel, right?” is his response. I am starting to realize that Walmart owns higher brand recognition in these parts than does Westin. Maybe I’ll drop by the Marketing department at the Stonebriar if I have a chance. They need help.

11:30am The Westin: The conference I am attending is the first annual Customer Loyalty Summit, and the agenda is full of presenters from highly credentialized loyalty sponsors including Harrah’s, Wachovia, Neiman Marcus, Best Buy, and JetBlue. The unintentional theme for Day 1 is examination of approaches to linking customer satisfaction data to profitability while improving customer experience. It is refreshing to hear about the gritty details of program execution rather than the usual theoretical pabulum.

5pm The Westin: The highlight of the day is the final session given by JetBlue. Bryan Jeppsen delivers a folksy talk detailing how the airline interprets responses to open ended survey questions (known as contextual data) and arrives at actionable strategy to increase customer satisfaction. He closes with a video that he admits “I really like but am not sure what it has to do with loyalty”. The video is clever and draws a surprised response from the attendees. Funny stuff, but Bryan was right, it had nothing to do with anything on the agenda.

11pm Comfort Suites: Offering feedback on the accumulated customer experiences I encountered today would overflow the space allotted to answer survey questions from American Airlines, Budget Rental, Comfort Suites, and Westin ……. if only I had been given the chance.

Didn’t I say it was April Fool’s day in Texas?

Bill Hanifin