Oracle is increasingly active in the Loyalty Marketing industry and has reported success in providing technology support for some of the largest frequent flyer programs in the US.

I recently ran across an Oracle blog that recounted how Alaska Airlines upped its email game, adding a greater degree of personalization by replacing a legacy mainframe loyalty system with Siebel Loyalty and Siebel Marketing. Going beyond the sales driven copy in the post, I was interested to hear Steve Jarvis, Vice President Market Sales & Customer Experience – Alaska Airlines speak about the airline’s commitment to provide “proactive customer service” and “superior customer service and innovations” to the over 22 Million passengers they fly annually.

Apparently, Alaska could only reach the 2 Million flyers enrolled in its frequent flyer program and was suffering from the same problem encountered by many retailers – how to identify the customer and create customer engagement. The Siebel installation apparently changed all that as Steve Jarvis relates in this video.

Alaska’s new-found ability to reach its customer base with targeted emails and promotions made me think – which pattern will they follow? Will it be a judicious email policy adopted by the legacy airlines or the firehose approach adopted by the newer “discount” airlines, in particular Spirit?

Hanifin Loyalty recently completed a survey of the use of email as a communications vehicle across the loyalty programs of 22 companies in the Airline, Retail, and Hospitality industries. Full results of the survey will be published in the very near future.

As a preview of the findings, the airlines had the highest rate of email issuance at 5.4 per month. 35% of the emails were related to program membership (meaning statements and newsletters) while 56% were purely promotional and 6.75% were pitching cobrand credit cards.

Sadly, less than 1% of all emails had evidence of a behavioral trigger (i.e. the customer did something that triggered a promotion or offer) and surveys were rare indeed.

The biggest contrast stood out between legacy and discount air carriers with legacy (American, Delta, US Airways) issuing 3.5 emails per month & discount carriers 7.3 per month. Spirit stood out among all airlines surveyed with a whopping 14.8 emails per month.

The results of our email survey pointed out the importance of cadence and relevancy in managing email campaigns. Spirit certainly displays a consistent cadence with an email almost every other day. Trouble is, how many “Red Light Specials” can the recipient endure before she reaches for the delete button every time Spirit shows in the Send field?

For loyalty program sponsors, in this case airlines, two huge areas of opportunity exist.

1. Use the data they possess to send fewer emails with higher relevancy. This is the antidote for customer attrition.
2. Make it bleeding obvious (as my UK friends would say) that something the customer did triggered the email.

I want to know that because I visited the Delta Crown Room in LaGuardia that I later received a discounted offer for annual membership. Better yet, I’d like to see that my survey response indicating St. Croix as a favorite destination with American Airlines resulted in a packaged offer of hotel and discounted airfare.

Air travel has changed from an exciting and privileged experience to something considerably less elegant. Leisure travelers absorb the shock from ever-changing TSA procedures at security checkpoints, and unknowingly contribute to the woes of their fellow travelers when they board loaded down with enough bags to make the Beverly Hillbillies look like minimalists.

For the business traveler sitting across the aisle, aspirations of time efficiency and comfort are placed on a 3 hour hold each trip as seat pitch has become so tight that only a notebook computer will open up comfortably in flight.

Corporate travel is increasingly driven by economics, and many flyers who used to hold out for a legacy carrier to fly in familiar circumstances and collect more frequent flyer miles are now abdicating “loyalty to the livery” and accepting the best combination of schedule and price – period.

There is a lot of talk among airlines and consumers about how to improve the air travel experience, and last week Spirit Airlines took a bold step towards “improving” the situation by announcing it would impose baggage fees – not for checked bags – but for bags carried on with intent to be placed in the overhead bins as of August 1.

Ben Baldanza, Spirit’s President, has been making the media rounds defending his airline’s new policy. Advancing a questionable argument, he has been rationalizing the new policy saying that consumers will actual save money on a net basis because Spirit’s fares are being reduced, and that 5 minutes saved in more efficient boarding  of aircraft accumulated over a 24 hour period will save 20 hours of airplane time per day – the equivalent of having two extra $40Million planes in the fleet. If that isn’t fuzzy math, then I don’t understand the concept.

Spirit’s new baggage policy has its foundation in operational efficiency as do many similar airline policies. The trouble is, they seem to have forgotten about the customer in the process. Between the new baggage policy and the recent announcement of its “pre-reclined seats”, Spirit is either focusing ever more narrowly on its target market, or is outsmarting itself one new policy at a time.

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Spirit may be wiser than we think. They are a price-driven airline appearing to cater to the leisure traveler. It is possible that they have abandoned all thought of courting the business traveler, and are moving ahead with new policies to further strengthen its position in its chosen market.

Spirit’s promotional marketing strategy is oriented to the leisure flyer. In a recent survey of email communications used by loyalty program sponsors, Hanifin Loyalty found that Spirit was the single most prolific sender of email among 22 companies studied, with an average of 14.77 emails per month. With almost zero evidence of behavioral triggers in its email flow, Spirit uses edgy messaging to tout low prices in over 96% of its emails.

In my view, there can only be one low price leader per category. In retail it remains Walmart, and in air travel, it could be Spirit. There is risk to this strategy, and cracks have appeared in Walmart’s low-price strategy recently as consumers are questioning if in fact they offer the lowest prices around. There are several discussions on Retail Wire on the topic and here is a link to one of them. The warning is that once a company is positioned as the low price leader, they have little to cushion their fall should they lose the advantage as customer experience and quality are often perceived to be below the competition.

Time will tell if Spirit has made the right moves and, while the market decides, my vote is for the regulators to stay out of it.

I believe that many business travelers will resist these changes and avoid Spirit or any other airline who adopts similar policies for two big reasons – checking a bag limits the ability to make changes to an itinerary on the day of travel and costs business travelers precious time once landed at a destination.

Spirit has the right to choose its course, as do we in the frequent flyer population.

What do you think?

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.

Consumer brands are not only tough to establish, but expensive in the process. The investment and impact both have long term implications, so most companies exercise extreme care in crafting their intended message.

Brands within categories tend to share turf. Soft drinks are young and fun, while banks tend to convey safety and confidence. Contrasting messages have emerged in some verticals as newer competitors attempt to shake up the space. For example, discount brokerages tend to emphasize personal service and low fees, while the big boys (who’s left?) issue a more traditional sentiment.

The airlines have generally held pattern, painting aspirational pictures of all the places they can take you and the comfort in which they will do so. This was the case when the US had 5 or 6 trunk carriers, but not anymore. Whiz kids Jet Blue and Southwest have broken the operating mold and leverage their business model in their brand communications.

Marketer, Mechanic or Pilot?

Almost apart from the pack is Spirit Airlines, who would receive the award for edgiest airline, if there was an award to give. Spirit has spooled up its promotional engines to blast out a seemingly endless string of wacky messages that paint the sky like a summer contrail.

The spirit messages that I am thinking of are presented via the company’s favorite media channel – email. The 2-3 times per week emails feature price, price, and more price that look like a multiplication table:

• $12 off for 12 hours
• $24 off for 24 hours
• $35 off for 35 hours
• $48 off for 48 hours

Others punctuate seasonal change, ranging from an Autumnal “Jack O Low Fares”, an Election Day “Ochobama” fare special to Thanksgiving’s “Tan your Turkey” event.

But the self proclaimed “Kings of Shock Marketing” has outdone themselves with a series of promos that would thrill Dr. Ruth to the bone: “Red Light Specials” are just the start with “Don’t Go South Without Protection” and “We’re proud of our DD’s (Deep Discounts)” joining up with “MILF”, “WTF”, and “We’re having a threesome (Three sales in one)” capping off a list that might create misgivings about exactly what services are being offered.

Spirit evidences a high level of self-awareness when it writes in an email that “These promotions are designed to be entertaining, humorous, and of course, impactful”, and to their credit, they don’t miss a trick. Even the current economic cycle gets the spotlight with “The High Fare Bailout Sale” run last fall.

The question is not so much “what are they selling” as “is it compatible with air travel”? I’m all for differentiating from the competition, but has Spirit gone “hors categorie” in their attempt to gain consumer attention? Will this branding create the competitive edge needed for future survival, or will Spirit simply become known as the Ashley Madison of the skies?