Promotions won’t make millennials loyal

The holy grail of brands and advertisers is reaching millennials, that misunderstood demographic that represents the future of every brand. This is the group everyone from retailers to TV networks is trying to reach in order to gain lifetime brand loyalty.

With college students returning to school this month, retailers are trotting out specials to attract that young generation. Target, Bed Bath & Beyond and Best Buy allow students to sign up for a kind of wedding registry so family can contribute. Amazon is offering college students six-month free trials of its Prime membership and DirecTV allows students to access its NFL Sunday Ticket coverage without a satellite subscription.

Millennials
Promotions won’t make millennials brand loyal.

I give those brands credit for at least thinking tactically. Industry experts estimate that the average family spends about $900 getting a child back to college, so the pot is big once you consider how many college students there are.

In addition, I’ve always maintained that brands should find opportunity at the point of a life event. So few do, thinking that cost and convenience will do the trick without considering when consumers are most likely to buy.

Sure, brands promote products seasonally. However, when retailers talk to consumers in a language that speaks to the current situation of the consumer, they have placed themselves within the consumer’s decision tree.

Millennials respond to brand meaning

But if those brands believe they are making life-long consumers this way, they are delusional. That is, they are delusional if they don’t have a brand that speaks directly to millennials at an emotional level. Life-long preference is not built on promotions. It’s built on the consumer’s self-identification within that brand.

Of the retailers mentioned above, I’d say only Amazon has a brand with appeal. The three retailers mentioned – Target, Bed Bath & Beyond, and Best Buy – are struggling to hold onto market share so any promotional fix will only be temporary. (DirecTV and NFL Sunday Ticket is a different animal. The brand carrying the meaning is the NFL.)

So, I give a nice pat on the back to those retailers for thinking about a life moment for potential consumers. To reach them earlier in the decision tree, where true preference lies, you need a brand millennials want to spend their lives with.

The rebrand of MasterCard isn’t a rebrand

Doing a re-launch of a brand is hard work to get it right. You have problems to overcome, not just with your outward face like a your current logo, but also what you do operationally. You have to do hard quantitative research, examine the competition (so you are positioned against it) and slay any sacred cows within the company.

MasterCard
MasterCard introduces MasterPass but not much else.

The re-launch of an updated MasterCard brand gets it only half right, but in a weird way. The credit card company now has an app that you use to pay, ala the Apple Store app. This is the wave of the future where physical cards become extinct. (A purchasing app is also something retailers should do more often.)

MasterCard with its MasterPass app has taken the first step forward and I expect its competition, such as Visa and Capital One, to follow suit. In fact, because MasterCard has always had an old feel to me, I’m a little surprised that MasterCard was the first to step forward.

Why MasterCard did not truly rebrand.

MasterCard got the operational part of the brand re-launch right, but the new logo is actually just a refresh of its old one. It won’t affect target audiences much. It might help it get rid of that old feel a bit. But it doesn’t have a new promise or anything new to say. And it’s not connected with anything new MasterCard is doing, such as MasterPass.

Companies are loath to completely rebrand, which is why I’m using the word re-launch. That seems to soothe companies because a rebrand sounds scary.

To steal market share, all options must be on the table. That’s why the slaying sacred cows edict is so important. Companies are wary that a complete rebrand will scare away current customers, but that’s not true. They are already ambassadors of the brand. The target audiences you want to reach are the customers of your competition.

MasterCardThe old adage goes that the definition of insanity is doing the same thing over and over again and expecting a different result. That’s what MasterCard has done here. It has, I’m sure, poured money and time into this re-launch and it will have negligible effect. It will be left wondering why the re-launch didn’t move the needle and its leaders will believe that any kind of future rebrand would fail.

But that’s because MasterCard did not rebrand.

JetBlue paying for TSA PreCheck is not enough

For any of you who traveled through the air over the July 4th weekend, you know how cumbersome going through security has become. We live in a world in which security is among our most important issues and TSA have responded by having one of the least efficient ways to get passengers through.

TSA PreCheck
The best way to avoid these lines is through TSA PreCheck.

The best way to avoid the large crowds and clogged lines that can stretch for yards is to sign up for TSA PreCheck. As many of you have probably seen, it’s a special entrance that moves much faster because you don’t have to take off your shoes and other duties that slow down the line. By going through the pre-check process, you have already been noted as someone safe to enter.

That is why I wonder why more airlines aren’t doing what JetBlue announced it was doing today. Footing the $85 bill for TSA PreCheck for its most frequent fliers.

Now, this kind of thing does happen at other airlines. You can often negotiate with your airline to pick up the fee, especially if you are switching loyalty programs as I did when leaving United to join American.

But no one has promoted such a response as JetBlue, which said it will pick up the fee for anyone who has flown 30 one-way JetBlue flights and earned 12,000 base flight points within a year.

Picking up the tab for TSA PreCheck isn’t a game changer.

A note of caution, however. This isn’t going to change the industry landscape much. For one thing, JetBlue doesn’t have nearly the number of routes that the big three of United, American and Delta have. But as air travel picks up and the security lines increasingly frustrate passengers, it makes sense for the bigger airlines to institute such a loyalty reward.

Airlines are currently basking in increased travel but they still have the same problem they had when things weren’t so rosy for them: How to create preference. For the most part, when it comes to the most frequent fliers, preference comes through loyalty programs and location of hubs.

It is artificial preference that can change by new loyalty rules (that’s what happened to me) or new or less routes. The airlines might think they have you trapped, but you can switch anytime.

Even paying for TSA PreCheck, while a strong move for any airline, won’t guarantee preference. The airlines have still failed to find any kind of emotional reason for why you would prefer one airline over another. It’s the reason why you have seen so much consolation in the industry because it’s the only way they can grow.

TSA PreCheck is a great thing. But the main problems still exist.

Affinity programs and why they fail.

Affinity Programs Rarely Create Affinity

Almost all businesses from retailers to transportation companies have affinity programs designed to foster brand loyalty. Most work very poorly and often are simply a table stake in the category. Retailers, manufacturers and airlines will often find that their customers belong to a host of affinity programs that most certainly includes their competitors. (Affinity programs are an extension of CRM. Read an article on CRM here)

Affinity programs are similar to coupons

In many ways, discount coupons can be part of the affinity programs because they are all aimed at fostering trial and gaining repeat business.

As retailers know all to well, this sort of affinity program has severe limitations because consumers all begin to regard the couponed price as the real price.

Affinity programsAs a result, a business built on couponing lowers the standard price point significantly and reduces margins. P&G (Proctor & Gamble) are victims of this game. As margins reduce so do advertising dollars. What these packaged goods giants are left with is poorly supported brands that rely on a discount price for business success. Not a very good model to say the least.

I have written extensively about the airline industry in the past. Nowhere are affinity programs more a part of day-to-day business and many are utter failures. Often times the programs seem more like a criminal sentence rather than a benefit. Let me give you a personal case in point.

Airlines use affinity programs as a cornerstone of customer relationships

I have frequent flyer accounts on a multitude of US airlines. These affinity program accounts promise advantages on international carriers as well because of the alliances (like the STAR Alliance, SKYTEAM or ONEWORLD Alliance). I am a perfect example of a prospect who belongs to a host of competing programs. How then do the airlines try to compete for my business? In a word—Status.

United Airlines affinity programsWhen you fly as much as I do, gaining status on one or more airline is not that difficult. The key number to remember is 100,000 miles. Generally, at that threshold your status is considered premier. Don’t confuse this with PREMIER STATUS, which is an industry designation. I am speaking of having gained a premier position in status over other flyers. And this is where the trouble begins. The promise of status is very different from the reality.

I have flown over 2.5 million miles on United Airlines. As a result, I earned their top tier status. I am officially known as a Star Alliance, 1K Gold Member. This means I have flown over 100,000 miles in the previous calendar year. Sounds impressive on the surface but the system really falls apart after that.

Global Services. The Pinacle of Affinity Programs

On United Airlines they have a special status known as Global Services. If you have ever waited in your designated line at a United gate you have probably heard this group called to board the aircraft after people with disabilities that need extra time to board and in conjunction with military service people in uniform. United does not disclose how they formulate the invitation to Global Services but there are plenty of blogs around that speculate in a revealing if not an accurate way on just how they do it.

Global services is the ultimate affinity programTwo years ago, United awarded me with a Global Services member invitation. Benefits included first on the aircraft boarding, upgrades to first class 72 hours before your flight based upon availability. A separate phone line to call to speak with a Global Services representative. No fee charges to change a reservation. Hotel rooms paid when needed —regardless of the reason (including weather). And if possible, they will even pick you up at a connecting gate with a tight connection and whisk you off directly to the next gate in a company automobile. I have even had them bump a fellow traveler from a flight in order to guarantee me a seat in a last minute change.

Affinity programsSounds pretty good. And it can be. The problem is in how United manages the Global Services membership. It turns out that Global Services status is not based upon miles flown but rather the revenue you generate for the airline— in comparison to your peers.

This past year, for example, I flew my usual 100,000+ miles on United. I also have a United credit card upon.which all of my travel is booked. My Hilton Honors program is linked to the United account (Hilton touts it as double-dipping) and even my Hertz rentals get logged into my United Mileage Plus account.

This year, United took away my Global Services status. The reason? Because their revenue was down on my total spend. I’m now just a 1K flyer.

I know, who am I to complain. Well I’m going to complain and I’ll tell you why. I am a human being and we all feel about our privileges in the same way we feel about a coupon price being the REAL price. Once we have it we feel punished without it.

How should affinity programs measure affinity?

What United did not recognize was the value of my long term business with them. They have no metric for understanding it and as a result will be the ultimate loser in this game.

American Airlines affinity programsAs a 1K, I’m on upgrade lists but I rarely get them because they continue to discount the first class seats up until the time of departure and award the remaining seats to any and all Global Services members. I no longer have a designated customer service rep to help me sort through the myriad of travel issues that accompany this many flights per year. On top of this, no one cares if my connections are tight or that I miss flights because of delayed connections. Well, almost no one because my clients and I care. It’s just that United does not.

Affinity programs

What United does no know is that I also have a premier status on American Airlines. I am an Executive Platinum with American and United just said goodbye to  all of my business.

Here is a bit of history. My local airport is a small regional one in Greensboro NC. Aside from a few select destinations like New York, Chicago, DC, Atlanta, Philadelphia and Dallas all flights require a connection. Many years ago I started flying with US Airways because they had the most connections out of Greensboro. I could get almost anywhere in the nation via a short 20 minute connecting flight through Charlotte NC.

As my international business grew, I began to fly more and more on US Airway’s STAR Alliance partner United Airlines because they had great connections internationally through another partner airline Lufthansa. Over the years, I flew more and more connections through United as opposed to US Airways because the hubs of Dulles, O’Hare and Newark worked as well for me as connections from Charlotte.

This seems to happen to everyone. Affinity Programs lose relevance.

What happened to me, as often happens to frequent flyers, is that my status with United grew and I tried to consolidate more of my flights with the airline to gain greater status. In an odd twist, United began to cut service from Greensboro at about the same time they acquired Continental Airlines.

United eliminated direct flights to Houston (a Continental staple flight), took on the Newark connection route and eliminated all real United flights from my airport. In its place they flew only United Express flights from GSO (as Greensboro is known) which utilizes small regional jets and are owned by companies like GOJet and other regional carriers. These flights were smaller and more cramped but the longest leg of the connection was Newark and you can put up with anything for an hour and a half.

Affinity programsThe next shoe to drop occurred when US Air merged with American Airlines, thus eliminating the option of any connecting flights through Charlotte. American is part of the ONEWORLD Alliance and not the STAR Alliance. At the same time as this merger, United stopped flying jet aircraft between GSO and Dulles and replaced those flights with a turbo-jet WW2 throwback that added 20 additional minutes to the flight.

Then United cut back on the frequency of flights eliminating the possibility of caching an afternoon flight out of DC for any international flights. Reliability of the on-time arrival of the connections was so bad that I took to always taking the earliest flight. Regardless of the length a layover I flew early because I was consistently missing my connections on United Express from Greensboro. To be safe, the best bet was first flight out in the morning on flights that originated from GSO.

Affinity programsThrough all of this turmoil, I remained loyal to United because of my Global Services status. They bailed me out of many a tight squeeze by meeting me at the gate and shuttling me to my connection. They provided me with the flexibility of flights by booking me on competing airline flights when the connection failed to work as planned. They treated me as if I mattered. As a result, everyone in my company flew United because often my colleagues fly with me. United failed to measure this value.

Affinity programs and the nNFL Baltimore ColtsThis past January, when United dropped me back to 1K status I gave up my loyalty. The reduction in status did not make me want to try to book more flights with the airline in an attempt to regain status. It had the exact opposite effect. It made me angry with them. I felt like a Baltimore Colts fan who had an emotional connection to a team that left me stranded in the middle of the night.

Suddenly I realized that my belief that I mattered to them was a figment of my own imagination. The affinity program was completely one-sided. They had no affinity for me.

In measuring my value to the airline, they failed to take into account the sacrifices I made to remain loyal. They also failed to calculate the value my fellow employees brought to United by flying with me. They completely missed the point. Affinity must work both ways or it simply does not work.

The brand opportunity for affinity programs

Here then is the brand effect of affinity programs; the value of a member needs to be calculated as a lifetime benefit not a short term measure. Once a benefit is granted it should be considered long term because anything less than that is viewed as a punishment. So the threshold of premier benefits needs to be a bit higher and the forgiveness of not meeting that criteria once gained needs to be significantly lowered.

Cvs affinity cardIt is possible that all affinity programs are incomplete or failed attempts at fostering loyalty. Often they begin to feel more like handcuffs than they do a life-line. The very act of specialness always requires that many be left out.

Think about this for just a moment. How special would it feel to be a premier member only to find out that everyone had the same status and boarded at the same time? You see the conundrum. Signaling out specialness is a double edged sword. It must cut a bit but not so much that it hurts.

Affinity programsThe airlines are in deep trouble. Currently, their revenues are up but that is due only to the dropping cost of fuel. They have never understood the costs of doing business and they continue to miss the value of customer loyalty. For the airlines the battle is defensive not offensive. They struggle to maintain loyalty and have very little to offer in the battle to steal market share.

To make up for this they have created affinity programs that express no love for the customer or prospect and reward only short term investment. They have never developed a metric to understand real value and fail to measure and reflect the sacrifice the member has made to remain loyal.

We have many choices in today’s world and most of us chose based upon short term values. Businesses, or rather brands must have a longer horizon. If they do not they become prisons rather than coveted havens.

 

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