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Celebrating “Gus” Kaminski on Veterans’ Day

Robert Andrew “Gus” Kaminski, US Navy SEAL, and Commander of the US NAVY Leapfrogs.

I knew Gus and many of you saw him in action – an anonymous actor who jumped into a stadium or super-speedway to launch a great event. I was very sorry to hear that he passed away.

Gus was Alpha-500, my battle-buddy at Airborne school. We met in September, 1995, right before I moved to Korea. I was Alpha-501, the second senior student by date of rank. Gus had graduated from the Naval Academy the year before and had just finished his SEAL training. He needed to complete the Army’s basic airborne course before assignment to his first operational team.

Gus was a character – and he knew it. He had a highly developed sense of humor and perfect timing. Gus was also a physical specimen. He could do fifty consecutive one-armed pull-ups. This brought a lot of pain for me. Gus would mouth off to the Blackhats (Airborne Instructors) regularly so the rest of us spent a lot of time in the front-leaning-rest to pay for his sins. I remember vividly that my face hurt from laughing more than my arms did.

He led the way, but wasn’t the only one who would rib our instructors. Anytime Gus would take a break, Second Lieutenant Pendergast, from the Oregon National Guard, Alpha-503, and a recent Ranger school graduate, would shout, “I’d rather be a Leg-Ranger than a Tabless Airborne!” This insulted our Blackhats who would tear into a rage every time Pendergast said it.

We were bruised, tired, and happy in the 100 degree heat – Hurricane Opel had just trashed Fort Benning and we were covered in Georgia sand, pine needles, tics, sweat, dust, and god knows what else. Gus wasn’t even winded when he started yelling – “You can’t smoke a rock”. That got ‘em fired up again – I was between the two of them trying to get air between laughing and doing pushups. Now it’s my turn so the Blackhats are yelling at me (for laughing). Apparently I wasn’t taking my Airborne training seriously, that’s when Gus changed his tune again to “You can’t smoke a quitter.”

I was living through a moment I knew I would remember forever. Unbelievably I followed him out the door on his first jump. Kaminski is still the toughest guy I’ve ever known and one of the happiest. Although we never spoke again I enjoyed knowing him – and I’m confident there’s an entire country that will miss Gus. You can learn more here.

Aviation Coaching
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Loyalty Programs that Work

Background

Contemporary loyalty programs generate power by transforming dreams into action. The Marina Bay Sands hotel pictured above epitomizes the aspirational destinations customers enjoy through participation in a travel loyalty program. Great loyalty programs inspire customers to choose the host company even when less expensive alternatives exist. So when the search for profitable customers drives you to create a loyalty program, here is how to do it right.

There isn’t a single recipe, but certain ingredients are known to taste better and every compromise you make to the set of principles outlined here will reduce the number of people you can influence. When applied carefully these principles will improve customer engagement and lead to higher profits and lower costs. Exceptional loyalty programs offer meaningful value. That value is accrued seamlessly without obstacles. Great programs are transparent and customers understand them intuitively; they eliminate friction at every turn.

Loyalty is measured by the number of customers you inspire to select you over and over again. Loyal customers spend more than average customers, they do it more frequently, and they’re more likely to stick with you after a bad experience. Your Customer Relationship Management team has segmented your customers thoroughly and you know how much your best customers are worth, and numerous white-papers and empirical research conclude loyal customers are responsible for a disproportionate share of business profits. But how do you inspire customers to remain loyal? More importantly, how do you convert ‘good’ customers to behave more like your most profitable, loyal disciples?

To answer those questions and for a thorough understanding of the loyalty space its worth exploring consumer and business loyalty programs including American Airlines’ AAdvantage program, Delta’s Skymiles, the Citibank AAdvantage credit card, Capital One cards, Starwood Preferred Guest for Business, Starbucks Rewards, and a host of business-to-business programs designed to engineer loyalty or drive customer retention. I’ll focus on travel industry programs and a few non-travel schemes.

History

Loyalty programs have spread to include everything from hotels, rental cars, sandwiches, haircuts, oil changes, and home mortgages. Many of the largest programs allow customers to transact with partners on both sides – earn and burn. Before Capital One credit cards, AAdvantage Miles and AMEX Rewards Points, companies rewarded consumers with “green stamps” from Sperry and Hutchinson (S&H). Greenstamps were literally stamps awarded to customers at the point of sale for a variety of behaviors. They started in 1896 and continued through the mid 1980’s. Retailers, supermarkets and other retailers purchased “Greenstamps” from S&H to issue to their customers and once the customer accumulated enough stamps they would redeem them for products from an S&H catalog. At their peak in the 1960’s S&H’s reward catalogs were the most widely distributed publication in the United States, while they issued more than three times as many stamps as the US Postal Service.

SH-green-stamps

By 1978 competition following deregulation of the airline industry and the widespread use of more powerful computers supported expansions in airlines’ sales and marketing programs. In 1981 American Airlines launched the AAdvantage frequent flyer program (followed closely by United Airlines) and a few years later added a co-branded credit card product with Citibank. The frequent flyer program gave people a chance to accumulate credits quickly, while the Citibank AAdvantage card offered another way for less well-traveled consumers to enjoy the benefits of cheap flights. Throughout its history, American’s AAdvantage program had the highest enrollment and member participation rates among frequent flyer programs and loyalty credit cards. Over the past decade American’s partners have purchased more than $1 billion annually to distribute across 50 million members making AAdvantage one of the most influential contemporary consumer loyalty programs. Mergers have driven Delta’s Skymiles and United’s Mileage Plus programs ahead recently, while global alliances including Oneworld, Skyteam and the Star Alliance expand program reach to customers who may never step foot on a US or European owned aircraft.

Airlines operate ‘anchor’ programs that drive scale and reach that few retailers can match (McDonald’s and Starbucks are notable exceptions). The most successful travel programs have powerful, exclusive relationships with consumer banks. Those banking relationships are driving the next wave of business-to-business loyalty programs and the future looks bright.

Value Proposition

Loyalty programs must be meaningful – the accrued value must be worth managing. Customers must be able to calculate value intuitively. Earning behavior must be easy to describe, easily understood, and programs should give credit for wide-ranging transactions, not just a narrow band of profitable behavior. This is distilled to Simple, Seamless, and Comprehensive.

Global Airlines run the largest programs and typically offer a free domestic coach ticket for 25,000 flown miles. An average round trip is 2,500 miles, so travelers generate 10% of the award value from each trip. That’s a good value trade-off. Travelers who also spend $25,000 on an airline credit card have an easy way to earn two award tickets every year.

Effective loyalty programs drive customer behavior. They reward profitable behavior – they are structured to generate more frequent, higher value business from program participants. So why doesn’t everyone join your program? A look at the airlines reveals that about 50% of all passengers do not belong to the airline’s program. Customers participate in programs that are personally relevant. The public is inundated with offers to join various programs, but they will not participate unless they’re offered enough value to justify wallet-space. Marginal Airline offers end up in the trash while a favorite restaurant makes the cut by offering a free entrée every tenth trip.

Currency

Currency choice matters – it must be intuitive and the average customer should be able to calculate the currency’s value and identify the activity or behavior required to earn common awards. Consumers get it when their barber issues a card that requires ten visits to earn a free haircut. Simple, seamless, comprehensive.

The earliest airline programs called their currency ‘miles.’ Miles are intuitive – when a traveler flies between New York and Los Angeles – they’ll earn one mile of currency for each mile in the air. That’s 2,472 miles each direction in this example. Miles are the basic building block – they’re analogous to a penny. Once you ‘earn’ 25,000 mile you can redeem them for a free coach ticket (treating miles like pennies is equivalent to $250 value). Loyalty credit cards lean towards ‘Points’ and a typical value is one ‘point’ for every dollar spent. The pure credit card programs often offer travel awards as a redemption option so a currency that converts easily to ‘miles’ makes it simple for most consumers to adopt the ‘point’ system and it gives them confidence about an already well-understood earn and burn structure. In the largest programs points and miles are equivalent and fungible – it’s like a foreign exchange system, you can often trade airline miles for the same number of hotel points.

In recent years other airlines, particularly the low cost carriers adopted segment based currencies – Southwest Airlines Rapid Rewards famously offered a free round trip ticket every time a customer flew sixteen segments. It’s easy, but customers could earn a ticket after purchasing just three trips if the routing required double connections (three segments each way). The other end of that spectrum is the customer who bought eight round-trip tickets for non-stop flights before earning the free ticket.

Southwest’s program didn’t seem equitable, so Southwest updated Rapid Rewards to issue ‘points’ based on two variables – the type of ticket and the price. Now customers earn six points for every dollar spent on Southwest’s “wanna get away” leisure fares, while it takes 6,000 points to ‘buy’ the same type of ticket. A quick calculation reveals free tickets are available after spending just $1,000. It’s a good system, but it leaves program players shaking their heads to calculate earn and burn values quickly – members need to read their statements carefully.

Companies that offer separate programs for consumers and businesses should think twice before they create parallel currency and banking systems for each type of customer. Specifically, many domestic airlines offer consumers mileage-based currency through their frequent flyer program, while offering companies a spend-based, point currency in their business rewards program. A review of award menus at United and American reveals similar awards are offered through each program, but the redundant systems increase costs and management workload.

An example on the hotel side can be found in Starwood Preferred Business (SPB) program; SPB is integrated with Starwood’s Preferred Guest program and can be managed in parallel and through the same systems – this arrangement reduces the cost and eliminates currency confusion since both programs payout in similar fashion – the traveler accrues points in their individual program, while their employer accrues points in the Starwood business program. This co-mingling makes it easy on the front-desk staff too and the entire company is aligned with the program messaging.

Companies can manipulate value on both sides of the ‘earn and burn’ equation, so consumers need to be familiar with program rules on both sides – the less fine print the better. And don’t neglect cash controls – management often overlooks the cash value of their awards or loyalty currency. Robust controls must be implemented to ensure employees don’t have the ability to give points or awards away without comprehensive tracking and reporting.

Awards

Give ‘em what they want! If you sell widgets because people value them, it goes without saying that widgets should be on the award menu. In fact, your award menu should include ‘starter’ widgets, widget covers, widget ‘bonus-packs’ all the way to up ‘premium’ widgets. Airline awards begin with highly restricted, long advance purchase, mid-week, domestic, coach tickets, and move up to last-minute, international first-class, around-the-world fares. A collection of ancillary benefits are available too – including lounge passes, upgrades, cash plus program credit, reduced fees and other special awards. All priced in loyalty currency.

Hotel award menu’s include rooms, upgrades, all priced in ‘point-based’ currencies tied to spend and room-nights. Another popular option for larger hotel programs allows point transfers into airline miles.

“Earn and Burn”

Program participation must be simple, seamless, and comprehensive.  Loyalty program members should be able to attach their membership numbers or customer identification to their transactions easily. Their purchases should be tied to online profiles or a barcode or a RFID membership card. Companies should take action so members don’t need to remember their member numbers and, if they do need to remember them, companies should create as many opportunities as possible to add the number throughout the purchase or use process. Effective programs make it easy to claim credit long after the purchase.

Avoid obstacles that reduce participation. Awards must be meaningful to the customer – in its simplest form awards should have the following qualities:

  1. Meaningful
  2. Easy to earn
  3. Easy to burn
  4. Supported by seamless customer service
  5. Common currency
  6. Multiple award levels
  7. Bonus structure with point multipliers
  8. Relevant partners

Customer Service

Same rules – simple, seamless, comprehensive. Most common requests – 1. provide ‘earn’ credit; 2. Reset account access; 3. Merge accounts ; 4. Provide enrollment support; 5. Provide redemption support (complicated program rules will drive these requests up). Companies should acknowledge that customers want to communicate in different ways (phone, email, and text) and should offer customer service through common channels. If your program can’t support a live 24/7 operation, at least provide self-help online and find a way to show customers you appreciate their business.

Promotions and acquisition campaigns 

Collect the low-hanging fruit – that means a laser focus on your existing customers before you move on to new or potential customers. Advertise your unique value proposition, currency and program rules to your existing customers with your existing marketing and communication channels. As enrollments begin to climb study your data to determine characteristics your most profitable customers share and seek out non-customer populations that exhibit the same qualities or behaviors. Future campaigns should target those potential customers and develop creative A-B test groups to hone your marketing skills and test intuition about your customers. Enrollment offers should include ‘seed’ points or miles to jumpstart member participation. Follow-up campaigns should segment customers in meaningful ways including a group that have earned enough points for basic awards, but have never redeemed points or miles. The possibilities are endless, but a careful approach that combines your industry knowledge with insight about your most profitable customers will yield the best results.

Common sense and the desire to limit liability suggest acquisition offers should be richer in competitive markets, and lower  where the host has higher market share. Targeted offers and A-B tests may require you to use a promotion code system (one-time use codes are recommended to prevent wide distribution via the Web). Before you get too far down this path it’s instructive to educate yourself about ways promotions can go wrong so here’s a great Website you should spend some time on to avoid making similar mistakes.

Conclusion

This is just a glimpse into the loyalty cook book – these programs are important tools to manage the relationship between companies and their best customers. Done well,  thoughtful programs can give you an edge and drive bottom-line performance. Use this simple guide to create a solid framework as you invent your own program and embrace ideas from successful programs across multiple industries. Finally, ask yourself why programs and their components work and what conditions exist that drive customers to participate in them? Answer those questions and you’ll understand new ways to achieve better results.

Coaching Sales & Marketing Travel Management
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My Hollywood Debut

Freedom to choose where we spend our time gives us powerful control. Recently a friend invited me to work with him in Beverly Hills on a press junket for Resident Evil 5. This is one of the cooler byproducts of that amazing trip. Click here to see My Hollywood Debut.

About the author. Paul Laherty is passionate about problem solving. Until recently Paul led the Americas Air and Hotel consulting teams at Advito, a travel management consulting company. Prior to Advito he managed teams in Sales, Marketing at Finance at American Airlines. Paul’s work at AA included supervising the global corporate contract team, working closely with large customers in Global Sales, and he managed the Los Angeles sales team where he met some very well-known customers. He also has experience in loyalty marketing, both business-to-business, and consumer. Paul managed American’s business loyalty program and he launched a loyalty credit card with American Express. He enjoys applying original research (he calls it Phynancial Fisics) to solve problems. Paul lives in Southlake, Texas with his wife and two daughters and flies a Cherokee 140 as often as time allows. He is active on Linkedin where you can view his detailed profile here:http://www.linkedin.com/in/paullaherty, follow him on twitter @Paul_Laherty or send questions to paul.laherty@gmail.com.

Coaching Sales & Marketing
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Do Your Wingmen Soar?

Let’s get real about your sales people, consultants and account managers in the travel management space. Your contracts should do the heavy lifting, but great sales people can make an enormous difference in your program. You have far more leverage than you think. Here’s a test: are you courageous? Curious? Assertive? Then how often do you tell your friends and colleagues when their out-of-office email or voicemail is out-of-date. Judging by how long some of them remain active I’ll risk offering that we don’t do it enough. We think we’re more assertive than we actually are, but HOPE could improve this situation – Help One Person Everyday. So the next time someone’s out of office is expired – be assertive and let them know.

Hope is often applied to managed travel – the other kind of hope. We hope that travelers will comply with our policies, we hope our CFO understands why rates go up, and we hope that we’ll have the best sales people, account managers and consultants assigned to us. Travel Management is notoriously lax at holding people accountable. For most airlines it’s nearly impossible to identify and measure sales teams against a metric they control that flows to profitability. All too often they’re not held accountable. Consultants are often treated the same way – many people act as if one is as good as the next. Experience proves otherwise. In the hotel and airline business awards are often given to the sales person responsible for customers in an industry or location that’s growing while scorn is offered to the person living and working in a declining market. This is where Travel Managers come in. Great account managers can be found anywhere (even declining markets) and you’re just as likely to find mediocre performance in growing markets. You must provide feedback to enhance your program and to serve your customers better and you do that by being part of the assignment process. This is where assertiveness is important.

Successful programs rely on great partners. Those partners develop and contribute outstanding account managers. Those managers share three qualities that you should focus on: 1. Competence; 2. Initiative; 3. Fit. All three are necessary for a best-in-class program.

Competence: combines a thorough understanding of the market, customer, products, policies, and procedures. Competent Sales people listen and ask questions before making sound recommendations. This can be improved with training and experience.

Initiative: take the appropriate action to solve or prevent a problem. These people are responsive – they’re on top of issues and have a sense of urgency commensurate with the situation. Improvements in this area often requires an attitude change – it’s more difficult to improve than competence, but good customers shouldn’t bear too many mistakes that thorough talent selection could solve.

Fit: Often overlooked, but personality characteristics and nuances are important to develop respectful, trusting relationships. Your account manager or consultant should be someone you enjoy working with and you should be comfortable around them. Too often Travel Managers tolerate bad behavior from account managers – they don’t return calls, they’re dressed inappropriately for meetings, they are slow to respond to problems, they have a sense of humor that is offensive to others. The list goes on, but sometimes what works with a few customers doesn’t work well with others and you shouldn’t tolerate it. Great account managers should hold customers accountable for their performance too – but sometimes everything else being equal, the fit just isn’t there and when it isn’t you should take action.

You get what you reward – if you make it a priority to gain one excellent airline sales person and two or more outstanding Hotel sales managers each year on your terms, you would very quickly build a network that will delight your travelers and make your job easier. You can even make freedom of choice part of your RFP process to tie it to something positive for the vendor.

Asking for sales people by name is very easy. But how do you get their name in the first place? I’ve discussed this problem with a few friends in the medical field and their example is instructive. How do you pick a great surgeon?

A great surgeon isn’t someone with good bedside manners (they might score well in this category, but it’s insufficient) – its the person who is calm under pressure when things don’t go right; a person who makes good choices about how to handle this never-seen-before situation. These are surgeons who are quick to ask a medical device representative standing next to the operating table – “how have other surgeon’s handled this successfully?”

You don’t find the best one by asking another doctor – they’re rarely in surgery together.  Anesthesiologists and surgical nurses have a small consideration set. That brings us back to medical device sales people. They see many surgeons as they operate and they have more evidence and better experience to give you an educated referral.

Great consultants, sales people, and account managers can be identified through your network – ask your peers and your suppliers’ sales leaders which sales person or consultant they admire or they have heard frequent compliments about from shared customers.  travel industry sales leaders generally have a larger customer network since they manage teams and are exposed to most of the largest, high touch customers in their area. It’s also helpful to understand that sales and consulting leaders maintain balanced territories – so if you don’t ask for someone by name, you’ll often be assigned the person who is available, and good people rarely have a light load. Consultants will have a larger impact on your program; it’s acceptable and I recommend that you ask about your consultant’s training and experience before a project or contract is implemented. Suppliers don’t offer different price points based on the team they assign to support you and you have a right to make requests related to this part of their offer.

Due diligence about your vendor’s personnel is your responsibility, and the management leaders who do this well will achieve championship results.

Coaching Travel Management
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Recruit Superstars Twice as Fast for Half the Price

A few years ago, when TelePresence was the newest thing and threatened to upset the airline universe, I had many conversations about the ways virtual meetings could become a viable substitute for air travel. In the real world, physical presence is irreplaceable, but the latest conference tools do offer a better way to conduct business and give you control over more of your time for certain tasks. As tools evolve we should use them to improve the clunkier practices in use today. This article throws recruiting into the blender for a business process makeover.

Talent Management leadership describes the two highest payoff tasks every manager must navigate (in order): 1. Get the most out of their existing teams; 2. Find the best people to fill openings. Effective selection strategies begin with an assumption that it’s possible to measure candidates in a meaningful and predictive way that will allow managers to choose the best person among a strong finalist group. High performance teams are made up from high performance people and great managers know finding the right candidate is often a difficult and time consuming process. Managers want to select people who will be a good fit for their organizations, are able to do the job well, and need minimal supervision. In this article I will introduce a process that will show you how to achieve your hiring goals faster and with less effort than you’re probably applying today.

Several years ago I had a choice assignment as American Airlines’ sales manager in Los Angeles. My team had multiple openings for account managers and I posted the positions on AA’s internal career site. It was common for nominally qualified applicants to receive an interview in-person. Since the rest of the country was buried under an unusually harsh winter the candidate list grew to more than thirty people in the first week. This created an enormous opportunity to design an efficient process that could uncover hidden talent since I needed to reduce the candidate pool substantially before inviting people to meet face-to-face.

Requirements: create an ‘interview’ screen to evaluate as many candidates as possible to minimize problems caused by rejecting internal candidates who’s current management team viewed him or her as well–qualified. Next, ensure the filter would provide each candidate an opportunity to showcase their skills and experience, but eliminate the standard thirty minute or hour-long interview call. Furthermore, the process should stratify candidates and generate a clear threshold to determine if a follow up interview would be necessary. And finally, include other team members to secure their buy-in and support for the new employees.

I settled on a simple process that required low effort and only a brief time commitment to organize and plan compared to our former approach. As soon as the posting closed I sent each candidate an invitation to participate in a first round interview, via conference call. The call was mandatory and concluded with a series of questions. Candidates were shown the following agenda:

  1. Detailed overview about the position, and qualities and experience expected from an ideal candidate.
  2. Current team members would share information about their experiences.
  3. Hiring manager and team would answer candidates’ questions.
  4. Round one – Answer three questions.
  5. Candidate responses should be returned via email within two hours.

The first-round conference call was effective – over thirty percent of the applicants dropped out before the call, many because they were not invited to attend in-person. Several more declined to move forward following the call and either decided the questions were too much work or they were not as qualified as they initially hoped. We even received calls from other managers who told us their employees were impressed by our process – many were confident they knew more about this opening than any position they had applied for previously.

As responses arrived I pasted them into an email and assigned each candidate a number (a blind evaluation works well to minimize bias when candidates are known to other team members).  Once the complete list was ready I sent it to the team and asked each of them to rate candidates by choosing: Yes, No, or Maybe to answer the question – should we interview this candidate further? This simple stratification led to remarkably clear results. The top three candidates received a Yes from all six evaluators, while the bottom nine candidates received a No from most evaluators. The “Maybe’s” fell into two groups – those who split between “Yes” and “Maybe”, and those split between “No” and “Maybe”. In the span of five business days the position moved from a ‘closed’ status to a short list of finalists; it effectively allowed me to interview twenty-five people with four hours of work, and dramatically reduced the number of face-to-face interviews.

Team participation increased morale, and the team’s capabilities. Their participation created transparency and gave them insights into the hiring manager’s decision-making process. Another side benefit – your team’s ratings provide you with information about their assessments for each candidate. This has proven to be a useful framework to discuss differences among team members’ value weightings and how they applied personal judgment to the selection process. See the sample evaluation grid below:

Candidates

You shouldn’t underestimate how much you can learn about a person from a written response to a simple question, trust me. Furthermore, it gives you an effective way to offer candidates feedback about their performance. This solution revealed other norms that have held up since my first experiment. Top candidates respond within thirty minutes. Their answers are usually weighted to the lighter side in word count, but content wins and their stories are laser sharp. Many poor answers are returned quickly too, but additional time does not seem to improve a particular candidate’s chances.

The questions are important, and predictable, with at least one tailored to the position:

  1. Why do you want the job?
  2. Why should we hire you?
  3. How much is the monthly rent for a home you’d be willing to move to in Los Angeles?

Finally, some candidates will not be available for the call on short notice, or you may need to add someone to your list after the initial call. Easy fix, simply record the call, and as people are added tell them to let you know when they have three hours free (one hour for the call, and two hours for the questions), then send them a link to the recording and require a response three hours from the time you send it.

Technology does the heavy lifting and saves you time. Great candidates can pass through any filter because they have the sharp skills, business acumen, flexibility, and communication gifts required to articulate a tailored response to “Why you and why this job?”  During the past three years I have applied this process to almost a dozen employee searches with the same effect. High performance teams are collaborative-they give everyone a voice and they depend on emotionally healthy, intelligent, mature, hard-working, value-driven employees to generate the championship results that set them apart. I hope you can put this experience to good use and reduce the time and energy you put into building a better organization.

Coaching