60 Seconds with Rolfe Shellenberger

60 Seconds with Rolfe Shellenberger

Rolfe Shellenberger was the Manager of Marketing Plans at American Airlines when the AAdvantage program was born 20 years ago.

InsideFlyer:
If there were a godfather to all these frequent flyer programs, who might that have been at American?
Rolfe:
Tom Plaskett, he really was the godfather of it all. I was the lead guy in the marketing and it was also something that I probably had more experience than any other staff member, selling as a rep for 10 years. But certainly I take the bows for the upgrades.

I insisted on upgrades on being a part of the program and being maintained. The upgrade was a key factor in the success of the program. Because it was a cheap way to keep the guy locked in. A little more than two roundtrips coast to coast would get you in there.

InsideFlyer:
So the upgrade is the single most important element that made this program work?
Rolfe:
It’s the thing that got people early on eager to get more. It was like feeding a bunch of pigs in a trough. The upgrades really made a lot of sense as they made people feel that the airline was doing something for them.

InsideFlyer:
Prior to that, first class cabins were pretty empty at that time weren’t they?
Rolfe:
Yes, the cabins were pretty small and empty. We, and all the other airlines, were still at that point of living under the vessels of the government regulations and nobody could figure out what to do about first class because we weren’t selling that many seats in first class. We had lawyers going up to New York from Texas in first class because they could bill it. It was by then that most of the business firms decided that those anointed by God would be able to fly in first class.

InsideFlyer:
Was there any kind of defining moment when Tom, you and the others said. We made it!
Rolfe:
Yes, I think probably the Fall of 1981 when United launched the six trip segments and you get a free trip. Our reaction to this was foolhardy. But at least it gives the program legitimacy and is now on for the long haul. And then of course there were a lot of modifications from there on to reflect the competitor factor. I think it’s an interesting case of pure marketing theory but the competition worked very well to improve frequent flyer programs at that time.

InsideFlyer:
What was the most important event ever in the history of these
programs that you recall?
Rolfe:
It was when Delta got in bed with American Express in 1988 and launched their triple miles program.

InsideFlyer:
Because of the liability increase at that time?
Rolfe:
That’s part of it, Pan Am’s death I think probably shows you the rough side of the programs.

InsideFlyer:
How so?
Rolfe:
Pan Am was caught between the devil and the deep blue sea for the very simple reason, if they failed to give up seats to their customers somebody would say there going to go broke and the there would be a lawsuit. So they let the people use up their miles before Pan Am was dead and that helped to kill Pan Am.

InsideFlyer:
How did the first partners come about, how did you pick Hyatt, BA and Hertz?
Rolfe:
It was my design to have partners in it. Because giving someone a roundtrip ticket without a place to sleep is giving half a prize. And I said we have to get a partner. We went to Hyatt. I made the decision to pick Hyatt and Hertz because they represent a high profile company. At that time you did not have Marriott as being in the same league as Hyatt. Now Marriott probably outdistantances Hyatt in terms of the affection of business travelers. But, that’s why I picked Hyatt. I picked Hertz because, well, I had done something with Hertz back in 1971 and I liked working with them, they were very professional.

InsideFlyer:
And the hotel?
Rolfe:
With Hyatt, we said essentially we’re giving you the advertising value, all you have to do is take care of a few customers that, in about a year from now, are going to have earned a 50,000-mile award. It was strictly on our part, we’re going to give you the advertising value and the exclusivity of the program in return for you giving us the free trip.

InsideFlyer:
How long after that did they call and say, “you know there are more than a few trips here.”
Rolfe:
The response to that was the strangest thing that ever happened in my experience in marketing. They said we’re going nuts, we’re selling out our rooms is what we’re doing. And I said, “Gee, isn’t this a successful program?” Our calculations were too modest. It eventually became a much more tied-in deal. I didn’t like it when they expanded the hotels. They put Sheraton in place of Hyatt.

InsideFlyer:
And then came British Airways. I bet that was interesting.
Rolfe:
Yes, right after we had a conference call, it was so funny. We’ve got this guy up in New York. I don’t know who it was, but he was sitting up in New York with a British accent and we were sitting in the conference room and I was the head man and I said now look, what possible harm could it do to you by the exposure to the millions of people who live in America that are not directly served by British Airways. They bought it. He said we really aren’t sure we want to do it.
I said well, we want to have an overseas partner and we think you’re the best in the lot, but if we can’t go with you we’ll have to go with somebody else. It cut the deal, that phone call ended with saying we’ll try it! About three weeks later, we announce that we will substitute with Braniff on their overseas routes. Braniff had to drop their run from Dallas to London, because Braniff was in their death throes at that time. So what happens is that American is suddenly
a direct competitor of British Airways.

InsideFlyer:
How did that phone call go?
Rolfe:
Another phone call! They were so livid. Again I got out the same old song that I was singing before, I said, okay you guys have American Airlines as a competition from Dallas to London, but you like the program and it’s not hurting you in any way, your risk in it is almost zero but your reward is very high. We can give free tickets away without worries and so can you. And they agreed. It turned out to be probably the best thing that they could have ever done in order to establish legitimacy in the US market. I believe that was early in 1982.

InsideFlyer:
So in retrospect Rolfe, is there anything that is most surprising to you in the 20 years of frequent flyer programs?
Rolfe:
Yes, this is something that is a little weird, but I’ll tell you anyway. The thing that I’m most surprised about is the failure of any of the airlines to demonstrate to me that they watch where I go. They book my travel activity but they don’t give me announcements of new service and this would be very easy to do. There is very little marketing that is tuned in to where the customer is and what the customer needs to do on a regular basis.

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