Cover Story – July, 24 2008

Cover Story – July, 24 2008

Trevor Van Nest
Vice President of Consumer Card Marketing
American Express

InsideFlyer
Let’s talk about where American Express is with Aeroplan.
Van Nest
We knew we had to come to market with a very aggressive value proposition and the most important feature of an Aeroplan card is going to be the ARM rate. Our Aeroplan platinum card members receive 1.5 points for every dollar spent on purchases. Combine that with lounge access around the world and you’ve got yourself a winning value proposition. We’re excited about that product and it obviously attracts the highest spending customers. Those that understand the Aeroplan value proposition are really loving this product. We’ve got a win-win product across our three stakeholders.

IF
What has been a home run for your card members?
Van Nest
We continue to tweak our offers and one of the most recent additions has been the Fairmont Presidents Club. Our customers now can gain access to the highest level of the Fairmont Presidents Club with only staying five nights a year (normally 30 nights).

IF
Is this your only hotel partnership?
Van Nest
Yes, Aeroplan currently has a number of redemption partners that are hotels, but in terms of our product and what we offer, that is our only hotel offer. This card really is about earn and lounge.

IF
What is Aeroplan’s reaction since they have their own lounge program with Priority Pass?
Van Nest
There really is no problem; Priority Pass is not really huge in Canada, so our members for the most part are using the Maple Leaf Lounges domestically. When they travel internationally they know they’re covered, so there is very little overlap between Maple Leaf and Priority Pass.

IF
What happened to the accelerator products, or is it built in with the 1.5?
Van Nest
We’ve got that covered with Aeroplan. We have three products.

Blue at 60 dollars that gives one Aeroplan mile for every dollar spent. Gold, which is tiered: you receive one for one up to $10,000; 1.25 above $10,000. And then Platinum is 1.25 up to $25,000; 1.5 above $25,000.

IF
Are there spending caps on the Gold and Blue cards?
Van Nest
No, we’ve never had spending or earning caps on our cards in Canada.

IF
Any plans to offer new cards in the future?
Van Nest
When it comes to the Aeroplan products we are very pleased with the three we have. We feel it covers all the bases and no competitor is able to touch our earn rate really anywhere in the world with a co-brand airline program. There’s no cheaper way to earn Aeroplan miles in Canada so we really feel good about the product line-up, which is why we haven’t significantly tweaked it.

IF
When American Express became aggressive and really wanted to be a part of Aeroplan, did you have any idea where Aeroplan was headed?
Van Nest
We had no idea that changes like dynamic pricing and the ability to access virtually any seat on the plane, obviously going public, and now becoming a corporation would occur. There are all kinds of things our customers benefit from as Aeroplan looks to satisfy new shareholders and improve the overall customer satisfaction with the Aeroplan program. It has improved dramatically over the past few years.

IF
And from your cardholders points of view?
Van Nest
No question about it. Access to any seat is huge. People sitting on a few million miles historically may have wondered if there was value in those miles, now they know they can use them. And in fact, we see that customers are redeeming about as many miles as they are earning and that kind of churn rate really speaks to the value people are able to get out of the Aeroplan program.

IF
It must be a little bittersweet in some respects, you had worked so hard at creating one of the better card divisions of the American Express Membership Rewards area, now you have a shared brother/sister relationship with Aeroplan customers. Many of these customers used to be just Membership Rewards customers and now they’re in Aeroplan. Is it an overall growth if there has been a shift in their credit card portfolio between the two brands?
Van Nest
It’s actually incremental growth. People who understand the value of Membership Rewards have really stuck with the Membership Rewards program. It gives them flexibility to move their Membership Rewards points to any number of alternatives. The Aeroplan co-brand card has attracted a brand new segment and we really feel that is a shift of share.

IF
What kind of customer is Membership Rewards stronger for and what kind of customer is Aeroplan stronger for?
Van Nest
We have a lot of different products in Canada that meet the needs of a variety of different segments. We have the only Costco card that is accepted within Costco, we have the AIR MILES relationship, the Aeroplan relationship and of course we have Membership Rewards. We have developed in the last several years a value proposition that works for virtually any segment of the Canadian marketplace. So when you compare Membership Rewards to Aeroplan, we can give people a choice.

IF
It seems with the popularity and growth of Aeroplan that you might be minting mileage millionaires. Is that something you’re seeing?
Van Nest
No question about it and all the feedback we’re getting from our partner Aeroplan and our customers is that there is no faster way to earn.

IF
Frequent flyer programs seem to get beat up by the general media, yet when you talk to the industry, you don’t hear the doom and gloom. Where is the disconnect?
Van Nest
It may be between markets. Because AIR MILES and Aeroplan totally dominate the Canadian reward space and those two programs are relatively independently run, the need to ensure that they are giving fantastic value back to their customers is absolutely paramount.

That may not be the case in the United States because of so much competition, so that the customer actually does not win out. There are a lot more restrictions in the United States like spend caps and other restrictions. Also there is a lot more gifting of rewards in Canada than in the United States.

IF
Gifting in terms of say, 40 percent of all redemptions do not go to the account holder versus maybe 20 percent in the United States — that type of gifting?
Van Nest
Yes, where people are choosing to redeem their points for something they will give away.

IF
Have you seen any trends in behavior in terms of growth or types of redemptions with your members?
Van Nest
From the earning perspective, our acceptance in Canada continues to improve. We’re getting a lot more of the everyday spend. From a redemption standpoint, the traditional categories continue to do well. With frequent flyer programs, Pay with Points is our travel redemption with Membership Rewards — where you can use your points regarding travel as long as you’re using an American Express travel agent. Experiential rewards and Points for Cash are very popular.

IF
Do you see the Points for Cash as an economy trend or do you think it’s popular without regard to the economy?
Van Nest
Canada’s economy is very stable, so I don’t think it is driven by the economy, but more just by people recognizing that their points are good for virtually anything.

IF
In the last four years what have you seen that has really stood out as an impact within the industry?
Van Nest
I think about where Aeroplan has come from, and I would say that in itself has had the biggest impact for our customers. The flexibility of the Aeroplan program has really helped our ability to acquire new customers and build the growth and loyalty of customers with the Aeroplan product. No one could have imagined “any seat available” four years ago.

IF
What’s your point of view on the growth of exchanges, like points.com or loyalty match?
Van Nest
I would say they’re not very popular yet and won’t become popular until someone comes up with a model that makes it valuable for the customer to transfer and consolidate. It’s probably a product that would do better in a market like the U.S. where there are so many rewards programs. Canada is really divided by two and most Canadians are carrying currency on both so the opportunity here seems more limited than compared with other markets.

Jill Noblett
Senior Vice President of Loyalty and Direct Marketing
Wyndham Hotel Group

Mike Mueller,
Vice President, Partnerships and International Marketing
Wyndham Hotel Group,

InsideFlyer
Can you give us a quick history of the Wyndham Rewards program?
Jill Noblett
The Wyndham Rewards program is the culmination of an evolution, as our brand portfolio and customer segment base has evolved over time. We launched back in 2004 and we were trying to appeal primarily to the leisure customer. It was important for us to create a program that resonated with those consumers so we launched with an open earn and burn network. We gave members a lot of usual and unusual earning opportunities and a lot of different ways to redeem to keep them engaged in the program, even if they weren’t traveling as frequently as the business customer.
As our brand portfolio evolved, we’ve needed to make changes to our partnerships and program structure. We’ve added brands over the years such as Baymont and Wyndham and over the past several years, we’ve started to focus more on the business travel segment and created a program that would appeal to those folks.

IF
I’m a big fan of Ramada. Where does Ramada stand right now with Wyndham?
Mike Mueller
In 2004 we acquired the full rights to the Ramada Brand in North America and then we acquired the full rights overseas, which has substantially increased our international presence. We now have these, four and in some cases five, star hotels all around the world. We’re upgrading the properties and eliminating the Ramada Limited brand and making those properties into full service brands.

IF
Who do you look at within the other hotel companies as your competition?
Noblett
Our competition has increased since we’ve added the Wyndham brand because now we really do want to position that brand so it can effectively compete with comparable companies. We’re looking at all the hotel companies as our competitors.

IF
There are a few areas that can cause confusion. The Wyndham ByRequest is a very good program but it’s within the program of Wyndham Rewards. How do you educate people on this program within a program?
Noblett
We feel strongly that Wyndham ByRequest and the personalized approach is an integral part of the brand’s strategy and something that we wanted to retain as part of the overall program. We need to educate people so that they understand ByRequest is something you get that is extra special at the Wyndham Hotels and Resorts. ByRequest is a very unique program and it’s something we are going to continue to sponsor.

IF
Is the Wyndham ByRequest program only going to be within the Wyndham brand or could it be a unique set up for elite levels within your different properties?
Noblett
We have considered elite levels in the program, but we’re not there yet. We didn’t want to launch something and have to make changes to it or in any way affect the value of it.

IF
In terms of your marketplace, is SkyMall your merchandise redemption partner?
Mueller
Yes, we chose them because they have such a great marquee name. We also felt that as we attract more and more frequent flyer members into our own program, it’s a program that resonates with them. SkyMall is handling all of our merchandise redemptions and they are an earning partner as well.

IF
Do you have a large membership base globally?
Noblett
We just recently launched globally so the membership base overseas is still relatively small. It’s small and it’s growing every day but our membership base is primarily in North America.

IF
What are some of the lessons you learned from your launch?
Noblett
Internationally we did a lot of research; we did not go into the launch lightly. We didn’t go into it thinking we could launch a U.S.-centric program. We learned so much about the cultural nuances being in a market and having the experience of running the program on a day-to-day basis. We understand that you can’t necessarily run a program from the U.S. in China. You need folks that are there and understand that marketplace.
Mueller
We also learned in the China market that there is not a long history of loyalty programs, in the same format as we have in the western hemisphere. Therefore we are learning very quickly that people are not used to accruing points that they can redeem for a future value. They are more interested in instant gratification. We’re learning that we’re going to have to adapt the program to make it relevant for the local marketplace. We also recognized that there is a lot of inbound business into China and the inbound travelers want something different from the loyalty program than what the domestic China traveler wants.

IF
Does Wyndham have a central database for each of your brand properties?
Noblett
In the U.S. we do have a central database and it’s been incredible for us in being able to understand our customer base and look at their activity levels and make sure they get their points and all the things that are integral to a loyalty program. We do not have that internationally right now.

IF
Were there any other names considered other than Wyndham Rewards?
Noblett
That process happened before we launched TripRewards. When we changed our corporate name to Wyndham Worldwide, it made the most sense to change the name of the loyalty program to Wyndham Rewards to create a stronger partnership between the sister companies and really build the Wyndham Worldwide brand globally.

IF
What are you working on now within Wyndham Rewards?
Noblett
We are still a relatively young program and have been around for about four and a half years. We still have work to do as far as building our membership base. Integrating the program into all of our brands and their cultures is also something we are continuously focused on.

IF
Some brands try to be everything to everyone — what is Wyndham Rewards approach?
Noblett
For us, we want it to be the program that people feel they actually get rewarded in and they actually get something at the end of the day. We learned over time that we can’t be all things to all people and we want to be a program that is achievable and we want our members to feel rewarded for their loyalty.

IF
What is the number one thing your members redeem for?
Noblett
As we change our partnerships and members have more options, we expect redemptions to evolve. I would say to date the number one redemption is free nights. Gift cards that enable people to dine and shop have also been very popular.

Gary Kelly
Chairman and CEO
Southwest Airlines

InsideFlyer
Where is Rapid Rewards today and how does it place within the revenue side of Southwest Airlines?
Gary Kelly
This is our 37th year and we have been experiencing unprecedented cost increases this decade and also significant changes to the whole customer airport experience. There are opportunities for Southwest Airlines that we’ve never taken advantage of in our history.

So, we were built to fly on a point-to-point basis domestically, not interact with other airlines, and we’ve focused on carrying passengers from point A to point B. We now find ourselves with not only $130 plus crude oil, but we’re the largest airline in the world in terms of the customers we board and we have the second largest travel site in the world.

We have very few partners on southwest.com or rapidrewards.com. We’ve built the airline to serve the business traveler, but historically have approached our services as more of a one size fits all and there are business customers’ needs that we could better meet. So we’re evolving southwest.com and we’re implementing codeshare and international codeshare capability. Coupled with all of that, our entire marketing team has envisioned taking the Southwest Rapid Rewards program up to the next release level.

We have taken some baby steps over the past couple of years to position us, but look forward to Southwest Rapid Rewards 2.0 in 2009.

We do think there are very substantial revenue opportunities related to evolving the frequency program, and not the least of which is simply making an investment in our brand that makes us even more appealing to business customers. We want to make ourselves even more compelling, especially in our newer markets.

IF
Is 2009 the transformation from baby steps to your giant leap forward?
Kelly
We haven’t given a lot of detail on that yet, but I can at least say that it will be the next major release of the frequency program. And it will also be the year we introduce broad codeshares and also evolve our southwest.com products. We have a big year planned for exactly how we position the Rapid Rewards changes but it’s a little premature for us to provide any details.

IF
Will codeshares always be a part of Rapid Rewards?
Kelly
That is in the infancy stage, in that with ATA’s demise, we currently do not have a codeshare partner. So we are in the midst of looking for partners to different destinations: Canada, Hawaii, Mexico and the Caribbean. Whether it ends up being four airlines or less or more remains to be seen. I would say that the frequent flyer program is a substantial part of the dialogue and that’s why it’s premature to give you a lot of details.

We’re open to evaluating a variety of alternatives where we have integrated earn and burn or whether we host someone else’s frequency program or vice versa. We’re open to thinking about all of those things. Given the brand we have at Southwest, and given the growth that we’ve experienced, we think that Rapid Rewards, which is an award-winning program in its own right, has substantial value to offer a codeshare partner.

IF
Southwest Airlines has always been successful; will changes be difficult for you?

Kelly
I think there is beauty in our simplicity and I think we leave a lot of opportunities on the table — and that will be the challenge. We’ve only got so many capabilities with our current technology, so we need more flexibility. How we choose to then deploy them is subject to some debate. But what we would love to do is keep all the good stuff and add a lot more goodness to it.

Frequent flyers tell us what they would like with our program and what would make Southwest a more appealing choice — we are very much a customer driven organization.

We’re not the same company we were in 1987 and we’ve never had a major update or refresh of the program. After 20 years we felt it was time.

IF
What are the top two or three things your members tell you they would like to see?
Kelly
Our automatic award generation is a minus to some people so I think banking awards and having more flexibility with how you use your awards.

Members want more destinations. We get enormous credit for our availability of award seats and we certainly don’t want to give up that value. If we keep the generous program we have, with more flexibility and more options in the future, I think those are easy things to consider, with the very obvious need to figure out how we’re going to integrate our plan into codeshare partners. We’ll want to pull in destinations to all these other entities as well and set the stage hopefully one day to codeshare to Europe and Asia.

IF
Rapid Rewards does not include a fuel surcharge for any award redemption, correct?
Kelly
That is correct. It fits in very cleanly with our brand promise to our customers. Aside from the mandatory federal law of the September 11th fee, we offer free awards and that is what we intend to continue to do.

IF
How did you handle all the giving away of double credits for booking online? It really must have accelerated the earning and redemption for Rapid Rewards members.
Kelly
It was overall a great technique. That was our advertising technique to get people to try southwest.com and it worked famously. I think we at the same time were able to manage the award redemption and keep ourselves profitable. As the southwest.com penetration grew, and the award generation and usage grew, we did run into problems in having flights oversold with free awards. One of the things we were hearing from our customers, which was working against our desire to create loyalty, was that a year is not a long enough life for credits to accumulate to an award level. All of those things combined necessitated a change in the number of seats that we allow per flight. But overall, we still have potentially the same award program that we did in prior years. I don’t think we could afford to do double credits for southwest.com into infinity, but I think the results speak for themselves.

IF
Southwest does not seem to get some of the same criticism as other programs out there. Do you worry that if you were to change Rapid Rewards that maybe you’ll start getting more criticism?
Kelly
I think any time you change, you’re going to have naysayers and people resistant to that change. But at the same time, no doubt you’ll be changing to things some people are advocating. That is the balance we need to secure.

We are very proud of the fact that we are different. For the first time in a while I think those differences are more apparent. They have always been there, but sometimes they are less apparent to customers. The “fees don’t fly with us campaign” is something we are celebrating here. We will certainly seek a different approach with our frequency program to the extent that we can.

Julien Fournier
CRM Manager
goldpoints plus

InsideFlyer
We’ve heard that you monitor the threads on flyertalk.com to keep abreast of what your members are saying about your program. What have you learned?
Julien Fournier
Yes, we do keep an eye on the different threads on flyertalk.com. We look at two things — we look for information about how members behave or how members react to airline programs so we understand how they think. For example, we look at the surveys. We found a recent survey where members were expressing what would cause them to switch from one loyalty program to another and 75 percent said they could be influenced to change programs. For half of them, the main reason would be if they saw a competitive benefit in a different program. Members are aware of what’s going on and what the airline and hotel programs are offering.

We also look at the threads that are linked directly to the goldpoints plus program. We relaunched the program globally in Oct. 2007 with Carlson and we have some specific benefits for Gold elite members in EMEA. Gold members have a weekend extend offer, which allows them to stay for free on the weekend if the weekend is consecutive with a paid stay. This benefit was postponed when we relaunched the program for internal operational reasons, but many members were posting threads saying that the weekend extend offer was removed. This caused us to put the weekend extend offer back on the top of our “to do” list.

IF
Do you have someone who represents goldpoints plus on FlyerTalk?
Fournier
Not directly, but we work with some people at Carlson who address these queries directly online. We still don’t have an official spokesperson who would speak on behalf of the program globally, but it is something we are discussing. At some point, we will have one single voice for all of the regions who will address all the queries on FlyerTalk.com

IF
What projects, if any, related to social media is goldpoints plus working on?
Fournier
We do have some partnerships with professional social networks, such as Xing (formerly OPenBC), which is the European equivalent of LinkedIn, but is specific to the German market. We invite members to join goldpoints plus at the Gold elite level. We are not working yet on social media projects, but we do have partnerships with social networks. The number one media site which we are planning to work on is FlyerTalk.com

IF
Within the last couple of years goldpoints plus consolidated the programs between North America and the rest of the world. How has the consolidation worked out?
Fournier
This consolidation has been a one year project and involved approximately 30 people worldwide with different areas of expertise like IT, marketing, HR, finance and operations. I think it went well and we were able to reach our Oct. 27 launch date. One of the biggest challenges was to migrate our database to the U.S. platform and make sure that the new database would accept all the different fields. We created an entirely new customized database so we had a few glitches linked with the databases migration into one single platform. Now we have a stable platform and we can truly use the new database and all of its capabilities.

IF
How has the consolidation benefited the members?
Fournier
We now have a system that allows a faster transfer of points, which benefits members. We also added more redemption options. We introduced a new Points and Cash award and we added some new airline partners for points exchange. We have just launched Visa prepaid cards that start at 28,000 points, allowing members to use points for a prepaid Visa card that can be used in our hotels or retail stores. We also improved our Web site with better navigation and we now have an entirely online process to book an award stay anywhere in the world.

IF
What do you see as the biggest strength that goldpoints plus has to offer over the other hotel loyalty programs?
Fournier
The number one thing is the strong payback in terms of point earning and its ratio to the number of points required for a redemption night. To prove this point, we are running a campaign that looks at how many points you can earn and how many free nights you can get with goldpoints plus compared to Marriott, Hilton, Priority Club, Starwood and Hyatt and goldpoints plus is on top.

Number two is the program is global so members don’t get any friction in terms of properties not recognizing their membership card or tier. Members can earn and redeem points at over 950 hotels worldwide.

Looking only at EMEA, we offer the weekend extend option to Gold Elite members and Bag Guard for Silver and Gold members, which will help you quickly retrieve your luggage if it is lost in transit.

IF
Could you explain to our readers the relationship between Carlson Hotels Worldwide and the Rezidor Hotel Group?
Fournier
Rezidor is the master franchisee of the Carlson hotel brands (Radisson SAS Hotels & Resorts, Regent Hotels & Resorts, Country Inn & Suites, Park Inn hotels) in the EMEA geographic region. Since the end of 2006, we are on the Stockholm stock exchange and Carlson is our major shareholder with 41.74 percent of Rezidor group shares.

IF
You work specifically in the EMEA region. Does the program offer exclusive bonuses or offers to members within geographical areas? If so, can you give us an example of a recent offer?
Fournier
Gold members in EMEA can redeem for the weekend extend offer. This summer we are offering to all members the option to use half of their points for an award stay in Europe. You could stay in London from 15,000 points or in Brussels from 30,000 points. We also offer exclusive discounted rates during this period all over EMEA, allowing members to stay, for example, in Berlin from 99 EUR, or in Malmo from SEK 1071. More information is available at goldpointsplus.com/summer.

We also send exclusive newsletters on art, for example, informing members what the current exhibits are. We work with our agency to send customized newsletters based on when they joined, their point balance and where they live. We have a newsletter called Timezone and we personalize this newsletter based on country of residence, language, value and redemption history.

IF
The goldpoints plus in-hotel Express Awards offer members a way to spend points on in-room movies, room upgrades, express laundry service, hotel restaurant discounts and more. How popular are these awards? Why did goldpoints plus introduce them?
Fournier
These awards are popular, but they are just available at check-in. The idea behind it was to allow members who just joined the program or have a small account balance to enjoy benefits and get familiar with the redemption process. They allow members to redeem a few points to enhance their stay at a hotel at no extra cost.

IF
We read that Rezidor Hotel Group has plans to develop a lifestyle hotel brand, Hotel Missoni. Can you tell us anything about this new hotel brand and whether it will become a part of goldpoints plus?
Fournier
Hotel Missoni is the latest brand we have added to our portfolio. We have signed a license agreement to develop the brand worldwide. The idea behind Hotel Missoni is to offer a different kind of hotel, a boutique type of hotel with a strong focus on design, an appreciation of detail and quality of food and wine. This is in partnership with the Italian Missoni fashion brand. We have two Hotel Missoni branded hotels under development in Edinburgh, Scotland, and Kuwait City, Kuwait, which will open in 2009. Comparable competitive brands include W, Morgan and Malmaison.

We are still working on the various marketing activities for the Hotel Missoni brand and we can’t say anything at the moment about whether it will become a part of goldpoints plus as we are still discussing the pros and cons of its integration into the loyalty scheme.

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