Randy Petersen's Opening Remarks – February, 21 2011

Randy Petersen's Opening Remarks – February, 21 2011

SkyMiles and Rapid Rewards–carrying the torch for the industry?

We all live in a world of fact and fiction, our belief vs. the beliefs of others and hard research vs. emotion. What I’m about to tell you today will likely provide enough emotional outlet that if measured would power the entire airline industry without need for biodiesel fuels.

In a recently released study of 1,000 reward program participants conducted by the Zocalo Group, a word-of-mouth marketing agency, the travel reward programs that received the highest “recommendation index score”–determined by the ratio of positive to negative comments–were Delta SkyMiles and Southwest Rapid Rewards. They actually did not score that well compared to other types of rewards programs, Delta SkyMiles coming in at number six with an index score of 11.04 and Southwest Rapid Rewards coming in at number eight with an index score of 11.01–the average recommendation index for the reward program category is 13.78—but the two were the highest ranked of travel rewards programs.

In a conversation with Paul Rand, President of the Zocalo Group, he noted a few interesting observations from the survey, including that positive recommendations far outnumbered those of negative recommendations even in the travel rewards category, which at times seems to contradict the more visible comments from various travel-related forums. He said that those who comment about a travel company in a negative way are typically looking for a reaction and a solution while those commenting in a positive manner are dealing in a degree of currency, passing along information of an upgrade or experience with an award redemption that lets someone else in on their secret and leaves them feeling helpful.

As a casual observation, last year one of many consultants issued a report that seemed to indicate that the Delta SkyMiles program was ranked last in award availability. And according to Mr. Rand, the primary drivers of negative word of mouth and recommendations point to “problems with redemption,” “lack of benefits” and “expiring points”—all of which led to negative recommendations. These relate specifically back to the difficulty that consumers have in making use of the rewards they’ve spent time accruing. While many piled up on Delta SkyMiles pointing out that their award inventory was a negative aspect of the program, this sample seems to indicate that SkyMiles has enough going for it that either the report was flawed or Delta has done a superb job in overcoming that problem. We obviously hope it is the latter.

As for Southwest Rapid Rewards, it is never a surprise that they rank among the highest in any sort of recommendation index as they have a very transparent and outward looking policy when it comes to monitoring social media, and as such with any sort of research as Mr. Rand’s agency conducts, those who are active in online conversations through blogs, forums, Twitter and other discussion venues will often rate higher for recommendation because their possible negative score is being acted upon as online customer service—turning negatives into positives. And really, the base of this research points out where the value is.

“The recommendation index makes clear what drives discussion, recommendations and criticisms in the reward card market,” Mr. Rand went on to say. “Marketers spend so much in this area that gaining insight into what really makes a program highly recommended can offer a huge advantage. Consumers are very clear about what they value–and recommend.” Mr. Rand went on to say that there are significantly more positive recommendations than negative–something not always apparent.

The study took a dive into how consumers are recommending the nation’s reward programs —uncovering that the biggest are not always the most recommended and that everyday rewards are key, which seems to parallel the efforts by many frequent flyer programs to introduce more relevant awards which can be used more readily than the typical 25,000-mile award. While the average U.S. household has more than 14 reward or loyalty memberships, the study seems to illustrate that members tend to recommend reward programs based on their most recent experience earning or redeeming rewards. Accordingly, members are most likely to speak positively about those programs that reward them “everyday” and provide some form of instant gratification.

So the next time you wonder which is the best program to recommend, now you know that Delta and Southwest are on the minds of frequent flyers.

Now turning your attention to something new. As written a few months ago, I thought that the new year would bring plenty of great new tools for the frequent flyer and boy did I ever get that right. In the past month alone several of these new mileage manager ventures have landed funding to create new tools for you. In fact by my calculations, there is nearly $7 million recently pledged. So look for names such as MileWise, Superfly, Using Miles and many more to catch your attention during the year ahead. But that is not all. I recently got involved in creating a new place online for frequent flyers to meet. Called MilePoint, our mantra is clearly driven by using the latest and greatest technology to make it easier to find and participate in the popular forum type websites devoted to frequent flyers. We’re busy. And there is another reason you might want to check it out–all during the month of March we are featuring a free iPad-A-Day Giveaway just for registering. See you there.

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