The 6 A’s of Coalition Loyalty Success & The Virtuous Cycle of Profitability

The 6 A’s of Coalition Loyalty Success & the Virtuous Cycle of Profitability

Net: Over a billion dollars have been lost by companies and investors trying to create a profitable coalition loyalty program in the U.S. over the past 30 years. In recent discussions with Sir Keith Mills, who created the original AIR MILES shopping reward program and the first consumer focused coalition loyalty program in the UK, my former company The Loyalty Group in Canada, Nectar in the UK  and successful programs in The Netherlands, Spain and the UAE, we agreed there are six requisite elements of successful programs.  Rewards must be aspirational, attainable, and accessible to target consumers.  They must be sufficiently affordable to investors, program operators and the business partners who pay for the reward to enable a clear and attractive return on their investment.  The program must be designed and executed to collect actionable information on participating member’s behavior to both prove that the program is delivering an attractive ROI and to identify underperforming segments and new opportunities to use the program’s assets to increase the businesses’ profitability. Finally, participants must be aware of the program’s benefits.  They must be clearly and effectively marketed at launch and on an ongoing basis to create awareness and understanding of program value to potential and existing members and the businesses paying for the rewards.   If these “6 A” elements are present in the program’s design and effectively launched and enhanced through rollout and operation, the loyalty business generates an attractive virtuous cycle of profitability driven by the value created for all stakeholders.

The 6 A’s of Coalition Loyalty Success

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Collaboration Big Citizenship for Skateboarding in Brookline

Net: Realizing that our son had no dedicated places to skateboard in our town of Brookline, Massachusetts, my wife Patty organized a group of young skate boarders and parents, teachers, nonprofit and other leaders to advocate for the creation of safe places to skate in our community.  Although we have a lot of work to do and have only taken the first few steps in what will undoubtedly be a long journey, the collaborative efforts of our small but committed group, the over 100 friends who supported us online and the 60 young skaters and their parents who attended our presentation to the town’s Parks and Recreation Commission have successfully launched our campaign.

In his recently published book, my friend Alan Khazei – the social entrepreneur , Co-Founder of City Year and former candidate for the US Senate – makes the case for creating change through the collaborative efforts of public private partnerships, where citizen activists, business leaders and government agencies work together to address challenges and create new opportunities.  He refers to this model as Big Citizenship, advocating that the old models of relying too heavily on either big government or private industry are tired, ineffective and not appropriate for creating change in the 21^st Century.

Although the concept of Big Citizenship is not intuitive to all, you clearly know it when you see it in action.  I had such an experience recently.  Realizing that our son had no place to skateboard in our town of Brookline, Massachusetts, my wife Patty organized a group of young skate boarders and  parents, teachers, nonprofit and other leaders to advocate for the creation of safe places to skate in our community.  Alan would see this as a clear example of the power of big citizenship, and I would agree. But I also see it as a compelling example of collaboration and, as we are beginning to increase our social and traditional media outreach, a great case study in how the internet can support and turbo-charge the efforts of a small but committed group.

None of this would have been possible without both Patty’s initiative and the phenomenal and strategic efforts of our friend Armin Bachman.  Armin is truly a Big Citizen.  (Last year I encouraged Alan to promote his book by starting a Big Citizen contest where people could nominate others for recognition; I had Armin in mind as a leading candidate.)  Armin is an entrepreneur; he is co-owner of Orchard Skateshop, by far the best skateboarding store in the Boston area.  He is a social entrepreneur, having founded the nonprofit Extension, to make skating more accessible in the greater Boston area.  Armin and

the other owners of Orchard are big citizens in their community as well, giving 1% of their revenues to local nonprofits and helping new artists by hosting shows in the gallery above the shop.  He is also one very smart and connected dude, knowing leaders in the skateboarding space across the country and increasingly around the world, and very gifted at finding data related to developing safe places to skateboard.  (Full disclosure: Armin is also Myles skateboarding teacher.)

Other members of the original group included Nicco Berinstein, a Brookline High School 11^th grader and avid skater; Eileen Amy, Nicco’s mother and a registered nurse; Michael McKittrick, a Brookline High School teacher and the faculty advisor to the school’s skateboarding club; John Wynne, a Cambridge businessman, skater, and a passionate skateboarding advocate; and our son Myles, an avid skater and the person who helped us see the need for safe places to skate in Brookline.

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Too little too late? Will Obama’s lack of collaboration kill health care reform?

Net: Obama’s failure to leverage the collaborative efforts of others, consider and include good ideas from his opponents and provide the requisite and timely leadership contributed greatly to congress’ inability to pass heath care reform.  Will the rhetoric and approaches of the last two weeks be enough to revive it or are they too little too late?

I have often wondered if there is a common event that gets people to start blogging.  I imagine for many it’s a topic or an issue they feel so passionate about that they feel compelled to share their thoughts with others.   For a wonderful example of this, see my friend Dr. Mark Pearlmutter’s blog from his two weeks as a volunteer in Haiti.

One thing I know for sure is what stopped me – jumping into the Citizens for Alan Khazei Senate campaign for the last 55 days of the 90 day special election to fill Ted Kennedy’s seat.  Since the campaign ended, I have had many posts “drafted” in my head, but have been experiencing some kind of weird writer’s block that kept my fingers from typing.   I began to fear that maybe leading 128 pages of policy work in under two months used up all of my words for the year!

As anyone who knows me knows – health care is my biggest issue and has been since my then six month old daughter was sick for the first time.  Fortunately, we were living in Toronto and had access to a wonderful pediatrician who returned our call at 10:00 in the evening and sent us to a world class children’s hospital a few blocks from our home.  I realized at that moment that there were millions of American’s who couldn’t have done what we did and became a dedicated soldier in the war to bring health care to all American’s and to lower the cost and improve quality for those of us lucky enough to have coverage.

I have written before about my frustration with Obama’s ineffective attempt to sell health care reform to the American people in the post What Obama can learn from Ross Perot, Cecil Underwood and Coalition Marketing.  Listening to some of his remarks about health care reform over the past ten days has me sufficiently agitated to start blogging again.  A few more suggestions for the President:

1. Look for others who have already collaborated and use them.

Last summer, I found an incredibly thorough bi-partisan proposal for health care reform called Crossing Our Lines: Working Together to Reform the U.S. Health System.  This report was written by former Senate Leaders Bob Dole, Howard Baker and Tom Daschle.  George Mitchell also was a major contributor to the project, but was not listed as an author on the final report after shifting all of his efforts to his role as special envoy to the Middle East.  The report was the product of a two-year consensus-building process called the The Leaders’ Project on the State of American Health Care.  Their plan is a comprehensive set of policy recommendations that aims to provide quality, affordable health coverage for all Americans and includes recommendations to improve quality and control costs.

Having stumble upon this report, I was surprised that I had not heard of it from traditional news media or blogs, and disappointed that Obama wasn’t using this as a framework for his heath care reform efforts.  We used this as one of the primary sources for developing Alan Khazei’s health care policy during his race for the Massachusetts U.S. Senate seat.

Then, last week on either XM Radio’s POTUS or CNN, I heard the President refer to The Leaders report at least twice.  Saying,

“The component parts of this thing are pretty similar to what Howard Baker, Bob Dole and Tom Daschle proposed at the beginning of this debate last year.

“Now, you may not agree with Bob Dole and Howard Baker and Tom — and certainly you don’t agree with Tom Daschle on much … but that’s not a radical bunch. But if you were to listen to the debate, and, frankly, how some of you went after this bill, you’d think that this thing was some Bolshevik plot.”

“And so I’m thinking to myself, ‘Well, how is it that a plan that is pretty centrist… (more)

Why didn’t he use this as an example and – better yet – use Dole and Baker to help him sell health care reform over the past twelve months?

2. Collaboration means working together and using each other’s good ideas, not just giving them lip service.

RNC Chairman Michael Steele spoke at Harvard’s Institute of Politics last week. During his remarks, he mentioned that Republicans had offered over a dozen ideas and proposals for addressing the country’s dysfunctional medical malpractice system, but none of them were given serious consideration by the administration.    If Obama is serious about lowering the cost of health care, he needs to address medical malpractice, considered by many experts to be the major driver of defensive medicine.  The cost of defensive medicine has been estimated to be between $70 billion and $200 billion a year by PriceWaterhouseCoopers Health Research Institute and others.

Again, this idea is not new.  Bill Bradley wrote about the need to form a bi-partisan coalition to pass  health care reform and the opportunity to use medical malpractice reform as an issue that would bring Republicans to the table in his 2007 book, The New American Story. He made this point again in an August 2009 New York Times Op-Ed article, Tax Reform’s Lesson for Health Care Reform.

On the Khazei campaign, we reached out to our network of friends we were introduced to Dr. Alan Woodward, a former President of the Massachusetts Medical Society and a passionate expert on health care cost reduction.  Dr. Woodward turned us onto the successful approaches to medical malpractice reform being successfully implemented by the University of Michigan Health System and recommended on by the Joint Commission on Accreditation of Health Care Organizations. (I will write more about this in an upcoming post on the collaborate efforts of the Khazei campaign.)

Again, the answers are out there if you truly believe in collaboration and are willing to do the work to find them.

3. Collaboration does not mean abdication of leadership.

Anyone who has engaged in a truly collaborative effort quickly realizes that harnessing the wisdom of crowds takes work.  I recently experienced this when using 99designs.com to run a contest to develop a logo for a new organization among hundreds of graphic designers from around the world.  As John Della Volpe, the Founder of SocialSphere Strategies wrote about in a recent blog post, you need to provide leadership (a clearly written brief) and guidance (continuous feedback to initial and revised designs) to get a quality product when using this or other hugely collaborative processes.

President Obama’s lack of leadership on health care has been a concern to many of us who applauded his courage to take on this most important and possibly most challenging issue.  To me, his almost hand off approach through most of 2009 felt like a “guardrail to guardrail” over-reaction to the mistakes of the Clinton administration’s health care reform efforts.  Whereas the Clinton approach is remembered as one where Hilary Clinton, Ira Magaziner and a few others developed in closed meetings the plan they expected congress to pass, the Obama administration’s approach was almost the polar opposite.  The President’s instructions to congress to “increase coverage without increasing the deficit” and his failure to make a major address about health insurance reform until late summer are two examples of the lack of leadership he provided, with what we now see as disastrous results.

According to Politico Pulse – a great new source of information I recently found on my Kindle - at the closed door session with Democrats last week, Al Frankin and others raised this concern:

Sen. Al Franken ripped into White House senior adviser David Axelrod this week during a tense, closed-door session with Senate Democrats.   Five sources who were in the room tell POLITICO that Franken criticized Axelrod for the administration’s failure to provide clarity or direction on health care and the other big bills it wants Congress to enact.

Obama has scheduled a Health Care Summit meeting with Republicans on February 25^th.  Lets hope he provides both real collaboration and leadership and that it won’t be too little too late.

Dear Ace Tickets: Is the customer always right or are you never wrong? Pick one.

Net: Ace Tickets refunded skateboarding tickets we overpaid for through our own ignorance, yet refused to refund “pole view” tickets at Fenway Park they assured us were unobstructed.  Sur La Table re-funded a four year old purchase without a receipt on a product they no longer carry. Both have solid customer ID technology, one used it to build loyalty, the other to damage it. Which one are you?

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What Obama can learn from Ross Perot, Cecil Underwood and Coalition Marketing

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Hotels.com uses Web 2.0, great service and rewards to score a Collaboration Evangelist trifecta

Net: Hotels.com provides great consumer value, excellent web and phone customer service and has one of the most rewarding loyalty programs I have seen.  The company shows how applying the philosophy and applications of Web 2.0, good customer service and a well designed and implemented rewards program can create customer loyalty.  Why book anywhere else?

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Amazon Kindle 2 even better than the original

Net: I loved the original Kindle and the Kindle 2 is even better.  Thinner, more durable, faster user interface and improved battery life.  It pays for itself in 6 months if you switch from buying the paper versions of the Boston Globe, NYT and WSJ to the KIndle versions.  If you click on the link below to buy one, 10% of the price will go to the nonprofit job training program Year Up.

Click Here to buy a Kindle from amazon.com and 10% of the price will be donated to Year Up

Last summer my wife bought me an Amazon Kindle for our anniversary.  I was so impressed with the device – and felt that it was so poorly marketed – I wrote a long email praising the product and sent it to everyone on my email list.  I had never done this before for any product or service.  I turned the email into a blog post and posted it on Collaboration Evangelist under the CHU Recommends section.

The post was titled 4 Reasons why the Amazon Kindle e-reader is one of the best devices ever, will help you lose weight, save money and lower your stress level. I won’t repeat all of the praise for the Kindle here; the main points I emphasized were:

1. Although Amazon markets the Kindle as an electronic book reader, I find its real value comes from reading newspapers and blogs.  The Kindle automatically and wirelessly downloads newspapers and blogs to the device.  So anywhere in the country I wake up with the latest versions of the New York Times, The Wall Street Journal and The Boston Globe and the 10 blogs I follow on My Kindle. You never need to connect the device to your laptop.
2. It is very readable, even in bright sunlight.
3. The battery lasts for days.
4. You get new content by searching right from the Kindle, purchasing with “one click” on the device and are billed through amazon.com as if you made an online purchase.  No need to enter passwords, credit cards, etc. on the Kindle. Books download in 60 seconds.
5. It’s incredibly light, about as heavy as a Blackberry.
6. It’s a great value, as long as you cancel your paper subscriptions.  Although the Kindle 2 is slightly more expensive than the original at $359 and the cover is sold separately for $30, it is still a great deal.  Breakeven is less than 6 months if you switch from paper to Kindle versions of three newspapers.  Books cost about $10; blogs are around a dollar a month.

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Three facts and 6 myths about Web 2.0

The three facts:

1. Forrester’s 2008 Technographics research found that over 50% of the members of all major age groups are actively engaged with at least one Web 2.0 application, including blogs, user reviews and social networks.



2. A 2008 McKinsey study of over 1900 large enterprises around the world found that only 28% were applying at least one Web 2.0 technology or tool.
3. Of those companies surveyed by McKinsey that had applied at least one Web 2.0 tool to their business in 2007 and 2008:

• 21% were very or extremely satisfied with their investments
• 22% were very or extremely dissatisfied with their investments

 Yes, more businesses were dissatisfied with their investment in Web 2.0 tools than were satisfied.

The six myths:

1. My customer (or employee or business partners) base is too old to engage with Web 2.0 and social media tools. This makes a lot of sense for businesses that cater to a younger population, but not for us.
2. Our business is in a serious industry where privacy is very important. Therefore using Web 2.0 tools would not be appropriate.
3. Web 2.0 is a fad and it will go away.
4. Less than 30% of businesses are using Web 2.0 tools; if it doesn’t fade away, the next person in my job can deal with it.
5. Social media applications do not need to be “launched” either internally for employee applications or externally with customers or partners. You should just put them on the web or your intranet and if they are valuable, people will use them. We tried an experiment and nothing happened, all of the above are correct.
6. No one has been able to measure the business impact or the ROI of investing in social media technology.

Data and case studies to support 1-6 to follow in future posts.  Let me know your favorite myths. 

What business can learn about leadership and collaboration from Little League Baseball

Although you wouldn’t know it from the 50 degree weather we have had the last three days, it is spring in Boston, which means my 9 year old son is playing baseball again.  Helping coach his little league team reminded me of the leadership model we developed at the Loyalty Group that others have found helpful and I thought I would share it with you.

During the time I was CEO of The Loyalty Group, we grew from three entrepreneurs in a Toronto hotel room to over 600 employees when we sold the business to Alliance Data System (NYSE: ADS).  Throughout this period, I thought a lot about both leadership and how to help executives develop the requisite skills to advance as far as they wanted to in their careers, as this was one of my most important roles. Few things give me greater satisfaction than seeing several of the people I hired continue to grow and be successful in their careers. Indeed, many of those I hired and mentored have taken Loyalty to levels of success we didn’t even dream of during my tenure, and we were pretty big dreamers back then.

One of the things I came to understand about leadership and developing executive talent became what we called the “Three I’s of Leadership.”  I realized to build a successful high growth company while delivering on our cultural goal of “creating business success that others consider impossible, while treating people with respect and having fun along the way” we needed leaders with the following skills:

• Intellectual Leadership – Leaders who had both the raw brain power to identify opportunities and solve challenges and very deep skills in their specific areas of expertise.

• Implementational Leadership – Leaders who were not just “consulting smart” but who could get things done to move the business forward.  Executives who could actually stop thinking, developing models and drawing matrices and “land the helicopter, get the troops in the field and make things happen.”

• Inspirational Leadership – Leaders who could get things done through others without making everyone quit.

Over time, I found out two things about this model:

Three I Leadership can be, and usually is, a shared set of skills.

Although no senior executive can have below threshold skills in any of the three areas, many highly successful companies are led by “Three I Leadership Teams.”  I first realized this through being involved in YPO (the Young Presidents Organization) where I spent a lot of time with other Presidents of successful companies. My original belief was that successful CEO’s had to be “A” players in all three leadership skill sets, but I realized that this often wasn’t the case.  I observed several very successful CEO’s who clearly were not what anyone would consider “motivate the troops inspirational” and others who although incredibly smart “idea machines,” needed someone to figure out what ideas should actually be implemented and then take the idea from the white board (or the back of the napkin) to the business and the bottom line.  All I observed were very smart, but not all would qualify for Mensa.

I soon realized that almost everyone had built a “Three I Team” around themselves by hiring direct reports that balanced and complimented their skill sets. There was the collaboration principle at work again.  Once I realized the importance of Three I Teams – and the stupidity of expecting every senior executive to be naturally gifted at all three – I started using the model to help my direct reports work on their weakest areas and made sure we had Three I Teams leading all of our major groups and strategic initiatives.

I later began using the Three I model in recruiting and would ask candidates to distribute 100 points across the Three I’s to indicate their leadership strengths and weaknesses. One of the funniest reactions I received to this question came from an executive who had worked at American Express during the 90’s when Harvey Golub was CEO.  He responded something like: “That’s a great model.  Harvey is 60 intellectual, 40 implementational and 0 inspirational.” Then he became even more excited and said, “No, that’s not correct, he is 60 intellectual, 60 implementational and negative 20 inspirational.”  Although the candidate was clearly exaggerating in jest, he was making my point exactly as Ken Chenault was Gulob’s number two at the time. Then and now, there may not be a better example of a “High I Inspirational” leader than Ken.

The model can apply to the leadership teams of organizations large and small.

Back to my baseball analogy.  Last year, I thought about this regarding little league baseball coaches.  A coach needs to know the game of baseball, the complex rules, how to catch, hit, run and steal bases, etc.  But knowing how to play baseball is necessary, but insufficient. Someone on the coaching staff needs to know how to teach young kids how to play baseball – how to learn the game and improve their skills. What drills are most effective in practice; how to spot a batting stance off balance or a throwing motion without follow-through and how to make the subtle changes to correct these errors.  Finally, as all sports are partly mind games, and baseball can be incredibly stressful for young athletes, at least one of the coaches has to be able to keep the kids fired up and have a vast vocabulary of positive things to say no matter what happens at on the field – a swinging strike becomes a “good cut, “bases loaded means “we now have an easy out at every base,” etc.

If this model makes sense to you, try it inside your own organization.  If it applies, consider building it into your professional development systems and recruiting strategies.  If you use it, collaborate with us by letting me know how it worked and what you have done to improve the model.

I lost my Kindle and missed a flight, but still had a good experience as Air Canada and USAir collaborated to provide extraordinary customer service

Net:  On a recent day trip to Toronto which could have been “travel hell,” several USAir and Air Canada employees worked together to get me there and back painlessly.  Air Canada’s Connie Hughes went the extra mile to help me look for a lost Kindle.  These businesses should make it easy to tell their CEO’s about extraordinary service.

Over years of business travel it seems that missed flights, mechanical delays and other problems that create “travel hell” cluster on one or more days during the month.  I was saved from just such a day recently by great customer service.   I started the fun on a recent day trip to Toronto by misreading my itinerary and showing up for a flight through Philly after the plane had departed.  As I was traveling to Toronto for only two meetings, including one with a very interesting company that has an opportunity to create a coalition loyalty program in China, I was suitably upset with myself for this screw-up.  I went to the USAir Club and Sonia Perez, the club’s customer service agent was very helpful and put me on the next flight, despite the fact that it was 100% my fault that I missed the earlier plane.  Great service experience number 1.

After a long day of meetings, I checked into Air Canada’s Maple Leaf Lounge at Pearson Airport only to find that my return trip through Philly was delayed.  [Although I am not a member of the Air Canada club, through the Star Alliance, USAir and AC collaborate and allow me to use the club with my USAir Club card]  I remarked to the customer service agent at the Maple Leaf Lounge – whose name I would soon learn is Connie Hughes – that my flight was delayed and I was worried about missing my connection.  She immediately looked at the Air Canada flights and suggested I ask USAir if they would put me Air Canada’s direct flight to Boston. She informed me that if the delay was for mechanical problems, USAir should make the transfer and then found the only gate at the airport where I could talk to a USAir representative.  Great service experience number 2. I went to the gate and the gate agent happily put me on the direct flight, which by the way, would get me home two hours earlier than my connection. Great service experience number 3.

So far so good as what could have easily been a travel hell day was actually turning out to be better than expected.  But the best was yet to come.  I went back to the Air Canada club to wait for my direct flight to Boston and realized I had left my Amazon Kindle somewhere.  As I struggle with ADD, this was a frustrating but not unusual occurrence, so I began to retrace my steps.  I returned to the gate and everywhere else I had been but found no sign of the Kindle.  When I came back to the lounge, Connie was again at the front desk and I asked her if there was a lost and found.  This is when customer service went from great to amazing.  Here’s what she did:

• She found the two numbers for lost and found and called them both for me.
• She helped me search the club for the Kindle.
• She told me that she was from Boston and was flying there for the weekend and offered to check both the lost and found and the Wolfgang Puck restaurant where I could have left the Kindle for it and if found, would bring it with her on Friday.
• She emailed me that evening and the following day to say she had not found the Kindle.

Great customer service experiences 4 – 7.

One of my fist posts on customer service was about how two Massachusetts state employees turned a flat tire into a great experience with their extraordinary acts of service. And although I am still upset about losing the Kindle, I feel a lot better about the whole experience because of all Connie did to help me.

Fortunately, I was able to get the email address for Calin Rovinescu, the President and CEO of Air Canada and will send this to him along with a special thanks to Connie for her excellent service.  The only recommendation I have for Calin is to find a way to make it easy for customers who experience extraordinary service to let him know about it.  USAir does something like this, as they send their frequent flyers “Above & Beyond” cards to fill out and send in when they receive great service.  Perhaps AC can start this practice as well.

Questions:

1.       If Connie Hughes can turn a lost Kindle and an almost travel hell day into a good experience, what are your employees doing to help your customers today?

2.       If your employees are providing extraordinary service today, have you made it easy for your customers to say thank you and let you know about the experience.

3.       If you hear about extraordinary acts of service, how will you reward the employees who delivered it?

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