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

All profitable coalition loyalty programs share six common elements in their design, launch and on-going operations. The most profitable loyalty programs, like the AIR MILES Reward Program in Canada, now part of Alliance Data System’s LoyaltyOne division, maximize the effective implementation of all six.  Although trade-offs can be made among the six – as programs that offer extremely high value in some of the areas can still be profitable with less than optimal performance in others – we know of no programs that have been successful, sustainable, and profitable over the long run (e.g. more than five years), who fail to contain all of these elements. The most important witness to this is the collective failure of the various programs that make up the infamous Billion Dollar Club, the term we use to highlight the fact that over one billion dollars of investors’ money has been lost trying to develop successful coalition loyalty programs in North America alone over the past three decades. They all failed to deliver on one or more (and usually several) of the requisite design and operational program imperatives.

A Most Important Caveat

Before diving into the details of each of the 6 A’s, we must share one overarching fact that we know from literally hundreds of years of combined experience by our partners running and studying programs in the space:

A great loyalty program will not compensate for an uncompetitive consumer value proposition.

If your business, product or brand suffers from poor service, product deficiencies and/or pricing that is unaligned with the value provided to target customers by your competitors, a great loyalty program – either stand alone or coalition – will not compensate.  At best, the program will motivate members who have not tried your product or stores to test them, but if they came because of the loyalty rewards, they are unlikely to return if your consumer value proposition is uncompetitive.

We learned this the hard way in the early days of AIR MILES Canada in our grocery category.  In Western Canada, we launched with Safeway, the region’s leading grocer, who became and remains an extraordinary program sponsor.  In Ontario, my business partner and I – both originally from the US – signed Food City in the wee hours the night before our launch press conference.  Although Food City’s flagship store was attractive and high quality, we didn’t realize that many of its stores were old, tired, and offered poor service, at best, from unmotivated employees.  I unfortunately learned this firsthand in an embarrassing moment when Keith visited Canada shortly after launch and I took him on a “store tour” to visit several sponsors.  We stopped at a Food City that I had not visited before and was clearly not a flagship store.  Once inside, I noticed the TV with a built in VCR that was supposed to be playing an AIR MILES promotional video was turned off.  I pushed in the tape, anxious to show Keith some of the marketing support the chain was putting behind the program, but within a few minutes of starting, a check-out clerk shouted something like “What’s that crap?” And another responded “Oh, it’s that AIR MILES video.  I am sooo sick of hearing it.”  Needless to say, not my best experience taking a Chairman on a store tour.

The data soon demonstrated in a more powerful way the problem with including a sponsor with a poor or inconsistent consumer experience and/or brand image in a coalition program.  Soon after launch, we began to test numerous data base driven targeted offers in the early months of the program.   Specifically, we identified collectors with large households who were earning miles from Shell and living in the trading area of one of our grocery partners, but had not yet earned miles on their grocery shopping.  We ran simultaneous programs in Western Canada for Safeway and in Ontario for Food City.  The comparative results were stark and telling.  I recall that more than 50% of those targeted with bonus offers from their nearest Safeway tried shopping at the store. Then, close to 80% of the non-shoppers who tried Safeway returned for additional visits – demonstrating the initial behavior of new, and highly profitable, loyal customers.  The Food City results were nearly opposite.  Significantly less than half of those targeted tried their local Food City, reflecting the chain’s overall weak brand.  More telling is the fact that under 20% of those who shopped at the store once returned for additional visits.  Today, over 15 years later, Safeway remains a cornerstone of the AIR MILES Canada program.  Food City and AIR MILES did not renew their initial contract and the brand was eventually retired. No Food City stores remain in Ontario.  They are a testament to the fact that even a great loyalty program will not compensate for a poor consumer value proposition.

The Details

1. Aspirational rewards:  The program must offer a reward or selection of rewards that will motivate the consumer to change their behavior.

My view of what constitutes “aspirational” has changed over time. When we were first selling in and launching Air Miles, we often made fun of programs that offered “bathroom scales” and other consumer appliances as rewards.  But a few years into the business, our research demonstrated that a significant percentage of our best customers, or Gold Collectors, also held membership in the Canadian mass merchant Zeller’s Club Z (“Zed” in Canada) and that many felt “Club Z is more relevant to me.”  It dawned on me that the definition of an aspirational award was largely individual-centric and we began to expand our rewards, first into other travel related rewards, then entertainment, like free movie passes.  Eventually, we developed a full catalogue of rewards, from electronic merchandise like iPods and flat screen TV’s to grocery and other gift certificates from our Sponsors.  For some, cash back remains an aspirational reward; for others, saving a few cents per gallon of gas on a few fill-ups per year appear to be motivating.

2. Attainable rewards: The consumer must believe she/he can earn the reward in a reasonable time and that the actions required to earn the reward are worth the costs, e.g. risks of trying something new, the inconvenience of crossing the highway to buy gas from a specific station. .  “Attainability” is a word that those of us in the loyalty business speak about almost as a technical term.  But at its core, attainability is a mental calculation or a gut feeling that everyone who continues to participate in a loyalty program operates on.  To continue demonstrating the requisite behavior for the time needed to earn the reward, a consumer has to believe it’s a good deal.  Am I going to stay in LA two hours later and take the 12 AM Delta flight instead of the 10 PM American, just for the frequent flyer miles?  Am I going to carry a Stop & Shop card and use it every time I shop there to get discounts?  Am I going to pay $25 to join the Barnes & Noble program to receive 10% off my purchases for a year?  If I believe I am getting good value for these behaviors, I will continue to do them – as long as I am reminded of the benefit (see Awareness below).  If not, I won’t.

A simple way to think about attainability is “how long does it take to get something I want.”  One of the major benefits of a coalition program over a stand-alone or single company program is the consumer’s ability to accelerate and maximize attainability by consolidating all of their shopping with program sponsors.

At AIR MILES, based on our initial research and re-enforced by ongoing Collector behavior and feedback, we designed the program so that the average member could earn a free trip in a year and, with the addition of our lower mileage reward options (acronymed LeMRO’s), a smaller reward every month.  Adding LeMRO’s to the program in the mid 90’s dramatically improved our attainability for a broad selection of Canadian consumers.  One of the most important consumer groups became the front line employees at our Sponsors.  A young person pumping gas at Shell, for example, wouldn’t spend enough in a year to earn a free flight, but could earn several movie passes or days skiing with our expanded and more affordable reward options.

The attainability of programs that offer cash back, usually 1% back, present an interesting question.  For some, getting a discount of any value is aspirational and therefore even small amounts back at the time of purchase or later into an account also represents program attainability.   This segment may change over time, partly driven by life stage and partly driven by the economy – particularly the consumer’s personal household economics.   One thing we believe is that the amount of cash or funds that can be reasonably collected over a year in niche marketed programs must be reasonably significant.  For example, saving $20 a year toward a college tuition bill that will likely cost me $500,000 in the not too distant future doesn’t feel like a “good deal.”  Neither does being able to decrease a $25,000 season ticket to an NFL game by $500.  But again, attainability is in the eye of the collector.  That said, one thing that cash back does not offer is a reward that is easy to differentiate from competitive offers. Furthermore, putting a dollar in a member’s account can be the most expensive reward (see Affordable below).

3. Accessible rewards: Rewards must be relatively easy to both collect and redeem. If access to rewards is inconvenient, feels complicated, or requires multiple steps, the less attractive the consumer value proposition.

It is amazing how many programs blow this one.  Granted, I don’t believe anyone starts out trying to design a program that makes it difficult for consumers to earn rewards. In their desire, however, to rush to market – usually for reasons as urgent as a thinning cash flow – many companies end up with unbelievably complicated or burdensome programs.  The two best known examples of this are the grocery execution for the 1992 AIR MILES program in the US, and a Dominos Pizza offer in NASCAR’s Race Points program.

In early 1991, Loyalty Management Group, the company that launched AIR MILES in the US, was struggling to sign grocery chains as sponsors and also realized that the then hugely fragmented nature of the retail grocery store industry would make it difficult to sign enough to offer sufficient convenience to the majority of American households.  LMG made the decision to offer exclusivity instead to the major consumer packaged goods (CPG) companies – brands like Coke and Kellogg’s – as a way to offer miles to collectors.  Although LMG executives were able to sign up multiple companies offering great offers on literally hundreds of products, in the pre-internet era, the only way for consumers to actually earn points for buying the specific products was to cut out the UPC codes and mail them to the company’s clearing house partner.  Two years after launch, I called my then-70 year old mother to tell her that the US program was shutting down and to reassure her that I still had a good job.  The first thing she said was, “Oh my, that must be because of me!”  Certain that she was not the cause of the company’s demise, but always interested in her thinking, I asked her to explain.  She replied, “Because I have a whole drawer full of UPC codes that I have cut out and keep forgetting to mail in.”  Although my mother was a social worker (and later twice First Lady) by profession, her business and political instincts were almost always spot on.

Several years ago, NASCAR developed and launched a Race Points program with the firm Stoneacre.  Although some offers were strong and easy to collect, the program suffered from low attainability with no grocer or other major retail sponsors, and with at least one sponsor requiring a baffling level of complexity to earn points.  Dominos, a great and nearly ubiquitous brand, was a Race Points sponsor.  But to earn points from Dominos, collectors had to: (1) Buy pizza, (2) Go to the NASCAR web site, (3) Find and click-on the small Race Points icon, (4) Find the Sponsors tab, (5) Click on Dominos, (6) Locate and print a form, (6) Find the piece of paper that was taped to the pizza box (probably now in the trash or being destroyed by the collector’s Lab), (7) Locate the code on the bottom of the piece of paper, (8) Write down the code on the printed form from Step 6, and finally, (8) Fax in the form to Race Points.  My reaction as a consumer was TMTNGTDT: (too much trouble, not going to do that).

These are extreme, although quite real, examples.  Less extreme would be to require payment card registration or payment with a specific credit card.  These requirements have worked in many programs, but none are as easy as simply showing the same membership card at the point of sale at every sponsor.

Another requirement that will dampen initial and ongoing consumer participation is what we call “two-step programs,” where the consumer must collect points in one program (usually an existing single company program) and then transfer them into another program’s points before they can be redeemed.  This, too, can work and is made far easier with the Web.  For example, I am a loyal American Express Membership Rewards collector and often transfer my Amex points into Delta’s Skymiles.  This can now be done in a few clicks within the Membership Rewards web site, which credits the miles in a few minutes – quick enough for even a world-class procrastinator like me to be able to transfer points and book flights at the last minute.  Although transferring points from one program to another can increase attainability, such a design increases complexity and adds friction that will decrease participation and behavior change, at least to some degree.  Again, the more aspirational and attainable the reward, the more hoops an avid collector will jump through to earn the reward.

4. Affordable rewards: The cost of the reward to investors, the program operator and merchant participants must be less than the incremental value of the concomitant consumer behavior change, on a fully diluted basis.

At the end of the day, nothing else matters if the program is not demonstrably profitable to whoever is paying for the cash back, the points, or other benefits.  In most programs this means that the entire system cost of delivering the reward to program members in exchange for their specific shopping behavior must produce a positive ROI, or return on investment.  The program must be designed in such a way that the economic benefit of members’ behavior change can be shown to be greater than the full cost of implementing the program.  The larger the program, the greater the ROI burden on the company executive sponsoring the program and the agencies or program operators helping run it.

With the growing opportunities for leveraging social, mobile, and interactive digital media to monetize online consumer behavior, the sources of value from reward programs are expanding rapidly.  Traditional programs must prove program ROI from a combination of behaviors usually referred to as lift, shift and retention.  Lift is increased spending from existing customers who join the program. Shift is new revenue from customers who switch from a competitor to the participating business or try a new product. Retention is the revenue gained from slowing or eliminating defections to competitors.

While we use “affordability” as a catchall for program ROI, the actual cost of the reward is an important part of the equation.  The greater the difference between the perceived value of the mile or point to the program participant and the cost of redeeming that point to the company or program operator, the easier it will be to demonstrate and prove profitable behavior change.  The original AIR MILES Shopping Reward Programme developed by Sir Keith and his colleagues in the late 80’s benefited from the ability to access excess seat inventory from British Airways at a fraction of the retail cost of buying a seat.  It helped that BA owned half the company.  Points-based programs can also benefit from “breakage,” or the percent of points that expire or are otherwise not redeemed. That being said, I like to work with programs with minimal breakage in their economic models.

While affordability and ROI are hugely affected by the cost of the reward, the most important part of the equation is not the cost, or the “I,” but rather the level and economic impact of the demonstrated behavior change, or the “R.”  The more aspirational the reward, the faster the attainability, the more accessible the sponsors, and the greater the ease of collecting points, the greater the behavior change.  And most important, if the combination of the company’s product’s, and service’s consumer value proposition (including the reward program) do not provide significantly greater competitive value to targeted customers, then the program will not change behavior over time and instead become only an additional cost of doing business.  This is what happened to trading stamps in the 60’s.  Eventually nearly every grocery store and every gas station offered stamps that could be redeemed for exactly the same merchandise in exactly the same amounts. Eventually, since no storeowner or company executive believed the programs were creating profitable behavior change, they all stopped issuing the stamps.  I believe the ubiquitous grocery gas discount programs are headed rapidly in the same direction.

5. Actionable data: The program operator and merchant participants must be able to identify the incremental spending and profits, and/or the improved retention of members and opportunities for targeted initiatives.

At the end of the day, all businesses continue to exist over time because they create value for their customers – the force that actually generates revenue.  The same is true in spades for loyalty programs, coalition or other.  Those programs that continue to exist and grow, like AIR MILES Canada and Nectar, are clearly providing demonstrable value to their Sponsors.  With AIR MILES Canada’s annual revenues approaching one billion, it’s safe to assume that some sponsoring companies are paying around $100MM per year for their loyalty program.  They would pay this amount, nor would AIR MILES have grown to anywhere near its current size without the ability to prove that the money Sponsors pay for points, data, insights, and targeted marketing programs increases the profitability of AIR MILES Collectors far in excess of their investment.  I use the word investment intentionally.  One of the company’s greatest competencies is their ability to track collector behavior and to work with Sponsors’ CFO’s and other leaders to calculate and maximize their return on investment.

This is only possible if the program is designed and implemented to enable both the program operator and the participating companies to measure behavior change: namely, lift, shift, and retention.  Program value can only be maximized for all parties if the loyalty program’s information system has the ability to identify the gap between members’ potential and current spending at sponsors.   A simple example would be the ability to identify a program member with four persons in their household, who lives within a few blocks of a sponsoring grocery, but spends less than $50 a week at the grocery.  Higher levels of value can be created by understanding other demographic characteristics, responsiveness to offers, reward preferences, etc.  This is another advantage of a coalition program over a stand-alone or single company program.  A coalition program will always have a more robust data set on its members than a single company loyalty program. Coalition programs even have the opportunity to identify changing consumer spending habits over time, e.g. home renovation or an increase in household size (e.g. babie$).

Regardless of whether the program is stand-alone or coalition, the ability to credibly track the cost and value of incremental behavior change, and increasingly, identify high-potential, underperforming households, must be built into the program design before launch.  At a minimum, neglecting this important element will make the program operator’s life miserable.  More likely, executives within the companies who are paying for the program will – and arguably should – kill it.

6. Awareness of benefits: The program attributes and benefits must be clearly and effectively marketed on an ongoing basis to both potential merchant sponsors and to consumers who become program members.

Although this would seem like a no-brainer, we are continually amazed at the number of poorly marketed loyalty programs.  Some recover after a weak launch, but many remain so over time. We can also point to positive examples.  CVS does a great job of marketing their ExtraCare program. 99% of the time I am asked for my CVS card by a cashier and 100% of the time by the self-checkout machine.  CVS also lets customers use their phone number as a program identifier, a good example of making the program accessible, or easy to collect.  Although we never analyzed this, we all believed that one of the primary drivers of AIR MILES’ early enrollment and ongoing participation success was the fact that almost all Sponsors’ front line employees “ask for the card.”  When we were recruiting sponsors for Jaz Rewards in 1999, I would bet US company executives $1000 that if they drove across the border and bought either gas at Shell or groceries at Safeway they would be asked “Do you have an AIR MILES card?” I never lost that bet.  While in Canada, I was a member of YPO (Young Presidents Organization) and was fortunate to be in the small group Forum with Don Guloien, now CEO of Manulife.  Don showed up at a Forum meeting one night, looked at me and said, “I almost got in a fight because of you today!”  Don is a brilliant and passionate Chief Executive, but doesn’t exactly strike you as someone who would ever get in a fight. Shocked, I asked him why.  He responded, “I’m driving a Suburban and the guy at my local Shell told me I was an idiot for not having an AIR MILES card, given how much we spend on gas.”  You get the point.

Creating awareness for the program at launch and on an ongoing basis is critical, but awareness without understanding is actually more damaging than below threshold awareness.  I unfortunately learned this the hard way when we absolutely blew our initial launch marketing for AIR MILES.  We created a marketers nightmare: high awareness faced with even higher misunderstanding.  Many Canadians thought we were a frequent flyer program (duh!), or a credit card program, or that it would take forever to earn a reward.  We knew we had a problem when initial enrollments fell short of our expectation, so we immediately invested in research to understand the problem and rapidly changed our creative to address the problem (this last is now the subject of a business school case study). We learned two lessons. The first was to not get too creative with the program message.  Whereas our initial creative featured people shopping and then flying through the air, our re-launch marketing focused on sponsor products and services with the tag line “buy me, fly free.”  We learned the value of “two-by-four” marketing.  The second lesson taught us to promote “attainability.”  We produced a simple chart that showed potential and existing collectors how quickly their miles would accumulate if they shopped at our largest sponsors, as well as what those miles could be redeemed for. The value of a coalition program became immediately clear.  It is amazing how many programs fail to use this simple but powerful approach to demonstrating their potential value to customers.

The Virtuous Cycle of Profitability

If you get the 6 A’s right, both at launch and on an ongoing basis – and if you are running a coalition program and the sponsoring company partners also get it right at launch and on an ongoing basis – you can create a virtuous cycle of profitability for all stakeholders.  As we stated above, all businesses eventually succeed or fail based on the value they create for their customers and their investors.  One of the reasons we are so passionate about the coalition loyalty model is that the value creation formula is so visible and so linked between collectors, sponsors, and investors.

When I was CEO of the Loyalty Group, part of our mission statement used to read, “always put the Collector first.”  At our core, we believe that loyalty programs must work for the customer – the person who joined the program.  First, the customer must be getting a reward they value, in a reasonable period of time. Next, this must be in return for actions they believe represent a good deal relative to the value they perceive themselves earning.  A program that achieves these two results yields consumers who will not only join, but also continue to exhibit the desired behavior.

In a coalition program, the consumer maximizes program value, or points earned, by consolidating all of their purchases at sponsoring companies.   Sponsors in turn benefit when program member buy as much as they can from their respective businesses.  Most sponsors also want program members to buy specific products that offer bonus miles, as well as register for automatic payment, pay their bills on time, and/or exhibit other profit maximizing behavior.  The consumers’ desire to earn points and the sponsors’ desire to maximize share of wallet are completely aligned. This, however, only touches the surface of the value creation story.  We found that if Sponsors were seeing a significant ROI on their investment in AIR MILES, and at the same time we were helping them identify opportunities to target underperforming customers, they would actually help us recruit additional sponsors.  Derrick Fry, SVP of the Bank of Montreal, flew from Toronto to Calgary with us to attend a dinner with Shell executives who were considering joining the program and then took the red eye back to work that same evening. Both Bill Turner, CMO of Sears Canada, and Jim Brophy, a BMO Vice President, participated in our pitch to the Chairman and President of A&P Canada, who soon after joined the program.

More sponsors in the program increase collector attainability, and this, in turn, increases collector loyalty to each individual sponsor.  Although this is intuitive, it is backed up by behavior we saw demonstrated quantitatively in our programs.  We began to call this pattern “the multiplier effect.” Nectar and their grocery partners Sainsbury’s allowed Harvard Business School to publish the following chart in an HBS Case Study, showing that collectors increased their spending at Sainsbury’s as they increased the number of other Sponsors they bought from:

Consumer value creates sponsor value; sponsors invest to increases consumer value, which even further increases sponsor value.  But what about the program operator and its investors?  They, too, participate in the virtuous cycle. Coalition loyalty is like many businesses, in that they must invest in the creation of a customer. In this case, the customer is a program member.  The program member is initially a cost and only a potential asset. The cost of creating or acquiring a program member only becomes a profitable investment if the consumer begins to earn points by shopping at sponsors.  Depending upon the cost of acquisition and enrollment, the program operator will likely not create a profitable collector if the program member only shops infrequently at one sponsor.  If they shop at more than one sponsor, however, the program member begins to contribute to the fixed costs of running the program sponsors.  Collector value – and therefore program value – is maximized when members consolidate their spending at as many sponsors as possible.  Again, the value creation of all stakeholders – collectors, sponsors, and program owners and operators – is clearly and completely aligned.  This explains why coalition loyalty programs, (with a few notable exceptions), either become large and sustainable businesses or fail within a few years of launch, and why a company three of us started in a hotel room now employs thousands.

So if this is the model for program success and investor profitability, how are coalition loyalty and stand-alone programs doing?  In aggregate, not well, at least in the US.  The loyalty trade magazine Colloquy reports that the average US household has joined 14.1 loyalty or shopping reward programs, yet remain active in only 6.  In other words, the average American consumer has joined and consequently dropped out of more programs than those they have found valuable enough to remain active in.  From our experience around the world, we know that well designed, launched and run loyalty programs can maximize value for all stakeholders.  We believe that those who have joined “the billion dollar club” of loyalty losses invested in programs that failed to fully understand and implement one or more of the 6 A’s of loyalty success.  When this happens the virtuous cycle of profitability can quickly become a vicious cycle of failure.

In future articles, we will share examples of best and worst demonstrated practices for each of the 6 A’s.

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.

Armin, Patty and John found amazing data to support our cause, including the following:

-     Skateboarding is one of the fastest growing sports in the US (and around the world) and is now larger than baseball.

-     Skateboarding is the 3rd largest sport for ages 6-18 and the 6^th largest participant sport in the US.

-    Skateboarding is one of the safest sports, with less than 1/10^th the injuries of basketball, 1/5^th of baseball and 1/3^rd of soccer. (My own experience mirrors the data: despite logging close to 100 hours watching skateboarders, the only real blood I have seen was my own when I was stupidly carrying my elbow pads while riding across an asphalt parking lot and wiped out on a pebble the size of a peanut  J).

-     Over half of the injuries occur from skating on poor surfaces like asphalt, usually caused by a lack of safe concrete skatespots and parks for community skaters.

-     Skateboarding is less noisy than football or local traffic and skating on concrete features is over 20% quieter than those made out of wood or metal.

-     Brookline has amazing recreational and sports facilities, including 14 official youth baseball fields – or one for every 60 kids who participate in Brookline baseball – and 8 dog parks, but no safe features or parks to skate on for the estimated 600 skaters who skate almost every day.

From Armin and John, we also learned that the idea of “ good places to skateboard” has evolved significantly over the past few years, with leading edge communities working with local architects and landscapers, skaters and national foundations to create a system of neighborhood skate parks, smaller “skate spots” and even smaller “skate dots.” One of the most innovative concepts we learned about was the creation of “skateable art” – concrete artforms designed to be both outdoor sculpture and great skateable features.

Armed with this great data from Armin and the team, I was able to put my Bain skills to work and developed a presentation that we gave to the Brookline Parks and Recreation Commission.  Although the presentation was helpful in getting the support of the commissioners, I believe an equal or greater impact on the commissioners came from the 60 young skaters, their mothers, Brookline social workers, and members of the nonprofit Architects for Humanity who came to support us.   I haven’t been to a Parks and Rec meeting before, but I imagine that 60 people for a single topic was a rather large community turnout.  Credit to Armin again for both being able to factually and compellingly answer almost every question the commissioners asked and for putting our meeting on Orchard’s Facebook page, which received over 100 “likes” from the Orchard Community and many words of encouragement.

Although I am very focused on our goal of getting a system of safe, attractive places to skate in Brookline; as an entrepreneur, I have also learned to enjoy the journey and celebrate the mini-successes along the way.  One of the things I liked most about the meeting was seeing the sense of pride and empowerment Patty’s initiative gave the young skaters in the room.  These high school, middle school and elementary school Brookline residents were seeing democracy and big citizenship at work.  In fact, they were active participants.  Myles spoke after Patty’s introduction about the personal benefits of skating and many others answered questions from the commissioners.  None were shy about expressing their passion for skating or the appreciation they would feel for the town if Brookline embraced our vision of moving from a laggard to a leader in this fast growing, diverse and accessible sport.

As recently reported in The Brookline Patch, the online community news site that wrote an article about our efforts and the meeting, the commission had a positive response to our collaborative efforts:

“The presentation was well-organized, passionate and articulate,” said Erin Gallentine, director of Parks and Recreation.

The town formed the informal subcommittee to talk about the possibilities after two parents proposed facilities for skateboarding at a recent Parks and Recreation Commission meeting.

Gallentine said the town considered adding facilities next to the basketball court at Lawton Playground when the park was renovated, but the idea was scrapped after neighbors raised concerns about noise. A few proposals for skateboarding facilities have came before the Parks and Recreation Commission over the years, but Gallentine said the Underwood’s proposal had been particularly interesting.

Although we have a lot of work to do and know we 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 and supporters who attended our presentation to the town’s Parks and Recreation Commission have clearly move us forward.

Here’s what you can do to help:

Join our Facebook page Friends of Brookline Skaters

If you live in Brookline or know people who do, share this and our presentation with others.

Let us know if you are interested in helping with research, organizing or fundraising.

And think about opportunities in your own community to form collaborative public private partnerships and join with other big citizens to create the change you want to see.

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.

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?

Ace Tickets – The Good

For my son’s birthday party, Patty purchased four “Premium Seats” from Ace Tickets for the Boston Dew Tour skateboarding championships for $50 each.  Imagine our surprise when we arrived at the event only to find that we could have bought the same tickets at the door of $25.  Patty emailed Ace Tickets to complain about being scammed. Within a few hours, she received an email back from a customer service rep defending the sale and the “buyer beware” nature of the ticket broker business, noting that if ticket holders want to try and sell tickets at above face value – even for events that are not sold out – that is their prerogative.  If buyers pay more that they could have, that isn’t Ace’s problem.  Not incorrect, but also not the kind of response that makes you want to return to the site or recommend them to others.  Then they did something that surprised us – they sent a $50 gift card as compensation for the experience.  As we noted in our post Customer Service Disaster Recovery, they went a long way toward turning a bad customer experience – albeit one that was our fault – into a good experience.  They were also smart to give us a gift card as it gave us a reason to give Ace another chance.

Ace Tickets – The Bad

I just returned from visiting the Ace Tickets location where I used the gift card as partial payment for an upcoming Red Sox game.   Given our relatively good experience with Ace customer service for the Dew Tour tickets, I also finally brought them the picture of the horribly blocked seats we bought last season for a Red Sox game.  These tickets were in “Grandstand 1,” a section notorious for obstructed views, so when I called Ace to buy them – purposely not buying them online – I asked if the seats would have a clear view.  The Ace ticket agent assured me they were unobstructed, so we made the purchase, only to be greeted with the view pictured here of an I-beam that perfectly blocked the pitcher’s mound.

When I shared the picture above with the Ace agent in Brookline, he fist looked up our account on their system and confirmed that we had purchased seats for the July 7, 2008 game.  I was impressed that he found the record and readily admitted that the seats could have been blocked, but the employee was only authorized to wave a $25 handling fee on my next purchase.  “If the Red Sox don’t put on the tickets that they are obstructed, that’s all we can go by.”  Given that we paid at least $150 for the seats, the $25 rebate and blaming the Red Sox wasn’t a great experience.  This is yet another example of a company that (a)  has the data to know that we are good, frequent customers and (b) acknowledges they made a mistake by claiming that the product was better than it actually was and then (c) not taking advantage of the opportunity to correct the service disaster.

As a related aside, I found a great site www.preciseseating.com that will give you the exact view from any seat in Fenway Park.  Wished either I or the Ace Tickets salesperson had access to this when I bought the seats. 

Sur La Table – The Great

Four years ago I bought a hand blender at the kitchen store Sur La Table.  Shortly thereafter, someone gave us one.  So I put the – fortunately – unopened one in the mudroom closet next to our back door as a reminder to return it. There it remained until last week when I needed something from our local Apple Store, which is in the same mall as Sur La Table.  So I tossed it in the car, fully expecting that I would not be able to return the device.  When I brought it into the store, without a bag or even a receipt, and explained to the associate that I had purchased it roughly four years ago, he took one look at it and said, “I don’t think we even stock this item anymore.” Then, he proceeded to ask for my name and phone number, looked up our records online and told me exactly what I had paid for it.  He gave me a store credit, which I exchanged for a griddle that was the same price.  The associate even apologized for having to charge me a small incremental amount because the Mass sales tax had increased since I bought the blender!

Next time I need a kitchen appliance, I am lot more likely to head to Sur La Table than any other store nearby and will probably go there instead of online, in large part because of the brand building experience I had.  Not so for Ace Tickets. Both companies have invested in the technology to know my purchase history – one used it to confirm a purchase and fulfill an unreasonable request for a refund, the other to confirm a purchase and not accept responsibility for their customer service reps untrue product claims.

Which company are you?

I just finished reading The Battle for America 2008, a great book about the 2008 election, on my Kindle.  It is clear from the book that Barack Obama learned a lot about the need to prioritize healthcare reform from the late Senator Kennedy.  Here are a few thoughts on lessons he could learn and apply from others leaders:

From Ross Perot and Cecil Underwood – Use the data and a few high impact charts. 

Every time President Obama speaks on health care, I expect to see a few high impact charts that layout the major problems that need to be addressed.  And every time I am disappointed. The data is clear and easy to access.  A few examples:  Medicare’s administrative costs are about  1% of total costs, while private insurance administrative costs are around 15%; the average American family’s health care insurance premiums paid have doubled since 2001  from $6000 per year to $12,000 a year; US health care cost per capita is over $4000 higher than the next highest country.  Obama could make this data extremely relevant to the average American by showing the impact of higher health care costs on the price of a car or other goods made in the US vs Canada or Japan.

 In 1992, Ross Perot effectively used simple charts to get some of his major points across.  Years early, in my father’s 1956 successful bid to become the youngest governor of West Virginia, he used simple posters to point out that the state was paying much more than surrounding states for road building equipment.

During my six years as a consultant, manager and partner at Bain & Company, we used simple bar charts to show clients their uncompetitive cost positions.  During my tenure, I showed CEO’s, factory workers, and cardiac surgeons these charts, and in every instance, they got it.  Obama needs to do the same. 

From Coalition Marketing – Use the logo’s of your diverse group of supporters and use their voices to support reform.

In 1992, after launching the AIR MILES shopping reward program in Canada, I coined the term Coalition Loyalty Program to describe reward programs where consumers could collect points from multiple retailers who were given exclusivity or co-exclusivity in their consumer spending category (e.g. grocery stores, gas stations, credit cards).  In addition to AIR MILES in Canada, other successful coalition loyalty programs include Nectar in the UK, Fly Buys in Australia and Upromise in the US.  One of the benefits of a coalition program versus a single company or stand-alone program is the power of coalition marketing.  When programs are launched with the full marketing support of leading companies like Safeway, Shell and Bank of Montreal, they achieve breakthrough awareness in record time. 

The support of these market leaders also gives the new program instant gravitas, which helps the company running the program to receive favorable PR coverage and in-turn, sign up more leading companies.  In all of our business development, PR and marketing materials we prominently featured the logos of our major sponsors.  Our coalition partners went even further to support the program and grow the coalition – they helped us sell new sponsors.  On one occasion, Derrick Fry, then SVP of Electronic Marketing for Bank of Montreal (which at the time was the 6^th largest bank in North America) flew with us to Calgary to meet with a potential sponsor for dinner and then flew back to Toronto on the red eye.  On another occasion, Bill Turner, then CMO of Sears Canada, helped us pitch a leading Ontario grocer on the program.

The other thing missing when I watch Obama’s press conferences and rallies are the logos and names of the broad base of businesses, organizations and other leaders that support healthcare reform.  Among others, Wal-Mart, the AARP, PhRMA (the Pharmaceutical Research and Manufacturers Association), and the AMA all support healthcare reform.  Why not use these organizations’ support as proof that reform is needed and why not use their leaders to promote the need for reform? 

One of the best examples of creating and leveraging a stellar list of supporters also comes from the coalition loyalty world.  In 2001, Michael Bronner and Jeff Bussgang, the founders of Upromise, with the help of their VC General Catalyst, created one of the most impressive lists of supporters ever assembled.  Their Advisory Board included: former Senator Bill Bradley; Kim Clark, then Dean of Harvard Business School, John Doerr from Kleiner Perkins, David Rockefeller; and John C Whitehead, former Chairman of Goldman Sachs and the Federal Reserve Bank of New York.  Talk about gravitas, with this lineup of supporters, Upromise could get a meeting with any CEO or CMO in the country and they used the group to help them recruit the largest coalition of sponsors ever assembled in the US.

A few months ago, former Senate Leaders Democrat Tom Daschle and Republicans Howard Baker and Bob Dole published Crossing Our Lines – Working Together to Reform the US Health System, their proposal for healthcare reform.  Why not use these three leaders along with the CEO’s of Wal-Mart, the AMA, PhRMA, and the AARP as a base to build a broad coalition of supporters and engage them in the active promotion of the need to pass healthcare reform?

I agree with the experts and pundants  that if Obama wants to pass healthcare legislation this year, he needs to take a more aggressive leadership role and also be more specific about the plan he wants, but I also believe he will be much more successful if he builds and leverages a coalition of supporters to help him.  That’s how he became president in the first place.

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?

When I tell people I write about Web 2.0, customer service and loyalty, I know some (many?) find these three subjects a bit random or at least unfocused.  Through case studies and other posts, I hope it is becoming clear that they are often critically linked.  A few examples:

·         The case study Another Dell Misfire showed how focusing on Web 2.0 and posting user reviews on your web site without engaging customer service agents can both de-motivate front line sales and service employees and actually lose potential customers. 

·         The case Customer Service Disaster Non-Recovery found that Kimpton hotels invested in a loyalty program, but appear to neither provide customers with a way to comment on poor customer service nor monitor and/or respond to the most popular Web 2.0 travel sites including Trip Advisor and hotels.com.

Consumer value proposition

Hotels.com is a business that appears to be investing in and performing well in all three areas, but before providing details about their Web 2.0, customer service and loyalty initiatives, it is important to understand that they are built on top of a very good consumer value proposition.  Although some of my greatest business successes have come from customer loyalty programs, one of the most important lessons we learned in the early days of AIR MILES Canada was “a good loyalty program will not make up for a bad consumer value proposition or an inconsistent brand.”  Put another way, a great loyalty program can lead a horse to water and get him to take the first drink, but if the water tastes bad, the horse won’t come back.”  We learned this the hard way by signing Safeway – an excellent grocer – as our exclusive partner in Western Canada and another chain – whose stores were so inconsistent that the brand no longer exists – in Ontario.  With our data we saw that non-shoppers were much more responsive to Safeway acquisition offers than the weaker chain and that new shoppers who tried Safeway were about 4X more likely to return there than they were to the Ontario stores.  This lesson is amplified with Web 2.0 and the increasing use of user reviews as customers can check out a brand’s reputation before trying.  

I originally found Hotels.com when looking for a deal on a hotel room.  Although I can’t remember the first hotel I reserved, I am sure that I believed I got a good deal; otherwise I would not have come back.  The business delivers on its core brand proposition – they find great deals on good (or better) hotels.  I had an amazing experience a few months ago when looking for a suite for our family’s trip to Prague to visit my nephew who was in film school there.  Through another site – possibly American Express – I found the Pachtuv Palace, which had what looked to be amazing two bedroom efficiency apartments in a great Prague neighborhood.  Through Amex Platinum Travel, I found what seemed to be a good deal, something like $550 a night, but thought I would check hotels.com to see if they even offered the property.  They did and had a much lower price of $400 per night.

Here’s how hotels.com uses Web 2.0, customer service and a loyalty program to make their brand even stronger and their customer loyalty – and therefore profitability – even higher:

• Web 2.0 – Like many in the travel industry, Hotels.com asks for and prominently uses Guest Ratings to help customers choose hotels.  Their search filters are very good and users can set Guest Rating parameters from 1.0 to 5.0 and sort search findings based on other users’ ratings. 

• Customer Service – One of the things I find maddening about many Web based businesses is their insistence on burying, hiding under multiple layers or just not providing a customer service phone number.  Amazon does this and so does Adobe.  As someone who created and ran a business with over 400 customer service representatives that was also among the first loyalty businesses with a Web site, I understand the microeconomics of Web based vs. phone and CSR based interactions.  I also understand that millennials and other generations increasingly prefer to use the web over the phone for just about everything.  But until everyone has 24/7 Web access and reaches the Internet uber alle state of being, many companies have an opportunity to gain market share by making it easy for customers to find their phone number.  I was pleasantly surprised to find that Hotels.com prominently displays their phone number at the top of every Web page.

Last fall, I discovered how great their service was when I had started to book a room online for a trip to London but ran out of time and had to shut down to drive to a meeting.  I called Hotels.com form the call and was pleasantly surprised by the following:

-          Very short wait time

-          Customer service agent spoke excellent English

-          When I told them I needed a room in London, they asked for a budget, star rating and area and within seconds found a great deal at the May Fair for $200/night.

-          They took my credit card and did not charge extra for a phone booking, something I have come to expect from other services.

• Loyalty – Hotels.com offers consumers a free loyalty program called Welcome Rewards.  It rates high on many of our keys to success for a profitable loyalty program, including the following:

-          Aspirational reward: Free hotel rooms up to $400 in value.  Anyone who is booking on Hotels.com would find free rooms, especially at this level, rewarding.

-          Attainable reward: Members earn a free hotel room after only 10 nights – that’s nights not stays.  This is nearly off the charts attainability and value.  Considering consumers can often find three star hotels for $100-150 and four or five star hotels for $200, a free night in a $400 room (hotels.com rate, not the rack rate) translates to between 20 and 40 percent back.  Compare this to the average value of a frequent flyer point at 1 percent back and you can see how strong the Welcome Rewards value proposition is.  If this doesn’t change behavior, nothing will.

-          Simple to earn and redeem: Once you sign up online, every time you book either online or by phone, you automatically earn credits toward the ten needed for a free night. When you are ready to redeem, you can easily do so through either phone or online bookings.

-          Awareness: Hotels.com prominently features their Welcome Rewards program on their home page and recently on TV advertising as well.  Their customer service agents are in the loop as well and promote the program to sign up new members. 

Dave Nichol – the brilliant creator and promoter of President’s Choice, the powerhouse store label brand of leading Canadian grocery retailer Loblaws, once defined loyalty as “nothing more than the absence of a better alternative.”  Although I was and remain a huge admirer of Nichol’s intellect, drive and accomplishments, I respectfully disagreed with his definition.  One of the ways I define loyalty is the presence of a value driven relationship that removes any interest in looking for an alternative from the consumer’s mind.  In other words, a loyalty customer goes there first. 

For me, at least, Hotels.com consistent consumer value proposition, their use of Web 2.0 and their top notch customer service and loyalty programs keep me coming back.  Why would you book anywhere else?

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.

Improvements

As great as I thought the original Kindle was, the Kindle 2 is greatly improved.  Major improvements include:

Much thinner.  About half the thickness of an iphone (even without the maddeningly fat iphone booster battery).

Much more durable.  The battery cover on the original comes off easily.  This one doesn’t.  Note you can’t change the battery on the Kindle 2, but you don’t need to as it lasts for days.

Sleeker, cooler design.  Think ipod touch vs. 80 gig video ipod.

Improved user interface.  The addition of a joystick controller improves ease of use.  My favorite improvement is shifting the stick to the right advances to the next article, something that required multiple actions on the original.

Problems with the new version

The only complaint I have with the upgraded Kindle is it seemed harder to read when I first used it.  Thinking it was just my aging eyes, I asked my colleague Nicco Mele if he thought it was more difficult to read.  “Yes!” he exclaimed, obviously relieved that he wasn’t imagining the same thing I saw.  To get a third opinion, I took both models to Kinkos and ask them to scan the same page side by side.  Here’s what I found:

If you are reading this on a small screen, you may not be able to see the difference, and note, the scan appears much darker than the real screen, which looks very close to black type on white paper.  Although the Kindle 2 (left) has slightly less contrast, due to the increased grey scale that makes black and white pictures appear more clearly (which I don’t care about because the pictures are not great and only come in B&W – an easy trade off for weight and battery life), that’s not what causes decreased legibility.  The surprising finding is that the spacing between lines on the  Kindle 2 is much tighter, which makes it more difficult to read.  When I first looked at the side by side scans, I thought the Kindle 2 was set to a smaller font, but after measuring and counting both word count per line and lines per inch, I realized the problem was tighter spacing.

Although in hindsight I am embarrassed about this, I actually returned my first Kindle 2 because the decreased legibility bothered me so much.  I reversed my decision after a couple of weeks because I realized how much I valued the increased durability, improved size and faster scanning of articles using the joystick. After a few days, I couldn’t remember that the Kindle 1 was easier to read.  Maybe it was my 52 year old eyes after all?

Last point – Amazon is still missing a huge opportunity by not building in the capability to email articles to clients, colleagues and friends.  When I find something I want to share, I have to go online, find the article in the newspaper or blog, get the link and then email it.  How many more Kindle’s could Amazon sell if instead of a standard email, non-Kindle users received an email with “Sent from my Amazon Kindle.  Click here to learn more about the Kindle” in the signature line?   Although a great improvement over the original in many ways, the Kindle 2 is still not Web 2.0 ready.

Postscript – Amazon recently shipped the Kindle DX, which features a 9.7″ screen, larger than the  6.0″ screen on the Kindle 2. I was with John King from Perot Systems at a Year Up Board Summit last week.  John is even a bigger gadget guy than I and as soon as he saw me, he whipped out his brand new DX and let me play with it.  I am not going to review it, as there are several good reviews available including this one from Gizmodo.com, but my initial reaction was it was too big.  I like the existing size and – almost – everything about it.

If you click below to buy your Kindle 2 from amazon.com, 10% of the proceeds will go to Year Up, the innovative nonprofit job training program I have been involved with since its beginning in 2001.

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

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. 

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.

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?