Future Forces: First at being second

A look at the airline industry can help retailers reshape their strategies for rewarding top customers. By Patrick Kiernan As Seinfeld’s George Costanza said, “It’s not a lie if you believe it.” While many companies in our industry aspire to provide first-class products and services, in truth, most companies’ business strategies are built around being followers. Being first at being second minimizes risk by copying best companies’ products, category sets and services. This strategy helps answer that age-old question always asked by people in our industry: “Who else is doing this?” But sometimes it is better to look outside one’s business to see service through fresh eyes. The airline industry, first at establishing today’s modern computer-based customer loyalty programs, that is now more than 25 years old, can serve as a mirror to look at our industry’s desire to retain shopper loyalty. I’ve chosen United Airlines to examine customer loyalty, having flown more than one million miles on this airline and also occasionally experiencing United’s first-class service. Just like the grocery industry, United knows its best “Premier” customers spend 70% more per flight and fly four times more often than non-premier passengers. We can also sympathize with United and an industry that has faced tragedy and bankruptcy. So how does a company that once was at the top of the list in customer service climb out of the bottomless pit they have created? Early this year, United disconnected its customer service phone system in favor or requiring written complaints. United contends that written comments result in happier customers and that the company already receives constant feedback from its premier members. These same “best customers” have put United in last place in customer satisfaction. Lesson #1. Your service complaints live on the web in social networks. There are now numerous blogs, tweets and even websites devoted to stories about every company’s products and service, where you are not in control. On a recent United business trip, we used frequent flyer miles to upgrade to business class. With the flight scheduled to depart at 6 a.m., United’s premier service was easy to observe. At check-in for baggage, the coach class check-in area opened 15 minutes before first class, making the best customers wait. At security, the business premier line was twice as long as the regular security line, due to all the airport employees going through the premier line. At the Red Carpet Club, opening hours start after the early flights depart. Lesson #2. Providing extra service to best customers is easy to promise, but very hard to deliver. At Costco, executive members’ are offered exclusive early shopping hours, but the stores seldom open enough checkouts or provide early product sampling for their best customers. United recently hired an executive from Disney to improve customer service. We could all learn something from the Walt Disney Theme Parks and how they deal with rush hour, long lines, security and park information. Closer to CPG retailers, both Office Depot and Home Depot offer improved customer service examples. But a key ingredient in customer service is company culture. United’s “Friendly Skies” and Disney’s “Guest” cultures have not yet come together in the daily stories told by United’s flying public. Lesson #3. No business provides satisfactory customer service through an unhappy workforce that is afraid of speaking out or challenging the customer service rules. United has now announced improved service for its loyal customers in the second quarter of 2010 with “free” unlimited domestic upgrades to business or first class. However, at the same time, United is selling its least loyal customers all the same premier travel service, i.e., extra legroom, early boarding, priority security, 100% bonus miles and Red Carpet Club access for as little as $47 per trip. With no increase in service employees or premium seating, United will continue to insult its best customers. United’s promises offer better service, but its policies create an experience that reflects the belief that profits come from full seats, not is best customers. Lesson #4. Special prices offered to everyone with a shopper card or promising to have no more than two people in line are empty promises to your best customers. After 25 years, isn’t it time for some new thinking on how to attract and keep loyal customers beyond ubiquitous frequency shopper cards and price discounts? With every household now using two or more cards for multiple retailers, a rediscovery of one-to-one relationship marketing might yield results. If the Walt Disney Co. can use the help of Steve Jobs and his Apple retailing team to re-invent the shopping experience in 340 Disney Stores, surely the grocery industry can begin to share consumer information to create a better shopping experience. Patrick Kiernan, managing partner of Day/Kiernan & Associates, is affiliated with The Center for Food Marketing at St. Joseph’s Uni­versity, Philadelphia; the Institute for the Future, Palo Alto, Calif.; and Encore Associates, San Ramon, Calif. He can be reached at [email protected].