Not long ago, loyalty programs at major U.S. carriers were simple. They almost always rewarded customers miles based on how many miles they flew annually, often without considering what the passenger was worth to the airline.
Some road warriors remember those days wistfully because they could earn impressive perks while flying a lot and spending little. But from a revenue perspective, it never made sense. Why would a company reward its most frugal customers?
At American Airlines, Bridget Blaise-Shamai, the carrier’s vice president for loyalty, is helping shift the program to one that rewards its most lucrative members with the best perks. And as it transforms, American seeks to learn more about makes these customers tick, so it can make predictions about their wants and needs. In some cases, American can predict a high-value customers is at risk of leaving American even before the consumer switches to another airline.
The key is data. American’s program, AAdvantage, has long had unusually rich information about its members, but until recently, it hasn’t leveraged it. “I often joke, even when we as an industry are a bit cash poor, we’ve always been rich in data,” said Blaise-Shamai.
Skift recently met with Blaise-Shamai, and her colleague, Alice Curry, managing director for customer loyalty and insights, at American’s Fort Worth, Texas headquarters to discuss the brand’s approach for the eighth installment of our Airline Insiders series.
Note: This interview has been edited for length and clarity.
Skift: Why is loyalty so important? Why can’t I just buy the best fare every time? Why must American Airlines own me?
Bridget Blaise-Shamai: With loyalty comes proven behavior of consolidating spend with you. There’s less of that at the moment decision of whether I should pick this airline versus that airline. It is an underlying sense of, ‘This is my brand. This is where I had my experiences and this is where I feel the greatest affinity.’
Skift: Why are people loyalty to American? Is it usually simple, like you have a hub in their hometown?
Blaise-Shamai: For a lot of our customers, the fare is it, first and foremost. To another segment, the program itself will be the first and foremost consideration. And then to others, it can be our staff — like for Concierge Key, [American’s highest frequent flyer tier.] There’s not necessarily one global attribute. Pricing resonates more frequently. But there’s other attributes that simply come into play.
Skift: Delta Air Lines Chief Marketing Officer Tim Mapes often talks about splitters — or consumers to who fly different airlines. He’d like to get them to fly Delta exclusively. Do you also track people you think are splitters?
Blaise-Shamai: There is certainly fragmentation. There are a host of reasons why customers choose to do it. What we strive to do is use pretty clever data and analytics looking for customers that we have a pretty good hypothesis are high-value customers in another airline’s program. we’ve had significant success on doing that for some time.
I don’t know whose program they may be a part of. I just have enough about them that would give me a very good success rate on being more right than not — that they are high dollar customer in another competitors program.
Skift: What data do you use to make this determination?
Blaise-Shamai: Well that’s something we don’t share.
Skift: You know so much about your customers? But the knock is that airlines rarely do much with their data. Are you working to leverage it better?
Blaise-Shamai: Airlines have forever been rich in data at the customer level. You do something with us, we’re more than likely to have captured that. You earn a mile, you redeem a mile, you fly on us, we lose your bag, we leave on time, we don’t leave on time, you log into dot-com, you download something off the mobile, you check-in at the kiosk.
I often joke, even when we as an industry are a bit cash poor, we’ve always been rich in data. You will see more attention on how we make that work harder for us and for our customers. We also have what I consider a very enviable set of organic marketing channels because travel is so important to so many of our customers.
We’ve got a group of customers who travel frequently and then we got a much larger group of customers who travel a whole lot less. The group of customers who are very frequent in their interactions with us are very trusting of information coming from us. We find that messaging them using our data and other organic benefits like incentives — miles and upgrades and seats and priority boarding — gives us a lot of space to go forward in a much more relevant, individualized way. But we’re also thinking about how we become more real-time responsive with our customers.
Skift: So you know more than just how often I travel?
Alice Curry: We’ve been capturing the transactional stuff forever but now we’re trying to make sure we better understand what your experiences have been with us — if you traveled 15 times on us last year, we were on time 13, you were delayed twice but one of those delays was six hours. Or we lost your bag, or those types of things — trying to better understand what your experience has been with us versus just that you flew 15 times to these places.
Skift: Can you give an example of how you’re using data to increase loyalty?
Curry: We have a win-back program where we look at people whose travel has fallen off fairly dramatically and we pick up the phone and call them and ask why and have a conversation with them to [ask] if there is something we could do to bring them back.
That program is kind of a long tried-and-true program. But what we’ve done recently is we started taking all the information and using predictive modeling to figure out what is the chance that you might be about to step away from us — versus waiting until you’re already gone. Often times, people just want to make sure we know that we have not met their expectations and then we can talk about things that we can do to get back on track with them.
What we’re now doing is looking at, here are people who have left American. What were the attributes that we saw that led up to that? And then we mirror that on top of existing customers to say — I’m making these things up — if lose your bag more than twice, then your likelihood of defecting goes up by X percent. We take all of those different factors and we look at our at-risk list. Then we can go out and proactively talk to those customers, making sure we’ve appropriately compensated them.
Skift: How does the compensation work? Are you trying to get away from a one-sized-fits-all model?
Curry: We’re still evolving from looking at things on a transactional basis. I may give you 10,000 miles because you were delayed four hours, [as a matter of policy.] But we’re trying to [change] so I may give you 20,000 miles because this is your third time for being delayed. We’re trying to look more at your whole experience with American instead of just that one transaction.
Skift: At every industry conference, executive debates whether flight attendants should try to ‘guess’ what customers want to drink. Their tablet might say, ‘this customer almost always drinks gin-and-tonic.’ And then the flight attendant would drop off the drink before the customers asks for it. Would you do that?
Blaise-Shamai: I think anticipatory or even latent demand is an amazing place to be. We hold ourselves up to that standard. [It’s] not easy because sometimes that moment is not one when the customer wants that drink proactively handed to them. [Maybe] the last seven times you had the gin and tonic, and that day that person may not be feeling it. But you take that risk, on the likelihood that that feels really good for the customer.
Skift: You’re not doing the gin and tonic thing now, right?
Blaise-Shamai: No, not today. But the complete view, it’s part of what we’re striving for.
Skift: We’ve spoken about elite benefits, and for many business travelers those are important. But what about frequent flyer redemptions? Travel bloggers don’t know all, but some accuse American of being stingy with the free seats it offers.
Blaise-Shamai: We work in partnership with our colleagues in revenue management, so we represent the demand, and they represent the supply. I think it’s fair to say we’ve very public about where we’ve been, and we recognize we have opportunity. We’ve also been equally public about where we’re going. We have set forth a goal to be very competitive with other network carriers. In the last part of the year — the last six to eight weeks of 2017 — these improvements started hitting the market. Award travel is markedly up and directionally going the right way.
We are still working to go higher and we have all confidence we will be there in 2018 given all that we are doing.
Skift: Do you get pressure from your bank partners, Citibank and Barclays, to make more free seats available? They buy miles from you, which they use to reward card-holders. Presumably it’s important for them for their customers to be able to redeem these miles?
Blaise-Shamai: No. We listen to our customers. And certainly under my purview as well is our partnerships with our banks and other partners. We know that we have our responsibilities in terms of the partnership, but I wouldn’t say it’s what we would talk about between the parties, anymore than we talk about what the APR is on the credit card for example.
Skift: Other airlines are trying to come up with more creative ways for customers to use their miles. They might, for example, let you use miles to buy pricey champagne in the lounge. Would you like to to do that more of that?
Blaise-Shamai: Absolutely. It’s about, how do you make sure you provide relevant value propositions to a group of customers who self-select into a travel program? We have tested things in the past, [but that doesn’t mean] whatever didn’t work yesterday wouldn’t work again tomorrow under a different set of conditions.
Where we’ve had some successes beyond flights and upgrades has been travel related. You have seen us test car and hotel. And guess what? It has stuck around, [along with] club [memberships] and vacation packages. We are looking to extend where it makes sense, where it would be relevant.
I wouldn’t expect us to go look at hard goods, at least not as a priority. But look for us to do things that are kind of satellite or tangential to travel. Is your example the one that’s going to pop first? Ha ha. I don’t know. But it’s consistent with how we’re thinking about the extension.