Forget The Green Stamps Give Me A Ticket To MiamiGary Mcwilliams
Remember those trading stamps that stores across the country used to hand out to win shoppers' loyalty? The simple lure of exchanging them for a toaster made S&H Green Stamps and hundreds of similar programs fixtures of consumer marketing in the 1950s and 1960s.
Some Midwestern consumers can still get Gold Bond stamps, but by and large, this ploy has gone the way of The Milton Berle Show. Soon, though, the essence of the trading-stamp idea--an incentive that is not a price cut--will get a very visible boost. In March, Boston-based Loyalty Management Group will use a $50 million promotional and advertising campaign in the U.S. and Canada to launch Air Miles, a program that uses the promise of free travel to win shopper dollars for specific marketers. Marketing types expect big things of it. "This will have a huge impact in the '90s," says Richard G. Barlow, president of consultant Frequency Marketing Inc., which specializes in frequent-shopper programs.
Air Miles lines up one sponsor each in a range of businesses, from credit cards to gas-station chains, and retailers in separate territories. By patronizing these sponsors, consumers enrolled in Air Miles rack up "miles" that are good on United Airlines, American Airlines, USAir, or Air Canada. Air Miles buys seats from the carriers at a discount bulk rate and books members mn their free flights. Air Miles gets a small percentage of every piece of business an Air Miles member gives a sponsor. It can also handle direct mail campaigns that target the heaviest spenders from Air Miles records.
Airlines have been using frequent-flyer plans since 1980, of course. But many consumers feel left out. Sara Linnie Slocum, a lighting designer in San Francisco, has belonged to four such programs over 10 years--and has never racked up enough miles for a free ticket. "I have become extremely cynical" about the programs, says Slocum.
Keith Mills, Air Miles' founder, hopes his program will banish such cynicism by bringing free tickets within the grasp of people who don't travel on business. He says customers can rack up miles by, say, using a sponsor's credit card to pay for lodging at a sponsoring hotel, then phoning home on a sponsor's long-distance service. He says a typical customer could collect enough miles in a year to win a free trip from New York to Florida. Charged with the task of enrolling consumers is Marketing Vice-President Michael A. Miles Jr., who may have marketing in his blood (box).
According to industry sources, Air Miles already has such sponsors as AT&T, Citicorp, Sears of Canada, and Time Warner, though none of those companies will comment. "By 1995," says Miles, "we'll have 2 million to 5 million consumers a year taking trips." The prospect of new customers pleases the airlines. "What's nice is, we can fill seats with a mechanism that isn't hurting pricing," says L. Anthony Bacci, a managing director at American. And since Air Miles doesn't target business travelers, it's unlikely to compete with the airlines' own frequent-flyer programs.
Those empty seats inspired the British-born Mills to dream up his plan. In 1988, the 41-year-old former adman persuaded British Airways PLC to back his idea--and fly 100 marketers to a castle in the Bordeaux region of France for a feast and sales pitch. Since then, the British Air Miles program has reached some $40 million in revenues and picked up such sponsors as Shell, IBM, and Toshiba. One sponsor, National Westminster Bank PLC, figures Air Miles has helped it win a higher share of British Visa and Access credit card transactions.
BIG PAYOFF. The U.S. market is certainly ripe for such a program. Retailers and other marketers know they have to promote their products harder than ever. But most promotions involve price cuts, which tend to erode a brand's image and encourage shoppers to switch stores and brands in quest of the best deal. And with the growth of overall consumer spending slow, keeping a customer is more important than ever. A study by consultants Bain & Co. concludes that a company that improves customer retention by 2% can boost profits as much as if it had cut costs 10%. Dozens of marketers, from Waldenbooks Inc. to Volkswagen, are trying variations on buyers' clubs to secure such loyalty.
So Air Miles has a promising formula. But will it be a winner? A lot depends on whether consumers find the program, which has to track mileage points from a variety of sources, easy to use. Remembering which store or brand is a sponsor could become a bother--and eventually a deterrent, says Joel C. Huber, associate professor of marketing at Duke University and a student of promotional plans. "Gradually, people come to realize what the real cost is and stop," he says. And defection among sponsors could confuse customers. Burton Group PLC, a British apparel retailer, dropped Air Miles in 1990 after concluding it wasn't a strong enough selling tool, especially in a recession.
And it's not as though other programs aren't out there. You can spend money using Citibank's Visa card to rack up miles on American Airlines. Or you can use American Express to earn miles on several carriers in the Membership Miles program. U.S. Sprint Communications Co. and Holiday Inns Inc. have mileage-award programs, too.
Mills figures that with a stable of up to 20 heavy-duty sponsors to start, his program will have a scope unmatched by any other loyalty plan. As for customer turnoff, he's setting up an administrative center in Florida to make the program as painless as possible. It's an impressive plan. The challenge is to make this clever version of trading stamps take wing.
FREQUENT-BUYER MILES 1 Air Miles signs up one sponsor each in such categories as gas-station chains, bank credit cards, and department stores 2 Consumers enroll and rack up Air Miles for free trips by buying from sponsors 3 Air Miles collects a percentage fee on the business it generates for sponsors 4 Air Miles buys discounted blocks of seats from airlines, and awards them to members in exchange for their Air Miles DATA: COMPANY REPORTS
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