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know your customer

 

 

Growing the company. It’s the CEO’s #1 priority. And yet oftentimes a gap exists between the strategies of the CEO and the demands of customers. This strategic gap slows growth and erodes your competitive edge while exposing your organization to unnecessary risks. By gaining a deep awareness and understanding of this chasm, CEOs can lead the charge to align the strategy, promises and experience to gain customer loyalty and advocacy and eliminate the friction that can open the door for a mass exodus to the competitor.If you’re in the C-Suite and concerned about the growth and velocity of your company, REALLY Know Your Customer is the podcast for you. Let Betsy Westhafer and Tony Bodoh be your guides to show you how to close the strategic gap that exists between your company and your customers.

 

Speaker 1 (00:03):

Welcome to the REALLY Know Your Customer Podcast with your hosts, Betsy Westhafer and Tony Bodoh. Join Betsy and Tony as they dive in with highly successful C-suite leaders who have grown successful organizations by creating a laser focus on listening to their customers and building deep customer relationships. Now it’s time to join Betsy and Tony for the REALLY Know Your Customer Show.

Tony Bodoh (00:40):

Welcome to the REALLY Know Your Customer podcast. I’m Tony Bodo, CEO of Tony Bodoh International.

Betsy Westhafer (00:46):

I’m Betsy Westhafer, CEO of the Congruity Group. We’re so excited for this conversation today. Thanks for joining us.

Tony Bodoh (00:51):

I’m really excited to talk to Mark today, Betsy. It was such a great conversation both in our prep and then also when we recorded the podcast. One of the points that he brought out really toward the end of the show, what we build till we get there is these what he calls these small moments. I don’t think he realized it, but we talk about micro moments in our first book, Profitability, on camera here I’m just showing up. Shameless plug for the book Profitability. We wrote this book in 2018. We talk about these micro moments, these short three second, five second moments where you do something for a customer and it just puts your brand in their mind in a way that they’re emotionally connected with it and it really changes how they see the world, how they see your brand, how they see themselves.

(01:36):

That may seem like, wow, how do you do that? Well, he talks about how the airlines do it and just gives some very basic examples. So as I said, it’s toward the end of the show, but when you talked about that, it’s like, yes, this is what a lot of people just don’t understand and how to build, not just a loyalty program, which we’re going to talk extensively about, but how to build loyalty because you can’t have a loyalty program without having loyalty first. It’s not just about the perks and the benefits. I want to be with that brand, I want to use that brand. I want to go back again and again. So this is not just about airlines. It goes much broader than that.

Betsy Westhafer (02:09):

Yeah, absolutely. Mark Ross-Smith is the CEO of StatusMatch, which is a fascinating model for the airline industry. It would be best to let him explain it, which he does at the front end of the interview. I just love talking to entrepreneurs like him because he experienced a problem that people weren’t really talking about it being a problem, and he was like, “There’s a solution to this.” Fast forward, he’s spent a lot of years learning how to solve the problem before he actually started solving the problem and he talks about how he did that. But I just think this is such a fascinating conversation. We were talking off camera about I live in Dayton, Ohio and it’s such an aviation town because of the legacy of the Wright Brothers.

(02:53):

So this particular interview has just been really fascinating to me learning so much about the challenges in the business model of the airlines that you don’t actually hear about in the news. They talk about a lot of things, and as he points out, the CEOs are talking about things that really that conversation should be shifting and he anticipates that the conversation will shift. So I just think it’s a great conversation that our audience is really going to embrace because more than likely everybody that’s listening to this show is a flyer and many of them probably frequent flyers. So this will be a really interesting conversation for everybody listening in. So without further ado, let’s meet Mark Ross-Smith from StatusMatch.

Speaker 4 (03:35):

What is the one massive mistake that company leaders make that hand millions to their competition who know better? They assume that their customer’s priorities are the same today as they were yesterday. You can completely avoid this costly mistake by reading The Rarest Advantage: How to Co-Create Strategic Value to Retain and Expand Your Key Customer Accounts by Betsy Westhafer and Tony Bodoh. If you care enough to keep your key customers, get this book today from Amazon, The Rarest Advantage.

Betsy Westhafer (04:10):

Mark, welcome. We’re so happy to have you here today.

Mark Ross-Smith (04:12):

Hey guys, fabulous to be with you.

Betsy Westhafer (04:14):

We’re really looking forward to this conversation. As our audience knows, we do prep sessions and we know kind of where this conversation’s going to go and it’s a really unique business you have, so we’re really excited to dive into it. So give us the background. Tell us about you, how you got to this point with the work you’re doing now, where you’re from, where you live now, all the things.

Mark Ross-Smith (04:35):

That is like eight questions there. Glad we’ve got three hours on this podcast.

Betsy Westhafer (04:39):

Power load the front end of the question.

Mark Ross-Smith (04:42):

Australian originally, now living in Malaysia, Southeast Asia, and kind of got into this industry on deliberately. My previous business in Australia had a social network. It was in the telco industry, and as part of having a cool funky social network flying around the world, conferences, events, speaking, just basically being a frequent flyer, right? That was a lot of fun. When you work your way up the food chain in an airline to get gold, platinum, diamond, those kind of status levels, you start meeting people at airlines. Funny enough, they want to get to know you. They want to know how they can improve the experience for you and they can do more for you because they want you to spend more money. Funny that. So when I met a lot of people there, really interesting, got a bit of insight into how the airline game worked.

(05:24):

I’d sold that business in Australia and I moved to Hong Kong after that. When I moved there, I couldn’t fly Qantas, the Australian airlines so much because I’m different country, I’m moving legitimate reason. So I spoke to Cathay Pacific, the major airline in Hong Kong, and I said, “Can you give me what’s called a status match? So I said, “Look, I’m really high level with this one airline over here. I want to start flying you guys. You just give me the same with you for free right now and I’ll start flying with you. I fly a lot. I like flying. Clearly, I’m going back to Australia a lot cause I’ve got family there, so I’m a good customer. Why wouldn’t you want me to spend more money with you? So if you do that, I basically spend with you. If you don’t, I don’t spend money with you.” I said, “Take your fit.” They said no. So that was an awkward conversation.

Betsy Westhafer (06:07):

But did you just think that was such a no-brainer that they’d say, “Of course. Absolutely”?

Mark Ross-Smith (06:11):

Well, so in my mind I’m spending 50, 60, 70,000 bucks a year in business class travel. I thought I’m a customer that you’d want, right? Now that having worked in the airline industry, that is a customer that airlines should want. I thought, “Why wouldn’t you want my business? Cost you in theory nothing to get that, just give you the diamond status, right?” There’s a brick wall I sort of ran into there. So I spoke to another airline, Singapore Airlines, in the region. I tried with them, they said no. I spoke to another airline in Taiwan, China Airlines. They said no. I thought, “This is odd. Why do airlines not want my business?” Because you see them, they spend a lot of money on marketing, branding, advertising. You see things, all the emails all the time fly from LA to Phoenix for only $59.

(06:55):

They spend a lot of money on this stuff trying to acquire business, and yet here I am basically walking the door putting my hand up saying, “Hey, I proved my ability to spend some decent cash in the industry. Do something. Give me the status, right?” I thought it’s just weird. So what I figured out is airlines are really good at getting the average, what I’ll call average, once, maybe twice a year flyer to fly. They’re pretty good at that. But as you work your way up, there’s a gap in the middle. So the people that have a silver or gold top level with an airline, they’re not too good at getting these people on board.

(07:27):

The ultra top end, like corporate, government kind of big contract clients, they’re pretty good at that. But sort of in what I’ll call the middle, the meat of sort of a member base of an airline, which to be fair is actually represents 30 to 40% of all the ticket revenue. It’s actually a pretty big base you want to look after. They’re just not that great at it, at acquiring it, I will say. So that’s sort of where all this sort of started is I thought, I’ve got to create a process. Being a customer of an airline, so I understand that part. Now I need to create this for the users, basically represent my fellow human frequent flyers out there, try and solve that problem. So I started back in 2013, 2014. I started trying to create StatusMatch back then and didn’t really work. I didn’t really understand enough.

(08:12):

So what I did from there is I thought… just sold my business in Australia, effectively unemployed now, out of bit money. So I thought there’s no university to learn this stuff. You can’t go to university and learn how to do airline loyalty, doesn’t exist. So I just went to every conference possible, just paid my way in there. I had nothing to sell, I’m just there to learn. I realized pretty quickly I could grasp a lot of what they were doing because being a real customer of the product. Sort of went from there, and then long story short ended up using that knowledge, getting real experience, going working for actually brand loyalty at an airline and then sort of left there and then sort of picked this up again and it’s doing pretty well now.

Betsy Westhafer (08:51):

So tell us a little bit about how the business operates. We know the problem you’re solving, but how do you go about that?

Mark Ross-Smith (08:58):

So we do two things. We obviously outreach to frequent flyers. We say, “Hey, if you’re moving cities, changing jobs just like I was, hey, just come sign up. It’s free. Punch in your details. Something comes up, we’ll let you know.” There’s a bit of that. Then there’s a bit of also proactive outreach, talking to major global airlines and hotels and saying, “This is you. You’re not that great at acquiring customers. Let us just do it for you, right? It doesn’t cost you anything, it’s totally free. We’ll pick through a process. We validate stuff, just take all the legwork out of it.” All the logistics behind it that airlines are just not set up to do. Airlines are pretty good at flying metal tubes through the sky. They’re pretty good at feeding you in the air. They’re okay at cleaning stuff. They’re not good at acquiring new gold members. So that’s where we come in and sort of a bolt on to their business. So just let’s them focus on what they’re good at.

Betsy Westhafer (09:49):

So then what’s the business model for StatusMatch?

Mark Ross-Smith (09:52):

So we charge the end customer. So when you apply as a customer, we charge you a fee anywhere between 49 and $99 to apply. That’s actually really good because it kind of gets rid of the tire kickers, people that expect it for free. This is a whole psyche around when you pay for something, you’re more likely to value it and then use it, which is really important for the airline because if they go giving you elite status, a gold status for example, they want you to use it. The deal is I give you some of this over here and you give me some of that hard-earned money and fly with us, right?

(10:24):

So if you paid a fee, a nominal amount over here, 50 bucks for example, the chances of you flying are astronomically higher than if you had got it for free. Because if you get it for free, just kind of put it in your back pocket and think, “Well, one day that airlines brand come up, I might fly them.” But if you’ve paid for it, you’re like, “Well, I’ll show them, I’ll spend even more money with them.” As it kind of locks you in, sort of like Amazon Prime, I guess. You’re paying bigger subscription, where are you going to buy things from?

Betsy Westhafer (10:54):

Yeah, exactly.

Tony Bodoh (10:55):

So you brought up a statistic, which I don’t think I’ve heard before. The 30 to 40% ticket revenue comes from this middle ground, if you will, right? What is it that really drives airline revenue? We talked about this a little bit, but let’s really dive in deeper to why should they want to go after those status customers beyond just the ticket revenue. You talked about credit cards and some of the other ways that the airlines really are making their money. I don’t think a lot of people know that. I mean, I’ve worked in the hospitality industry for years and I was not aware at the level that airlines are really running into challenges with flying and making money that way. So the alternatives have got to focus on.

Mark Ross-Smith (11:29):

Yeah, I think there’s two major parts to airline revenue. One is selling seats for cash, just getting people to fly and there’s the whole ancillary revenue on that, charging for bags, seat selection, that kind of stuff. Then there’s this other part, loyalty. Since sort of pandemic started, a bunch of the big airlines, obviously it’s needed cash pretty quickly. How do you raise cash? You go to the government, beg for money basically, but the government, they’re bit smarter this time. They said, “Well, you got to secure these. These are loans, you’ve got to pay them back, you’ve got to secure it somehow.” They secured it with their loyalty programs because they’d already mortgaged aircraft, gates, lots, all this kind of, basically everything else was mortgaged to the hills so they needed something else.

(12:09):

I go, “Oh, we’ve got this loyalty program thing.” If you read through some of the SEC filings for the U.S. carriers, the loyalty program’s worth more than the airline, not just by little bit, by a factor of two to three times. So what it meant in a high pandemic, you got for example, in American United Delta, the market cap of the airline was somewhere between eight to 15 billion, in loyalty programs, all of them worth north of 20 billion. So just this tiny part of the airline was worth double, three times what the entire group is worth. So what it effectively means is airline’s worthless. The loyalty programs’ where all the value is. This is because it’s the type of revenue that’s generated.

(12:50):

So loyalty program, which is most of the revenue comes from banks, right? So you got your credit card, you spend, you earn one mile per dollar kind of thing, right? In the background there’s a lot of money changing hands. Effectively the bank is paying the airline for those miles, they put miles in your account, you redeem your miles, free flight. So you get a free flight, but the bank’s making money every time you swipe the card to buy something, right? They make many, many billions of dollars from that and it’s high margin revenue. There’s a report at recent I saw American Airlines published I think it was 73% gross margin they have on those points. I think it’s 52% net.

(13:23):

So there’s a bit of margin and it’s not it’s low volume. They’re selling billions if not trillions of these miles every year. So they’re making a lot. Because it’s high margin revenue and they don’t have planes and fuels and pilots and all this high CapEx stuff that airlines have, because it’s a loyalty program, it’s effectively a marketing company which is valued differently in the market than an airline kind of trades like a bad auto company, four to five times profit earnings ratio. Whereas a tech company is 20, 30 times is not unheard of. It’s pretty normal. So therefore that’s how you get these huge valuations on the loyalty program.

(14:03):

So I talk about if your loyalty program’s worth so much, it’s generating all this high margin revenue, why wouldn’t… let’s put a customer experience hat on for a second. Why wouldn’t you focus more on this loyalty stuff? Why invest crazy money in making the seat recline an extra three degrees or why go to the effort? What’s the payoff? Nominal. Whereas if you put a little bit of money into loyalty to grow the revenue by an extra 2 or 3%, that’s going to translate to 30 times more on the backend end value, which you can use to borrow more to invest in the airline to have a better product. This whole sort of cycle that sort of flows around where leading with loyalty, loyalty, customer experience as a Venn diagram, there’s somewhere they overlap, lead with that and the airline kind of follows along.

Betsy Westhafer (14:51):

It’s funny thinking about that. I’ve been flying a lot recently and I had the ability to tie my Lyft, and I think it was just Lyft, I don’t know about Uber but my Lyft app into my airline loyalty program. So every time I take Lyft I get points on my airline loyalty, which would not cost them anything. So these partnerships I think would be a good thing as well. The other piece of it is I get double those miles when the Lyft is taking me to and from the airport. So I just think there’s so much room for creativity that would not cost them a lot of money to do that and it got my attention.

Mark Ross-Smith (15:32):

Now you’re using Lyft more than you otherwise would do, right?

Betsy Westhafer (15:33):

Yeah, absolutely. It’s making me loyal to both. It’s a Delta perk and I don’t know if the other airlines do it or not, but just the whole loyalty thing can be so much bigger I think than just what most people, I think what the perception in the market is about a loyalty program. I’m fascinated with what you just said about just the margins on it and how it’s so much more valuable.

Mark Ross-Smith (15:57):

It’s a bit of a case with Lyft and Delta, it’s like one plus one equals three kind of to a certain degree. You get two big brands, people know them both. When you’re pulling them together, it’s like wow, this is kind of cool. I have to do it.

Betsy Westhafer (16:08):

Yeah. I didn’t realize until just this last trip that I was getting double miles when the trip is to and from the airport because they have that information on the Lyft app. I didn’t realize I was getting double. So that was kind of a feel good customer experience. I’m like, “Oh look at that. I got twice as many points just because I used Lyft to go to the airport.”

Mark Ross-Smith (16:25):

So now you’ve got to think twice about flying a different airline because now you’re ending with double points, right?

Betsy Westhafer (16:29):

Right, yeah,

Tony Bodoh (16:30):

I think it’s interesting deal too because if we start looking at how they’re connecting the dots and these different loyalty programs, I got a credit card recently from an airlines and I use it all the time and pay it off and use it again because I want my miles. But as I’m thinking about that, all of this data’s flowing through that they should be able to really know their customer because they’ve got so much data, but yet you’re telling us that they struggle to really acquire them, the loyal customers at least. So I’m curious, what is it that they really need to learn or what is it that they could do to really make a difference?

Mark Ross-Smith (17:02):

So I might back pedal a bit here, struggle is maybe not the right word. Some airlines may be slightly complacent to a degree, “We’re a big airline, people will just fly. They’ve got no choice. If you want to go from here to here, have fun flying in three stops on another airline.” Little bit of that I think. I mean, there’s the acquisition part, getting people to start flying your airline and traditionally it’s been outsourced to sales teams, not loyalty customer acquisition teams, right? Then I guess the other part is like a we’ll call retention piece, keeping people loyal with your airlines. So basically not flying other airlines. This is one of the top, I call one of the golden metrics, that loyalty airline programs have called share of wallet or share of spend. So this is how much you are flying this airline versus everyone else.

(17:47):

This is a really important metric because we can all have different numbers but it will be ultra loyal at the same time. So you got to imagine if Tony, you’re flying twice a year, it’s once to visit grandma and once to visit your cousin, whatever, right? So that’s 100% of your air travel. So if airline knows they’re getting 100%, happy days. Whereas Betsy over here has got 200 flights a year, spending a lot of money, first class all around the world, everywhere, 100 of those flights are with, making up, Delta. So in Delta’s eyes, you’re like a diamond member, top tier member, really valuable, great customer, really loyal, but actually you’ve got another 100 flights with American Airlines over here. So actually you’re not loyal, you’re 50% share of wallet, right?

(18:30):

So what that means is for an airline, what they would do is target Betsy with more promotions because the ability to grow that revenue, that share of wallet exists. Whereas Tony, they’re already getting everything they can out of you. So really it’s about sort of on one hand stretching it to try and get more out of someone. Or better yet maybe it’s hey, you fly a couple times a year, now get the credit card. Now here’s some ways you can earn some extra miles on the ground, hotel partners, all this kind of stuff. So it’s about expanding the revenue and the sort of engagement laterally through non-air at that point.

(19:04):

But if they’re not getting 100% share of wallet from you, there’s a big opportunity to capture more of that. Hence this is where loyalty programs are designed intentionally to have tiers in the program. So you want to reach that next tier up. This is also why airlines introduced new tiers, like really high tiers because you’ve got people that already have the highest tier. They start splitting business off to another airline. So for airlines to bring that back, what you might do is create a new tier so people stop spending over here, bring it all so that they sort of aggregate it with one airline and then you get this new status. That’s why a lot of airlines have five or six different tiers because they keep adding them on top of it to solve this problem that is never going to end of trying to get people to be more loyal in what we call the retention side of things, keeping people spending and on that sort of train of just earning status every year, keep earning the miles.

Speaker 4 (19:59):

What is the rarest advantage in business? The one that makes you competition proof. Find out in the new book The Rarest Advantage: How to Co-Create Strategic Value to Retain and Expand Your Key Customer Accounts by Betsy Westhafer and Tony Bodoh. The title for this book alone makes it a must read for anyone involved with strategic accounts. Get The Rarest Advantage from Amazon today. The Rarest Advantage.

Betsy Westhafer (20:28):

I want to go back a little bit to the beginning of the conversation when you said you were calling all these different airlines and they were just saying no. Did they give you any rationalization for why they were saying no or was it back to just complacency and it’s not what the script says? Or why do you think that is that you were just getting a brick wall there?

Mark Ross-Smith (20:47):

So to be fair, a lot of airlines just don’t have a process in place. There’s no policy, there’s no official way to do stuff. It’s generally been if you know the CEO, you have golf with him on the Saturday and hey by the way buddy, I need gold starters kind of conversation, I’ll buy you drinks if you do it for me. There’s been a bit of that. On top of that, you’ve got corporate sales teams at airlines and hotels going out there, schmoozing people doing dinners, drinks, dinners, drinks, dinners, drinks and hey, I’ll give you gold status. So there’s a bit of that. On top of that, there is the perception of one airline said, “Well, our top customers spend at least 50,000 bucks a year with us and we can’t just give it to you for free because you haven’t spent that with us. Well hang on, you’re not going to get it unless you give it to me.”

(21:30):

So chicken and egg here. I got a lot of airlines I can fly, but there’s not that many of me out there. So take your pick. So I didn’t end up giving this one particular airline my business. Long story short, end up meeting a girl there, marrying her. She worked at the airline and I ended up getting staff travel. So not only did they lose out my revenue, actually might have cost the money because suddenly I’m flying on staff flights everywhere where I could have been on paid revenue tickets. So lesson learned, hey.

Betsy Westhafer (21:59):

So when you’re talking to them now, are you starting to see them understanding what you’re doing? I mean, are they starting to embrace StatusMatch and understanding why this is so good for them?

Mark Ross-Smith (22:11):

Yeah, totally. We’re signing up sort of an airline a month kind of thing, the run rate right now. Traditionally the sales cycle of airlines is ridiculously long, like many years. So definitely a lot of interest for different reasons. Some are very strategic, some that are just realize that hey, we’re just not that great. You guys are the experts. Just handle it for us. A lot of that. It’s about education as well. Help you put policies, procedures in place internally to deal with these kind of requests from customers because a customer emails an airline says, “Hey, can you give me status match?” Which is a really common thing. If there’s no process, it kind of gets bit of a black hole. You don’t reply to someone. Someone’s got a gold status in airline they’re spending 5, 10, 15, 20, this is a good customer versus Tony over here is doing two flights a year.

(22:56):

So you want more of these people, right? If they contact you wanting something, just reply to their email. They you’ve to know what you are going to give them, put some terms around it, that kind of thing. So there’s some expectation there. So bunch of airlines that work with us, they just kind of outsources it. So if someone contacts them, they just say, “Look, just go to statusmatch.com. Just go through a process there. That’s who we work with.” It’s a lot easier. They save face as well. They don’t have to say no to customers, which is really can be awkward sometimes, especially if it’s like you’ve hit up a C-level person in the company and say, “Can I ask this?” The last thing they want to say is no.

(23:30):

It’s a lot easier to say, “Yeah, go here.” They’re not saying no, they are saying no, they’re saying yes at the same time. They’ve got a way to sort of a get out way to get out of that awkward moment if they need to. Bit of political thing there. We can kind of help manage some of that for airlines. But definitely becoming a lot more popular. Now we’ve got ways we help airlines generate revenue on back of it as well with other fees and stuff. We’ve actually got clients where we bring them new customers, the airline pays us nothing, but we actually end up paying the airline as well on top of that. So you get paid to get new customers. Who’s ever heard of that? I mean, I would sign up to that.

Betsy Westhafer (24:08):

Yeah, I’m thinking how can we do that? I love that you’re solving other problems for them, like saving face. I mean, that’s a problem you’re solving for them that isn’t maybe the primary one but it’s certainly a value add.

Mark Ross-Smith (24:21):

Exactly. You got to imagine a typical airline CEO, meeting a lot of people, a lot of handshakes, a lot of all around the world, governments, corporate, it’s people all the time asking for what I believe one of their most valuable assets, which is elite status and they’re asking for it generally for free. You know what it’s like. You’re in some industry, your friends know you do X and they’re going to ask you for it. Hey, can you fix my computer? Hey, can you do whatever it is? My tap’s leaking, just take a look at it for a second, right? So with airlines it’s like, “Can I get some free tickets? Can I get some miles? Can I get free gold status?” It’s that kind of thing. So something that these higher ups in airlines run into all the time and so helping them sort of through that process a bit, yeah, very positive results from it.

Tony Bodoh (25:05):

I want to shift gears for a second because the airlines have done an amazing job with loyalty programs. I think they’re probably next to hotels, they’re some of the best in the world at loyalty programs in general. What could other companies or other industries learn from the airlines that would really add value? I mean, I’m just thinking any consumer focused business, if they could generate two to three times the value or the revenue if you will from a loyalty program, why not go that route? So how could other companies do this?

Mark Ross-Smith (25:38):

So if we take a step back, look at why it’s really successful for airlines, right? There’s a lot of emotional drivers there for customers, right? I call it an emotional pull and that’s done via the loyalty proposition. For example, you’re a platinum member, they call boarding for an aircraft and they say platinum members can now board, it feels pretty darn good waltzing past 300 other people that are still lined up, right? That moment sticks with you for about five seconds until you scan your boarding pass. You get on the plane, you’re like, “That feels really good, I want more of that.” Right? It’s these small moments repeating over and over and over again. So that’s one.

(26:18):

Another one is when the cabin manager comes down, “Welcome back, you’re one of our loyal customers. Would you like a glass of something for a business class even though you’re in economy class today?” It’s these tiny little moments, small moments, highly emotional moments. What that does is it starts training you in your mind, I really like this brand, I really like this brand, I really like this brand. When this is consistently repeated over and over and over and over again, it sort of triggers these chemicals in your brain. It’s the same sort of feelings like falling in love basically. So with that in mind, how can other brands effectively replicate that?

(26:51):

It’s an emotional journey. So how do you make your customers feel really good about something? So for example, let’s say you own a juice company or something, making juices for people, five bucks that kind of thing. If you notice someone’s a low customer and it’s like you just give them an upgraded cup, for example, it doesn’t really cost you any, a bit of product. That’s about it, right? If you just did it, didn’t even mention it, just say, “Oh by the way, you might need two hands to hold your cup today instead of one.” Things like that. That’s one of these examples of the just a small moment, no one really thinks about it, you don’t make a big deal out of it. Just friendly reminder of what’s happening and you just feel good about it, right? So do that over and over and over and over again.

(27:32):

Putting a loyalty structure around that as well with tier, things like having a VIP line for top members, that’s one of those things. So you go, “Well, I’m going to go shop at this brand because there’s a special line for me.” All these high end luxury retail brands, there’s generally a couple of secret doors, right? You have a Louis Vuitton or something, there’s the main retail space, but if you want the real good stuff, there’s a special passage somewhere and you go into that and there’s always a super secret passage as well. So there’s like three tiers of shopping experiences. Not all stores, but a lot, right? So you know if you get into that super back room, you’re in the best space they have. They have products that no one else can buy. Generally you don’t ask about price in that room. It’s like you either can’t afford it or you you’re not invited there kind of thing.

(28:20):

So that would be an example of how some high-end retailers are doing it through not really a loyalty program, kind of is in a way. If they know you and they know that you buy a lot from there and you buy the right type of stuff and you’re the right type of clientele, they’ll just start inviting you to these things, “Just come with me over here, let’s go away from everyone else.” Some of these brands, you walk in and it’s like, “Do you want a drink? Can I get something for you today?” The answer is not I’ll grab a glass of water. The answer is I’ll have some champagne, right? Middle of the day, you got a glass of champagne, it’s kind of cool. You’re at a shopping mall just buying some shoes. Evidently not every business can do this, but it’s all about creating emotionally charged small moments and then consistently repeating them over and over and over again. That at its core is what airline loyalty does really well.

Tony Bodoh (29:05):

I think the consistency part of that is really important too, because like you said, just training the brain again and again and again to fall in love with that brand. So excellent.

Betsy Westhafer (29:14):

What I would add to that as well is the brands that proactively reach out to you. For example, we have a local store that will call my husband when something they know he likes has come in and they don’t have a lot of them, and like, “Hey, I’ve put a couple back for you. Come on in, we’ll be here. I’ll pull these out for you.” So just that when you have the ability to create those moments rather than to react to those moments, I think that just takes it to a whole new level because I’m so impressed whenever we get that phone call.

Mark Ross-Smith (29:45):

This is old school personalization. These days, all that big AI. Real personalization is really knowing your customer, those relationships, those small town type vibes where it’s exactly that, you get this product in, it’s like, “Oh, I know so and so would be interested in that. I’ll give him a call.” Car companies do this all the time. It’s like, “Oh, we’re getting this special model and it’s a limited edition.” I mean, a lot of them have waiting lists, but oh I might call so and so because I know he likes orange stripes, uncut, whatever it is. He hasn’t spent a million bucks with us year. I’ll give him a call. That kind of thing.

Betsy Westhafer (30:19):

Yeah, absolutely. Mark, this time has flown by. This to me was such a fascinating conversation. Tony, do you have any other questions before we start wrapping up?

Tony Bodoh (30:28):

I mean, I think the only question I really have is looking at where things are going. I mean, COVID changed a lot. So where do you see StatusMatch and maybe the airline industry moving over the next couple of years here? Because I think we’re just beginning to see people coming back to travel, but a lot of the work that I’ve been doing lately, I’ve seen people’s decision making processes change. I was talking with a cruise line actually just recently. They said they went from an 18 month booking window to literally people booking the week of or within just a few weeks to take a cruise. So I’m just curious what you might be seeing for your company but also for the airlines more broadly.

Mark Ross-Smith (31:03):

I think the business model’s in the cruise line definitely are changing. The business model airlines, at least 50 startup airlines like that have running jets in the world the last couple of years. It’s never been a better time to start an airline, if you want to make slash lose money, depends on how that goes. A lot of those are coming in with no debt or less debt than some of the legacy carriers, hence they’re in a much better financial position. So I think we’re going to see, specifically airline for a second, we’re going to see some business models that look and feel a little different traditional legacy carriers and different to the traditional low cost and ultra low cost airline models.

(31:38):

Don’t know how that’ll pan out yet. But some of those are obviously looking at loyalty programs and going, “Why are we trying to compete on price for seats when [inaudible 00:31:48] all the values in loyalty? So why don’t we compete on credit cards and compete on perks and benefits and lounge access and upgrades and miles and the stuff that apparently the market thinks is a lot more valuable?” To be honest, I think it’s a bit sexy to talk about than pilots, fuel and planes and strikes and all sort of stuff that has been what every airline CEO has been talking about the last, I don’t know, 100 years.

(32:11):

So I think it’s about time that the industry moved in a direction that is more sustainable from a business perspective instead of sort of ups and downs, ups and down in the airline business, more sustainable from a revenue economics perspective. That might be subscriptions or all sorts of stuff, right? I think on the whole sustainability thing, I think airlines are getting a lot of pressure from governments and sometimes customers to start acting in that area as well. Pretty tricky because they fly metal tubes through the air that spew out fumes everywhere. So it’s a bit difficult too, how do you do that?

(32:47):

There is an upside and benefit of people traveling, right? Because when you travel, you’re traveling for a reason, not just to have caviar with your friend for lunch. It’s like you’re doing some business there, you’re meeting someone, there’s economic activity that makes the world work because of that as well. So I think there’s a bit of a balancing act there. So I think in the next few years I think we’re going to see a bunch of new business models come out, which I think is going to be really exciting because they have to do it and I think other industries can learn from as well, right? Airline industry is forced to innovate. We’re starting to see a little bit of it and I think we’ll see a lot more of it in the coming years.

Betsy Westhafer (33:20):

I think that’ll be awesome for the consumers too. It almost has to be awesome for the consumers.

Mark Ross-Smith (33:26):

100%.

Betsy Westhafer (33:27):

Yeah. Well, Mark, it has been wonderful talking to you. I just think this is so interesting and really love the way your mind works, just thinking about this problem that I don’t think as many people are out there thinking about it the way you are. Before we wrap up on our show, we’d like to invite our guests to give a shout out to an organization, nonprofit, charity that might be doing some really good work that you would just want more to know about. So is there anybody that you would want to tell us about?

Mark Ross-Smith (33:53):

There is. Keeping on the theme of loyalty and points, there’s a really interesting product I guess called Do Good Points. So dogoodpoints.com. They partner with thousands of charities and nonprofit organizations. What I like about is you earn points when you give. So instead of just giving and not knowing where it’s kind of going, you own points from it and you can sort of choose. It’s kind of almost like charity introduction. I really like this because suddenly you see new brands, new charities, you’re like, you don’t really think about. So you think really niche, really small sort of charities that just don’t get the limelight they probably deserve because they’re so hyper-focused on this tiny little problem. You look at it and go, “Hey, that’s something I can really get behind. Cool, I’ll do it and get rewarded for it.” So I’m big fan of their platform, what they’re trying to achieve.

Betsy Westhafer (34:38):

It’s called dogoodpoints.com?

Mark Ross-Smith (34:40):

Dogoodpoints.com, yeah.

Betsy Westhafer (34:40):

Yep. Okay, awesome. Thanks. I have not heard of that. I can’t wait to dive into that and look at it. Well, thank you so much, Mark, for joining us. This has been a great conversation. Really excited to watch what happens in the next few years with StatusMatch and the evolution of the industry in terms of innovation. So thank you so much for sharing all of this with us.

Mark Ross-Smith (34:59):

Thanks Betsy and Tony, it’s been great to talk with you.

Tony Bodoh (35:04):

Betsy, what I really loved as we listened to this is early on in the episode, Mark identified something, I didn’t even hear the statistic when we did the prep session, but he talked about how people with status, certain gold, silver, platinum status, he said that they make up 30 to 40% of the revenue of the airlines, but the airlines really are challenged to acquire those, to bring them from other airlines over, right? I was thinking during the show, and I was probably a little quiet at the very beginning because I was just really processing some of the things that he was saying here, but it’s really about knowing your customer.

(35:35):

I mean, it’s the essence of our show. It’s like that the airlines don’t know those core customers, very small percentage of the customers that are bringing in 30 to 40% of the revenue, they don’t know well enough to really bring them over from a competitor, then that’s a big hole. You step back a minute just from the airlines and say, “Okay, what about other businesses? What other businesses really don’t know why their customers may be using a competitor, or potential customers are using a competitor, spending more of their money over there and how do you bring them back?” It got me thinking about the book that we wrote this year, The Rarest Advantage. Because in there we talk so much about how the executives really need to have this open door conversation with their customers, with their strategic customers, whether it be B2B or B2C.

(36:19):

You’ve got to have that open door where you’re listening, you’re asking questions, you’re engaging, you’re kind of living with them side by side, so you understand what’s going on in their lives, what’s going on in their businesses, so you can really step up and help them when they need that. If changing status is because you’re moving, your life has changed, whatever it may be, understanding what’s going on in a person’s life or business would open the door tremendously for these airlines and for a lot of other companies too.

Betsy Westhafer (36:45):

Well, and you think about the return on investment of really knowing your customers and the opportunity. He points it out so clearly. You’re saying, “Hey, I’m a really good customer. I’ve got proof that I’ve spent 50,000, $60,000 flying. Why do you not know this about me? Why do you not want to do everything you can to convert me to being your customer? Because I’m going somewhere. I’m not going to stop flying. I’m going somewhere. So why would you not work really hard to turn me into a loyal customer for you?” So I think it’s just such an interesting problem that he’s solving for the airlines, and then the residual, they’re taking it off the plates of the airlines not saying, “No, we’re not going to do that.” It’s rather, “Oh, here’s who you should talk to to help you do that.” So they’re solving that problem too and it has so many ripple effects. So I just think it’s really going to be fun to watch to see where this goes. I think it can only be good for the consumer.

Tony Bodoh (37:39):

It’s interesting though, on that point you made there, they’re outsourcing the solution to a problem that they have, which is making the experience better. I would normally will be the person saying, “You don’t want to outsource a strategic challenge that you have. You want to figure out how to do it internally because that could be a way you distinguish yourself in the market and differentiate yourself in all of that.” But the truth of the matter is some of these problems just are too big to solve internally because too much effort, and if someone’s got a good solution, it might be best to outsource them.

(38:09):

With COVID, if we go back to the beginning, when we started our show a couple of years ago, COVID was just hitting and I think about how all the retail stores and restaurants and all these other establishments, brick and mortar, we couldn’t go into them anymore, they had to immediately outsource to delivery services, last mile type logistics. They gave up the experience of being in the restaurant, being in the retail shop, but they had to. Now we know airlines are choosing to make this shift to really say, “We’ve got a bad experience in this area.” They’re smart enough to say, “Let’s hand it over to someone who’s an expert in this space so they can deliver on a great experience and we’ll focus on what we’re already good at.”

Betsy Westhafer (38:45):

Exactly. I think that’s a perfect way to wrap, Tony. As always, always a pleasure to have these conversations, love doing this show with you. Love our audience that’s been loyal and listening. But if you have not yet subscribed, please hit the subscribe button. We will continue to bring you great guests on the REALLY Know Your Customer Podcast. Thanks for joining us.

Speaker 1 (39:12):

Thanks for joining us for this episode of REALLY Know Your Customer. We hope you gained a lot of value from being here today. If you want to learn more about the work Betsy and Tony do to help their clients thrive, visit Betsy at thecongruitygroup.com and tony at tonybodoh.com. See you next time on the REALLY Know Your Customer Show.