Low-cost carriers earn marketing stripes despite industry challenges
Low-cost carriers earn marketing stripes despite industry challenges
23 million annual passengers
$3.3B annual revenues
86 million annual passengers
$10.3B annual revenues
Rising oil prices followed by a brutal recession that saw a plunge in both business and leisure travel threatened the airline industry as a whole over the last few years. While some airlines closed or merged to strengthen their position, it was the low-cost airline carriers that weathered the recession better than many of the legacy players. Two of those – JetBlue Airways and Southwest Airlines — posted healthy profits at the end of 2009, a year in which the International Air Transport Association predicted a global loss of $9.4 billion for the industry.
Smaller competitor JetBlue reported a profit of $58 million, an improvement over its 2008 report, while Southwest, the No. 2 domestic airline in terms of passengers flown, cleared a profit of $99 million, though its net income was down nearly 50% from the prior year.
Both JetBlue and Southwest's marketing teams continued to innovate throughout the downturn, contributing to their successes.
JetBlue overhauled its TrueBlue loyalty program last year with impressive results. Enrollment rates are up 50%, while the number of active members increased about 20%, says Dave Canty, director of loyalty marketing and partnerships for the 10-year-old airline. The new program counts points based on money spent with JetBlue rather than mileage; it also lifted a number of restrictions in the previous program, including removing blackout dates and end-of-year point expirations. “It's a validation,” says Canty. “We asked customers what they wanted, and we got a lot of feedback. It's validating to see that we made the right decision with our customers.”
Meanwhile, Southwest implemented a full-throttle advertising campaign, including TV, print, online and e-mail, that sought to position it as the no-fee airline during a cost-conscious era, while competitor after competitor began charging not only for checked bags, but also sodas and blankets. Introduced in 2008, the “Bags Fly Free” campaign will continue for the foreseeable future, company CEO Gary Kelly said in October. (JetBlue is the only other major airline that does not charge for the first checked bag.)
This October, JetBlue introduced its own campaign that pokes fun at what it sees as shortcomings at other airlines, such as a lack of direct flights and adequate leg room. The “You Above All” campaign, created by its new agency-of-record Mullen, includes print advertising, out-of-home and in-flight advertising along with social media marketing and humorous online videos. JetBlue also sought to inspire customers during the recession with the 2009 “All You Can Jet” unlimited monthly flight pass promotion running for the second time this year. The promotion grabbed headlines and provided the airline with a new well of brand ambassadors.
Both brands are active on social media, using it to build relationships and promote special sales. Their Twitter followers top 1 million each, but Southwest trounces JetBlue on Facebook with nearly 1 million fans to JetBlue's 400,000.
While innovation drives both companies' marketing teams, maintaining the basics of effective direct marketing remains vital as well. Southwest sends about 75 million e-mails each month, divided into three basic categories, a Click ‘N Save weekly promotional e-mail, transactional e-mails and e-mails for its loyalty members. Loyalty e-mails include both a Rapid Rewards account update that goes out a couple times a month and a more editorial-fueled monthly Rapid Rewards Report.
“A lot of the things we're doing are transactional, but also relationship building,” says Chris Herndon, senior manager in loyalty marketing at Southwest. “We're conservative in frequency,” he adds. While he wouldn't provide specifics, Herndon asserts that he's generally happy with the airline's open rates and e-mail performance.
Two years ago Southwest hired Responsys as its new e-mail service provider, which “took us from an internal homegrown service provider to an industry leader position [and] gave us a lot more capability to do a lot more with targeting,” says Herndon.
JetBlue sends out 20 million to 30 million marketing e-mails each month using e-Dialog, says Canty. He limits e-mails to no more than two a week for any customer and says open rates average around 25%. In comparing the two brands, Southwest's e-mails are crammed full of offers — compelling at times, overly busy at others — while JetBlue's are simple and short. Unfortunately, JetBlue misses a basic e-mail marketing tenet by frequently sending e-mails with one large image that appears as one big blank box for those with their email images turned off.
In addition, Southwest prominently places its e-mail signup box at the top of its homepage for easy access, while JetBlue's e-mail signup is buried under a section of the “Travel Deals” tab. Southwest's signup form consists of four short boxes, but JetBlue's runs more than a dozen lines, asking for details such as home airport and favorite destination.
Joanna Lawson-Matthew, senior client services manager at e-mail marketing company Blue Sky Factory, also cited JetBlue for wasting space at the top of the e-mail where pre-header text could grab those with images turned off. She praised Southwest for its text-to-image balance and raved about the personalization and cross-sell in a transactional e-mail sample.
“It's transactional, but they had some promotional aspects and cross-sells to partners and they promoted their e-mail campaigns which is great for list growth,” Lawson-Matthew says.
Canty says that JetBlue wants to further tailor its messaging and the e-mail program will “continue to evolve.”
JetBlue's new loyalty program is proving most worthwhile and nearly a third of its customers are now TrueBlue members. Southwest expects to revamp its Rapid Rewards loyalty program in 2011, though it's not saying yet what those changes will look like. In the last year, Southwest also promoted a new “text to enroll” campaign that encouraged customers to use their mobile phones to join Rapid Rewards.
Peter Davis, president of loyalty marketing firm, Vesdia, says, “They've both done a good job of supporting their loyalty programs.” He praised the simplicity of both programs, but suggested that JetBlue's new points systems provides more flexibility for the customer allowing them to redeem more from the airline's partners, not just flights.
JetBlue, perhaps due to its coming of age in the new millennium, rather than in the 1970s, possesses the sexier brand, and in terms of customer service, it consistently bests Southwest in reader and analyst surveys, including the annual JD Power and Associatesannual North America Airline Satisfaction and the oft quoted Airline Quality Rating from Purdue University and Wichita State University.
Southwest narrowly edges out its younger, smaller competitor's marketing capabilities by putting a polish on its efforts. JetBlue loses points for its e-mail misses, but it has shown a willingness to innovate and shake up the industry. Even on a smaller revenue scale, JetBlue is beating Southwest in areas where it counts, such as customer service, though typically only by one place mark.