Airmiles agony

http://www.independent.co.uk/travel/news-and-advice/simon-calder-free-flights-that-now-cost-a-small-fortune-2348214.html
I was rather shocked, if not surprised, to hear on Breakfast News this morning about the devaluation British Airways has announced for converting Airmiles into credits with its new scheme Avios. Simon Calder’s full piece for The Independent is above.
BA says it’s introduced the new scheme to have one common frequent flyer name across all its brands (it can’t use the name Airmiles outside the UK).
But although Airmiles will be converted into 10 times the number of Avios credits, the actual redeemable value will drop by 25% AND you will have to pay towards flight costs too.
Which will leave many long-time Airmiles members, such as me – I even used them to decrease the cash cost of our honeymoon in New York – feeling somewhat cheated.
So why the devaluation?
Well, firstly BA would look to be wanting to tidy up its legacy loyalty scheme by transferring everyone into the new one (it already has another called BA Miles).
Second, this should encourage Airmiles members to use them for flights, or other things, before the November transfer and devaluation – which would provide more BA with more activity and profits.
Finally, what I suspect is the main driver and unpublicised reason – reducing the contingent liabilities on their balance sheet.
Basically, the more customers build up loyalty points but don’t spend them, the more a company has to put aside money in case lots of them decide to use them. Similarly, car firms have huge amounts set aside in their contingent liabilities in case of expensive recalls or lawsuits. It’s “rainy day” money.
In BA’s last annual accounts the company (rather than the group) had £385 million set aside for contingent liabilities (http://bit.ly/nUvIIi). Which is a lot of money you could be doing something else more profitable with.
It seems to me that the new boss may be wanting to free up some of this by reducing the need for it through having fewer unused Airmiles hanging over the company’s head.
It’s a fairly sensible business decision, but from a longtime member’s point of view, a hardnosed and somewhat unfriendly one. How many people with whom BA has a long-time relationship will spend their miles and not join the new scheme? Many will probably transfer over but feel somewhat aggrieved.
But maybe that’s just the harsh reality of the airline business in a recession.
Whatever, PR-wise it’s not looking very customer-friendly.
And it makes using the phrase “the world’s favourite airline” a little harder.

TM need to take the initiative

http://www.guardian.co.uk/media/greenslade/2011/jul/31/trinity-mirror-piersmorgan
The drip, drip, drip of revelations surrounding Piers Morgan’s time at the Mirror could, if the reports quoted by Roy are to be believed, be damaging to Trinity Mirror.
If the police and/or judicial investigations into the behaviour of tabloid newspapers over the last 20 years show that now-repugnant activities went on while he was in charge, there could be some severe damage to the group’s brands. Never mind the compensation to all the victims who might be found.
Morgan’s comments over the years haven’t helped. They hint of an arrogance that speaks of a culture of impunity redolent of Leona Helmsley, the millionairess who famously said only “little people” pay tax. I fear the police investigations may show the same about The News of The World and some other NI titles.
TM needs to grab hold of this issue and show that it’s on top of it by taking the initiative. As I said before, the review of systems and processes really looks too feeble — just not facing up to the real risk that needs to be quantified and dealt with. And, more importantly from an investor point of view, be seen to be dealt with.
Yes, apologies and payouts may be tricky, but the sooner they can get any of that, if it has to be done, out of the way, the sooner they can move on and maybe even portray the group as the honourable face of tabloid journalism (which fits well with the legacy of Hugh Cudlipp) and hopefully reap a revenue boost from advertisers and readers fleeing from NI titles tainted by the years of revelations to come.
If they can’t do that and worse comes out soon, Sly Bailey’s future could be in doubt. She knows how important the brands are and she’s proven herself to be pretty shrewd in the past, so expect action soon.

Ethical — you heard it here first.

http://t.co/ScZfRjm
I was very pleased to see that the above survey confirms what I wrote all of five years ago.
I agree absolutely with all of Jane Asscher’s comments.
One worry though — although it’s always good to be good and do good, I wonder how much this simply reveals people’s rhetoric rather than what actually drives their buying behaviour.
Have Apple, Gap and Primark been seriously hit by past concerns about the ethics of their sourcing practices, or the practices of their manufacturers? News International may be hit short-term (James Harding told Steve Hewlett The Times has had some collateral damage from the NoTW phone-hacking coverage) but I wonder if the “fade factor” will apply here and with other ethical PR disasters. Look at Charles and Camilla. In 1997 there’s no way they could be married. A few years later…
Also, when recession comes, how ethically-driven are our purchases? That could depend on how secure we are on a Maslow basis — if your basic needs are secure, you’ll continue to let ethics lead actions. If you’re struggling financially, maybe you will buy from the cheaper store you don’t really approve of. Or maybe it’s just how strongly-held your beliefs are.
Whatever, it’s good for marketers to know that being ethically tip-top is something worth spending resources shouting about.

How best to respond to serious allegations?

http://www.guardian.co.uk/media/2011/jul/26/daily-mirror-publisher-to-review-editorial-controls
It’s a real test of your judgement if you’re faced with very serious allegations of illegal conduct by your organization, even if they only relate to the past. Particularly so when you’ve seen what’s happened to a competitor found guilty (at least in one case and allegedly more) of the same thing.
So how do you respond?
Obviously, first you have a serious conversation with the CEO and the other relevant executives to find what, if anything, they know and ask them to have conversations further down the organization on the basis that it’s most important that you know the facts regardless of blame.
If there is any basis to the allegation, you look into how you’re going to manage the situation.
If there isn’t, you need to put out a robust statement promptly saying that after looking into it thoroughly you can find no facts which back up the allegation.
I found TM’s disappointing because:

• It doesn’t mention any internal investigation into the past, now or previously. That’s the elephant in the room and they’ve clearly ignored it in this statement. But the question won’t go away. NI hoped it would, but it won’t until you deal with it properly and, most importantly, are seen to do so. There’s a real opportunity for papers to win trust, and maybe new readers and advertisers, by being seen to make sure they have clean hands over this.
  My fear is their action here is driven by a fear that there are secrets to be dug up and that, rather than getting them out now and heading on the road to recovery as soon as possible, they’re taking the short-term view of doing the minimum and hoping everyone will forget about this. But this topic won’t go away any time soon, especially with the forthcoming inquiry into journalism on the horizon.
• It doesn’t include any clear denial of the allegations.
• It sounds bureaucratic. A review of “editorial controls and procedures” doesn’t sound very reassuring — a key element of crisis management.
• It’s easily accused of being a case of closing gate after the horse has, potentially, bolted.
• It can easily be read to be a defensive legalistic wording which may reassure the financial stakeholders that there’ll be no new problems in the future which could affect the share price and ability to service TM’s massive debt. But as far as reputation management with wider stakeholder groups, such as readers and advertisers — whose trust is vital for future revenues and profits — it could be seen as too limited.

Balanced against all that you have to look at the cost to the organization of holding an investigation when you have no clear evidence of wrongdoing. Is it worth the cost for the sake of PR? It depends how much you rely on your reputation to compete in your market. DMGT’s response is, arguably, worse. Simply asking staff “Have we done anything wrong in the past?” clearly isn’t enough. Does anyone think they’d come forward and volunteer that? Ok, so far there are no allegations that DMGT titles have been involved in any of the “dark arts”, but if it turns out they have, this will be seen to be insufficient and more than a little complacent, if not incompetent.
In both cases, only time will tell.

How do you regulate influence?

http://www.guardian.co.uk/media/2011/jul/24/phone-hacking-vince-cable-murdoch-influence
You can absolutely see what Vince Cable is on about.
If one person, media or lobbying group becomes so influential with Government that it seems to be heavily influencing policy, as has been alleged with Newscorp over UK membership of the Eurozone, then you can see why there would be concerns over the effect on democracy — such groups becoming more important than the electorate in deciding what is done.
But how do you limit influence?
It would be easy to say no one group can own more than, say, 25% of the media in one country defined by the total number of people exposed to its media channels — readers of papers, TV viewers, digital media subscribers and web users etc.
But while it’s easy to enforce that prior to an acquisition through the MMC, what happens when a newly-enlarged group grows its total audience organically? Would it be right to force it to divest itself of some of its assets because it had been too successful? Should regulators intervening in the marketplace in that way?
Even before that, how can you really measure influence? The number of people a group’s media outlets reach would be a simple one, but surely some people can have huge influence without readers or viewers.
Like companies which can offer huge inward investment and want Government to regulate in a way which works to their benefit. To foreign governments who we want to stay on good terms with for non-commercial reasons like security c.f. the Saudi government over the decision not to pursue the BAE bribes investigation.
How do you contain their influence? There are no easy answers, but expect to see some attempts to be seen to contain media influence in future.

Radical transparency — is it for you?

http://www.wired.com/wired/archive/15.04/wired40_ceo.html
While reading through my backlog of old Wired magazines I didn’t have time to read while my mum was alive, I came across the above article by Clive Thompson suggesting that all companies can benefit by being absolutely open about everything they’re doing.
He calls it radical transparency. But is it for everyone?
Well, on the plus side:

• It has the potential to build trust with customers and potential customers.
• It allows crowdsourcing-type input to new product development (NPD) and customer relations processes.
• It encourages your whole organization to live by its stated values.

But the potential downsides are many:

• It could damage trust with other stakeholders like commercial partners and suppliers if you reveal things they’d rather you didn’t.
• It’s clearly not an option for everyone i.e. the MoD, MI5, firms which rely on technological innovation or ones with dark secrets to hide.
• The flashback if found to have lied or hidden something bad would be worse than if you’d not pretended to have been a saint in the first place.
• It risks damaging any competitive advantage you may have in things like NPD, R&D or customer processes if you’re too open about them.
• The most transparent PLCs pay the price of share price volatility for offering up info on their failures while the least transparent are rewarded with stability. Maybe anything which could be price-sensitive could be treated in the usual fashion.

So, overall, it looks like a bit of a non-runner for most firms. But for challenger brands trying to impress target customers in an area not known for transparency, it might be worth a look, but with carefully defined limits.