Recently, I was the recipient of what it means when a company gets the loyalty flip.

I was flying back from San Francisco on American Airlines on the 3:15 PM flight, needing to get home before a long day in NYC the next day.  The plane had a hydraulic leak and was taken out of service before boarding. OK, it happens.  To American Airline’s credit, they flew in another piece of equipment that took off for JFK at around 7:30 PM.  It was a really late night, but at least I got home.  Then, a couple of weeks later, I received the following unsolicited e-mail:

November 29, 2010

Dear Mr. Rubinson:

We make every effort to operate each and every one of our flights as scheduled. However, inevitably problems will arise in a business such as ours. Please accept my sincerest apology for the disruption of your plans when you traveled with us recently.

We want to restore your confidence in us. In an effort to do so, I’ve added 5,000 bonus miles to your AAdvantage® account. You can view this activity very soon via www.aa.com/aadvantage.

We hope you will travel with us again soon. It will be a pleasure to welcome you aboard when your plans call for travel by air.

On behalf of all of us here at American Airlines, I’d like to wish you and your family a wonderful holiday season and the very best for the New Year.

Sincerely,

B. J. Russell
Customer Relations
American Airlines

I did not expect this, and it is not about the number of miles.  It is about giving me an unexpected gift at an unexpected time (a line I lifted from the movie “Finding Forrester” but so true) that showed they cared about me.  They showed ME loyalty.  This is marketing based on the principle of doing the right thing and I totally applaud this.

Now, contrast this with what is sadly prevalent practice.  I was flying to the Midwest on a different airline which cancelled the flight after a 3 hour delay (I suspected load factor but who knows for sure?).  There was no information other than to go to a certain gate where a line of over 100 people awaited me to rebook. The only information came in the form of a gate agent shouting to the line, “Who wants to go to Hartford?”  Not even a loud speaker announcement! I mean, whuut??  I had to rebook myself via Expedia for an early flight the next morning and get my own hotel room.

I can’t always fly American, it depends on routes.  However, there is no question that they want my business and deserve my loyalty in return.

(This interview with Debbie Pruent, President of GfK Custom Research North America an auto industry expert is the second of a two-part series that began in Fast Company).

A couple of weeks ago, encouraged by new GM cars now being sold on eBay, I blogged in Fast Company that it was time to ”go all the way” and  reinvent the dealership and turn them into experience centers with web-enabled kiosks so people could buy a car without high-pressure sales tactics.  Car shoppers would welcome complete transparency on pricing, no “profiling” so women and ethnic shoppers would no longer pay more.  Dealerships would become more like apple stores and the anxiety that car shoppers, especially females (as reported by ABC news) would be gone!  I figured if the consumer is boss (as Procter says), why not… especially with GM having the ability to reinvent itself as it comes out of chapter 11.  (For the full blog text in @fastcompany, including some great comments, click here.)

Then, I got a dose of reality therapy; sometimes the consumer is NOT boss.  Sometimes federal and state laws are passed that institutionalize business practices in a way that are no longer serve the consumer but cannot be easily changed.  Welcome to what is called “Dealer Franchise Laws”.

To understand this better, I interviewed an auto industry expert, Debbie Pruent, President of GfK Custom Research North America and who, before that, worked at GM and a major auto industry marketing research firm.

Joel. How do you think dealers would respond if auto manufacturers offered a plan to turn dealerships into experience centers, removing sales pressure?

Debbie. I’m oversimplifying a bit but dealers are primarily interested in selling cars to make money (oversimplifying because they also make a huge amount of their profit on the service side). So if manufacturers could “prove” that experience centers generate an ROI then a huge part of the battle would be won. But that’s not easy as it sounds. Dealers view manufacturers (generally) as product manufacturers and marketers, not retailers. They view themselves as the experts in retailing (and advertising!). And while P&G may decline to deliver a product to a retailer who doesn’t meet their “standards”, or discontinue a product altogether, automotive manufacturers do not have this luxury due to the franchise laws. This is why a manufacturer like GM is unable to quickly or efficiently reduce its overall number of brands.

Joel. Can auto manufacturers insist on a plan?  Can’t they retail their auto brands however they want to?

Debbie. Manufacturers have much less control than the buying public may think. Generally speaking, they can’t insist on anything unless they are willing to pay for it (and even then they need agreement from the dealers). Exceptions are start-up brands which can build-in certain requirements like “off-road test track” (Hummer) or Saturn (uniform look and experience parameters). For the most part they must get the dealers to agree that a change to the service model is in their best interest. And while they may be able to convince some dealers on certain things, it is nearly impossible to get a uniform retail/service model in place across all dealers. So the short answer is no – they can’t retail their brands any way they want to – which is a constant source of frustration internally for them.

Joel. Did this situation change when some auto manufacturers declared chapter 11?

Debbie. Not yet although this is what I’m sure GM is hoping for (the breaking of the franchise laws) as one of the positive outcomes of filing for bankruptcy. If anything, additional pressure is being put on Congress right now to pass even more restrictive laws (e.g. to prevent closing of dealerships) and we see a great number of dealers who are petitioning (filing suits) to be reinstated (which Congress appears to be supporting).

Joel. What shopping process would car buyers prefer if they were calling the shots?  What does research show?

Debbie. Like much of the retail research across other industries, new vehicle buyers are looking to “have their cake and eat it too”. They want an engaging, entertaining, service-oriented (but not obtrusive) buying-experience where information (both the manufacturer being shopped as well as the competition!) is transparent and… they get the lowest price! Such is the dilemma for all retail since the offering of “experience centers” requires a compensation model. And for auto manufacturers, still more than many other products, there is still a large product component (given the size, durability and importance of the purchase).  Even a “new” service model like Saturn did not deliver a return over time because the product was not always in sync with the needs of the target-market vs. competitive offerings.