In late September, the Cox School of Business M.B.A. class on customer engagement taught by professor Marci Armstrong met for a guest lecture. The speaker related stories about working in the trenches of customer engagement for 30 years, consulting with such clients as American Airlines, Pan Am, Blockbuster and Borders. Although most of the students were too young to know many of those companies by name, they listened attentively because they knew they were hearing from a top expert in the field.
Hal Brierley has come a long way from starting a database marketing firm in 1969 in the basement of Dillon Hall at Harvard Business School. Brierley became well known as the only external consultant involved in the launch of American Airlines AAdvantage, the nation’s first frequent traveler program. He grew his firm Epsilon into an industry leader, and then spent 30 years building Brierley + Partners into a global leader in the design and management of customer loyalty programs.
After selling Brierley + Partners in 2015 to Nomura Research Institute, a leading Japanese technology services firm, the executive considered the “Father of Customer Engagement” is making a late-career segue. He recently moved his office from the Legacy area in Plano to an airy suite atop Parkland Hall on the old Parkland Hospital campus, only a few minutes away from his home in Highland Park – and from his latest venture in customer engagement at SMU’s Cox School of Business
Hal Brierley, who will serve as an executive-in-residence in Cox’s new customer engagement institute, spoke to MBA marketing students in September. Brierley first guest lectured in Armstrong’s class several years ago. From the beginning, he was particularly impressed to learn that American Airlines – extremely protective of its customer data – had given the students access to data from 10,000 anonymous AAdvantage members. As he interacted with the next generation of customer engagement marketers, Brierley wanted to ensure they were properly trained and educated in the ever-evolving field.
The seed of this hope grew into the $10 million gift that Brierley and his wife, Diane, gave to SMU in September to create the Brierley Institute for Customer Engagement in Cox, the nation’s first academic institute devoted to study of the field. The gift – among the largest in the history of the Cox School – will help students and businesses address a critical and growing business need: capturing customer attention in what Brierley describes as “a time-starved, social media-obsessed environment.” Armstrong will serve as the Harold M. Brierley Endowed Professor and Brierley himself will be an executive-in-residence.
Not what he planned
Brierley didn’t set out to become the guru of customer engagement. “Most of us who’ve been involved in direct marketing backed into it. Very few people of my generation sat down in college and said, ‘I think I’ll go into direct marketing,’” he recalls.
During his college years at the University of Maryland, he had the opportunity to work part time as a math aide at NASA’s Goddard Space Flight Center programming the early mega IBM computers. After earning a B.S. in chemical engineering, he was accepted at Harvard Business School, but decided to work for a year at IBM as a sales trainee. After getting his M.B.A. in 1968, he stayed on at the business school serving as a research assistant, with some outside consulting for The Boston Consulting Group and the Rand Corporation.
While working as a research assistant, Brierley’s college fraternity, Sigma Alpha Epsilon, recognizing his computer background asked him to help automate its membership records. “I naturally looked for a data processing firm that specialized in maintaining membership organizations.” Not finding one, he and a business school classmate offered to serve as consultants to automate SAE’s membership records.
They quickly realized that most other fraternities were also not yet computer savvy, and after a year, they were maintaining the membership records for 16 of the 18 national fraternity offices. “But,” Brierley adds, “we also found that our clients needed advice on how to use the computer to communicate with members, especially for fundraising, and we backed into becoming a direct marketing agency.” Over the next 10 years, Epsilon grew to work with more than 400 nonprofit organizations.
Gaining the advantage
Living in Boston, with all of Epsilon’s clients in the Midwest, Brierley became an early frequent flyer. One day, he stopped by United Airlines’ Chicago offices to visit the executive running its club for frequent fliers to talk about its membership record keeping. “While he politely told me he didn’t need help, a month later he called to tell me that the government was going to make United charge for access to the Red Carpet Club and that he may need help.”
Over the next several years as Epsilon helped maintain the records for United’s Red Carpet Club, Brierley recalls, “I became intrigued with the concept of customer loyalty. As we served as the vendor maintaining the Club’s records, we started wondering if we could use the Red Carpet Club as the vehicle to motivate flyers to concentrate their flying with United, offering unanticipated rewards and more personalized communications.”
Later, United introduced them to Pan Am and Epsilon started maintaining Pan Am’s Clipper Club records. With the advent of airline deregulation, airlines were freed from pricing restrictions and allowed to become more creative, he says. “So, I proposed to Pan Am that Epsilon could develop and operate a turnkey program to reward passengers for flying its new transcontinental routes from New York to San Francisco and Los Angeles. Our proposed ‘multi-trip discount program’ would offer passengers who flew three round trips on Pan Am’s transcontinental flights a free coach trip to Europe. Pan Am said it would never work, that no one would ever go out of their way to fly one airline rather than another simply to earn a reward.”
Later, after he had left Epsilon, one of Brierley’s business school classmates became senior vice president of marketing for American Airlines. Brierley recalls, “When we met, I told him what I had proposed to do at Pan Am and he said, ‘We’ve got a secret program we’re thinking about that would reward passengers for flying on American.’ It ended up with me as the one outside adviser on the design and launch of the AAdvantage program.
“American wanted frequent travelers to give the airline their names and addresses so it could communicate directly with them and provide their member numbers when they flew, thus allowing American to accurately identify their best customers. By offering a small incentive for participation and working the database, American thought they could gain a larger share of the customer’s travel.”
He adds, “It’s important to remember that the original AAdvantage program had a one-year term – you had to fly 50,000 miles in one year to earn a free ticket.”
Brierley proposed several key innovations, including entry-level awards starting at 12,000 miles, an unanticipated gift (a bag tag) after a member’s first flight, a monthly mileage statement, and a Gold program for members flying at least 25,000 miles each year. While he is still proud of his contribution, he always likes to point out that the work was done “by a very talented team of AA employees, and Bob Crandall was the visionary who said they needed the program.”
Brierley laughs as he recalls that American thought it had a one year head start against its competitors when it launched AAdvantage, since the technology and planning had been a year in the making. To American’s surprise, United Airlines matched it “literally over the weekend, improvising the initial program support. Obviously when a big competitor launches a major initiative, you should respond. But United made one big change,” Brierley adds. “They said, ‘If it makes sense to give people miles when they fly, why not let them earn miles for more than just year-to-year?’ So, United made the term for earning miles open-ended, and eventually, millions of travelers would earn a free trip.
“That totally changed the economics of the program, and led to these programs becoming much bigger and more expensive than planned,” he says. “However, offsetting the added cost, no one anticipated that someone would decide that letting travelers earn miles for using a credit card could change the credit card industry. So today, billions of dollars are spent by credit card companies to reward their cardholders with airline miles, making the sale of airline miles a major profit center for the airlines.”
Retaining customer attention
Over the more than 30 years since the launch of the first airline loyalty program, Brierley has worked with clients “to define what behavior change they want their customers to make – such as to sign up for a program or purchase something they might not otherwise have bought – the economic value of the change, and how much they want to spend to motivate the behavior change. In addition to the tangible incentives, I’m convinced providing emotional benefits and understanding the psychology of loyalty have become critical in designing a successful program,” he says.
Brierley believes that the next generation of loyalty programs will reward people for their time and attention. “We’re in a time-starved world today and the biggest problem for a brand is getting and keeping the consumer’s attention,” he says. “I think share of attention is going to be as important as share of wallet. And that’s where the focus on customer engagement becomes important.
“Talk about loyalty and a lot of CFOs think about a big, cumbersome reward program that offers trips to Hawaii. However, everyone has pretty well agreed that if we can get customers to engage more frequently with the brand, they will buy more.”
In Brierley’s view, customer engagement centers on having a conversation with customers and prospects. “Most marketers preach rather than converse. Conversation says I talk to you, I ask you a question, you tell me something.”
To emphasize this point, Brierley recalls when rental car company Hertz sat in focus groups with customers nearly 30 years ago and asked what kind of benefits Hertz could extend to them that would cause them to prefer Hertz. “What people said was, ‘I want a faster way to rent the car.’ They had their airline miles, and they didn’t want points or golf balls from Hertz, but they didn’t want to stand in line.” And, to Hertz’s credit, it listened and created the Hertz #1 Club Gold program.
The explosion of the internet and digital marketing has made it faster and cheaper to engage with customers. Brierley says that the idea of rewarding people for their time, for opening an email and for sharing their opinions by completing a survey, led him to launch e-Rewards, now known as Research Now, the world’s largest online market research panel. It monthly rewards over a million consumers for completing market opinion surveys for some 2,500 research firms.
“I’m firm believer that a well-crafted incentive can profitably change behavior. We’re an incentive-based society today.”
The next level of engagement
Brierley sees SMU’s new institute as a way to move to the next level of customer engagement. “I would like to think we’ll have a generation who actually knows how to profitably drive consumer engagement,” he says. “Since it’s a bit of a science and a bit of an art, there are a lot of nuances that make programs successful.”
His relationship with SMU actually began with the arts, which he and Diane have supported generously across Dallas for decades. Having earlier served on the executive board of Meadows School of the Arts, he was attracted to the National Center for Arts Research (NCAR) program in Meadows and Cox. “It struck me as a very innovative program; SMU was taking the initiative in a very entrepreneurial endeavor – building a database of best practices in the arts community. There was a fundraising opportunity to support NCAR that had a matching grant, and we gave $100,000.”
When it came time to make a major investment in developing the field of customer engagement, Brierley felt that SMU would be the best academic home.
“It could take years for Harvard to identify a professor interested in building a course around loyalty or engagement, much less establish an M.B.A. concentration,” he says. “SMU already had been teaching a class on customer loyalty, and working innovatively with American Airlines to let students work with real customer data and address loyalty issues. We have a professor who already had a love for customer engagement, we have an innovative school in Cox, and a superlative brand in SMU. I think we can make SMU and Dallas a center of excellence in this critical part of marketing. When you think of all the Fortune 500 corporate headquarters here, we have a tremendous laboratory for advancing loyalty.”