Following a period of financial losses and declining market share, a new management team at Travelocity led a turnaround to achieve what is now eight consecutive quarters of more than 25% growth and profitability. In this exclusive interview, CMO Jeffrey Glueck reveals the keys: building high-margin products, creating emotional connections to the brand, and delivering on customer-service promises. As a result, Travelocity has won awards for its rejuvenation, including "Turnaround Company of the Year" from the American Business Awards, and a Gold Effie from the American Marketing Association for best retail advertising campaign in the U.S.
Here, Jeffrey talks with Roy Young of MarketingProfs. He shares candidly how Travelocity moved from earning 70% of its revenue in low-margin airline ticket sales to earning 70% of its revenue from far-more profitable products and services. He also uncovers his crystal ball to tell us where online marketing is going, not just in the travel industry but in general. What follows is a transcript, edited for clarity and readability. This interview is also available in audio for our Annual Premium Members. Click here to play the podcast.
Roy Young: Tell us about your role and responsibilities as CMO of Travelocity.
Jeffrey Glueck: The Chief Marketing Officer role at Travelocity covers a wide range. It's advertising, obviously, but also all of our customer relationship management (CRM), all of our editorial, site design and production, loyalty programs, online search marketing, and the like. [At Travelocity], the CMO reports to the CEO.
Roy Young: You're speaking on marketing in an upcoming conference produced by IIR. What is the key message you hope to send to other marketers?
Jeffrey Glueck: The key message is that you can take a faded pioneer brand like Travelocity and completely re-energize and revitalize it by defining its mission: We stand for something timeless. We've seen a tremendous turnaround—from being an unprofitable company losing market share, to (now) eight quarters in a row of over 25% growth and profitability and market share gains. Back in 2003, when the new team came in, no one thought Travelocity would be [headed] anywhere.
So I will talk about how we approached revitalizing the brand, building high-margin products, creating a unique positioning in a commodity industry, and building emotional brand connections. I'll also talk about personalization technology in becoming a real retailer and customer service provider.
Roy Young: What are some of the things you were able to do to make the turnaround successful?
Jeffrey Glueck: As a company we think about three steps to re-energizing towards profitable growth. First, you have to have your economic engine in line—you have to know how you are going to make money. For us, that was moving away from air tickets towards high-margin products like hotel reservations and vacation packages and cruises.
In two years, we [shifted] from a company that made almost 70% of its revenue from just plain old airline tickets to a company that makes over 70% of its revenue from everything but airline tickets... which is pretty remarkable information for a company that this year sold about $7.4 billion worldwide in travel.
Secondly, once you have your economic engine in mind, you have to attack commoditization. For us, that means knowing what you stand for in defining a mission. We set out to be the premier advocate and champion for travelers—to say, sure, everyone has to have competitive prices, that's a given; but the key was an understanding that most customers really cared that there was someone standing behind their travel—there was a real human being to call 24/7 for help or advice, if they needed it.
We really differentiate ourselves with our Travelocity Customer Bill of Rights and in advertising our 24/7 access to travel professionals. And then, finally, with the Travelocity guarantee—our tag line for which is, "You will never roam alone." We really brought home the human element.
We redesigned the Web site completely to be human—not techno-oriented. We redid our logo, we came up with the tag line, and of course we launched our mascot, the lovable roaming gnome—the kidnapped concrete lawn ornament traveling around the world. [Such efforts] bring home the humanity of the brand and start to operate at an emotional as well as a rational level to break out of the pack.
We are really proud that the most important thing is that all the employees now can tell you the Travelocity guarantee: We will stand behind. [That philosophy] really defines our mission and they are proud of it.
The third step is being a smart retailer. That means you have to deliver on your customer-service promises, and offer good merchandising of products that will save customers' money but also be high margin.
Also, you have to personalize. You have to touch people in a relevant way through email as well as on the site, and you have to be consistent in all of your communications.
So, all those things: Build high margin products, understand your economic engine, define a mission and then deliver as a great retailer. Those were the steps we took.
Roy Young: Does your CEO understand marketing?
Jeffrey Glueck: Absolutely. She has complete faith in our marketing team. We check in frequently with our CEO. We have proven through econometric modeling and (more obviously) our market share and gains that the marketing team can be a strategic leader for Travelocity.
Three years ago, no one really thought of marketing as a strategic catalyst for the business. Now there is a lot of faith, including [that of] the CFO and CEO. We have tremendous support.
Roy Young: And do they understand branding?
Jeffrey Glueck: Absolutely. We had a very telling moment when we launched the Travelocity Guarantee, which [holds] that everything about your booking will be right or we will make it right—right away. The very first week, there was a mix-up: We started selling $0 tickets to Fiji, and before we knew it we had sold $2 million of free tickets to Fiji that really should have been $5,000-$6,000 tickets!
So for a company that the year before had only made $15 million in profit, eating $2 million seemed like a pretty big decision. You would expect CEO, CFO, and others to look at the marketing team and say, "Well, I don't care about your silly product launch this week, $2 million is too much."
There was not any hesitation; we met and it was obvious we were going to honor it. The CEO got on the blogosphere, on FlyerTalk, the bulletin board, and answered the hundreds of message posts that had gone up about the topic. She said to all those who bought Fiji tickets, "Bula!" That meant: "Have a great trip to Fiji and write us a hotel review when you get back!"
We got tremendous favorable press from the blogosphere and media. But more importantly, we had hundreds of emails to the CEO and all of us on the executive team. Up till then I didn't know if the Travelocity Guarantee was going to be for real. That [experience] brought it home that we are serious about this, and I am proud to work for the company as a result. So they get it, and obviously the financial results don't hurt either.
Roy Young: When you speak about econometric modeling and the metrics that chart your effectiveness, how important is that?
Jeffrey Glueck: Well, you know everyone does a double-take when we say we are incredibly ROI-focused in our offline advertising. People say, "Excuse me, did you mean to say in your online and search marketing?" and I say, "No, in everything including our offline."
We have built very sophisticated econometric models that allow us to track our large investments by channel—network TV, DRTV, network radio, national newspaper, local newspaper, online banners, search, email, etc. And we have refined it with three years' of data, on us and all sorts of economic indicators and industry indices and competitor advertising spend... and you name it. Now, after three years into the modeling, we have a pretty accurate model; we can forecast acquisition cost and traffic levels to a high degree of accuracy.
The only thing we can't forecast [accurately] is that our advertising keeps getting better and better, as people really start to love the gnome. It keeps beating our forecast, because the response to the advertising has been so great. There is always that human element you can't forecast.
We will pull money from search towards TV, as we are doing this year, because TV has actually been a lower cost acquisition channel than even search engines this year. That surprised a lot of analysts when we talk about it, but we think most companies are overbidding on Google and Yahoo—they are useful tools, but you have to be very careful how you measure them.
Most companies we think aren't really understanding their variable earnings per sale. If you think you are making $25 a sale and you are really only making $16 in variable sale—well, that would change how much you bid for a term, wouldn't it?
A lot of people mix things up—they jumble their search engine spending so most companies make a lot of money buying their own brand name in Google. If you're Target, for instance, you're going to be making a fortune buying people who type "Target" into Google or Yahoo because, believe it not, they have forgotten the URL. But if you are not careful with both profits, if you are not measuring properly, you will subsidize losses in other keywords that are more generic, so that could be an over-inflated price. We try to be very scientific and disciplined about all of our ROI in every channel.
Roy Young: Do you try to evaluate the lifetime value of a customer?
Jeffrey Glueck: We don't yet have a good sense of that, in part because we are investing it some better measurement tools this year, but in part because we also just think, in a world where loyalty has been hard to find, it's too easy a trap to overpay for things in the hope of making it back three years from now. So we are very much focused on short payback cycles for our acquisition.
Roy Young: Is there any way that you are using a longer-term focus?
Jeffrey Glueck: We are launching a loyalty program, in beta form. I am not talking too much about it in detail, but it is something we've mentioned that we are doing for several hundred thousand of our best customers, giving them special recognition, special service, some extra discounts, a little love, various perks. It's very early, but so far we are seeing a great response.
My goal is to prove that an online company can be more than simply online software, it can really be a trusted partner that you build a relationship with and that it serves you well. It points out ways you can save money, but also points out when it's worth spending a little extra to have a nicer hotel right in the middle of town convenient to all the attractions.
So being a good adviser and coming through when things go wrong in travel—that's another way that we really are earning loyalty. We are seeing a tremendous response. Our agents have even gotten marriage proposals for helping people out in their hour of need while traveling!
Roy Young: What helps marketing work well with IT?
Jeffrey Glueck: First [factor] is respecting communication, and that's probably the last thing, too. I've never been a fan of [the traditional] relationship between product managers or marketing leaders and IT—that is, [marketing] writes the specifications and [IT] comes back with a finished technical working piece of software. It's got to be a close collaboration on every stage, working to understand the technology team's problems and [ultimately answering]: Can we do it a different way and get there faster and more elegantly?
So it's really about forging close listening relationships and being respectful. That has to go both ways. You can't allow the technology team to get away with, "Just ship me a document and we will figure it out from here, we don't need more input."
There is a sort of a myth that there are tech decisions that technology people should make and there are business decisions that business people should make. That's an incredibly dangerous mindset. There is no pure tech decision and no pure business decision when it comes to building applications. They are both, and you have to collaborate at every stage.
Roy Young: What do you look for in team members, and what do you value most in new hires?
Jeffrey Glueck: We've built a tremendous team in the Travelocity Marketing Group. We have brought in a number of people and we've also promoted from within. I look for really sharp [individuals] with high communication skills and high intelligence. For very specialized areas, you look for people who have unique insights and talents and experience.
We hired a Head of Design who is fantastic intuitively at design and could create simple elegant solutions. We hired a Head of Advertising who had run accounts that were over $100 million before and built great brands. We hired a Head of CRM that had written CRM strategies. As the CMO, my job is to give everyone a vision and keep everyone aligned and moving together on an integrated path.
Roy Young: What makes you personally successful at Travelocity?
Jeffrey Glueck: Well, it helps to have a great team and be working with a tremendous group of people across the whole organization. We have a CEO and CFO who believe in the strategic vision of being the premier advocate for travelers, so that helps. I don't know if it's possible to do that without complete alignment.
One of the things I've been surprisingly fortunate to find in myself over the last couple of years is that working with all these specialists, my own specialty is integrating—so I have a good sense of how to be creative and keep creative people motivated, but also how to be pragmatic and technical when that's called on. Also, I know how to be ROI-focused when that's called on, too.
So it's stringing together all that—listening to the customer, showing creativity, the visual and aesthetic elements of making complex things easy for real people to use, and then bringing that all together with a focus on strategy and differentiation and financial returns. That kind of integrative thinking is what it takes to keep the whole team growing in the same direction.
Roy Young: Apply your crystal ball a bit and tell us where you think this online world is going—not just in your industry but generally, too, with marketing products and services on the Internet.
Jeffrey Glueck: I think you're going to see in every industry a blurring of the lines. Online retailers who were born as pure-play online retailers are going to have to add customer service and offline touch points of various kinds—if not stores then maybe little ways that they enhance the experiences for customers and move from just simple commodity sales to being integrators in experienced companies, solution companies.
The pure players are going to move and become a little more traditional, and the bricks and mortars companies are already moving quickly to make the Internet an integral part of their store or their commercial experience.
Second, I think media will become more targeted across the silos. Already we can work with a great partner like Yahoo where we spent more money than any other channel, and we can target our advertising at people who have recently been shopping for travel. We can do all that, without knowing their personal identities. I think that kind of targeting across seams of different channels is going to happen more and more and someday it's going to happen in TV.
We'll go beyond demographic targeting, which is kind of old style, and get towards a new style, real behavioral, and interest and psychographic targeting. That's where these things will integrate.
Note: Learn more marketing strategy from Jeffrey Glueck and more than 90 other speakers at The Conference on Marketing, March 20-22, 2006 in Las Vegas (www.theconferenceonmarketing.com).
