Episode 39 : Jonathan Clarkson (CPO, Southwest Airlines) | Loyalty isn’t earned, it’s experienced

I am Radhika Zavari, host for my teaching podcast "Podwalk", where I have candid conversations with industry leaders about brand purpose, leadership and what it really takes to grow in today's marketing landscape. After leading billion-dollar brands at companies like Nestle, I now serve as professor of practice at Southern Methodist University in Dallas, where I champion diverse and real world learning. Take a walk literally or in spirit and join me on "Podwalk" as we explore how marketers are building soulful brands and driving meaningful change. These are the stories behind the strategies and the people behind the brands you love. So what's the one brand Jonathan that you've been most loyal to in your life? I think it's probably Starbucks and my loyalty to Starbucks began through product and proximity. Starbucks stores are in my neighborhood or plentiful and I would always need a coffee and driving to work from the beginning of my career and I always love the product there. So I have my venti drip that I go get and they know I'm coming and I pick it up and it's all good. I think what's sort of enhanced that loyalty is the advances that they've made in their own loyalty program and specifically in their digital app. Now obviously with being able to order an advance and to customize your order that's only made it that much more fluid and frictionless have been experienced to get your coffee in the morning. When you make it easy for me to get a product that I actually look forward to every morning it's not hard to build loyalty. I think guys the last year in my report card I'd been I'd visited Starbucks 310 times and they're only three hundred six five days so to me that's queer loyalty. Have they listening to this podcast? I'm a love listening to that. I love it. Probably a lot of customers just like me. Yeah well small small moments count. Yeah sure do. Today on the show we have Jonathan Clarkson vice president and chief product officer at Southwest Airlines where he has led the charge of building products and building loyalty experiences that help the airline win more customers and drive proof. His marketing foundation was shaped by iconic brands like Dr. Pepper, Pizza Hut and Pepsi go giving him a shop lens on how brands earn both attention and trust. And outside of work you might find him running a race exploring Napper or New York or cheering on his Mustang at SMU. In this episode Jonathan and I will dive into how experiences AI and smart product design work together to create lasting customer loyalty with real examples of what loyalty looks like at Southwest Airlines and what it means for today's consumers. We're recording this in fall as folks are preparing to make travel plans for fall break and the holidays. So here's to making travel easier more fun and full of possibilities and to having Jonathan Clarkson on the show welcome to podwalk Jonathan. Thank you for having me. So Jonathan your career has been nothing short of impressive 18 years at Southwest Airlines and a lot of time at other iconic brands like Dr. Pepper and Pizza Hut and Pepsi and others before that and you really touched a lot of different marketing spaces from research to loyalty to product. So as you look back at your journey what does your journey say about the different paths a marketer can take and how do you think your career evolved over time? Yeah it's a great question. I think if if one were to sort of draw through line with the brands that you just that you just spelled out perhaps most significantly Southwest each of those are customer central companies and they start they build products they build programs they have brand propositions where it's your built around what customers want and I think that is really critical to to brands and companies being successful particularly in the in the B to C space. I think you know it's funny careers just like anything else you have your formative years at the beginning and I think the type of work that you do the type of job that you start out in has a lot to do with forming kind of how you look at at at at work going forward and for example if you start in the finance field you might be a little bit more prone to looking at things through the lens of a P and L you know even a decades into your career I had a benefit of starting in customer insights and doing customer research so it was our job to perform surveys and do focus groups and and then amplify in a times evangelize the voice of the customer for the rest of the company so that's just kind of how I learned to do it and and I think that was probably what helped me gravitate more toward brands who were receptive to that and where you can see the voice of the customer showing up and whatever the value proposition is. Yeah and I think research is such a great place to start at such a launch pad for marketers or can be because it teaches you to listen and really that's an integral part of what we market as do is to listen to our customers and really try to get them and hope that they get us. So yeah I think it's it listen and also incorporate multiple points of view I mean there's certainly you can see where there's sometimes there's a tendency to listen until you hear the thing you were looking to hear and then go and run with that but I think you know having sort of letting the play develop and hearing all all the voices in the room and then making an informed decision based on that collective customer feedback I think that's a really critical skill to learn. Yeah for sure for sure and you know travelers say about south west that it feels different that it's an airline that gets you so you're going back to this point about getting our customers how does a company like south west create a sense of empathy as well as connection on a day-to-day basis that's what it would be really challenging now. It is it's well it can be challenging given the breath of our operation you know there's 4200 flights a day or so it's the largest domestic care is south west largest domestic care in the United States has been for some time but what we also have is and what what is in our DNA is an embrace of hospitality and then making sure that that day of travel for the customer is a great experience and I think you see that in instances in our airline more so than you see it anywhere else. A great example I was just a friend of ours has a college student who's a cheerleader at a school in Alabama they were recently flying from Birmingham to Dallas to cheer at a game and I let the station manager and Birmingham know that and low and behold when the cheer team got there they had they had concocted this sort of cheer celebration for the team so you know and it was they were they loved it because they were being recognized at the airport they certainly didn't expect it it was it was recognition of what they were good getting ready to go do and it also happens at a place where you know we generally associate the airport with stress right or with uncertainty or things that are beyond our control so if you can take an environment like that and you can actually sort of turn on our head and make it fun and engaging and and get people even more excited about the trip that they're getting ready to take I think that's the license that Southwest employees have that other airline employees don't have and I think that's how we sort of make it real make it fun and differentiate the day of the trip from your experience and another airline even that can go on from the same two cities the next time traveling Southwest I know who to go yeah you know whatever that's the thing you didn't have to be me you could just go up to the gate agent probably and say hey we got this group here and they'd love to get a shout out and they do that all the time yeah and that's just a human touch you know like those Apple that you just just shared with the cheer leaders getting the shout out it makes travel more of a vibe than a trip like it makes it so much more and these stresses that you know to your earlier point about traveling can be stressful and there's only uncertainty and fun is such a key and integral part of the identity of Southwest and so that that also comes to life with the example that you shared and really feeds into the loyalty of your brand so if your brand objective is to have fun what would you plan to do this year to have fun yourself oh well uh personally I'm looking forward to doing some travel in the fourth quarter um I'm going to be uh my wife and I are going to head up to the east coast and be there I think will be there just in time to watch the leaves turn and that Vermont New Hampshire area oh is that right oh yeah I used to live in Vermont oh is that right okay yeah I mean this is how to pick your brain and where to go well for sure and if you haven't made your arrangements for hotel and stuff you better get all that quick yeah now it would work to stay with you - Yeah, we're on top of that, but we're excited for it. I think that's one of the great things about working in the travel space is that you work with, you have access to obviously to be able to go do things like that, and then you work around. A lot of people were very passionate about travel, so it's a fun little nucleus of folks. - Yes, love it, and I hope you guys have fun. - So John, Southwest Airlines is known for fun, and we were just talking about fun, and it's also been best known for its rapid-rewards loyalty program, which has been quite distinctive compared to what other airlines do, and it's based on fair paid, not distance flown, pretty simple, distinctive, easy to follow, and there have been many policies that reinforced that program, one of them being bags fly free, which has been such a hallmark for Southwest, and Southwest loyalty. I'm curious as to now that there's a change been made to that policy of bags fly free, and fees have been introduced. Can you take us back to the program while talking a little bit about the rapid-rewards loyalty program in general, and also sort of give us a sense for, how did you guys make a decision to make a change on such a beloved policy? - Sure, yeah, so I'll start with the rapid-rewards program and the evolution there. You're right, we were the first major program to evolve to a spend-based earn concept versus a mileage-based earn concept. It just made more sense, because it tends to reward the passengers more heavily based on the amount of money they spend. I think the other aspect of the program that made it appealing was wherever seat you wanted, wherever it was going, whatever time of year you could use your loyalty points for that, and not everybody else was doing that. There were capacity controls or blackout dates or things of that ilk. None of that existed at Southwest, so when you were with rapid-rewards, so when you take the ease and the simplicity of how you earn points, and you apply that across the largest domestic network in the US and all the places that enabled you to go made for a very powerful combination, and that's what's led to rapid-rewards to be one of the most popular and profitable programs in the industry. The bag's evolution is an interesting one too, as you probably know, for, as you mentioned, for 17 years, we're the only airline that did not charge for check bags. And we did that because that created a differentiator where customers were willing to fly us because we didn't charge for check bags. So therefore, we garnered market share that we wouldn't have otherwise had we adopted same policy as everybody else, and the incremental market share that we received offset the need to charge for check bags. What's happened more recently is their airlines have pursued a more premium trend. Now people are spending their own dollars on things like first-class upgrades and lounges, and we're here previously, that would have been, you would have only done that on a business trip. Now you're seeing a lot more of that in leisure, and as part of the evolution of the Southwest product to be more premium that we're seeing today with the science eats and extender leg room and things like that, that also came with the decision to charge for bags, in part to, because people were not voting with their wallets to the same degree that they were when prior to the premium innovation trend. - Right, and it's such a great example that, you know, oftentimes we think about loyalty as nostalgia, but this is such a great example of the fact that loyalty isn't just about nostalgia. It is about evolving with customers, and as they shift, and like you said, they want voting with their wallets anymore, and evolving with that shift as well. - You know, customers love flying Southwest. I mean, you hear this all the time. I'm sure you hear it all the time because of the ease and simplicity of the programs that you all have in place, and you all have recently implemented the assigned seeding which you alluded to before. And personally, I'm a fan of because I like certainty over change, I feel like I want to know that I'm sitting. How do you believe that this change is going to impact differentiation for Southwest Airlines and, you know, in turn loyalty? - Yeah, so, well, we're excited for it. You know, we, this is, this was not a decision that was taken lightly, I would say that we spent close to a decade in terms of researching what would happen if we were to evolve to assigned seed. So I think there was always, even though we were up until this year, we were the only carrier, I think in the world, it wasn't the signing seed. So it was truly a unique way of voting a plane. A couple different things around at one, the number one barrier for customers who don't fly Southwest today is because we don't assigned seed. So you're not alone in that, you know, you would prefer the certainty of knowing you're going to be in the seat you want as opposed to having a good chance to get the seat that you want. So in an effort to appeal to a broader base of customers, it made sense to do that. There's also an operational benefit to it. If you think about the way a Southwest Airlines flight boards today, because it's open seating, people prefer to sit in front because they can get off the plane faster when we land. So it creates effectively a front-to-back boarding process which, as you can imagine, slows things down, right? Ideally, you want people to board in a manner where you have at least an equal number of folks going to the back of the plane as well as to the front. So that's more efficient, whereas it versus having a log giant at the front. So there were also operational efficiencies that we knew it could capture by moving to it. I think from a loyalty standpoint, what will happen is we will have products that for our best customers will still, the loyalty program will still enable them to get the best seats. That's kind of how all the loyalty programs work now. And we'll do something similar there. I think once customers sort of see how a sign seating works and how it works, especially for our top tier customers, they'll embrace it and they'll be equally if not more loyal to us. But it is an interesting time because we're selling those products, but we haven't started doing a sign seating yet so we won't start until late January. - Yeah, I think this is announced just this year, sometime in May, so it's been produced. Yeah, but certainty, I mean, I believe it's the new comfort because traveling has just gotten airports are hectic and they're crowded and there's so much uncertainty with delays and this and that that I think there is a new comfort in having that certainty and I do hope that that works out for you guys and it's another win for your loyalty program as well. - Yeah, it is interesting because when we started talking to customers about this change at the beginning, again, we took very customer-centric approach to it and what we heard from a lot of people was that they don't necessarily equate a sign, open seating to sort of the soul of Southwest. Yes, it's an attribute of that, but what makes you guys different is again, that experience that you provide on the day of travel. So when you can couple have a certainty that didn't exist before and still maintain that same experience that we have, that we talked about earlier about making it fun and enjoyable and less stressful that feels like a winning combination and I do think that deepens loyalty. - Yeah, that certainly feels like a win and who doesn't like efficiency in getting on and off a plane as well as just helping reduce headaches to all the points in it can be a headache. It's not always a headache, but sometimes it is. And you know, recently I had an experience where an airline automatically re-booked my mother-in-law as itinerary during a delay and that just made our life so much more simpler because she was traveling solo and she's an older adult and there's more anxiety when they travel. And so AI is certainly helping in reducing and relieving us of some of those pressures and I'm curious as to how do you think AI could maintain a personal touch as it continues to help travelers and companies like Southwest in elevating the experience of travel day. - Yeah, well, I think it really I think it can benefit along the continuum of the travel experience. When we think about it as different touch points start with booking the flight and ends with actually deplaning. from the fight that you bought on the front end. And I think there's a role for AI to enhance each one of the experience of each one of those touch points. A couple of examples on the book inside, I think what you'll see emerge over time are more AI-driven tools that help people with trip planning. You know, a lot of the time, people know that they want to take a trip, but they don't really know what all their options are and they can just sort of tell you what they do want, but they haven't gone through the process of selecting that. So I think there are, if I can tell you that I want to go to a beach in a place that is Florida or Florida-like, and I want there to be mangroves on the beach, and I want to make sure that I get my bond boy points at whatever hotel I stay at. - Yeah. - You know, if you or I had those specifics for us to go plan a trip for somebody that would be quite a bit of work, and obviously that's not for mature generative AI tools today. So I think you'll see some of that. I also think you asked specifically about the day of travel. One of the things that's nice about assigned seating, different from what we have today with open seating is now we know exactly where everybody sits. So we have AI tools that know about what your preferences are in the day of travel and can maybe have a little bit more intelligence about you than somebody just standing there seeing you for the first time. And we know where you sit. There's a nice little sort of overlap of the ability to enhance that. They have travel experience to talk about and treat somebody even more, and in even more special way with the tools that we have at our disposal. - Yeah. - I think, yeah, I mean, we could talk all day about how all the different and enhancements that AI can provide for the travel experience at any juncture. But I think it is absolutely, just like in so many industries, it will continue to change the game and change our experience versus what we've done historically. - Even simple things like I always speak, I'll see, for instance, if I'm traveling. And you know, oftentimes like the app will ask you, like when you want to sit and like I think that's an evolution of AI helping you, if I always speak, when I have the opportunity, always speak and I'll see that you can just pick that for me. - Yeah. - Want to be in front of the plane. Like all those criteria because your habits don't change. Those are certain requirements that you want and especially if you are a frequent traveler. And you have that data behind your travel schedule. - And by the way, we are seeing that the IELC is the most popular, as we're now getting data on seed selection that we didn't have before. - Yeah. - The people are pre-selecting seeds for their trips in January and we are finding that IELs are more popular than Windows. - Yeah, you know what else is popular is the number of the seed. I don't know if you've ever heard this, but I've been hearing this. Like 11 is a popular number. Don't ask me why. I mean, I thought that was not supposed to be lucky, but I've been hearing that from people. But you want to be somewhere in the middle of the plane 'cause it's the safest thing in the front. - It could be that. It's also that's kind of where a lot of the time the extended legroom or the premium section falls in front of that. So in many cases, 11 could be the seed that offers the most value because you don't have to pay necessarily an upgrade for a premium seed, but you're still as close to the front of the plane as you could be without having to do that. - Oh, so those are the smart travelers. They figured it would be a good start. - Smart and savvy. - Smart freedom without them. - Yeah, they. (laughs) They're elevating their own experience. They don't need AI for that. (laughs) I want to switch to product next. You know, you've served as Chief Product Officer for many years now at Southwest Airlines. And you know, I'm curious about, what's the thing that you're particularly proud of? An example or perhaps a trend that you may have spotted early on that you could evolve with the design of product around. You talked to us about, take us to a place where you are particularly proud of something that you'll date with in product design. - Yeah, so I would point to the fair product that we have today. I think, or the one that we launched recently in combination with design seeding, or the launch of design seeding, what we, historically, what we had a product, we had four products. And people gravitated toward the first one because it had pretty good benefits and it was the lowest price. And what we've since found is that as you put different benefits in different products, you can get, you can, it enables people to buy up for, to choose more benefits. Now, what's good about that is it offers people a variety of options. So if all you're interested in is the lowest price product, no frills, anything like that. We have that for you in order to, and we have opportunities for you to pay more for subsequent fares, but in each case, you're getting more when you pay more. So it's just adding and layering and additional benefits in a to drive by up, but also to give customers, I think, more choice maybe than they have today. - Yeah, also sense of personalization, like they feel like they're customizing their experience based on what's relevant. - That's right. - Then, so these are just fantastic examples that really bring to life and showcase how experiences and AI and product design and really smart product design work together to create these lasting loyalty impressions. And I want to talk about personal experience that you might have had with SMU, as we talk about trust and loyalty and just brands that you may have had a relationship. Now, you're also a SMU parent. You have a child at, and I don't know if we can or cannot mention the students. - Oh no, yeah, my son Andrew, he's a junior at SMU, and he absolutely loves it. We've been so thrilled with the experience that he's had there. And all the great people he's met, the wonderful professors that he's had. Thank you for the opportunity to plug SMU. We've been very pleased with our experience there. - And it's wonderful to hear that from someone who does trust and loyalty and builds product and experience as a career, as a job. And so no, thank you, thank you for hearing that. - We're also repeat seasoned ticket holders for SMU football. - All right, we've got all the gear we're bought in, so. - Oh, good, so I might see you there. Yeah, phony up a lot of times, so that's wonderful. That's great. So Jonathan, you're ready for some headline questions? You may answer it in a third or sentence, whatever you feel comfortable doing. Okay, nice students love these, by the way, because these are the leadership tips that they love getting from leaders, such as yourself. All right, let's get started. What should young marketers learn in this digital age? - Interpersonal skills, we're increasingly digital in terms of how we interact, don't let your interpersonal skills erode as a result of that. - What's the most undervalued leadership trait? - Listening. I think there's a, I would say perhaps the most overvalued leadership trait is the ability to speak publicly. That's important, but it's not the most effective attribute of leadership. The most effective attribute of being a good leader is listening and understanding what's happening with your team, and if changes need to be made, you can do that based on what's actually transpiring as opposed to hearsay or conjecture. - In a sentence or two, can you describe the power of marketing? - The end of it's really understanding what the key customer insight is, and then playing that back to customers in a way that resonates with them. So you have to know what appeals to customers, and then you also have to be able to talk about that appealing attribute in a way where it resonates with why customers like it in the first place. - That you get them? - You got it. - What is the purpose of purpose, do you think? - That's a good one. I think there are, in any corporate career, there can be a multitude of extrinsic rewards that come with that. But the people that I have known over time that have been the most fulfilled in their careers, regardless of what level they elevated to or what line of work they were in, were the ones that also felt intrinsically rewarded and worked on brands and products. that had a stated purpose for customers or why they existed and how they're differentiated. I think that's why we have that. We have that in order to provide intrinsic rewards for both the employees of those companies and also the customers that we serve. - And what happens when an individual's purpose and the corporate purpose are not aligned? - It requires some hard decisions. I think one can either decide that they can make the alignment happen or move on, but almost invariably it's typically the corporate purpose is the one that's less likely to yield. So if you find yourself in a scenario where your values, your personal values don't align with those of the company, then it's probably time to go find something that it does align more closely with what you wanna do, assuming that you wanna be happy in your career. - Yeah, finding your fit. - Finding your fit, you got it. - Thank you, Jonathan, for coming to podwalk, your energy, your enthusiasm and just making our lives easier when we travel with Southwest have been so enlightening and rewarding to hear all the examples that you have shared with us, so huge thanks to you. And thank you for taking the time. Your stories and insights made it not just a fun conversation, but you really helped us understand the complex in very simple terms, so really appreciate that. A few key takeaways from my conversation with Jonathan today. Loyalty is felt not gone. It's the little wins, like smooth check-ins, fun touches, thoughtful surprises that make customers keep coming back, not just rewards or points, but for the experience. Second, smart tech and personal touch. Using AI to simplify complex tasks and delivering tailored experiences while combining that technology with empathy keeps that human connection alive. And lastly, products that level up logically. Building products with benefits that make sense, step by step. Each upgrade should feel obvious and worth it, step by step, so that customers see why moving up makes sense. Thank you for listening to the podcast on Apple, Spotify, or wherever it is that you're listening to us. We would appreciate subscribing to our podcast, so you can hear the newest one. And Lena's a positive review. We would love that. Until next time. [BLANK_AUDIO]