Limited Budget and Creative Thinking: United Airline's Launch of Ted

September 14, 2005

In the fall of 2004, United Airlines set out to launch Ted, its new low-cost carrier; a move that was critical to staving off the competitive upstarts and helping the company emerge from Chapter 11. In just six short weeks, an unconventional but superbly orchestrated marketing communications plan was devised that incorporated paid media, interactive, PR, and over 40 guerilla marketing tactics. Given the Chapter 11 status of United, every penny spent on marketing Ted would be tightly scrutinized--so brand and business metrics were an important consideration upfront, not an afterthought. The client and agency worked closely together to develop a strong brand positioning and voice, smart targeting, phased communications and creative thinking in its broadest form. The multi-faceted approach contributed to a stellar launch with outstanding business results.

Challenges

United Airlines had lost $40 billion and was in Chapter 11. Low cost carriers (LCC) were adding aircrafts, and putting them in key hubs of network airlines. There was a huge need to protect their hubs (Denver, Washington DC, and Chicago) from low cost carriers. The marketers and agency were under a tight budget and even tighter deadlines. To be a low cost carrier, you have to cut operating expenses.

Business Plan

  • Profitable improvement of limited mainline markets
  • Focus on leisure oriented customers
  • Strong links to mainline (leveraged focus)
    • Network compatibility
    • Operational excellence
    • Business traveler recognition
  • Competitive with external market conditions
    • LCC competition
    • Customer behavior
    • Product appeal
  • Employee / customer relevance

Marketing Objectives

Objective 1: Create awareness and positive buzz around the Ted brand

Objective 2: Drive trial of Ted (particularly online bookings, which are less operationally expensive)

Objective 3: Steal share from low-cost competitors

Targeting: (the ideal Ted customer: Ted Heads)

  • They are 23% of all leisure fliers but they account for 46% of all leisure flights
  • They fly on average 6 times a year for leisure (twice as often as the average leisure flier)
  • 11% of this group are already Mileage Plus members
  • They like to fly to domestic warm weather destinations
  • They over index on online travel purchase
  • Ted Heads Are Upbeat And Friendly
  • They Are Part Of The Community
  • They are spontaneous and adventurous
  • But...in Denver, they were not that excited about United

Tactics

Guerilla Marketing

  • Low profile guerilla tactics kicked off the teaser--free pizza from Ted, take a penny from Ted
  • Higher profile events once grassroots effort gained momentum--Ted Marching Band, street teams, classified ads, website with interactive music and Ted information (not the airline)
  • The 'tipping point'--Ted brand name cut into a farmer's field
  • Over $5.8 million worth of press impressions before story finally broke

Once the story broke:

  • Billboards, out-of-home
  • Simple print ads to emphasize brand personality
  • Low-cost broadcast commercial for flexibility

Launch in Washington and Chicago:

  • Transportation wraps
  • 'Paint the town Ted' in Chicago with local insights and creativity
  • River advertising on barge
  • Promos and street teams
  • Use technology to target custom neighborhoods via television

Results

In Denver:

  • 20% unaided awareness vs. 3% norm for new products (Millward Brown)
  • 175 million media impressions
  • 2 million hits on Ted teaser site

In all three markets:

  • Over 90% awareness by Q3

In Denver, $5milllion in flights booked online BEFORE Ted began flying.

Load factors in inaugural month at 82%, exceeding expectations by 10 points.

Currently, Ted online bookings at a strong 22% of total revenues (vs. 11% United)

Elites flying is up vs. year ago in total and at all Hubs (Dulles is up 32%).

Strong net share gains in all 3 hubs:

  • Denver: UA +16%; Frontier -14% (competitors pulled DEN-ONT and DEN-FLL)
  • Dulles: UA +11%; AA -2%; (Spirit pulled Dulles-LAS)
  • Chicago: UA +31%

Other Key Business Metrics

Financial:

  • Strong financial contribution to the company
  • Strong increase in YOY margin

Customer:

  • Strong customer satisfaction levels (repurchase intent higher than Mainline A320's)
  • Elite traffic is up 13%; Elite revenue exceeds avg. fare decline
  • In Chicago, 1K acceptance is strong, as well as in Denver and Dulles
  • Survey research showed 82% of customers said they would choose Ted again and over two-thirds thought Ted was a good value for money

Operations:

  • Exceeding all operational goals and higher than Mainline A320's

Question and Answer

Q. What was learned from an efficiency and productivity standpoint?

A. This case study details that over analysis could have led to being too conservative with launch. A clear agency brief, a defined partnership with the agency and gut feelings paved the way. Always focus on key customer benefits and what is important to them.

Q. What success learnings did you gain as client/agency partners?

A.

  • Short time frame served as stimulus for creativity
  • Scrappy resourcefulness was needed in the mix of creative development
  • Clear objectives from the client were key
  • Open communication and true working partnership
  • Smaller decision-making structure. There were no layers to work through and this empowered all team members on both sides
  • Ability to figure out how to leverage PR into the marketing mix. Internal PR team was at the table from the onset. PR agency was brought on once Ted as an airline announcement was made
  • Balancing intuition and database analytics (working both ends of the spectrum in unison)

Q. What lessons were learned working with a $12M budget?

A. A focused strategy in one given market. Used media right strategies to achieve $5.8 million in press impressions and truly leverage PR in the marketing mix. 'Discovery marketing' vs. 'blanket marketing.'

Q. If budget was higher, would anything have been done differently?

A. Not necessarily. A slim marketing organization made a lot of the tactics easier to implement.

Source

"Limited Budget and Creative Thinking: United Airline's Launch of Ted." Rob White, President, Fallon Minneapolis; Tim Simonds, Director, Brand Strategy and Research, United Airlines. ANA Advertising Financial Management Committee Meeting, 09/14/05.