Co-brand cards: which are most rewarding?



In American Airlines' latest financial update the carrier disclosed that 66% of its total frequent Flier miles were sold to partners, such as the bank issuing its co-branded credit card. That's a whopping 125 billion miles! This demonstrates the power of co-brand and the importance airlines' place on this revenue source. However, at least in North America (because the trend hasn’t totally caught on everywhere), the banks have responded to the lure of travel as an incentive; the banks have established their own travel reward cards.

So, which cards are most rewarding?  Are consumers better off with an airline co-brand card or a bank travel reward offer?  My recent research “Card Carrying Generosity” came up with some intriguing surprises. I’ll be sharing the results of this research as part of my talk at the FFP Spring Event in Washington DC in April. Quantifying value in the loyalty business is never an easy task, but the report indicates banks have gained an advantage. The lesson I will offer during my presentation is this - - airlines be aware, because your competition is wide awake.

I’m also delighted to be able to share that Airline Information has made the Kids First Fund their supported charity for 2013.  The fund works to help abused children in resource-poor areas of the world. Kids First Fund is supported by generous donations from airlines, hotel and car rental companies which provide prizes for our charity auction. If you’d like to know more about the charity, or to make a donation for the charity auction, please click: www.KidsFirstAuction.com

In the meantime, if you want to know more about the "Card Carrying Generosity" report you can visit: www.ideaworkscompany.com.  Click on the recent report link.  I’ll also be at the FFP Spring and the Freddies Award Ceremony if you want to come and know more about this research or the charity.

Guest Editorial by:
Jay Sorensen
, President, IdeaWorksCompany
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Guest Editorial: Dual Co-Brands, Driving Loyalty Revenues



Guest editorial from The Mallett Group

Is your loyalty program leaving revenue on the table? Over the past few years Dual (Jewel/UK lingo) card offerings have begun to be reluctantly embraced by the merchant networks to address acceptance issues. For those of us who have not encountered dual card offerings, they are co-branded credit card products that offer not one, but two network branded cards tied to a single consumer account. Meaning there may be a Diners Club card paired with a MasterCard that is placed into market within a merchant's co-brand card offering.

Why:
Because the dual network offering allows the issuer to garner all spend due to acceptance restrictions in certain markets. For example, American Express has more limited merchant acceptance in the UK market, so a companion Visa is offered to capture spend that otherwise would be relegated to other card products in wallet. Meaning it is better to have partial share than no share at all. Counter intuitive upon first blush, but potentially sound as one never wants to be late to the party.

Where:
We have seen these offerings in the UK – with the likes of Virgin Atlantic, as well as with airlines in Spain and India. And, watch this space as there are more to come!

Challenges:

  • Ego: When was the last time die hard competitors played together and were happy?
  • Commercial:  Complex negotiations to produce a consumer value proposition (CVP) that is acceptable to both networks
  • ROI: Projections of spend that relate to back-end compensation to the network, issuer and ultimately the brand sponsor
  • Marketing: Messaging correctly to acquire and retain.  Customer confusion can be a concern
  • Earn:  Internal network requirements place restrictions on enhanced and devalued mileage/point earn ratios
  • Benefits:  What card benefits get attached to what network offering
  • Negotiations:  How to please some of the people some of the time
  • Contracts:  How agreements are structured and how the money flows including VAT in some markets

Outcome:
The Dual Card offering can be a powerful measure to employ in a less than ideal market situation. However, one needs to navigate the obstacles in a sophisticated manner.  It takes more than the average plug and play solution, but in the end it can provide a robust product to consumers and reward the brand with enhanced commercials.

To learn more about loyalty co-brands and dual cards in particular, please contact Marc Berman, President, The Mallett Group by emailing him at This email address is being protected from spambots. You need JavaScript enabled to view it.. Marc will also be chairing the Co-Brand 2015 Conference in Chicago on 27 & 28 May 2015 and the Travel Co-Brand Partnerships Conference at Mega Event in San Diego on 4 & 5 November 2015 in San Diego
 

Follow Ai on Twitter: @Ai_Connects_Us and Checkout our Events at: www.AiConnects.us

Innovation & Travel Co-branded cards

Co-branded credit cards are rapidly evolving.  Pressure from regulators on “interchange” fees is putting pressure on the credit card networks to reduce the fees they charge, which is beneficial for merchants, but not for those trying to offer large rewards for airline & travel co-branded cards. British Airways recently offered 100,000 Avios Points to consumers for opening its U.S. card, where interchange fees are higher, but the richest we have seen in the UK market place is 35,000 points, as interchange fees are generally lower in Europe. 

There is also pressure on co-branded cards from cash-strapped consumers who are turning increasingly to pre-paid cards.  Growth in pre-paids is also being driven by innovation, an example of which is the One Smart Card from Air New Zealand. The Kiwi airline put 1 million prepaid cards in to the hands of customers as a joint pre-paid/Frequent Flyer card that allows consumers to load money in various currencies onto their Frequent Flyer card, reducing or eliminating the foreign exchange fees charged by many cards to consumers when they make purchases abroad.  

These developments and many others will be discussed at the Co-brand Partnerships EMEA Conference in London on 23/24th of October 2012.

The Co-Brand Partnerships EMEA Conference is the event to find out what is happening in the airline & travel co-branded credit card space in Europe, Middle East and Africa.  As good information and up-to-date market insight is essential for innovation and decision-making, we are delighted that The Nilson Report is our media partner for this event.  The Nilson Report is the essential place to go for a comprehensive view of everything in the co-brand and consumer payments market with statistics not available elsewhere. 

Please visit the Nilson Report website to receive a sample of the service and see for yourself.  I am sure you’ll agree it is an excellent resource.

We look forward to seeing you in London next week.

Michael Smith, Managing Partner, Airline Information

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