Edition 6: September - November 2006
Credit Cards – Maximising the Value from Partnership Airlines have been partnering with card companies for over 15 years. Virtually every Frequent Flyer Programme (FFP) has at least one partnership with a card company and it has been a relationship that has seen great benefits for all. For the FFP, Card partnerships generally represent the strongest mileage revenue. The Card company can forge relationships with the airline’s source of customer base and capitalise on the attraction of the airline’s frequent flyer programme to increase spending on the card. Customers get the bonus of accelerated earning for their usage of both the airline and the card. It is a win for all parties. But after 15 years, are FFP’s maximising the value that can be derived from these partnerships? At American Express, we are always looking for opportunities to enhance the value we deliver to our FFP partners and cardmembers, whether through Membership Rewards or customised co-branded card programmes. In this article, I have summarised some of the key success factors and opportunities to develop card partnerships further. In virtually every market, card competition is intense. Consumers have a considerable choice of cards available and this matched with greater access to information has allowed them to make better informed decisions. For a customer to choose an airline card, they need to be attracted by a relevant card proposition that delivers against clear needs. These needs can vary within the FFP customer base and marketers must therefore segment their customers: some customers are driven purely by the reward of free flights, while others can be more motivated by airline recognition benefits. Customers who carry an airline card are more likely to enhance their engagement with the airline as they consolidate their flight activity with their card spend. The stronger and more relevant the card proposition, the better the customer appeal and engagement. Card acquisition from within the FFP member base, as well as targeted joint acquisition of new members, generates significant and ongoing revenue streams for both the FFP (point payments) and the airline (seat sales). Opportunity exists for the FFPs to work more closely with their airline sales colleagues to recognise the combined contribution of these revenues to support investment in the card proposition and maximise card penetration of the FFP base. However, with the cost of fares continuing to fall on certain routes and seat availability an increasing concern, there is pressure on the value of some FFP redemptions. Recognising this trend, card companies have recently begun to work with travel agents to offer flight rewards via ticket purchase, in addition to existing FFPs options. These trends have also led to FFP’s adapting their programs to offer improved availability or ‘cash back’ on any flight purchase. Although these changes reflect the need to deliver value for customers, they should also be viewed as an expanded opportunity to build loyalty to the airline. There are two other areas where card partnerships are underleveraged. Firstly, the opportunity for better integration of other FFP partners, like hotel and car rental companies. The successful integration of such companies can help create a stronger card proposition for the customer. Secondly, the card base represents a prime channel for airline communication and promotions. These customers are more likely to take up targeted offers as they represent a highly engaged subset of the FFP base. Time has proved that the partnership between airlines and card companies has been lucrative for both groups. We need to build on the successes to date but adapt to changes in both market conditions and customer demands. The customer is becoming savvier and, correspondingly, card and reward propositions need to evolve to continue delivering relevant value. By meeting these needs, FFP’s and card companies can attract their target customers, and help improve engagement, resulting in better revenue generation and ultimately greater customer loyalty. American Express is proud to co-host the 2007 FFP Conference and I will have the pleasure of opening the conference part focused on partnerships. In my presentation, I will expand on some of the opportunities discussed above to jointly maximise the value from cards partnerships. We look forward to seeing you all in Vancouver in February. * * *
Read similar FFP Online articles on Credit Card Programs: Discovering the Benefits of a co-Branded Credit Card
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