Benefits of co_branded Credit Cards

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Edition 4: March - May 2006

Discovering the benefits of a Co-branded Credit Card

By Aytun Demiral, Marketing & Sales Manager, HITIT Computer Services

Introducing alternative ways of earning and spending frequent flyer program currency is an excellent way to increase customer retention and incremental revenue. The co-branded credit card is a key component of modern airline loyalty strategy and serves to exploit the promotional and analytical capabilities of today’s IT systems.

Co-branded cards are beneficial for all parties involved. Credit card companies gain customers with a great potential to spend and airlines make money for each mile earned by customers. Most importantly customers gain mileage for every dollar they spend. It is a win-win-win situation.

If used properly, a co-branded credit card, in relation with your FFP, can be used as a profit-making tool. Some banks may also offer value added features such as travel insurance. Deciding to have a co-branded card is the first decision, however, you should already have a good idea what your target market segments will be and their value-proposition.

A co-branded card will be attractive to your high-frequency and low-frequency customers for different reasons. Understanding the needs and trends among your customer profiles will allow you to formulate an effective co-branded credit card acquisition strategy. This will also be the basis to have your credit card contribute to the overall profitability of your FFP operation. Today, some airlines are able to make use of this practice while some are only beginning to become aware of it.

Deciding to opt for a co-branded card is the first decision. The second decision is whether you want to partner with a credit card company or with one specific bank in particular. To obtain the best possible agreement with a credit card issuer, determining the exact monetary value that you will be paid for each mile is extremely important. The valuation of your currency must be attractive for the Frequent Flyer Members, while at the same time ensuring that both your airline and the credit card company gain. You do have the leverage to choose from among the many different credit card companies and banks competing in your local market to achieve the most favourable deal. Work towards attracting the different credit card issuers to work with you. Use your power!

Liability is always important! To reduce your mileage liability, you may consider introducing a different mileage credit and a different mileage expiry rule for the miles earned through credit card spending.

Finally, to successfully operate a loyalty program with a co-branded credit card, you need a flexible Frequent Flyer Software System that is functionally capable of making market segmentation, flexible marketing rules and the method to measure success. Having a Manager with an analytical mind and airline experience will then guarantee the success of your co-branded card.

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