US Bank FlexPerks Thrives On Data

Oct 17, 2011

The ATPS/Cobrand conference held last week in Toronto offered both new and old to anyone in attendance. The old was delivered in the form of history as Steven Grosvald, the virtual Godfather of frequent flyer programs, shared tales of how he and his colleagues guided the introduction of AAdvantage circa 1980. The core concepts of linking customer profile and travel data to the reservations systems at the airline are table stakes today, but Mr. Grosvald and his friends made these connections for the first time wondering “if it would work”.

The new came in an incredibly refreshing talk by Bob Daly, SVP Retail Payment Solutions at US Bank. Over the past year or so, Mr. Daly has been telling the story of how US Bank migrated the Northwest Airlines WorldPerks cobrand credit card portfolio to a new travel rewards program, FlexPerks. Last week’s talk shared how the bank was intelligently using data analysis to improve cardholder engagement and improve profitability.

The migration to FlexPerks is a victorious tale as US Bank was able to preserve the majority of cardholders in its portfolio following the acquisition of Northwest by Delta and the ensuing move of the frequent flyer base to Delta’s card issuer. Part of the initial success of that move was due to learning extracted through analysis of customer transaction history.

Daly shared that 90% of all tickets purchased were under $400, therefore the lowest threshold for free flight redemption was set to 20,000 miles up to values of $400. Customer satisfaction was baked in to this calculation as US Bank knew what it would take for most people to earn a reward and judge the exchange to be of fair value.

US Bank was not afraid to encourage redemption as the data told that cardholders who redeemed for awards had 29% higher spending levels on their card and 15% less attrition. This is a great lesson in why many in our industry are focusing on engagement rather than hoping for breakage. Data segmentation guided other cardholder offers and led to the ability to exchange miles to pay for the card annual fee.

FlexPerks offers double points on gas, grocery, and airline purchases, giving it a value proposition where travelers can earn free flights quickly. Being in tune with the marketplace and thinking of customer experience didn’t hurt either. US Bank observed the “unbundling” of air travel and knew that travelers were weary of paying baggage check and seat upgrade fees. With that in mind, the bank included a $20 allowance with every redemption for flights in order to make the customer experience with FlexPerks and the ensuing flight more pleasing.

Results have been good all around. New card activation was targeted for 70%, and the bank reached rates in excess of 85%. Responding to this success, the bank has expanded the initial card product with the FlexPerks value proposition into a 12 product suite, making it one of the most successful in the US Bank portfolio, and a great example of how data can be put to use to drive strategy and business results.