PARTNER CHANNEL: Death of Travel Cards Greatly Exaggerated

Posted: 07/2002

Death of Travel Cards Greatly Exaggerated

By Tara Seals

When an agent thinks "postpaid calling cards," the words "dead revenue stream" may follow swiftly. But calling cards still have niche markets with strong vital signs and include the high-margin items as an adjunct to a 1+ sale makes for easy additional commission.

Postpaid calling cards add itemized calls made away from home to users' regular phone bills. The cards generally have fewer fees than prepaid long-distance calling, but the rates are higher. The products target business users that need them for accounting purposes, parents who want to know whom their away-from-home children are calling and travelers who find their cell phones unusable overseas and hotel surcharges outrageously steep. Co-branded cards offer frequent flyer miles or hotel discounts. Plus, there's an ease-of-use element: It's a benefit for the on-the-go business user that memorized one access number to keep it for years to come.

The best target market demographic for postpaid cards is the international traveler, says Ted Schuman, president of master agency U.S. Telebrokers Inc. "A postpaid calling card is a necessity for the global traveler who doesn't want to pay those exorbitant hotel rates," he explains. "Cell phones don't work overseas."

Cognigen Inc., for example, offers the "CogniCall" product, with global origination from more than 50 countries. Rates range from 6.8 cents per minute from the United Kingdom to 11.5 cents per minute from Japan. There are no monthly or per-call minimum charges; it offers online signup, Web call details and automatic six-second billing after a one-minute minimum.

RoadTel Communications Inc.'s international calling card works from more than 30 countries worldwide. It is billed monthly, in full-minute increments, and the regular cost of domestic interstate service is 8.5 cents per minute. There is no per-call surcharge with the exception of payphone calls, but there is a one-time $2.99 activation fee, along with a $1.99 monthly fee.

On the domestic front, postpaid cards offer a number of amenities not found in other communications options, according to Stacey Acampora, director of marketing at master agency Global Systems Telecom Inc. "The credit limit can be varied by card, so it's great for kids, and all activity shows up on an itemized bill so companies can see salespeople's performance while on the road and can track down fraud," she explains. "Enhanced features like voicemail, speed dialing, weather reports, sports and other entertainment options increase their appeal."

It's also a cost-containment tool, she says. "Rather than have your sales force call back to the office on an 800 number, they can use the card. And you can cut them off at will." Domestic provider LINQ Telecom Inc. offers its AccuLinQ calling cards in two flavors: the 4.9 cent per minute flat-rate card for domestic calls via local access numbers, and the 8.9 cents per minute flat-rate card for domestic calls via a toll-free number. Both cards can be used overseas from 24 countries, but the appeal is the cards offer six-second billing, no per-call surcharges except from payphones and call detail and account management via the Web.

The QuickLinq feature lets users call an 800 number from a pre-designated phone number to bypass having to enter a PIN number. The feature is meant to compete with 10-10 dial-around options, and offers a rate of 7.9 cents per minute for domestic interstate and intrastate calls.

Many agents sell the cards as a value-add to a long-distance deal. For instance, Schuman says for his company it's a second or third-level sale. "We sign an LD deal and say, so how many calling cards do you need? They always want a few for the executives."

Cybertel Communications Corp. expects to bring in at least $15 million in revenue during the next 30 months with a custom-branded affinity communications program for calling cards, long-distance service and Internet access for Nature's Sunshine Products Independent Distributor Association (NSPIDA), which will market Cybertel services to its 300,000 members and more than 7,000,000 customers throughout the United States.

Members and customers of Nature's Sunshine Products can sign up for services via the telephone, the Web, or mail or fax. NSPIDA will promote its custom-branded program with an aggressive marketing strategy, including advertisements in its newsletter sent to more than 300,000 members within the United States; regular mailers; links on the Website, promotions and package inserts at regional and national meetings and a custom website to promote services.

Despite these opportunities, the market isn't exactly exploding. Research firm Atlantic-ACM covered the postpaid calling card market in annual reports from 1993 to 1999, but it discontinued sizing the opportunity once it became apparent that "we were saying the same thing over and over," explains Imke Louis Mensah, senior product manager of prepaid calling cards at Atlantic-ACM. "There's not a lot that changes in that market."

She still follows the postpaid calling card world on a more informal level. Her last growth projections, in 2000, estimated a fairly flat growth rate of 3 percent. She says she would now scale that prediction back to a 1 percent growth rate for the foreseeable future.

One downside: travel use can be sporadic. "They are high-margin and we make money on them, but there may be a lot of activity one month then nothing for six months, so you can't count on it," Schuman says.

Also, other service segments, such as prepaid and wireless, have cannibalized the customer base somewhat, says Mensah. "Postpaid cards are for the mainstream user, but prepaid calling cards are moving in as they gain more acceptance," she says. "Prepaid cards can be found at Kmart, Target, mainstream stores now. And cell phones cut into the [postpaid calling card] market domestically."