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."