Milepoint.com adds a monetary twist to frequent-flier programs.
Feel like you’ll see the next millennium before your frequent-flier miles start paying off? Launched Oct. 30, Internet startup MilePoint.com, Minneapolis, enables frequent fliers to convert their miles into a new online currency called MilePointMoney, which can be used toward the purchase of hard goods and services. Begin redeeming now.
While the “dot-com” label appears to be the kiss of death these days, MilePoint.com has an advantage in that its deep-pocketed marketing partners are also its investors: Airlines and hotels themselves believe enough in the model to lay their own money on the line. Delta, Northwest, Continental, US Airways, TWA, America West, and Hilton Hotels are funding the venture, as well as offering MilePoint.com to their customers, which combined total more than 45 million unique individuals.
Other Internet players such as Salt Lake City-based WebMiles offer travelers the chance to cash in on their miles before the typical 25,000 minimum mark, but only for additional travel services. “The world doesn’t need another way to earn airline points, it needs a way to use them,” says MilePoint ceo and co-founder Mark Lacek, who previously worked at Northwest Airlines on the WorldPerks program and headed up The Lacek Group, a Minneapolis-based loyalty marketing firm.
Frequent fliers register their accounts with MilePoint, which tracks miles across multiple programs and converts them into MilePoint Money at a rate of two cents per mile. For example, a flyer with 100,000 miles in his frequent flyer account receives the equivalent of $2,000 in MilePoint currency, which can then be redeemed at more than 100 participating retailers including Amazon.com and SkyMall; the latter outfit is building a network specifically for MilePoint customers that will provide access to more than 100 retailers including The Sharper Image, Orvis, The Wine Enthusiast, and Hammacher Schlemmer. “We’re a partner offering our back-end technology rather than just sitting inside the MilePoint service,” says Tom Edwards, president of SkyMall Ventures. “It’s attractive for retailers because they’re getting more eyeballs, and it opens the door for purchases to be made that don’t have anything to do with MilePoint.com.”
Frequent fliers represent an attractive audience for merchants. “It can really provide the cream of the crop,” says Edwards. “The average household income is over $70,000, with many fliers earning more than $135,000.”
Airlines apparently aren’t about to turn down a service that could make their frequent-flier programs even more appealing. “We’re always looking for anything that provides more utility, and as we get into purchasing with e-commerce, MilePoint presents an interesting business model,” says Russ Hinckley, managing director of WorldPerks Marketing at Northwest Airlines, Eagen, MN. “We haven’t done much in the way of alternate promotions before.” Northwest will inform its customers about Milepoint through mileage statements and other mailings.
Payment In Full The viral marketing aspect of the program is convincing retailers to come aboard. “Merchants have agreed to forgo the cost of merchandise for the expense they would have otherwise applied to recruiting these new customers,” says Lacek. “Depending on the merchant, 10 percent to 100 percent of the purchase can be covered by MilePoint Money.”
MilePoint earns a “nominal” fee (which Lacek wouldn’t disclose) for providing its service for hotels and airlines, and a sales commission from merchants that runs between three percent and eight percent of sales. The company is currently in discussions with 180 additional merchants about joining the network. By the holidays, Lacek expects MilePoint to provide service for more than 50 million consumers recruited through its airline and hotel partners.
Marketing will be handled primarily by the airlines and hotels themselves through in-flight magazine and newsletter advertising, as well as in frequent-flier statements. Lacek says MilePoint is considering developing its own sweepstakes and contests as additional support, but has no firm plans at this stage.
The skies get friendlier all the time.
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