Cleartrip & Axis Bank's Collaborative Strategy: Game-Changer or a Gamble?

Authored by Mohit Khadaria Co-founder, Sprect

A Genius Marketing Tactic or A Giant Mistake

Get this! I happen to cancel a ticket the other day and actually got back more than I spent. And no, it wasn’t a technical fault.

It has always intrigued me, who foots the bill for credit card offers. Are the margins for credit card companies really that high, that they can absorb it all in the name of business? Do the offer providers bear some of the brunt from their marketing expenses?

Travel portals these days tie up with multiple banks to offer weekly credit card discounts on flight, hotel and package bookings. So much so, that if you aren’t saving 15% on advertised rates, in my view, you are losing money. Nothing against those willing to pay 10% above the online rates, on average, when booking via travel agents as long as they do it for the convenience and personal service. Who am I to question how much you value that service versus going at it yourself.

Easemytrip raised itself to number 2 in the Indian travel market by something as simple as eliminating convenience fees. Turns out, that Rs. 300 discount, mattered quite a bit to the price sensitive Indian community. Speaking to this audience, who I believe has further graduated from mere convenience fee discount to using every credit card in their arsenal to achieve 15% discount on all their bookings over the years, here’s something interesting.

Typically on a flight booking - seats, meals and free cancellation can cost upwards of 1,000 to 1,500 rupees. A joint marketing offer by Axis Bank and Cleartrip reduced this price to just Re. 1.

Free Cancellation for Re. 1? Sounds too good to be true. However, this meant one could no longer take advantage of any credit card discounts and would have to book the ticket at the displayed fare as well as foot the additional convenience fee. In this day and age of excessive credit card discounts and usage, having customers pay displayed fare, in my mind, is nothing short of Genius.

It does, however, like all things too good to be true, come with an equally giant risk of insuring all booking cancellations. Who is paying the airline cancellation fee?

The airline itself? I don’t think so. Since the offer is applicable to all airlines, why would they forgo a key revenue stream when the user has no idea they are even part of the offer?

Axis Bank? Perhaps. But would they shell out Rs. 3,500 per ticket cancelled (up to 1 a week per card) to offer this as a feature to their card holders?

Cleartrip? I believe so. I believe for every ticket booked at displayed fare, they are insuring the ones that get cancelled, having earned 15% extra than what they would have if the customer had availed of a card discount.

Now for the anecdotal fringe case that left me with a net gain on cancellation:

General Offers

• Book a ticket on an Online Travel Agent
• Pick the Lowest Fare
• Apply Credit Card offer to get an additional 15% discount on fare
• Convenience fee added

Cleartrip Axis Collaboration

• Book a ticket on Cleartrip
• Select FlexiMax to add discounted seats, meals and cancellation insurance
• Select Axis offer to discount FlexiMax charges to Re. 1
• Convenience fee also waived

Now,

You have purchased (Work trip) flight ticket on Cleartrip for Rs. 5,000.

You have provided your company GST details.

You have used Axis Bank offer to buy FlexiMax for Re. 1.

If you happen to cancel your flight, Cleartrip refunds you Rs. 5,000. Cleartrip bears the airline cancellation charges of Rs. 3,500. (Inclusive of GST)

Airline offers your company GST credit of approximately Rs. 250 on the cancellation charges. You are left with (net positive gain) Rs. 5,250.

The cancellation charges that you supposedly paid to the airline were refunded to you by Cleartrip in the form of a discount for using FlexiMax. Credit card companies and Online Travel Agents are facing such stiff competition that in their zeal to offer aggressive benefits, they might have offered a net positive gain to someone who ends up cancelling their booking!

Mind you, it was a win-win for everyone.

• Axis Bank absorbed the FlexiMax insurance fee (instead of 15% upfront discount for their card holders).
• Cleartrip gained additional upfront insurance pay and non discounted base fare from anyone booking this ticket. Considering a small percentage end up cancelling, they can cover the cancellation charges from the additional revenue received from other customers.
• Customers with genuine need to cancel received a full refun

So, I ask again, Genius Marketing Tactic or Giant Mistake?

To connect with the author 1:1 reach out on https://sprect.com/pro/mohit