How successful are affinity programs -- those deals where you get free airline miles or auto rentals when you use certain products?

"Very," says Michael Taliaferro of Countrywide Home Loans, the big national lender which typically funds in excess of $125 million in mortgages a month through relationships with companies in the travel industry.

Under its affiliations with United and American Airlines, the nation's largest independent mortgage banker gives borrowers frequent flyer mileage in either United's Mileage Plus or American's American Advantage programs.

Borrowers taking out a first mortgage receive 100 miles for every $1,000 borrowed. So someone with a $250,000 loan would receive 25,000 miles in the program of their choice. (Owners taking out a home equity loan receive a flat 25,000 mile reward, no matter how much they borrow.)

Taliaferro would not reveal what Countrywide pays the airlines for each mile it gives away, saying only that it is "less" than the over-the-counter rate of two cents per mile. But even at that rate, the cost for a $250,000 loan is only $500.

That's one top of all its other marketing costs, but it's still more cost-effective than most of the big lender's other marketing promotions. And it's also a small price to pay for the kind of business it brings in, says the Dallas-based Taliaferro, who is executive vice president of the Countrywide's consumer markets division.

Members of these frequent flyer programs are "fiercely loyal," he explains. "So they are inclined to check us out. And all things being equal, they covet those miles, so they usually go with us."

Business travelers tend to have higher income levels than the average Countrywide customer, resulting in average loan balances that are 30 percent to 35 percent higher than the company's national average loan amounts for other marketing campaigns.

"That tells you a lot about the profile of the average (frequent flyer) member," Taliaferro says. "We've done loans of more than $1 million where miles have been given away."

Typically, United members borrow a little more than American's, but that's probably attributable to the fact that United has more hubs in more expensive markets than it's rival.

Countrywide also has a similar relationship with Hilton Hotels, giving borrowers 100 Hilton Honors points for every $1,000 borrowed. But it's not as popular as the frequent flyer programs.

Noting that borrowers can't double dip -- they must chose one or the other, hotel points or airline miles -- Mr. Taliaferro says the airlines are the bigger draw.

"We've also done a lot of hotel points, but it pails in comparison with the airline programs," he says. "They are among the strongest affinities around. People are really rabid about frequent flyer miles."

For more articles by Lew Sichelman, please press here.

Published: January 31, 2001

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