Friday, July 25, 2014

My PSA for the TSA

By Kirsten Snyder - Director, Integrated Insight

After much prodding (and harassment) from my husband, I finally decided to apply for TSA Precheck.  Because I don’t frequently travel internationally, I didn’t think Global Entry was necessary.  However, after reviewing the application process and prices for both Global Entry and TSA Pre-check, the government got me to buy up.

Let’s start with what you get with each program.  TSA Precheck gives expedited security processing via a special line, where you don’t have to remove your laptop, take off your shoes, or any of the other annoying security measures normally required by the TSA.  Global Entry gives you the same benefits as TSA Precheck in addition to expedited and automated entry through customs and immigration.  And once you are approved, the program eligibility lasts for five years for both, after which time you have to go through the application process and pay the fee again.

Because Global Entry has been around for awhile, the introduction of TSA Precheck created a quite an attractive upsell structure, albeit accidental.  At just $85 for TSA Precheck, there is significant benefit for anyone who travels with even mild frequency.  And because they maintained the $100 price, now a mere $15 more you can get you Global Entry.  With most of my flying within the US, receiving expedited security access was of primary interest.  However, for $15 and a five year window to travel internationally, upgrading to Global Entry seemed like a no-brainer, even if I only traveled internationally once.

With one main objective of these programs being to reduce staffing requirements at airports, the strong value of the current pricing should attract frequent fliers in droves.  However, it seems that there is probably opportunity for the government to increase the prices while still continuing to attract new fliers to the program, in particular for Global Entry.  When you compare it to Clear, which costs $179 annually and arguably gives you fewer benefits, it can only be a matter of time before the government realizes the program is underpriced.  How does this apply to your company?  Strong product stratification can provide significant pricing leverage, creating upsell opportunities and generating incremental income.  A 1% increase in price realization can drive 5% to 10% plus increases on the bottom line.