American Express Blue Brand Analysis
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American Express Blue
Lewis, Li, McMullen, Roth, Yung
American Express Blue Card A Brand Analysis
Professor Ki-Young Lee Principles of Advertising 20062 Group 5 – Lewis, Li, McMullen, Roth, Yung
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Company Analysis History Henry Wells, William Fargo, and John Butterfield, founded American Express in Buffalo, NY as an express business in 1850 (wikipedia.com). Originally the company began as a competitor against the U.S. Postal Office beginning with money orders, but today they offer a wide variety of options (answers.com). The company launched their Traveler Cheque in 1891 as a solution for the customary letter of credit, and finally their first credit card in 1958. The company is now competing with three major services, including travel, financial advice and international banking.
Philosophy Current American Express CEO Kenneth Chenault states, ―Adaptability is one of the keys to company success in the rapidly changing terrain of the global marketplace‖ (knowledge.wharton.upenn.edu). According to americanexpress.com, the company‘s basic philosophy and mission is ―…to be the world‘s most respected service brand.‖ American Express began as a company who believed in serving the people and making life simpler and have continued to do so, still believing in serving their customers with ―commitment, quality, and integrity‖ (manonamission.blogspot.com).
Sales & Advertising Expenditures Although American Express believes they‘re a high quality credit card company, their advertising tactics have previously done little to improve that image. In an attempt to increase their market share in 1992, the company changed endorsers from Ogilvy & Mather to Chiat/Day/Mojo. The change wrought debate between cardholders and American Express due to the reported cost of $60 million for the new ad campaign.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
While American Express was spending money in order increase market share, current stakeholders felt the company should have lowered discount rates (Giesen). As a result of the 1992 advertisement disaster, American Express‘ brand goal was to ―support all American Express cards,‖ according to newswire.ca. In the past ten years, American Express‘ has moved away from the controversial advertisement that promoted excessive spending, to celebrity endorsed ads that promote the catch phrase, ―My Life. My Card. American Express‖ (Giesen). As a result, the company‘s market value shot up to $70 million dollars as of February 2007 according to finapps.forbes.com.
Market Analysis Overview The U.S. credit card market is the most developed in the world, with consumers spending more on credit and holding more cards in their wallet than those of any other country. In terms of value, the U.S. counts for 53.1% of the global retail lending market (U.S. – Retail Lending). The chart below shows the market share for the most prevalent regions.
United States Retail Lending Market Segmentation (Year: 2004)
Geography U.S. Europe Asia-Pacific Rest of the World
Percentage 0.531 0.299 0.151 0.019
Currently, bank credit cards account for roughly 18% of personal consumption expenditures made by U.S. consumers (Personal Credit Institutions). Retail credit cards
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
and debit cards account for another 6%. According to CardWeb.com Inc., debit and credit cards account for roughly 30% of all U.S. spending.
Market Size The U.S. retail lending market had a total outstanding credit balance of $10,847.7 billion in 2004, representing a compound annual growth rate of 10.5% for the five-year period spanning 2000-2004 (U.S. – Retail Lending). In comparison, the global market experienced a growth rate of 8.6% during the same period. The consumer credit sector was valued at $2151.4 billion and held 19.8% of the market share in 2004, as shown in the chart below.
United States Retail Lending Market Segmentation (Year: 2004)
Category Mortgage Consumer Credit
Percentage 0.802 0.198
In the mid 2000s, the average American consumer was estimated to have 11 credit obligations on record with a credit bureau (Personal Credit Institutions). Of these, 7 are credit cards. The U.S. lending market experienced increasingly high growth rates in the past five years, with a high of 10.9% in 2004 (U.S. – Retail Lending).
Growth The U.S. lending market is forecast to grow at a lower rate than in previous years, with an anticipated compound annual growth rate of 6.2% for 2004-2009 (U.S. – Retail Lending). This is expected to drive the market‘s outstanding balance to $14,634.6. The chart on the following page shows the expected growth rate for the entire global market.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
United States Retail Lending Market Value (Units = USD)
Year 2000 2001 2002 2003 2004 Compound annual growth rate
Value 7270300000000 7960800000000 8761000000000 9717400000000 10847700000000 2000-2004
Growth 0.095 0.101 0.109 0.116 0.105 0.105
Growth within the U.S. market can be attributed to the country‘s increasing Internet culture, which has caused a significant increase in the number of customers using Internet and telephone banking (U.S. – Retail Lending). The increasing popularity of credit cards has also played a part in the market‘s growth.
Trends Credit companies have become more and more instrumental in educating consumers in the management of personal finance, particularly in advising against over-borrowing and improper management of finances (Personal Credit Institutions). American consumers along the East Coast states have also been taking advantage of access to free credit reports as well (U.S. – Retail Lending). This trend has resulted in better-informed consumers who borrow with more ease and confidence. There‘s also a growing trend among consumers to tap into funds using home equity credit as well as debit cards, which provide the ease of use of credit cards without carrying a balance.
Competition Visa currently operates as the leading consumer payment brand in the world, ahead of both MasterCard and American Express. Most of the difference in market share is attributed to aggressive co-branding programs taken on by individual companies.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Uncontrollable environmental factors also have the potential to affect the retail lending market, such as in 2005 when Hurricane Katrina devastated the assets and livelihoods of the U.S. market‘s consumers. In response, companies were forced to offer relief strategies to affected borrowers, including a reduction or suspension of mortgage repayments and changes to the terms of clients‘ mortgages (U.S. – Retail Lending).
Consumer Analysis Market Segmentation American Express offers a line of credit to any U.S. citizen who is making $10,000 a year or more. They offer four main different types of cards, those being Gold, Platinum, Green and Blue. Each card offers different plans and benefits and each card can also be further segmented to fit a customers exact needs. The Green Card is American Express‘ most basic line of credit. With the Green Card, American Express‘ Membership Rewards program can also be used to earn points to be redeemed while shopping, traveling or towards entertainment. The American Express Gold Card is a card more specifically targeted towards individuals who travel and attend entertainment events often. With this card the Membership Rewards is highly emphasized with points redeemable for ―tickets to exciting theater, concerts, sporting events, and family entertainment events‖. With American Express‘ Platinum Cards you can ―get room upgrades, complimentary breakfast, late checkout, and special amenities around the world with the Fine Hotels & Resorts program‖. This card is designed especially for world travelers, who don‘t just like to travel but who like to travel comfortably and no doubt have the means to do so. The Blue Card offered by American Express is the next
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
step up from the Green Card for those interested in being able to manage accounts online. This card is emphasized as the card for the individuals of today, offering card management online including balance transfers and bill payments, point rewards with 125 online brand name retailers, double points awarded when travels are booked online using American Express Travel. This card is all about convenience of accessibility through the Internet. In connection with this card another product that American Express can provide for a small extra fee is a protection plan against card theft. Another feature that the Blue Card has that the others do not is Blue Cash, which is an ―unlimited cash back financial tool‖. With this feature users can use their reward points to earn cash back.
Prospective Consumers American Express has highly segmented variations of each card, offering upwards of 30 different variations in all. One of the better-known programs for a more segmented market is American Express‘ Corporate Card program, designed for businesses. The Corporate Card offers ―practical solutions to the expense management challenges facing growing companies‖ and ―options to help you better manage business expenses‖. With different specialized programs designed for small businesses to Fortune 500 companies, American Express truly does tailor every credit line to their customers‘ needs.
Out of all of the different consumers that use this product most are individuals or businesses looking to establish a line of credit with a well-known company that offers its customers many different types of rewards and benefits for utilizing its services. The rewards that American Express offers to its customers offer true benefits to its users, encouraging many people to switch to American Express.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Brand Analysis Current Situation American Express‘ sales as of February 1st, 2007 were at $58.22 Price/Sales Ratio 2.64. Their Shares Outstanding was at 1,204 million, and their Market Capital at $70,096.9 million. American Express has many different cards for many different target markets, with special benefits that vary among each. Most of the attributes include the same perks such as no annual fee, 0% intro APR and Fee-free rewards program.
Target Market American Express Blue is targeted toward students, with fast and simple services. ExpressPay is a way to buy things using the card without having to swipe. This creates convenience as well as promptness—as the company understands that students hate waiting and they want transactions to be quick.
Benefits The fundamentals of the Blue card include guaranteed protection for shoppers and travelers. Some examples include the global assist hotline for customers traveling for more than 100 miles away from home, which provides security and peace with medical, legal, financial or other emergency assistance right besides them. The purchase protection plan allows consumers to shop with confidence where the plan protects eligible purchases made with the card against accidental damages and theft for up to 90 days from the date of purchase. American Express is holding themselves accountable for a lot of heavy issues but users will feel like they are being thanked for choosing American Express.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Competitive Analysis Overview The top bank credit card issuers in the United States are JPMorgan Chase, Citigroup, MBNA, American Express, Bank of America, Discover, Capital One, HSBC, Providian, Morgan Stanley and Wells Fargo (Personal Credit Institutions). These are American Express‘s direct competitors. Debit cards are an indirect competitor to all companies—as they‘ve been found to be more popular than credit cards.
Top Direct Competitors – Brands - Visa Visa is owned by 20,000 member financial institutions, which issue and market their own Visa products and participate in the VisaNet payment system (Personal Credit Institutions). Serving nearly 25,000 member financial institutions worldwide, MasterCard is the #2 payment system in the U.S. The company provides services in more than 210 countries and territories, and its cards are accepted at more than 23 million locations around the globe. MasterCard also operates the Cirrus ATM network.
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Mastercard
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Discover
Discover Financial Services (DFS), a business segment of Morgan Stanley, is best known for issuing Discover-brand credit cards, which are used by some 50 million members at more than 4 million retail and cash outlets.
Top Direct Competitors – Card Issuers - JPMorgan Chase The company broadened their target audience with two new ad campaigns in 2006—a Spanish language television ad for the company, and a feature to their cards designed to bring greater protection to corporate supply chains as businesses aim to remain compliant with international trade and security laws. -
Citigroup The world‘s
pre-eminent financial services company, with some 200 million customer accounts in more than 100 countries (U.S. Retail Lending). It provides consumers, corporations, governments, and institutions with a broad range of financial products and services.
-
Capital One Emerged as one of the America's largest consumer franchises with almost 50 million customer accounts and one of the nation's most recognized brands because of their mission foundation (Capital One services).
Principles of Advertising 20062
Prof. Ki-young Lee
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Morgan Stanley In addition to corporate investment banking services like securities underwriting and mergers and acquisitions advice, the firm offers brokerage and asset management products and services for institutional and individual investors (Morgan Stanley).
Market Share Combined, the top ten bank credit card issuers held over 85 percent share of the U.S. credit card market (Personal Credit Institutions). Total Visa cards in circulation in 2004 exceeded 1 billion worldwide, and annual transaction volume exceeded $1.1 trillion. American Express accounted for 22.3 percent of the $1.58 trillion rung up in credit-card transactions last year, ranking it third after Visa and MasterCard (Sidel and Athevaley).
Distribution & Sales American Express tends to seek any venue where customers of the demographic they‘re seeking will be engaged, while Visa and MasterCard generally target a large audience (Jalili). In the past year, American Express has been generating additional spending by entering into relationships with certain banks, including Citigroup and Bank of America (Sidel and Athevaley). Under those agreements, the banks are issuing cards that are branded with the American Express name and processing the transactions over American Express‘s proprietary network.
Features Visa and MasterCard both have several cardholder perk programs, but almost all of them are offered through the card networks‘ bank and co-brand partners. Rewards have become lavish in recent years, with offerings including cash-back rewards as high as 5% on Discover cards, rewards points toward purchases at Disney theme parks on Chase cards, and oil changes, tire rotation, and tune-ups on Bank of America Cards (Sidel and Athevaley). The American Express Blue cards aim to help maximize cash rebates.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Cardholders can earn 1 percent back at grocery stores, drugstores, and gas stations, and 0.5 percent back on most purchases until they‘ve charged $6,500 (Stern). Then it‘s 5 percent on those everyday categories and 15 percent on everything else, with no cap.
Promotional Expenditures Advertising spending by the leading credit card networks, including Visa, MasterCard, Discover, and American Express, exceeded $800 million in 2001 (Personal Credit Institutions). Marketing dollars spent by individual card issuers, such as banks, totaled roughly $10 billion that year. In promoting its Blue card, American Express launched a contest offering cash prizes up to 50,000 for Java developers to create new uses for the card (Bryant). MasterCard has set aside part of a $50 million fund to invest in high-tech companies that develop new uses for its smart cards. It has also donated $5 million to set up the MasterCard Future of Transactions Laboratory at MIT to research such things as new smart-card tricks and mobile shopping. American Express made its ―My life, my card‖ campaign omnipresent by boosting media spending nearly 37 percent to $602 million (Frazier). In the face of that challenge, both Visa and MasterCard each spent about half that amount. Still, Visa edged upward 0.4 percent to 52.1 percent market share and MasterCard declined imperceptibly in share as American Express grew 0.4 percent to 16.5 percent.
Visa and MasterCard are also attacking the market with new or augmented messages. Visa recently launched a new campaign, ―Life takes Visa,‖ and MasterCard has added an interactive twist to its ―Priceless‖ work that encourages customers to fill in the blanks and write their own ―Priceless‖ campaign (Frazier). The charts below shows the market share
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
and the dramatic jump in advertising spending from 2004 to 2005 among the top four credit card companies and the top credit card issuers as well: Credit Card Visa MasterCard American Express Discover
Credit Card Issuer Bank of America JP Morgan Chase Citigroup American Express Capital One Financial Morgan Stanley HSBC Holdings Washington Mutual Wells Fargo U.S. Bancorp Industry Totals
Market Share % 2005 31.58 22.1 16.5
Market Share % 2004 32.3 22.9 16.1
Ad Spending 2005 $360.2 million $340.6 million $420.9 million
Ad Spending 2004 $11.4 million $15.2 million $36.5 million
3.9
4.0
$83.8 million
$21.2 million
Market Share % 2005 21.3 20.0 16.0 10.4
Market Share % 2004 10.3 20.0 17.2 9.4
Ad Spending 2005 $50.6 million $126.1 million $315.2 million $547.7 million
Ad Spending 2004 $20.9 million $84.6 million $411.9 million $333.7 million
7.7
7.8
$317.0 million
$349.3 million
6.3 3.9 2.8
6.8 3.3 2.7
$81.8 million $2.6 million $0.8 million
$83.8 million $3.8 million $0.6 million
2.5 1.6
2.2 1.6
$0.0 million $0.0 million $0.0 million $0.0 million $2156.0 billion $2039.7 billion
SWOT Analysis &Recommendations Strengths American Express drew in consumers to the Blue card with a combination of technology and rock ‗n‘ roll marketing. The new card bowed with a saturation campaign, using media the company had never tried before.
-
Growth & Marketing Achievement
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Innovative Product Features
American Express was the first credit card company in the U.S. to launch contactless credit cards when it unveiled the latest version of Blue. The Blue card features an embedded computer chip powered by radio frequency technology.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
American Express is distinctly positioned and continues to develop their whole, overall portfolio strategy. The company ranked No. 14 in Interbrand‘s latest annual poll of best brands—while its brand value increased 6% over the year.
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Brand Awareness
-
Sense of Community
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Workforce Diversity & Equal Opportunity
Another strength of the company is its established sense of community among small-business owners, driven through integrated communication via their website (Maddox). Employee networks play an integral role in the overall diversity strategy by helping to support the company's business objectives.
Weaknesses There are escalating demands from internal customers, as well as the need to better educate the American Express staff to improve performance and create new vision and mission statements (Heal Thyself).
-
Training & Financial Literacy
-
Cut-backs American
Express has just recently ended the 5% and double-cash-back rebates offered for cardholders who frequent grocery stores and gas stations (Stern). The latest reward schemes are more complicated, less generous, and require some planning.
Opportunities To attract new customers in a crowded market, American Express needs to pitch cards with sleek new features that it can pitch to banks, retailers, and direct-mail companies. The industry can be transformed by tapping into customer emotions with credit cards exhibiting pictures of their favorite universities, hobbies, or sports teams. (Sidel).
-
Further Innovation
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Co-branding
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Product Placement
American Express has seen opportunities for higher growth in the SME market (Frary). The company could expand further with co-branding into other forms of travel such as cruise ships or rental agencies as well to promote its brand. There are stronger opportunities for product placement using more popular, highly rated television programs and movies alike. Venturing into regular daytime programming such as the Oprah Show, for example, would create total product awareness among a huge audience.
Threats -
The credit card world comes hand-in-hand with a very experienced and aggressive group of competitors who will fight even harder to defend turf they once claimed as their own. Competition
Principles of Advertising 20062
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American Express Blue
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Advancing Technology Trends The technology of
contactless payment methods will be around for a long time, and with this, American Express may lose the edge they‘ve gained with the initial addition of security features first added to their cards.
Advertising Objectives Expand customer awareness by 15% within 5 years‘ time and stay ahead of the major competition by continually implementing the newest technology and security features to redesign and beef up the American Express Blue card.
Target Market The Blue card is targeted to individuals with a youthful mindset, who want great value, financial flexibility and world class customer service. The card is launched to a group of people who had previously not seen American Express as relevant to their needs, conceived both in terms of an emotional affinity that would embrace a younger, hipper and more modern prospect mindset. The intended customers are motivated by a success that is not just financial, but optimistic and entrepreneurial in spirit.
Intended Message American Express Co. is the world‘s most respected service brand, aimed at enriching the lives of American Express customers, their families, and our communities. The company intends to create a selling experience with honest, open disclosure, with the idea that the people are in control and managing their own lives, and credit cards are interactive and enabling devices for self-reliance.
Suggested Course of Action - Increase Exclusivity American Express has to be a louder voice and get out there on a more frequent basis to make sure they penetrate through the clutter of the many new
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
product offerings and marketing campaigns of their competitors. By getting their message out there more frequently and creatively, American Express will increase its market share. The prospering of the Blue card was a combination of product appeal— a card with a ―smart chip‖ for secure online shopping—and a seamless multimedia campaign (Cardona). More than 2 million Blue cards were circulating by mid-April, with more than half of them to users who didn‘t have another American Express card before. More importantly, a survey by Brittain Associates, an Atlanta market researcher, estimates users transferred $1.8 billion in balances from other credit cards. By making the success of the Blue card known, along with the featured benefits and services American Express offers, the company can make themselves known and draw in loyal customers with future products.
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Continued Modernization
The card-design boom recently got a boost when American
Express licensed the technology used to create its popular transparent Blue card. The clear card‘s unusual look received a wave of attention when it was first issued, and executives say Blue card holders hang onto the card longer than some other versions and consumers use it more often than the other cards in their wallets. The cards are like art to the customer. Combining the best of form and function, the Blue card is a stylish card with state-of-the-art technology, making it easy, secure, and efficient whether for everyday shopping, travel, or online use. Innovation must continue to be at the heart of American Express‘ offerings. The company‘s products must remain unmatched with original features, lifestyle benefits, and services. Lifestyles are constantly evolving, and consumers are making choices based on what distinguishes them, such as the car they drive, the clothes they buy, and the places they vacation
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(Bawaba). With payment cards being an essential aspect of everyday activities, the card a person carries is not just a payment tool but a lifestyle statement and accessory.
Bottom Line The Blue card has stemmed from the need to support the growing sophistication in consumer lifestyle and purchase habits. Those who aspire to have the best and get the best out of their life should not have to look further than benefits and services of American Express. The company must aim to redesign its coveted Blue card with the newest technology and security features every 12 months to maintain public interest.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Bibliography ―About Citi.‖ Citigroup. 2007. Online. 1 February 2007. ―About Us.‖ American Express Web site. 2003. Online. 7 January 2007. ―American Express.‖ Answers.com. 2007. Online. 7 January 2007. ―American Express.‖ American Express Blue For Students Web site. 2007. Online. 21 February 2007. ―American Express Advertising Campaigns.‖ Search Your Love. 2006. Online. 16 February 2007. ―American Express Co. Information‖. At A Glance. Online. 9 February 2007. ―American Express Company Overview.‖ Redbook. Online. 12 February 2007. ―American Express Company Profile.‖ CNN Money. Online. 10 February 2007. ―AmEx‘s Ken Chenault Talks about Leadership, Integrity, and the Credit Card Business.‖ Knowledge@Wharton. 2005. Online. ―American Express Launches Largest Brand Campaign in Canada.‖ American Express Canada. 18 April 2005. Online. 8 February 2007. Frary, Mark. ―What Lies Beneath.‖ Business Travel World. Oct 2005. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. ―Heal Thyself.‖ Alexandria. Oct 2006. Vol. 60 Issue 10. ProQuest ABI/INFORM Global. Online. RIT Library Online Database Search. 2 February 2007. ―History.‖ Morgan Stanley. 2007. Online. 1 February 2007.
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Inman, William. ―The Future is Now.‖ Industrial Engineer. Jun 2006. Vol. 38, Iss. 6, p26. ProQuest ABI/INFORM Dateline. RIT Library Online Database Search. 5 February 2007. Jalili, H. Michael. American Banker. 28 Nov 2006. Vol. 171 Issue 227. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. Maddox, Kate. ―Creative.‖ B to B. 13 May 2005. Vol. 90 Issue 7, p37-39. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. Marquez, Jessica. ―The Insider.‖ Workforce Management. 13 March 2006. Vol. 85 Issue 5, p1-41. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. ―MasterCards Canada Press Section.‖ MasterCard. 2007. Online. 11 February 2007. ―Our History.‖Capital One. 2007. Online. 1 February 2007. Sidel, Robin. ―Credit-Card Appeal: A New Look, Smell.‖ Wall Street Journal (Eastern Edition). 15 Nov 2006. ProQuest ABI/INFORM Global. Online. RIT Library Online Database Search. 2 February 2007. Sidel, Robin and Anjali Athavaley. Wall Street Journal (Eastern Edition). 1 Aug 2006. ProQuest ABI/INFORM Global. Online. RIT Library Online Database Search. 2 February 2007. Stern, Linda. ―Credit: Playing Your Cards Right.‖ Newsweek. 11 Sep 2006. Vol 148, Iss. 9, p60. ProQuest ABI/INFORM Dateline. RIT Library Online Database Search. 5 February 2007. The Gale Group. ―United States – Retail Lending.‖ Business and Company Resource Center. Online. RIT Library Online Database Search. 5 January 2007. The Gale Group. ―Personal Credit Institutions.‖ Business and Company Resource Center. Online. RIT Library Online Database Search. 5 January 2007. ―The History of our Firm.‖ JPMorgan Chase. 2007. Online. 23 January 2007. ―Visa History.‖ Visa.com. 2007. Online. 4 February 2007.
Principles of Advertising 20062
Prof. Ki-young Lee
Lewis, Li, McMullen, Roth, Yung
American Express Blue Card A Brand Analysis
Professor Ki-Young Lee Principles of Advertising 20062 Group 5 – Lewis, Li, McMullen, Roth, Yung
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Company Analysis History Henry Wells, William Fargo, and John Butterfield, founded American Express in Buffalo, NY as an express business in 1850 (wikipedia.com). Originally the company began as a competitor against the U.S. Postal Office beginning with money orders, but today they offer a wide variety of options (answers.com). The company launched their Traveler Cheque in 1891 as a solution for the customary letter of credit, and finally their first credit card in 1958. The company is now competing with three major services, including travel, financial advice and international banking.
Philosophy Current American Express CEO Kenneth Chenault states, ―Adaptability is one of the keys to company success in the rapidly changing terrain of the global marketplace‖ (knowledge.wharton.upenn.edu). According to americanexpress.com, the company‘s basic philosophy and mission is ―…to be the world‘s most respected service brand.‖ American Express began as a company who believed in serving the people and making life simpler and have continued to do so, still believing in serving their customers with ―commitment, quality, and integrity‖ (manonamission.blogspot.com).
Sales & Advertising Expenditures Although American Express believes they‘re a high quality credit card company, their advertising tactics have previously done little to improve that image. In an attempt to increase their market share in 1992, the company changed endorsers from Ogilvy & Mather to Chiat/Day/Mojo. The change wrought debate between cardholders and American Express due to the reported cost of $60 million for the new ad campaign.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
While American Express was spending money in order increase market share, current stakeholders felt the company should have lowered discount rates (Giesen). As a result of the 1992 advertisement disaster, American Express‘ brand goal was to ―support all American Express cards,‖ according to newswire.ca. In the past ten years, American Express‘ has moved away from the controversial advertisement that promoted excessive spending, to celebrity endorsed ads that promote the catch phrase, ―My Life. My Card. American Express‖ (Giesen). As a result, the company‘s market value shot up to $70 million dollars as of February 2007 according to finapps.forbes.com.
Market Analysis Overview The U.S. credit card market is the most developed in the world, with consumers spending more on credit and holding more cards in their wallet than those of any other country. In terms of value, the U.S. counts for 53.1% of the global retail lending market (U.S. – Retail Lending). The chart below shows the market share for the most prevalent regions.
United States Retail Lending Market Segmentation (Year: 2004)
Geography U.S. Europe Asia-Pacific Rest of the World
Percentage 0.531 0.299 0.151 0.019
Currently, bank credit cards account for roughly 18% of personal consumption expenditures made by U.S. consumers (Personal Credit Institutions). Retail credit cards
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
and debit cards account for another 6%. According to CardWeb.com Inc., debit and credit cards account for roughly 30% of all U.S. spending.
Market Size The U.S. retail lending market had a total outstanding credit balance of $10,847.7 billion in 2004, representing a compound annual growth rate of 10.5% for the five-year period spanning 2000-2004 (U.S. – Retail Lending). In comparison, the global market experienced a growth rate of 8.6% during the same period. The consumer credit sector was valued at $2151.4 billion and held 19.8% of the market share in 2004, as shown in the chart below.
United States Retail Lending Market Segmentation (Year: 2004)
Category Mortgage Consumer Credit
Percentage 0.802 0.198
In the mid 2000s, the average American consumer was estimated to have 11 credit obligations on record with a credit bureau (Personal Credit Institutions). Of these, 7 are credit cards. The U.S. lending market experienced increasingly high growth rates in the past five years, with a high of 10.9% in 2004 (U.S. – Retail Lending).
Growth The U.S. lending market is forecast to grow at a lower rate than in previous years, with an anticipated compound annual growth rate of 6.2% for 2004-2009 (U.S. – Retail Lending). This is expected to drive the market‘s outstanding balance to $14,634.6. The chart on the following page shows the expected growth rate for the entire global market.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
United States Retail Lending Market Value (Units = USD)
Year 2000 2001 2002 2003 2004 Compound annual growth rate
Value 7270300000000 7960800000000 8761000000000 9717400000000 10847700000000 2000-2004
Growth 0.095 0.101 0.109 0.116 0.105 0.105
Growth within the U.S. market can be attributed to the country‘s increasing Internet culture, which has caused a significant increase in the number of customers using Internet and telephone banking (U.S. – Retail Lending). The increasing popularity of credit cards has also played a part in the market‘s growth.
Trends Credit companies have become more and more instrumental in educating consumers in the management of personal finance, particularly in advising against over-borrowing and improper management of finances (Personal Credit Institutions). American consumers along the East Coast states have also been taking advantage of access to free credit reports as well (U.S. – Retail Lending). This trend has resulted in better-informed consumers who borrow with more ease and confidence. There‘s also a growing trend among consumers to tap into funds using home equity credit as well as debit cards, which provide the ease of use of credit cards without carrying a balance.
Competition Visa currently operates as the leading consumer payment brand in the world, ahead of both MasterCard and American Express. Most of the difference in market share is attributed to aggressive co-branding programs taken on by individual companies.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Uncontrollable environmental factors also have the potential to affect the retail lending market, such as in 2005 when Hurricane Katrina devastated the assets and livelihoods of the U.S. market‘s consumers. In response, companies were forced to offer relief strategies to affected borrowers, including a reduction or suspension of mortgage repayments and changes to the terms of clients‘ mortgages (U.S. – Retail Lending).
Consumer Analysis Market Segmentation American Express offers a line of credit to any U.S. citizen who is making $10,000 a year or more. They offer four main different types of cards, those being Gold, Platinum, Green and Blue. Each card offers different plans and benefits and each card can also be further segmented to fit a customers exact needs. The Green Card is American Express‘ most basic line of credit. With the Green Card, American Express‘ Membership Rewards program can also be used to earn points to be redeemed while shopping, traveling or towards entertainment. The American Express Gold Card is a card more specifically targeted towards individuals who travel and attend entertainment events often. With this card the Membership Rewards is highly emphasized with points redeemable for ―tickets to exciting theater, concerts, sporting events, and family entertainment events‖. With American Express‘ Platinum Cards you can ―get room upgrades, complimentary breakfast, late checkout, and special amenities around the world with the Fine Hotels & Resorts program‖. This card is designed especially for world travelers, who don‘t just like to travel but who like to travel comfortably and no doubt have the means to do so. The Blue Card offered by American Express is the next
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
step up from the Green Card for those interested in being able to manage accounts online. This card is emphasized as the card for the individuals of today, offering card management online including balance transfers and bill payments, point rewards with 125 online brand name retailers, double points awarded when travels are booked online using American Express Travel. This card is all about convenience of accessibility through the Internet. In connection with this card another product that American Express can provide for a small extra fee is a protection plan against card theft. Another feature that the Blue Card has that the others do not is Blue Cash, which is an ―unlimited cash back financial tool‖. With this feature users can use their reward points to earn cash back.
Prospective Consumers American Express has highly segmented variations of each card, offering upwards of 30 different variations in all. One of the better-known programs for a more segmented market is American Express‘ Corporate Card program, designed for businesses. The Corporate Card offers ―practical solutions to the expense management challenges facing growing companies‖ and ―options to help you better manage business expenses‖. With different specialized programs designed for small businesses to Fortune 500 companies, American Express truly does tailor every credit line to their customers‘ needs.
Out of all of the different consumers that use this product most are individuals or businesses looking to establish a line of credit with a well-known company that offers its customers many different types of rewards and benefits for utilizing its services. The rewards that American Express offers to its customers offer true benefits to its users, encouraging many people to switch to American Express.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Brand Analysis Current Situation American Express‘ sales as of February 1st, 2007 were at $58.22 Price/Sales Ratio 2.64. Their Shares Outstanding was at 1,204 million, and their Market Capital at $70,096.9 million. American Express has many different cards for many different target markets, with special benefits that vary among each. Most of the attributes include the same perks such as no annual fee, 0% intro APR and Fee-free rewards program.
Target Market American Express Blue is targeted toward students, with fast and simple services. ExpressPay is a way to buy things using the card without having to swipe. This creates convenience as well as promptness—as the company understands that students hate waiting and they want transactions to be quick.
Benefits The fundamentals of the Blue card include guaranteed protection for shoppers and travelers. Some examples include the global assist hotline for customers traveling for more than 100 miles away from home, which provides security and peace with medical, legal, financial or other emergency assistance right besides them. The purchase protection plan allows consumers to shop with confidence where the plan protects eligible purchases made with the card against accidental damages and theft for up to 90 days from the date of purchase. American Express is holding themselves accountable for a lot of heavy issues but users will feel like they are being thanked for choosing American Express.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Competitive Analysis Overview The top bank credit card issuers in the United States are JPMorgan Chase, Citigroup, MBNA, American Express, Bank of America, Discover, Capital One, HSBC, Providian, Morgan Stanley and Wells Fargo (Personal Credit Institutions). These are American Express‘s direct competitors. Debit cards are an indirect competitor to all companies—as they‘ve been found to be more popular than credit cards.
Top Direct Competitors – Brands - Visa Visa is owned by 20,000 member financial institutions, which issue and market their own Visa products and participate in the VisaNet payment system (Personal Credit Institutions). Serving nearly 25,000 member financial institutions worldwide, MasterCard is the #2 payment system in the U.S. The company provides services in more than 210 countries and territories, and its cards are accepted at more than 23 million locations around the globe. MasterCard also operates the Cirrus ATM network.
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Mastercard
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Discover
Discover Financial Services (DFS), a business segment of Morgan Stanley, is best known for issuing Discover-brand credit cards, which are used by some 50 million members at more than 4 million retail and cash outlets.
Top Direct Competitors – Card Issuers - JPMorgan Chase The company broadened their target audience with two new ad campaigns in 2006—a Spanish language television ad for the company, and a feature to their cards designed to bring greater protection to corporate supply chains as businesses aim to remain compliant with international trade and security laws. -
Citigroup The world‘s
pre-eminent financial services company, with some 200 million customer accounts in more than 100 countries (U.S. Retail Lending). It provides consumers, corporations, governments, and institutions with a broad range of financial products and services.
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Capital One Emerged as one of the America's largest consumer franchises with almost 50 million customer accounts and one of the nation's most recognized brands because of their mission foundation (Capital One services).
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
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Lewis, Li, McMullen, Roth, Yung
Morgan Stanley In addition to corporate investment banking services like securities underwriting and mergers and acquisitions advice, the firm offers brokerage and asset management products and services for institutional and individual investors (Morgan Stanley).
Market Share Combined, the top ten bank credit card issuers held over 85 percent share of the U.S. credit card market (Personal Credit Institutions). Total Visa cards in circulation in 2004 exceeded 1 billion worldwide, and annual transaction volume exceeded $1.1 trillion. American Express accounted for 22.3 percent of the $1.58 trillion rung up in credit-card transactions last year, ranking it third after Visa and MasterCard (Sidel and Athevaley).
Distribution & Sales American Express tends to seek any venue where customers of the demographic they‘re seeking will be engaged, while Visa and MasterCard generally target a large audience (Jalili). In the past year, American Express has been generating additional spending by entering into relationships with certain banks, including Citigroup and Bank of America (Sidel and Athevaley). Under those agreements, the banks are issuing cards that are branded with the American Express name and processing the transactions over American Express‘s proprietary network.
Features Visa and MasterCard both have several cardholder perk programs, but almost all of them are offered through the card networks‘ bank and co-brand partners. Rewards have become lavish in recent years, with offerings including cash-back rewards as high as 5% on Discover cards, rewards points toward purchases at Disney theme parks on Chase cards, and oil changes, tire rotation, and tune-ups on Bank of America Cards (Sidel and Athevaley). The American Express Blue cards aim to help maximize cash rebates.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Cardholders can earn 1 percent back at grocery stores, drugstores, and gas stations, and 0.5 percent back on most purchases until they‘ve charged $6,500 (Stern). Then it‘s 5 percent on those everyday categories and 15 percent on everything else, with no cap.
Promotional Expenditures Advertising spending by the leading credit card networks, including Visa, MasterCard, Discover, and American Express, exceeded $800 million in 2001 (Personal Credit Institutions). Marketing dollars spent by individual card issuers, such as banks, totaled roughly $10 billion that year. In promoting its Blue card, American Express launched a contest offering cash prizes up to 50,000 for Java developers to create new uses for the card (Bryant). MasterCard has set aside part of a $50 million fund to invest in high-tech companies that develop new uses for its smart cards. It has also donated $5 million to set up the MasterCard Future of Transactions Laboratory at MIT to research such things as new smart-card tricks and mobile shopping. American Express made its ―My life, my card‖ campaign omnipresent by boosting media spending nearly 37 percent to $602 million (Frazier). In the face of that challenge, both Visa and MasterCard each spent about half that amount. Still, Visa edged upward 0.4 percent to 52.1 percent market share and MasterCard declined imperceptibly in share as American Express grew 0.4 percent to 16.5 percent.
Visa and MasterCard are also attacking the market with new or augmented messages. Visa recently launched a new campaign, ―Life takes Visa,‖ and MasterCard has added an interactive twist to its ―Priceless‖ work that encourages customers to fill in the blanks and write their own ―Priceless‖ campaign (Frazier). The charts below shows the market share
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
and the dramatic jump in advertising spending from 2004 to 2005 among the top four credit card companies and the top credit card issuers as well: Credit Card Visa MasterCard American Express Discover
Credit Card Issuer Bank of America JP Morgan Chase Citigroup American Express Capital One Financial Morgan Stanley HSBC Holdings Washington Mutual Wells Fargo U.S. Bancorp Industry Totals
Market Share % 2005 31.58 22.1 16.5
Market Share % 2004 32.3 22.9 16.1
Ad Spending 2005 $360.2 million $340.6 million $420.9 million
Ad Spending 2004 $11.4 million $15.2 million $36.5 million
3.9
4.0
$83.8 million
$21.2 million
Market Share % 2005 21.3 20.0 16.0 10.4
Market Share % 2004 10.3 20.0 17.2 9.4
Ad Spending 2005 $50.6 million $126.1 million $315.2 million $547.7 million
Ad Spending 2004 $20.9 million $84.6 million $411.9 million $333.7 million
7.7
7.8
$317.0 million
$349.3 million
6.3 3.9 2.8
6.8 3.3 2.7
$81.8 million $2.6 million $0.8 million
$83.8 million $3.8 million $0.6 million
2.5 1.6
2.2 1.6
$0.0 million $0.0 million $0.0 million $0.0 million $2156.0 billion $2039.7 billion
SWOT Analysis &Recommendations Strengths American Express drew in consumers to the Blue card with a combination of technology and rock ‗n‘ roll marketing. The new card bowed with a saturation campaign, using media the company had never tried before.
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Growth & Marketing Achievement
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Innovative Product Features
American Express was the first credit card company in the U.S. to launch contactless credit cards when it unveiled the latest version of Blue. The Blue card features an embedded computer chip powered by radio frequency technology.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
American Express is distinctly positioned and continues to develop their whole, overall portfolio strategy. The company ranked No. 14 in Interbrand‘s latest annual poll of best brands—while its brand value increased 6% over the year.
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Brand Awareness
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Sense of Community
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Workforce Diversity & Equal Opportunity
Another strength of the company is its established sense of community among small-business owners, driven through integrated communication via their website (Maddox). Employee networks play an integral role in the overall diversity strategy by helping to support the company's business objectives.
Weaknesses There are escalating demands from internal customers, as well as the need to better educate the American Express staff to improve performance and create new vision and mission statements (Heal Thyself).
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Training & Financial Literacy
-
Cut-backs American
Express has just recently ended the 5% and double-cash-back rebates offered for cardholders who frequent grocery stores and gas stations (Stern). The latest reward schemes are more complicated, less generous, and require some planning.
Opportunities To attract new customers in a crowded market, American Express needs to pitch cards with sleek new features that it can pitch to banks, retailers, and direct-mail companies. The industry can be transformed by tapping into customer emotions with credit cards exhibiting pictures of their favorite universities, hobbies, or sports teams. (Sidel).
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Further Innovation
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Co-branding
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Product Placement
American Express has seen opportunities for higher growth in the SME market (Frary). The company could expand further with co-branding into other forms of travel such as cruise ships or rental agencies as well to promote its brand. There are stronger opportunities for product placement using more popular, highly rated television programs and movies alike. Venturing into regular daytime programming such as the Oprah Show, for example, would create total product awareness among a huge audience.
Threats -
The credit card world comes hand-in-hand with a very experienced and aggressive group of competitors who will fight even harder to defend turf they once claimed as their own. Competition
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
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Lewis, Li, McMullen, Roth, Yung
Advancing Technology Trends The technology of
contactless payment methods will be around for a long time, and with this, American Express may lose the edge they‘ve gained with the initial addition of security features first added to their cards.
Advertising Objectives Expand customer awareness by 15% within 5 years‘ time and stay ahead of the major competition by continually implementing the newest technology and security features to redesign and beef up the American Express Blue card.
Target Market The Blue card is targeted to individuals with a youthful mindset, who want great value, financial flexibility and world class customer service. The card is launched to a group of people who had previously not seen American Express as relevant to their needs, conceived both in terms of an emotional affinity that would embrace a younger, hipper and more modern prospect mindset. The intended customers are motivated by a success that is not just financial, but optimistic and entrepreneurial in spirit.
Intended Message American Express Co. is the world‘s most respected service brand, aimed at enriching the lives of American Express customers, their families, and our communities. The company intends to create a selling experience with honest, open disclosure, with the idea that the people are in control and managing their own lives, and credit cards are interactive and enabling devices for self-reliance.
Suggested Course of Action - Increase Exclusivity American Express has to be a louder voice and get out there on a more frequent basis to make sure they penetrate through the clutter of the many new
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
product offerings and marketing campaigns of their competitors. By getting their message out there more frequently and creatively, American Express will increase its market share. The prospering of the Blue card was a combination of product appeal— a card with a ―smart chip‖ for secure online shopping—and a seamless multimedia campaign (Cardona). More than 2 million Blue cards were circulating by mid-April, with more than half of them to users who didn‘t have another American Express card before. More importantly, a survey by Brittain Associates, an Atlanta market researcher, estimates users transferred $1.8 billion in balances from other credit cards. By making the success of the Blue card known, along with the featured benefits and services American Express offers, the company can make themselves known and draw in loyal customers with future products.
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Continued Modernization
The card-design boom recently got a boost when American
Express licensed the technology used to create its popular transparent Blue card. The clear card‘s unusual look received a wave of attention when it was first issued, and executives say Blue card holders hang onto the card longer than some other versions and consumers use it more often than the other cards in their wallets. The cards are like art to the customer. Combining the best of form and function, the Blue card is a stylish card with state-of-the-art technology, making it easy, secure, and efficient whether for everyday shopping, travel, or online use. Innovation must continue to be at the heart of American Express‘ offerings. The company‘s products must remain unmatched with original features, lifestyle benefits, and services. Lifestyles are constantly evolving, and consumers are making choices based on what distinguishes them, such as the car they drive, the clothes they buy, and the places they vacation
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
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(Bawaba). With payment cards being an essential aspect of everyday activities, the card a person carries is not just a payment tool but a lifestyle statement and accessory.
Bottom Line The Blue card has stemmed from the need to support the growing sophistication in consumer lifestyle and purchase habits. Those who aspire to have the best and get the best out of their life should not have to look further than benefits and services of American Express. The company must aim to redesign its coveted Blue card with the newest technology and security features every 12 months to maintain public interest.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Bibliography ―About Citi.‖ Citigroup. 2007. Online.
Principles of Advertising 20062
Prof. Ki-young Lee
American Express Blue
Lewis, Li, McMullen, Roth, Yung
Inman, William. ―The Future is Now.‖ Industrial Engineer. Jun 2006. Vol. 38, Iss. 6, p26. ProQuest ABI/INFORM Dateline. RIT Library Online Database Search. 5 February 2007. Jalili, H. Michael. American Banker. 28 Nov 2006. Vol. 171 Issue 227. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. Maddox, Kate. ―Creative.‖ B to B. 13 May 2005. Vol. 90 Issue 7, p37-39. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. Marquez, Jessica. ―The Insider.‖ Workforce Management. 13 March 2006. Vol. 85 Issue 5, p1-41. EBSCOhost. RIT Library Online Database Search. Online. 2 February 2007. ―MasterCards Canada Press Section.‖ MasterCard. 2007. Online.
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Prof. Ki-young Lee
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