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Brand Audit

January 2015

American Express

TEAM AMEX ANA MARIA CARDOZA

JENNIFER GRACE SUSAMMA MEDOFF

NIMIT ROONGTA ANNELEIT SONNENBERG

Late 1800’s the company, American Express was founded

in the US on March 18, 1850 as a consolidation of three

existing companies engaged in the business of land

transport of products and goods. The three companies that

came together to create American Express were Wells and

Co., Livingston, Fargo and Company, and Wells,

Butterfield and Wasson. The giant white dog atop of the

boxed goods demonstrates commitment to protection and security of their customer’s goods

being transported. Importantly, during the late 1800’s the company undertook an important

evolution under the leadership of James Fargo, brother of the original partner, William Fargo.

The company began to transition from a transport operator to banking operations and in the

new century into the travel industry. In 1882 the company launched the American Express

Money Order, in 1891 the American Express Travelers cheque was introduced and in 1895 it

opened their first European office in Paris and later that decade in England and Germany.

In the 1900’s the world came to know American Express as a travel operations company.

American Express identified a niche market for the overseas American citizens’ who needed to

access their money. This emerged during the First World War and then again as US citizens were

taken unaware by the break out of the Second World War.

So, we now have a former transport company, financial services provider and a banker

that expanded it’s business to provide traveler’s cheques and arrange for world travel for it’s

members. It was reasonable to question at that time what and who is American Express? The

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I. CREATING AMERICAN EXPRESS

TRUST. SECURITY. VIGILANCE. SERVICE.SOURCE: AMERICANEXPRESS.COM

founders of the company were innovators and were unafraid to evolve and expand their

company into untested markets on the basis of identified gaps in services to it’s customers.

1950’s saw American Express launched it’s first credit card

service and the introduction of the gladiator into their

design. The soldier design remains a topic of discussion. A

trademark lawsuit in the late 1980’s required American

Express to clarify the significance of gladiator or a centurion. The case presented by American

Express confirmed the Gladiator was part of their brand identity.

1970’s till the 90’s continued to be a period of innovation and evolution for the

company. With the introduction of the blue and white color patterns for branding in1975,

American Express created an identity that was simple and easily registered in the minds of it’s

customers. During this period the company also suffered setbacks. There was a downturn in the

financial market that required drastic actions to be taken in the form of stock sell off and

American Express brand was bruised in its public perception. This came in the form of

uncovering of the fee structure of the point of sale. A Public warning was

issued by Fair Trading in the UK to American Express and in the US, in

Boston, the Boston Fee Party was created, a direct connection to the Boston

Tea Party, who objected to the taxes imposed on tea.

2000 and beyond the company prevailed and continued to expand. American Express

firmly positioned itself in the Global Top 100 Brands. Even the global financial crisis could not

shake the steadiness and strength of the brand image. Exhibit 1 provides evidence to illustrate

the wealth and brand equity that American Express continues to hold. The data evaluates the

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brand value to it’s customers and shareholders. It also measures the value of customer choice and

the competition to the brand in the industry.

Establishing and managing brand equity is priority in the credit card business and a way

to build strong brand equity from loyal customers and profits. People are attracted to American

Express (AMEX) because they boastfully trumpet that “membership has its privileges” and along

associating with the brand, the services provided and numerous other tangible and intangible

factors AMEX becomes an attractive culture (see Exhibit 2 for the CBBE Pyramid). Whether it’s

about offering a safer way to carry money with travelers checks or by encouraging people to

travel and experience, they envision a service culture that allows cardmembers to feel like their

lives have been simplified and rewarding them at the same time. AMEX core principles are:

Trust, Security, and Service. Today, the brand iterates this experience in the form of plastic (and

sometimes Titanium) credit cards that offer abundant incentives and always reminding its

cardmembers about their outstanding service interactions. AMEX distinguishes itself through it’s

premium pricing strategy and has over 109.9 million cards (American Express Company

Consolidated Statements of Income).

We had an opportunity of discussions with Mr. Neil Gandhi, Vice President of Global

Business Transformation at American Express on his vision about the company. Mr. Gandhi has

been a part of the company for almost 10 years now and when we asked him “Who or what is

American Express?” he passionately shared, “We are a very diverse service company with diverse

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II. COMMUNICATIONS, PRICING & DISTRIBUTION

group of 90 million cardmembers. Our business model offers

something for individual consumer, travelers, small businesses and

large corporations. We originally started off as a traveling company

and began offering travelers checks as our first product. Our first

charge card came out in 1958 and we’ve continued to evolve since

then. We are not a Wall Street company, but see ourselves as closer

to Procter & Gamble and are present to fulfill an existing market

need. AMEX has a very people oriented culture and we work towards developing people

(AMEX employees), higher employee engagement and retention.” Neil also made clear that

American Express has cardmembers— not users or customers. A distinction that has part of the

brand and its culture.

AMEX has always maintained a powerful and highly respected marketing capability that

has given them a dominant position amongst it’s competitors. “Service is a hallmark for

American Express. When I call American Express, I can speak to someone competent! We

operate on a spend-centric model and do not depend on fees and penalties as a source of

revenue,” said Mr. Gandhi. American Express’ compelling value proposition attracts high-

spending individuals and corporations to be members of such premium brand that gives

outstanding rewards which gives access to unique experiences and outstanding customer service

worldwide (Exhibit 3). American Express vision embodies the company’s past, present and

future that revolves around helping customer’s achieve more, by being their financial services

provider to make all things possible. Its strong proposition value to users creates insistence at the

point of sale and gives everyone a reason to use the AMEX card. The company mainly utilizes

the closed-looped model, which allows ownership and control of the entire value chain by having

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NEIL GANDHIVP, GLOBAL BUSINESS

TRANSFORMATION

unique insight into buying patterns and spending trends, making it a competitive advantage in

the credit card market.

AMEX target market was on the basis of the net present value of its current and

potential customers to itself and its competitors. Individuals that prefer to pay their bills in full

each month were more valuable to American Express instead of the competitors. However,

“financial inclusion is important,” emphasized Mr. Gandhi, “with that in mind we have been

extending our reach from affluent customer to everyone else. For example, our Blue line of credit

cards is meant to serve the needs of college students. More recently, we’ve also adopted initiatives

to service the under-banked segment of the United States with American Express Serve. This offers

financial services to previously untapped markets by our company, which include services that

would normally be offered by banks. As a global payments provider, we feel that it could be a

huge market.” Implementing such a strategy earns consumer’s loyalty early and provides them

outstanding service and resources when people need them most. Refer to Exhibit 4 for a list of

features currently offered by American Express.

The power of the brand and its representation in the marketplace has allowed AMEX to

form premium lending partnerships with leading merchants such as the airlines industry (Delta,

AirFrance, Alitalia, British Airways, Jet Blue, Quantas, etc), wholesaler suppliers (Costco) and

luxury carmakers (Mercedes-Benz) American Express unlike others, puts emphasis on the

durability of the company and perhaps the most obvious advantage that AMEX embodies is that

it the only major company in global payments with unlimited usage. This gives AMEX the

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ARMY OF AMERICAN EXPRESS ALLIANCES.

network effect advantage, meaning the network becomes exponentially more valuable in

proportion to its number of users. It’s not to say that Discover, VISA, MasterCard, Paypal and

Square are not in the competition, but AMEX’s investments in the payment business surpass that

of other competition when it comes to global payments. The marginal costs of running

transactions over the network are negligible but AMEX return on equity helps to marginalize

those costs. Merchants accept AMEX, even at higher transaction costs because of the

profitability and attract high yielding customers. Unlike other card issuers, they do not gain sales

from lending fees or high revolving balances instead merchants pay the price for the usage. In

addition to their products, American Express provide pro-bono consulting to key non-profit

organizations to address a specific organizational challenge that need funds to strengthen the

non-profit sector. According to Mr. Gandhi, AMEX has “also had a huge focus on small

businesses with OPEN brand of products and Small Business Saturday. Acceptance at small

businesses has been challenging and we’ve taken these steps to show them that we are on their

side. Our business model must evolve.”

AMEX has developed a strong brand and has embodied what it represents in the minds

of its core customers through different channels of advertisement especially through the Open

Forum, the usage of content sponsorship programs, by live streaming concerts by some of the

biggest names to fans worldwide. By customers just seeing a message with the AMEX logo, it

makes them consider the brand because they can associate it with something memorable they just

experienced. Their main focus of advertisement has always centered around the experience for

the customer. They have the right blend of product quality, features, prestige and costs that has

made them a high-profile brand in the credit card market. These set of attributes have also

presented unexpected hurdles for AMEX. During our conversation with Mr. Gandhi, he

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discussed “problems where people have associated AMEX with only the ‘fun’ stuff (Example

concerts and traveling), but we want cardmembers to use their card at Duane Reade and CVS.

The American Express EveryDay Card is meant to change that perception—where we reward

members based on the number of transactions every month. However, we must be careful not to

dilute our brand. We have a history of exclusivity and that is an asset for our company.” This

plan also attempts to bridge the coverage gap and seek more financial inclusion.

To further engage with more diverse group of customers, AMEX has been using

social media platforms (via Twitter, iTunes, Facebook, LinkedIn and Foursquare) to help

bring the communities to life that was never possible before, by bringing value to card

members and merchants. They are innovative in their unique style of communication.

As seen in their TV ads, online ads and in the forums, they endorse famous personalities

to promote their products, and aims to represent exclusiveness in a simple, clear and

clever nevertheless attractive way.

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THE COMPANY HAS COMMISSIONED PLAYFUL WORK WITH FAMOUS ARTISTS AND USED SOCIAL MEDIA PLATFORMS AS AN

AVENUE TO ENGAGE WITH CUSTOMERS.

Although American Express stands alone as a luxury credit card, it does have two

competitors: MasterCard and Visa. MasterCard has somewhere close to 2 billion cards out in the

world. Its revenue is 7.3 billion dollars. More merchants accept MasterCard than American

Express. Visa is accepted at more places than MasterCard. Both Visa and MasterCard are

accepted in 170 countries and in more than 25 million locations. American Express generally

charges merchants a higher fee and is acceptable in only 130 countries. For this reason Visa and

MasterCard are acceptable in more locations than American Express.

Visa is known for convenience. When is the last time you asked “Can I use Visa here?”

Visa’s revenue is 10.4 billion dollars. CEO Charles Sharf states that the “characteristics that have

driven-and will continue to drive the Visa business forward are “a payment network, a partner,

enabler, a technological innovator, and the best way to pay (and be paid)- for everyone,

everywhere.” Olympic sponsor, VISA definitely

stands out. Visa has aggressively started to

execute new strategies from it’s innovation

center in San Francisco as of July 2014. It is

making a headway in its mobile as well as

digital expansion with Visa Checkout and also

on its international expansion. Best of global

brands site “consumers' trust on the brand, and

wide business endorsement” putting Visa in a

strong brand position.

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III. Competition

“We often also get a lot of heat for charging higher transaction fees, but the truth is MasterCard and Visa pricing is not transparent to the merchant and varies based on the type of card used by the customer. We are a premium product and we justify

charging more.” -Neil Gandhi, VP at AMEX

MasterCard is on the innovative band wagon too. Its slogan since 2012 is “A World

Beyond Cash.” CEO and President Ajay Banga says innovation is a priority. The brand promotes

a smooth experience for both user and merchant. MasterCard introduced a smart chip and leads

in the space of security. Security is the brand’s second priority. Convenience and speed are also

up there. The company recently launched a disbursement service that gives governments and

businesses the ability to send funds to consumers in minutes as opposed to days. MasterCard’s

innovation continues globally with the introduction of mobile wallets through its acquisition of

C-SAM. Touch-less transactions, face imaging recognition software, and a moon shot lab are a

few other examples of innovating. MasterCard also launched Start Path to support start-ups who

are innovating themselves. So is innovation “priceless” as MasterCard’s old slogan would once

say? Innovation allows MasterCard to get in front of its users convenience wise and emotionally.

MasterCard is seen in its advertisements as the funny or even breathtaking credit card. Is the

experience as well? Hopefully it’s just breathtaking.

American Express expresses the following mission: “Each day, American Express makes it

easier, safer and more rewarding for consumers and business to purchase the things they need’’.

They work hard every day to make Amex the world’s most respected service brand.

They created the Blue Box Values that reflect what they stand for as a company.

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IV. Consuming

- Customer commitment - Respect for People - Teamwork- Quality - Good Citizenship - A will to Win- Integrity - Personal Accountability

A survey created on Survey Monkey was conducted among Amex users (see Exhibit 5 for the

survey questions and Exhibit 6 for survey outcomes). The survey was carried out among users of

different nationalities so as to capture varying perceptions and international experiences. The

following results were generated from the survey. Amongst the people that were surveyed, people

in the age group between 18-24 & 25-34 were the largest segment of AMEX cardmembers.

Amongst the American Express cardmembers, 6 out of 13 use the card regularly and 3 out 13

always use American Express. Some of participants only use the card in case of emergencies.

When participants were asked why they use American Express the most common reason was

benefits that American Express offers. . Other reasons mentioned were: joint card, insurance,

service, trusted brand, and favorable exchange rate. Additionally, participants were asked which

of the available benefits mattered them the most. Majority (7 out of 12) answered that the

rewards programs mattered the most.

Amongst the participants, majority reason for not owning an AMEX card was no need to

own another credit card over their primary card. The American Express customer associated the

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FIGURE 1: WORD ASSOCIATIONS WITH AMERICAN EXPRESS

words as mentioned in Figure 1, with the brand. As evident, Exclusivity and Great Services struck

the minds of the customers most often. Participants didn’t have any celebrity associations with

the brand, but it could be concluded that the brand was perceived as high-end. One participant

stated that Amex made him/her feel like a celebrity. Furthermore, all participants pointed that

they trust the brand. All this is in alignment with what AMEX stands for, and is recognized and

perceived by the consumer in similar manner. The survey also showcased the problems

participants encountered while using AMEX. The majority commented that often times vendors

refuse to accept AMEX. This was also considered as their worst experience with American

Express. Best experiences with AMEX included dealing with disputes, knowledge of the

customer service team, tickets and rewards.

The participants gave AMEX a Net Promoter Score (NPS) of +25. (12 participants— 6

Promoters, 3 Detractors, and 3 Passives). In 2014, AMEX overall NPS was +45. AMEX was the

leader in the credit card business for 6 years in a row. Discover took over the top spot in 2014.

Additional research, different forums and discussions on AMEX were analyzed and our study

showed very satisfied customers. There were numerous forums discussing the prestigious ‘Black-

Card’—also known as Centurion. The mystery, exclusivity and service offerings for Centurion

cardmembers has long been a coveted asset to AMEX and a fascination for individuals who are

hoping to own the card some day. In general, people felt proud upon approval for an AMEX

card.

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Strengths

• Strong brand image• Exclusiveness• Prestige membership and great

relationship with joint venture• High customer loyalty- Loyalty

programs for customers • Overall top brand in credit card

industry due to excellent customer service

• Globally acclaimed. • Staff aligned with corporate

direction.

Weaknesses

• Decision to restrict to specific target market

• Not accepted everywhere• Less product line due to closed-

loop network• Competitor have strong

marketing activities• Decline usage of Traveller’s

Cheque

Opportunities

• Expand more globally in other countries and be accepted everywhere

• Growth in technological products

• Enhance their business partnerships

• Regain its NPS leadership back• Diversify portfolios for

customers• Synergy acquisitions

Threats

• New competitors- particularly in technology

• Affect future growths • Fierce competition among other

companies in the industry• Possible financial crisis

(recessions)• Interchange fees – unattainable • Changes in Government

Regulations

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V. swot analysis

During the 2008 financial crisis, credit cards became a major source of sustainability for

many customers. AMEX’s model was built on the freestanding and financial strength of its

cardmembers. As the economy began to tremble, American Express customers were unable to

manage regular payments. Although, they were able to mitigate the credit risk by issuing credit

cards to high earning customers, the company’s growth operations were severely jeopardized due

to their spend centric model. By expanding to incorporate multi-user model, AMEX can

accommodate for growth in foreign markets, which will increase their market-share and provide

future growth in developing economies. In addition to a feasible expansion, they must enhance

their business partnerships and relationships across industries to expand AMEX’s target market

by attracting exclusive members by increasing brand awareness and recognition.

American Express has had enough history in the travel business that they are seen as a

global brand. It’s a huge growth area and local partnerships are vital to it’s success in

international markets. For example, the company recently partnered with Russian Standard Bank

to introduce American Express to a completely new population in Russia. Third party

partnerships are critical and adapting to local operating models are an equally important part of

an evolving business model.

American Express must continue to innovate and keep the customer experiences and services

a priority. For example, the company can explore the emerging technology alignment with the

banking sector and leveraging technology to make payments and transactions simple and

convenient. Mr. Gandhi also shared his opinion on responding to new technology, “ an evolving

business model is the greatest strength for AMEX and adapting to changing technology is just a

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Vi.recommendations

part of keeping up with the times. Depending on who the vendor is they can be seen as our

partner and as competitor based on the circumstances. When it comes to mobile payments, I

think Apple has won this race with  Pay. What technology will do to payments is yet to be seen

and American Express will continue to play an active role in it.”

Although AMEX continues to leap over its competitors in actively improving their service

with the use of technology, it must pursue the millennials more aggressively and look for ways to

regain its leadership from Discover. Mobile wallet is the next big thing in the credit card industry

and American Express should revise their strategy and market towards younger cardmembers to

gain more traction in the contactless payment space. Incentivizing members who use their Blue

line of credit cards to enroll in mobile payments.

Our survey reveals that customers see limited acceptance of AMEX by vendors as the

biggest drawback. The company must continue to look at partnerships with merchants and

increase their coverage. Partnerships with companies such as Living Social and GroupOn in

networking with business offers would be another way to improve coverage and change the

perception of AMEX as a card only for fun while still honoring its history of servicing travelers.

Offering statement credits to cardmembers who use their AMEX card for purchases through

channels popular amongst the younger segment of its cardmembers would also be beneficial.

AMEX had been the Net Promoter Score leader for 6 years in a row until in 2014

Discover took over. Each day Discover provides more evidence that it is poised to do great

things in the years to come. It is recommended that AMEX analyses the strategies and policies of

Discover and comes up with techniques to counter Discover. This will enable AMEX to regain

it’s leadership once again.

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Sources

• Keller, Kevin L. (2000). The Brand Report Card. Harvard Business Review, R00104-PDF-ENG.

• Keller, Kevin L. (2001). “Building Customer-Based Brand Equity: A Blueprint for Creating Strong Brands.” Marketing Management, July/August, 15-19

• Trefis Team. (March 29th 2013). Analyzing American Express’ Spend Centric Model and Future Growth Potential. http://www.trefis.com/stock/axp/articles/176460/analyzing-american-express-spend-centric-model-and-future-growth-potential/2013-03-29

• creditcards.com

• bestglobalbrands.com/2014/visa

• bestglobalbrands.com/2014/mastercard

• http://about.americanexpress.com/oc/whoarewe

• Joseph Grieco. (November 6th 2013). American Express Co. (NYSE: AXP) Sector Financials http://smf.business.uconn.edu/wp-content/uploads/sites/818/2014/09/AXP-One-Page-Report.pdf

• http://www.britannica.com/EBchecked/topic/19661/American-Express-Company

• http://creditcardforum.com/blog/american-express-logo-history/

• American Express 79 most asked questions, what you need to know. Tammy Roach 2009

• http://brandirectory.com/profile/american-express

• http://creditcardforum.com/blog/american-express-logo-history/

• http://www.adweek.com/news/technology/american-express-favorited-tweets-triple-artist-created-posts-159525

• http://www.bestglobalbrands.com/

• http://www.cathaypacific.com/cx/en_HK/frequent-flyers/cathay-pacific-co-brand-credit-card.html

• http://www.theglobeandmail.com/report-on-business/amex-appealing-to-customer-needs/article21427902/

• http://customergauge.com/news/net-promoter-news-amex-cashes-in/

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APPENDIX

Exhibit 1.

An annual report produced on the brand value of global companies. Source: bestglobalbrands.com

Exhibit 2. CBBE Pyramid American Express

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Exhibit 3. Spend-Centric Model.

Source: American Express Website, www.americanexpress.com

Exhibit 4. Types of Products

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Source: www.AmericanExpress.com

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Exhibit 5. Survey Questions

1. What is your Age? 2. What is your Gender? 3. What is your Nationality? 4. Do you have an American Express Card? 5. How often do you use your American Express Card? 6. Why American Express? 7. What benefits matter to you when choosing a card? 8. What comes to your mind when you think about Amex? 9. Do you have any Celebrity associations with Amex? If yes, please explain 10. What word associations do you have with Amex? 11. Do you trust Amex? 12. If you ever experienced any trouble when you wanted to pay with Amex, please explain 13. What is your best experience with Amex? 14. What is your worst experience with Amex? 15. How likely is it that you would recommend Amex to a friend or colleague? 16. Please explain why you are not using Amex

Exhibit 6. Survey Outcomes

Question 1:

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Question 2:

Question 3:

Question 4:

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Question 5:

Question 6:

Question 7:

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Question 8:

Question 9: Answered: 11, Skipped: 9

!

Do you have any Celebrity associations

with Amex?

11

1

9

No Karl MaldenMakes me feel a celebrityCustomers look like elite

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Question 10: Answered: 12, Skipped: 9 (3 word associations were asked)

!

Question 11:

What word associations do you have with Amex?11

11

11

1

1

1

11

11 1

23 1

1111

5

Exclusivity LuxuryRewards Black CardAmerican Company PrestigeGreat service Platinum CardsGreen SolidSafe We don't take AmexQuality MoneyValue ExportTop Notch TravelBeneficial UniqueMembership International

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Question 12:

Question 13:

Question 14:

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Have you ever experienced trouble when you wanted to pay with Amex?

0

3

6

Card not accepted by vendor Asia

Question 15:

Question 16:

!

Why are you not using AMEX?

3 1

1I already have enough cardsToo expensive No need

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Brand Mantra, Brand Portfolio

Points-of Difference: Points-of-Disparity • Distinctive target market * Competitive Advantage • Iconic symbolism * Best Customer Service • Emotional bond- creating loyalty

AMEX Service Offerings

Brand Name Emotional Modifier Descriptive Modifier Functional Benefit

American Express World-Class Service Personal Recognition

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