Case Study: Five Things American Express is Getting Right for the Mass Affluent Market

Case Study: Five Things American Express is Getting Right for the Mass Affluent Market

Case Study: Five Things American Express is Getting Right for the Mass Affluent Market

Sam Murrant

Samuel Murrant

Sam is a senior analyst on the consumer payments team at GlobalData. His areas of expertise include online payments and m-commerce, payment card loyalty, prepaid cards and the United States payments market.

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American Express is a brand well-known for providing high-quality service and generous rewards to wealthy clients, and it has leveraged this image to great effect in its marketing to reach the mass affluent.

The defining characteristics of the American Express customer base are affinity with the brand and above-average card spending. American Express cardholders tend to have sought out their cards – and to a far greater extent than holders of Visa, MasterCard or other scheme-branded cards. When asked about the most important reasons for choosing their credit card, 15.5 percent of American Express cardholders in the U.S. stated that "identifying with the brand" was a major reason for their decision. By contrast, only 8.5 percent of MasterCard cardholders and 7.3 percent of Visa cardholders stated this.

Here are five things the brand is doing right.

A primary relationship

As both a card issuer and a payment scheme, American Express has control over the features of all payment cards featuring its branding, as well as complete control over the fees they charge merchants (unlike banks issuing Visa or MasterCard-branded cards, which must abide by the interchange fees set by the card schemes). This status is both a benefit and a detriment to the company.

Unlike Visa and MasterCard, American Express holds the primary customer relationship on almost all cards bearing its branding, and gets all of the revenue and customer data available from those cards. On the other hand, it also needs to deal with managing its entire payments ecosystem as well as creating direct customer-facing products and services. The overall effect of this status is that American Express is a truly end-to-end service provider for its customers, which highlights the level of service the company provides.

Exclusivity factor

American Express is widely known for its range of premium-branded charge cards, which exist in four tiers beginning at the Green card, which charges an annual fee of $95 in the U.S., then moving up to Gold (annual fee: $195), followed by Platinum (annual fee: $450), which is the highest tier that can be applied for directly. Above all of them is the Centurion card, also known as the Black card (annual fee: $2,500, with a $7,500 "initiation fee") – an invitation-only card whose full range of perks are known only to its holders and American Express itself. The Centurion card is a powerful status symbol, and the fact that little is known about it aside from the price tag makes aspiring to own one a major draw to the American Express brand for ambitious mass affluent customers.

Outside of the ultra-premium Centurion card though, the tiered system encourages aspiration to the next tier. Each successive level is a greater status symbol than the last, and offers more generous rewards and higher levels of service.

Social media ties

American Express makes use of multiple channels to keep its customers engaging with the brand, with the aim of making it as easy as possible for cardholders to communicate their issues directly and have them speedily resolved. It utilizes social media channels, particularly Twitter and Facebook, as part of its customer engagement strategy, posting new deals and offers to its @AmericanExpress Twitter account and Facebook page.

American Express also uses social media for direct communication with cardholders. Its customer service-related Twitter account, @AskAmex (which is its U.S.-based customer service handle; it has other accounts for other regions) is used to field questions from cardholders in real time during business hours. Combined with the brand’s advertised 24/7 customer-service department, this contributes to the impression that the company is not afraid of complaints or difficult requests, and that there is always someone available to help.

Retention-based loyalty

Focusing solely on financial benefits and rewards encourages price competition and switching (generally a poor way to ensure customers remain loyal in the long term) but they do make a product attractive to an initial applicant. Due to its higher price point (both on the consumer side and the merchant side) American Express is capable of offering more to its cardholders than other providers, and the company makes use of generous introductory offers.

However, in combination with its emphasis on customer service and engagement, the American Express rewards are some of the most retention-focused (and therefore ultimately more valuable to the brand in the long term) in the market. By providing a combination of positive experiences (largely through direct interactions and customer service) and generous financial rewards, American Express makes its cardholders feel that they are valued and that they are getting good value. This prevents switching accounts to take advantage of introductory deals.

Partnering with merchants

Partnerships are of critical importance in modern loyalty schemes, and American Express makes heavy use of merchant partnerships to add extra choice (and therefore value) to its point schemes. One of the most notable recent partnerships American Express has introduced is a deal allowing cardholders to redeem Membership Reward points (accrued at varying rates on regular spending on American Express cards) directly at Amazon.com. It uses partnerships with big-name retailers to provide additional convenience and value in its loyalty schemes. By making it possible for cardholders to spend points as they would money, the points become more valuable to consumers, since they can be spent on exactly what those consumers want to buy.

Know your customers

American Express owes much of its success to a deep understanding of the wants and needs of the mass affluent. It aligns its brand with the values of aspiration, long-term loyalty, and customer service, and uses all available channels to push that message out.

The statements and opinions of the writer do not necessarily reflect those of TSYS.

Other Articles by Samuel

Samuel Murrant

Sam is a senior analyst on the consumer payments team at GlobalData. His areas of expertise include online payments and m-commerce, payment card loyalty, prepaid cards and the United States payments market. His main interests in payments lie in evaluating new payment products from a consumer perspective.

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