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1American Express Case Study

Running head: American Express Case Study

Marketing Case Study Analysis: American Express Company Lameka Fields

Ariel SheadNicole Outen

Shavon Dempsey

Marketing 3175Dr. A Arora


Table of ContentsExecutive Summary.................................................................................................................................................3History and Background.........................................................................................................................................4Corporate Culture....................................................................................................................................................5Code of Conduct.....................................................................................................................................................5Customer Analysis...................................................................................................................................................6VALS......... ............................................................................................................................................................7Product Market & Segmentation and Targeting.....................................................................................................8Company Mission....................................................................................................................................................8Competition & Competitive Market Analysis.........................................................................................................8BCG Analysis..........................................................................................................................................................9BCG Matrix...........................................................................................................................................................10External Market Environment...............................................................................................................................11PEST Analysis.......................................................................................................................................................11S.W.O.T Analysis & Matrix..................................................................................................................................12Marketing Plan Objectives.....................................................................................................................................13Differential and Positioning...................................................................................................................................14Marketing Strategy................................................................................................................................................14Porter’s Strategy & Five Forces Model.................................................................................................................15Marketing Mix.......................................................................................................................................................15Implementation and Control.................................................................................................................................16Financial Statistics................................................................................................................................................17References.............................................................................................................................................................18


Executive Summary

American Express is the world’s largest credit issuer by purchase volume and the largest provider of

travel services globally with assets totaling $153 billion,$30 billion in annual revenue and 62,500 employees

worldwide (www.americanexpress.com, 2012). American Express processes millions of dollars of transactions

daily. It operates through four segments: U.S. Card Services, International Card Services, Global Commercial

Services and Global Network & Merchant Services (www.marketwatch.com, 2012).

Its card services offer a variety of credit and charge card products and services to consumers and small

businesses making up over 90% of its company’s value and its travel services business making up the rest

(www.www.americanexpress.com, 2012). The Global Network & Merchant Services segment is responsible for

managing merchant services globally, which includes signing merchants to accept Cards as well as processing

and settling Card transactions for those merchants. It also offers merchants point-of-sale products, marketing

information programs and services (www.marketwatch.com).

A major factor threatening the company includes the most recent uncertainty in the U.S. employment

and housing market which has caused consumer spending to be down and the deepening economic crisis in

Europe has worried American Express stockholders (Johnson, 2012). Small business which is a major segment

of American Express’ target market has been greatly impacted by economic downturn. Despite the sluggish

economy loan performance has remained strong because many consumers have worked to pay off their bills

rather than take on more debt (Johnson, 2012). To the company’s advantage it primarily lends to affluent

customers, which has allowed it to maintain financial strength, unlike many counterparts in the financial sector

industry.

The rising global threat of economic and cybercrime fraud is a growing concern facing the financial

sector as whole and American Express must be vigilant with this issue by assuring the security and integrity of

it services and maintain the built confidence and trust it has established over the last 150 plus years of existence.

http://www.americanexpress.com/

http://www.google.com/url?q=http://www.utica.edu/academic/institutes/ecii/publications/media/global_threat_crime.pdf&sa=U&ei=vQHET5qpOIqi8QSLqMi5Cw&ved=0CCQQFjAI&usg=AFQjCNEtmXtPSlP-sDB-mICfMjSjsTnt_g

http://www.market/



American Express has a longstanding history of sustainability and longetivity, strong global presence

and is a trusted brand leader in the financial and credit industry. It is a recognized global leader in customer

service earning five consecutive J.D. Power and Associates awards for highest customer satisfaction among

credit card companies (Young, 2012).

History and Background

American Express Company has unique beginnings that have played vital role in the company’s values

and operations today. Since American Express’ 150 year inception “reinvention” has been the word used to

help establish its brand, overcome challenges and meet the growing and unique needs of its customers

(2012,www.americanexpress.com).

American Express founded by Henry Wells in 1841 began it existences as a New York express and

freight business, providing the safe transport of valuables (www.americanexpress.com, 2012). It then

progressed into money orders and traveler's checks and there its travel service operations, including its credit

card services emerged. Several key historical events challenged the company including major regulatory

changes in the express and travel industries, competition after the Civil War, the Card Revolution of the 1950s,

the International monetary crisis of 1971, and the Credit Card Wars: 1980s-90s (www.americanexpress.com,

2012). However the hallmarks of the American Express brand which are trust, integrity, security, quality and

customer service have remained constant (www.americanexpress.com, 2012).

Demonstrating a niche for global diversification and market development in early 1999 American

Express formed a branch of American Express Financial Advisors in Japan. In 2000 it established a strategic

position in the burgeoning Chinese economy by opening a headquarters in Beijing (www.americanexpress.com,

2012).







Despite intensified competition American Express has enjoyed a reputation for innovation, profitability,

and integrity (www.americanexpress.com, 2012).

Corporate Culture

American Express website proclaims that “As a company whose primary mission is to take care of

customers, American Express has created a culture with service at its core. We dedicate extensive resources and

effort to satisfying and surprising customers with thoughtful, creative and personalized solutions. You’ll find

the same level of personal attention, respect and support for our people as well. We place great importance on

doing what is right, what is best and what is innovative (“Working at American Express| Culture,” 2012).”

American Express also places great emphasis on creating a comfortable, flexible environment for their

employees, which includes those entering retirement and ones on maternity leave as well. American Express

states “We strive to create an environment where people are respected, feel personally and professionally

fulfilled, and look forward to coming to work. We empower our people to do the best job possible, while

creating a life that’s truly extraordinary (“Culture| Work Environment, 2012).”

Code of Conduct

The American Express Code of Conduct is a fifty-three page document expressing the need for

employees to remain integral throughout the company, especially since regulations are tightening. It also

includes reliable information about who to report violations to when an employee suspects or witnesses a

violation. Additional information centers around the brief outline and summary from the “Blue Box Values” in

the document.

“Customer Commitment- We develop relationships that make a positive difference in our customers’

lives.



Quality- We provide outstanding products and unsurpassed service that, together, deliver premium

value to our customers.

Integrity- We uphold the highest standards of integrity in all of our actions.

Teamwork- We work together, across boundaries, to meet the needs of our customers and to help our

Company win.

Respect for People- We value our people, encourage their development and reward their performance.

Good Citizenship- We are good citizens in the communities in which we live and work.

A Will to Win- We exhibit a strong will to win in the marketplace and in every aspect of our business.

Personal Accountability- We are personally accountable for delivering on our commitments.

The Result- By acting according to these values, we will inspire the loyalty of our customers, earn a

sustainable leadership position in our business, attract and retain a highly talented and engaged workforce, and

provide a superior return to our shareholders. This, in turn, will enable us to achieve our vision of becoming the

world’s most respected service brand (Employee Code of Conduct, 2012).”

Customer Analysis

American Express distinguishes itself as the world’s premier credit card and financial service provider

and contributes it success to it premium customer base and direct relationships with millions of consumers,

businesses and merchants worldwide. American Express card members on average spend about four times

more than those of MasterCard and three-and-a-half times more than Visa (Young &

www.americanexpress.com, 2012). In 2009 personal card members spent on average $11,213 and have the

highest credit ratings among the major card issuers (Young, 2012).


Customers see American Express as business partners and not just the issuer of credit and see value in

the products and services offered. “We earn the loyalty of our high-spending customers by providing them

with industry-leading products, services, rewards and benefits” (www.americanexpress.com, 2012).

VALS

Leading in product innovation and technological advances, American Express cardholders would be

typed on the highest level of the VALS framework as “innovators”. On the VALS types innovators are

described as highly successful, sophisticated with an abundance of resources, receptive to new ideas and

technology and enjoy a cultivating experience (www.strategicbusinessinsights.com, 2012). American express

has a signature for offering a valuable product and rewarding experiences for it users.

American Express also has extremely high value sets that model the company’s operation. The

company has strong ideals and believes in providing excellent customers service, community responsibility and

global leadership. Product development is highly involved in providing financial solutions and strategies for

business owners. Therefore other levels of the VALS segment such as “thinkers”, “achievers”, “experiencers”,

"believers”, “makers” and “strivers” can all be American Express’ target customer.


Product Market & Segmentation and Targeting

American Express has a brand and reputation that attracts customers and business partners from around

the world. American Express strives to differentiate its brand from other credit card companies by making a

commitment to provide a variety of products and services that offer flexibility, promote financial responsibility

and support communities with common interests.

A significant difference in the American Express’ product brand is the spend-centric model. Unlike

traditional credit cards, revenue is driven by card member spending and the business from merchants rather than

from lending fees and revolving credit balances (www.americanexpress.com, 2012). This places American

Express in the unique position to focus on product development and lead as an innovator in the market place.

Company Mission

American Express has three operation principles that are used to guide the daily action of the company

which are 1) offering superior value propositions to all customers 2) providing products, services, benefits and

rewards that deliver more value than any competitor and 3) supporting the American Express brand by striving

to always provide the world-class service and personal recognition that customers expect from the company

(www.americanexpress.com, 2012).

Vision

We work hard every day to make American Express the world’s most respected service brand.

Competition & Competitive Market Analysis

In the financial service industry there are many competitors. The top competitor of American Express is

cash. The company is still trying to figure out how to obsolete cash because there is always a need for cash in

the world, but from a company aspect the top competitors would be J.P. Morgan Chase, Visa, and MasterCard.


One of the biggest competitors of American Express next to cash would be J.P Morgan Chase which is

an American multinational banking corporation of securities, investments and retail. It is the largest bank in the

United States by assets and market capitalization. It is a major provider of financial services, with assets of $2

trillion. It is also ranked number 28 on the Interbrand Top Global Brands. The platform of “The Way Forward”

keeps them relevant to customers and they continue to be a valued expert in the unstable markets (Interbrand,

2011).

Next, Visa which is a global payments technology company that connects customers, businesses, and

banks in more than two hundred countries worldwide. According to the Interbrand Top Global brands it ranks

number 75. Visa’s brand idea is “Better Money for Better Living” which supports the company’s vision of

being “The Universal Currency of Life.” They are also committed to innovation and continue to launch new

products and services. They have built one of the world’s most advanced processing networks with the

capabilities of handling more than 24,000 transactions per second securely. (Interbrand, 2011)

Finally there is MasterCard, According to them they have been a leader in the global payments industry

for over four decades. They have accepted commerce at an unsurpassed network of more than 28.5 million

locations worldwide. MasterCard has also streamlined an intelligent approach to processing enabling efficient

commerce on a global scale. This is the largest VPNs in the world which is based on an agile network with

speed, integration and reliability.

BCG Analysis

American Express would be considered a cash cow. It continues to be a leader in the financial services

industry being ranked number 23 on the Interbrand Survey. American Express customers on average spend up

to 2-4 times as much as customers using competing cards; the average American Express cardholder spent

$11,213 per year, excluding cards issued by affiliates. This allows American Express to charge a discount rate

over twice as high as either of its main competitors (an average of 2.54%). American Express posted a net


income of $4.1 billion from its total revenues of $27.8 billion. This was an increase from its net income of $2.1

billion and revenues of $24.5 billion (wikinvest).

J. P. Morgan would be considered a star. The firm has a significant amount of international exposure,

with operations in over 50 countries and clients in every major financial market in the world. JP Morgan Chase

reported a full-year total revenue of $115.5B and a net income of $17.4 billion (wikinvest).

There are more than 1.7 billion Visa branded cards in the global market. Visa would be considered a

border line question mark and cash cow because they are continuing to grow and expand. Visa's operating

revenue reached $8.1 billion, and its net income was $3 billion (wikinvest).

MasterCard is the second largest electronic payments processor by purchase volume behind Visa in the

world. MasterCard reported an income of $1,847 million, a 26% increase over the previous year's $1,463

million (wikinvest). They would be considered boarder line between dog and cash cow because they are still

profitable and establishing position within the top financial services.

BCG Matrix

J.P. Morgan Chase

American

VISA

Master Card


External Market Environment

The top brand name credit cards that have been established have been around for decades. In the financial

service market it is very competitive and it is hard for new entrants to enter and become leader. The market can

be challenging at times because of the economical state and that may have a negative impact on the financial

service industry.

PEST Analysis

Political: President Obama signed the Credit Card Act of 2009 into law May 22, 2009. Millions of

credit card users will avoid interest rate increases on existing card balances and have more time to pay their

monthly bills, greater advance notice of changes in credit card terms and the right to opt out of significant

changes in terms on their accounts. The law has fundamentally changed the way credit card issuers market, bill

and advertise credit cards. American Express along with many other card issuers warn it will drive up the price

of and limit the availability of credit cards at a time when the country needs more spending to stimulate the

economy.

Economic: With the economy not being so stable it has had positive and negative effects on peoples

borrowing habits. There has been a cut back with borrowing suggesting that people are concerned about the

economy. Household are borrowing less and saving more. Some household have increased borrowing by

deciding to go back to school. So the economy can have positive and negative influences on American Express.

Social: Some American Express’ demographic and socio-economic characteristics are age, gender,

marital status, the level of education, the number of dependents in the family, and monthly income.

Technological: Technology has had a big influence in the credit card industry. In 2011, dealers saw the

development of the new mobile technologies that promise to change the way they accept payments. Mobile

http://www.creditcards.com/credit-card-news/obama-signs-credit-card-law-1282.php


processing has become very popular with many developing companies. American Express should make sure

they are up to date with all the technology advances that are happening worldwide.

S.W.O.T Analysis & Matrix

Strengths: American Express has many strengths which them a competitive company. They developed

many products and services over the years which show their diversity. They have travel cards to cater to

their customers who travel extensively. With multiple fraud cases happening in the US they have

established a Fraud protection program to protect their customer from having to experience this

problem. American Express also is highly profitable because they target high income customers.

Weaknesses: Like all companies American Express does have weaknesses. The financial credit crisis

affected profits due to decrease in consumer spending. There is also an overall lack in consumer

confidence because of the economic crisis.

Opportunities: American Express could take advantage of some of their opportunities to increase

profits for the company. They could market to new customers along with continuing to expand globally.

Threats: In this industry there are threats that could negatively affect American Express. One threat that

could affect American Express and its customers is the growing global rise of cybercrime and credit card

fraud. There is also a lot of competition to compete with along with the new government regulations

which can negatively affect the company’s bottom-line.

SWOT MATRIX

Strengths Diversity Innovation Travel services &

operations Brand loyalty Stability Fraud Protection

Weakness Financial Credit Crisis High membership &

annual fees Consumer Confidence

is low


Guarantee Target high income

customersOpportunities

Global expansion Diversify customers

SO - Strategies Market to different

customers Continue to innovate

but also expand globally

WO - Strategies Lower fees to appeal to

new customers Continue to build

consumer confidence

Threats Growing global threat

of economic cybercrime & fraud

Competition with other companies

New government regulations

ST - Strategies Continue to provide

security and protection to prevent fraud and cybercrime

Be aware of government regulations and continue to build brand loyalty

WT - Strategies Continue to build

customer loyalty by waiving or lower membership fee to prevent competitors from moving in on customer base

Marketing Plan Objectives

For 2012, American Express entered the prepaid debit card market wanting to eliminate fees and

increase rewards promotions to court customers. They desire to see growth through customer focus and

interaction. They plan to implement this through connecting with banks and partnering with social media sites

such as Facebook.

Differential and Positioning

American Express's position is interesting. People might feel that it is lost on the perceptual map by

being perceived as somewhat expensive and not widely available. However, you must use caution when

interpreting these maps. American Express's target audience is more upscale than the other cards, particularly


the Discover Card. Thus, "prestige" could be an important attribute for this segment but it was not investigated

in this study. The lesson is that the map is only useful for a set of brands that are appealing roughly to the same

target group.

Profitability

Lowliness Prestige

Non Profitable

Marketing Strategy

American Express marketing strategy has shown a great deal of evolution from the days of “don’t leave

home without it” to its global campaign featuring a new tagline – “WELCOME IN- the power of all of us” and new

digital and cable broadcast brand campaign entitled the “Membership Effect”. The objective of this marketing strategy is

to educate about the rewards, benefits and experiences of card membership. Encouraging existing and potential members

to “unlock the possibilities and power” of the American Express card. The campaign also emphasizes a macro-marketing

approach of working together to build community relationships, support small businesses and promote an eco-friendly

lifestyle.

Porter’s Strategy & Five Forces Model

American ExpressJ.P. Morgan Chase

VISA

MasterCard


The Bargaining Power of American Express customer/buyers is high. There are many choices in the

market place. One could always choose a product from the competition.

Bargaining Power of Suppliers is moderate. This is due to the rapport American express had with its

suppliers.

Threats of substitutes are high, due to unwanted interest rates and fees. Therefore, customers choose

substitutes like prepaid debit cards. Not to mention cash is still the leading threat to American Express.

The potential of new entrants to the industry is low. Most consumers are familiar with the established

brands in the market and are loyal to their brands because of customer rewards and other incentives.

The rivalry amongst competitors exists with American Express, Discover, MasterCard, and Visa. They

offer many similar items to increase brand awareness as well as attract and keep customers who are brand loyal.

The overall value chain of American Express brings value to its product through brand loyalty and the

service behind this product which establishes excellent customer relationships. This also gives them a fair

competitive advantage.

Marketing Mix

American Express has over 22 personal charge, credit cards and small business charge card types that

all offer unique features and flexibility to best meet customer needs. Features which include no pre-set

spending limits, no annual fee, no interest and an array of rewards programs which include travel and flight,

gas, and cashback benefits and rewards.


Marketing Mix/4Ps

Product Place

Price Promotion

• over 22 credit& charge cards

• Business Services• Financial planning &

management and Marketing tools

• Apply online or by phone

• Direct mailing

• Annual fees & Membership fees• Annual Percentage Rates (APR %)• Card agreements

• Special introductory rate offers

• Specialized Membership Reward Programs

• Other industry Partnerships

Implementation and Control

The major weakness facing the company is the financial credit crisis which affected American

Express’ profit a great deal. During this time customers spent less and saved because of increased

concern about the status of the economy. Customers need to be assured that they have financial stability

before they will continue or began using credit to make purchases. American Express needs to continue

to build their existing customer’s confidence and loyalty by ensuring stability and offering valuable

products and services. American Express should continue its efforts to maintain positive relationships

with it global partners as wells as gain new customers.


Financial Statistics

Currency inMillions of US Dollars As of:

Dec 312008

Restated

Dec 312009

Restated

Dec 312010

Restated

Dec 312011

Other Revenues 3,215.0 2,265.0 1,938.0 2,148.0

TOTAL REVENUES 22,567.0 19,024.0 25,375.0 28,850.0

Cost of Goods Sold 4,931.0 4,553.0 5,591.0 6,934.0

GROSS PROFIT 17,636.0 14,471.0 19,784.0 21,916.0

Selling General & Admin Expenses, Total 12,574.0 9,663.0 11,671.0 12,383.0

Other Operating Expenses 2,017.0 2,693.0 2,899.0 3,091.0

OTHER OPERATING EXPENSES, TOTAL 2,017.0 2,693.0 2,899.0 3,091.0

OPERATING INCOME 3,045.0 2,115.0 5,214.0 6,442.0

Currency Exchange Gains (Loss) -35.0 35.0 -4.0 48.0

Merger & Restructuring Charges -- -161.0 -98.0 -96.0

Other Unusual Items, Total 571.0 852.0 852.0 562.0

Legal Settlements 571.0 852.0 852.0 562.0

EBT, INCLUDING UNUSUAL ITEMS 3,581.0 2,841.0 5,964.0 6,956.0

Income Tax Expense 710.0 704.0 1,907.0 2,057.0

Earnings from Continuing Operations 2,871.0 2,137.0 4,057.0 4,899.0

EARNINGS FROM DISCOUNTINUED OPERATIONS -172.0 -7.0 -- 36.0

NET INCOME 2,699.0 2,130.0 4,057.0 4,935.0

NET INCOME TO COMMON INCLUDING EXTRA ITEMS 2,684.0 1,802.0 4,006.0 4,877.0

NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 2,856.0 1,809.0 4,006.0 4,841.0

Graph provided by Investing.businessweek.com


References

American Express Company. (2012). Working at American Express Culture. American Express. Retrieved June 13, 2012, for http://careers.americanexpress.com/working/culture/index.html.

American Express Company. (2012). Culture Work Environment. American Express. Retrieved June 13, 2012, for http://careers.americanexpress.com/working/culture/work-environment.html.

Johnson, A. (2012). American Express says spending growth dips. Retrieved on June 13, 2012 from http://www.marketwatch.com/story/american-express-says-spending-growth-dips-2012-06-13-16485231

Young, R. (2012). Top 10 Common Stocks You Want to Own. Financials, manufacturing, railroad and energy stocks to buy. Retrieved on June 13, 2012 from http://www.investorplace.com/2012/03/top-10-common-stocks-countdown-amex-pg-utx-eca-lmt-trow/

Positioning Guide for Market Brands. (2012).Retrieved on June 12, 2012 from http://healthandfitnessbay.blogspot.com/2011/09/positioning-decisions-guide-for.html

http://www.marketwatch.com/investing/stock/axp/profile

http://www.cardpaymentoptions.com/credit-card-processing/top-credit-card-processing-trends-for-2012/

http://www.usatoday.com/money/economy/story/2012-06-07/consumer-credit-april/55445348/1

http://www.govtrack.us/congress/bills/111/hr627

http://www.strategicbusinessinsights.com/vals/ustypes/innovators.shtml

http://www.wikinvest.com/stock/Mastercard_ (MA) (Retrieved 12 June 2012)

http://www.wikinvest.com/stock/American_Express_Company_ (AXP) (Retrieved 11 June 2012)

http://www.wikinvest.com/stock/J_P_Morgan_Chase_ (JPM) (Retrieved 12 June 2012)

http://www.wikinvest.com/wiki/Visa (Retrieved 12 June 2012)

http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2011.aspx

http://www.mastercard.com/us/company/en/ourcompany/the_mastercard_story.html

http://investing.money.msn.com/investments/stock-balance-sheet?symbol=AXP&

http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=AXP:US&dataset=incomeStatement&period=A&currency=nativeInvesting.money.msn.com

http://careers.americanexpress.com/working/culture/work-environment.html

http://careers.americanexpress.com/working/culture/index.html

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