Questions: Please provide detailed answers for the following questions

1. What is American Express background?

2. Illustrate the use of market segmentation and positioning by American Express

3. What are cross cultural implications of marketing American Express credit cards?

4. How is social class relevant to American Express marketing?

5. How does American Express use the concept of reference group influence in marketing its credit cards?

CASE 5 AMERICAN EXPRESS CO.* American Express Co. launched its charge card in 1956 ex- | customers want the best proxhart, not the cheapest product. pecting to free the American wallet from the large number of | Although it may sound like a cliche, managernent truly insists credit cards contained therein. The first card was a purple that the company strive to deliver the highest possible level of cardboard model. Today there are over 34 milkon plastic service, The service emphasis extends from the chief execu- American Express cards in use around the world, mostly tive down through the organization. The company has a sys green but also the more recent gold, platinum, and Optima teen for quantifying quality that mossures how long it takes additions which offer credit lines and extended payment operators to answer service center phones (7 seconds) and schedules. The cards have achieved tremendous success, how long it takes customers reporting lod card to receive being accepted al almost 3 million establishments in 130 seplacements by mad (45 hours). In addition, AmEx spends countries. American Express has become one of the best beavily to research card members perceptions of the service knowa brand names among consumer businesses. they receive. American Express' strategy has been to focus strictly on While AmEx seeks widespread ownership of its card, it upscale spenders in top line establishmcols, However, as its must be perceived as not suitable for everyone if if is to cardholders kovel off a new lack has been to get current maintain its prestige. As AmEx broadens its ound's appeal it customers In use their cards move frequently, even for non- risks alienating those who are attracted by its upscale image. dane occasions. The card is now accepted at not only the Such a move has Ilx potential of endangering the card's exclusive Four Seasons in Manhattan, but at all Shoney's niche. While helping it's profitability. the move may damage Lunity rostamrants. It is welcome at over 1500 Cineplex its image in the future. Odcon movie theaters and has been tested at MeDonald's. Will the card be alde to retain its "snob appeal" when the Not only are above average salaried cardholders welcome. person who uses it to change a purchase at Tillany's knows but also college students, who have potential for greater that across town it is being used to buy gas at a grimy :H examings. service station? Executives claim that the card is a badge of The American Express card has carefully built its image distraction and it doesn't matter where or bow the card is over a period of time by stressing five factors affecting its wed. Others feel that the move to broaden its usage can help prestige. higher price, high quality, limited supply, higher profits but best the American Express image qualifications, and cadesive reference groups. The card has Advertising for American Express bus reinforced the do- been priced for higher than alternative bank cards. The $55 sired exclusive image of the card but also broadened it some- fee on a green card compares to $15-$20 for most bank cards, what through successive campaigns, Ads also stress service and no fee at all for Sears' Discover Card. Even alver or gold | and try to minimize concern about qualifications by encourage so-called "prestige" or premium bank cards can often be ing prospects to apply, even offering an 400 number to facili- obtained for no fee. Thes, because the American Express | tate the process Ellective advertising has made the brand card is priced higher than most other cards around the world / extremely recognizable. During the 1870s AmEx ran the "Do it commutes much prestige. However, the challenge is to be | You Know Me? campaign which presented interesting and expensive enough to be profitable and perceived as exclusive. well known famous-named people who were not recognizable but law enough to be Hamable by appropriate segments. but were accorded insportance when they used the American While American Express claims its interest rates are lower Express Card. The promise was that the ordinary user would than other cards, some feel that consumers don't understand also be accorded prestige when they used de card. In the peratetage rate comparisons, but instead, respond more di- long-running "Membership Has Its Privileges" campaign. rectly to fees. Another side of the pricing issue is the fee | cardholders are shown enjoying paying the many benefits of the charged businesses who accept the card. This "merchant | card's services In all of these cumpsigns, consumers are discount," or the amount American Express keeps from the encouraged to think of being members of an exclusive dub. changes businesses submit, is believed to run from 1.25 per- not one with 34 million participants cent to L.5 percent higher than bank cards and the Discover Perhaps the brightest area for credit card growth is in the card. This difference can be a significant anant for low foreign market. although AmEx lags far behind its com- margin or struggling businesses. pellloss in Japan and Europe. The eventual foreign target The quality issue is closely connected to the pricing ques- boo, as people reflect on value received for the price paid. * Adapted from Jon Reny. "American Equas Againa ty Ropes." Adcock's AmEx has pursued a high quality image based on offering Marketing Weed, June 10. :891, pp. +-i, Heard Mitchell, "The Foked Vision Brownga West March 19, too, pp. 108-113, Joe Franiman aud Juim Merton move and better services than other cards it provides over "Cm AnEs Won the Maros-And Keep Its Claus?' Awinas Wert. Ounher 9. 1/400 travel service offices throughout the world. Evecutives Nite, pp. 134-183, john P. Newport, Jo, "American Expres: Service That do not apologise for the high cost of the card because they Seb," Fortune. Nowrender 20. 19:21, pp 60 91; and Miceand T. Carfan, "Core Cultural feespatmos no the Dynamic of Prestige, ' The journal of feel the quality is superior. According to one executive. AmEx Service Menbating. 317-24 Summer 1090market consids of 100 million or more people. One problem to customers and don't cost too much to make available. The slowing expansion will be the merchant chacount which some company maintains a profile of 430 attribute and purchasing merchants say differs by 4 percent from that charged by bank patterns on all cardholders that is updated weekly, AmEx rands. Another element which may restrict the growth of segments card owners by lifestyle and income, and then aims American Express in foreign markets is the company banks. services appropriate for each group, such as extra travel ingur Politically the name could be a negative fador in some mar- ance for senior citizens concerned with security or a special bets. In France, Commany, and Britain, the card market is magazine for shedents. Am Ex then plies its customer database malre; therefore, competing against well established cards with bill stuffers or catalogs to sell other items to receptive has been challenging for Ankx In the Japanese market the buyers. By carefully targeting direct marketing efforts to card- card has been able to grow rapidly as a niche player, appent holders only for products and services that are relevant to ing to users' designer-label affinity. However, the AmEx up- them, the company tries to avoid harming the client rela scale image is being toned down somewhal as evidenced by Honship. application forms that are found even in the back seats of Talkyo taxis. QUESTIONS The ultimate competitor to AmEx is not another credit card, but cash. It is estimated that in the United States only 1 Illustrate the use of market segmentation and positioning 15 percent of the items that could conceivably be charged are. by American Express. 2 What are the cross cultural implications of marketing Amerdem Express has been able to gain success by effec American Express credit cards? tively discerning what its present and potential card members 3 How is social class relevant to American Express market- want, and by carefully refining and test marketing new ideas. ing" The company has learned just what card "enhancements" How does American Express use the concept of reference. (ouch as automatic car rental insurance) are really important group influence in marketing its credit cards