Marketing Campaign Case Studies

Sunday, February 10, 2008


In June 1996 American Express Company launched a $200 million global marketing campaign to emphasize its strong brand presence and also to introduce new products and services. As competition in the credit card market intensified, American Express (AmEx) had suffered declining revenues in the early 1990s. At the same time AmEx lost market share as the company made a failed attempt at becoming a financial services supermarket by purchasing several brokerage firms, investment banking companies, and real estate businesses. American Express hoped that its ‘‘Do More’’ campaign, which consisted of both print and television ads, would lure consumers with the company’s historic brand image of reliability and prestige. Once interest was captured, AmEx planned to inform consumers of its wide variety of services and programs, with the belief that consumers would take advantage of the offers because they trusted and respected AmEx. John Hayes, the company’s executive vice president of global advertising, explained, ‘‘Our advertising used to be about a limited number of products and services, and was often defined by the people who used them. This campaign stresses our growing number of services and what American Express can do for you.’’
The ‘‘Do More’’ campaign continued into 1997, spreading information about the American Express collection of charge cards, credit cards, investment products, travel services, and more. In January AmEx also launched the ‘‘Competitive’’ campaign, which was part of the ‘‘Do More’’ effort yet focused exclusively on addressing the faults of its competitors’ services. The campaign primarily targeted longtime rival Visa International, which had a history of attacking American Express in its ad campaigns.

The competitive portion of the ‘‘Do More’’ campaign was a reaction to continual onslaughts from Visa’s marketing. Since the mid-1980s Visa had deliberately pitted itself against American Express, producing numerous television commercials that pointed out AmEx’s alleged shortcomings as a credit card provider. James Desrozier, vice president of MasterCard International’s advertising division, said in a 1992 Newsday article, ‘‘Visa went against American Express without mentioning MasterCard. It was the two of them and it just knocked us out of the game. It was a brilliant strategy.’’ American Express generally ignored Visa’s attacks, although battles occasionally arose. Prior to the 1994 Olympics in Lillehammer, Norway, agreement had been reached between the two companies to refrain from attacking one another in Olympic-related advertising. In addition, because Visa was an official sponsor of the Olympics, AmEx was not to use images or shots from the events in its ads or to imply an affiliation with the Olympic Games. When the Olympics began, however, the agreement crumbled. Visa objected to AmEx television ads that claimed, ‘‘So if you’re traveling to Norway, you’ll need a passport, but you don’t need a visa.’’ The play on words could be confusing, it was charged, and Visa accused AmEx of suggesting that it was connected with the Olympics by emphasizing its history with and presence in Norway. Visa then countered with television ads using its standard anti-AmEx slogan, ‘‘And they don’t take American Express.’’ American Express had long been marketed as a charge card that exemplified prestige and status, and its fees could pack a wallop. In 1995, for example, the standard green card commanded a $55 annual fee. An older marketing campaign embraced the tag line ‘‘Membership has its privileges,’’ which hinted at AmEx’s exclusive reputation. Its promises of privileges and perks, however, were not enough to sustain customer loyalty. Time magazine reported that in the early 1990s more than 2 million AmEx cardholders chose to cancel their membership. Other credit card companies such as Visa and MasterCard offered low interest rates and feefree cards to consumers, and they garnered a lower usage fee from merchants, which made them more attractive to retailers. In 1977, for example, Visa reportedly took a 2 percent fee from purchases, whereas AmEx still took 2.74 percent, down from 3.22 percent in 1990. In 1995 H. Eugene Lockhart, MasterCard’s chief executive officer at the time, told Fortune, ‘‘The consumer today simply doesn’t see the need to pay fees for a card that gives them no greater functionality than anything we or Visa would give them.’’ It appeared that the card of prestige had become the card of the privileged few rather than that of the masses, and, according to Fortune, AmEx’s share of the domestic card market declined from close to 25 percent in 1990 to 16 percent in 1995.

American Express’s clientele had traditionally included those who were financially established and for whom ‘‘membership ha[d] its privileges.’’ AmEx had long been embraced by business travelers and corporate clients, and, according to Time, AmEx customers were ‘‘big spenders who charged an average of $6,000 on their cards in 1996, in contrast to some $3,200 for charges per Visa card.’’ Business charges and travel expenses accounted for the bulk of this spending, however, and customers used AmEx cards infrequently for personal purchases. To remedy this situation and to increase its market share in the competitive credit card arena, AmEx needed to appeal to a broader market. The company thus expanded its target clientele to include not only the upscale crowd but also the credit card-carrying masses. To compete with Visa and MasterCard, AmEx promoted its Optima credit card, which allowed the cardholder to pay off a percentage of the balance each month rather than the entire balance, as with the traditional AmEx charge card. For the ‘‘Competitive’’ campaign American Express took aim at non-AmEx cardholders to inform them of its numerous incentive programs and premiums. While companies such as Visa and MasterCard had long offered a slew of cards and rewards to its cardholders, including discounts on purchases and free airline miles, AmEx had generally refrained from such programs and stuck with its traditional card offerings. But the company learned a lesson, reported Time, during a focus group session in the early 1990s when the holder of a competing card that offered free airline miles stated, ‘‘I want to go with you guys, but you guys are so stupid that you’re not offering this product to me.’’ In a company survey AmEx learned that its cardholders would use their AmEx cards for more purchases if the spending rewarded them with travel, food, and merchandise perks. AmEx thus expanded its small airline mileage program in 1995 to offer a wideranging rewards program. The Membership Rewards program allowed cardholders to earn points by using their AmEx cards, which could later be exchanged for travel rewards, merchandise, gift certificates, and more. AmEx also began to offer a wider variety of cards, including some with no annual fee and some co-branded with other companies, and solicited retailers to increase the number of outfits at which the card could be used. As AmEx president Kenneth Chenault told U.S. News & World Report, ‘‘If our customer wants to use the American Express card at a hot dog stand, we want to be there.’’

The Better Business Bureau had dealt with American Express and Visa on numerous occasions throughout the 1990s. However, until Visa cried foul over AmEx’s Visa-bashing ‘‘Paris’’ spot, AmEx had been doing all of the complaining.

Although American Express faced competition from credit card companies, major banks, and other financial service providers, Visa provided the most visible rivalry. According to RAM Research findings reported in Advertising Age, the ubiquitous Visa card dominated the credit card market with a share of 50.5 percent during the first half of 1996. MasterCard followed with 26.4 percent, AmEx with 15.9 percent, and Discover with 7.3 percent. Similar reports by SMR Research in USA Today indicated that AmEx’s share dropped from 20.4 percent in 1992 to 16.4 percent in 1996. Visa’s market share, on the other hand, rose from 45.1 to 49.2 percent, while MasterCard’s share remained essentially steady at 27.6 percent.
American Express’s market share could not match Visa’s, but AmEx showed signs of improvement in 1996 when it finally reversed a decade-long decline in its share of the credit card market. Advertising Age reported that spending on AmEx cards went up 15.6 percent in 1996 from 1995, while Visa’s purchase volume increased 15.5 percent. And according to U.S. News & World Report, 41.5 million AmEx cards were in circulation in 1996, an increase of 8 percent from the previous year. Carl Pascarella, CEO of Visa U.S.A., was not impressed, however, as he told Time: ‘‘They haven’t changed much . . . . Over the past eight or nine years, consumers have been pulling out their Visa card significantly more often than their American Express card.’’ AmEx indeed had a long way to go to catch Visa. There were almost 600 million Visa cards in distribution, and Visa was accepted by more than 14 million retailers globally. Although AmEx had been signing up more businesses to accept its cards and had more than 5 million merchant partners, this was still a far cry from Visa’s 14 million.

The primary purpose of the American Express
‘‘Competitive’’ campaign was to point out the shortcomings of its competitor Visa. The ‘‘Do More’’ campaign of 1996 had laid the groundwork by introducing AmEx’s numerous new services and programs, while also capitalizing on its image of reliability and downplaying its snobbishness. As the company’s Hayes explained in Advertising Age, ‘‘We’re reshaping the American Express brand to fit a wide variety of uses in the next century—we want to have long-term, meaningful relationships with people and we’re going to build them through marketing.’’
The ‘‘Competitive’’ campaign consisted of a print effort and of three television spots that aired on the national networks during prime time. The first spot, ‘‘Paris,’’ began airing in January of 1997 during the National Football League play-offs and implied that many of Visa’s alleged services were nonexistent or unreliable. The spot featured a Visa cardholder embarking on a vacation to Paris. The cardholder had intended to use the free airline miles he had accumulated on his Visa card but discovered at the airport that his miles had expired. He then attempted to charge the plane ticket on his Visa card, only to be told that he had reached his credit limit. The cardholder was forced to pay cash for his ticket, and his troubles did not end there. Upon reaching France, the traveler encountered problems entering the country. He then contacted Visa for traveler assistance but was turned down. Other obstacles lay in wait as well, for when the traveler injured himself and also was arrested for mistakenly declaring himself a spy in French, he was unable to use his Visa’s free medical or legal services. The message AmEx intended to send was that the traveler would not have had such problems had he used an AmEx card.
American Express timed its aggressive campaign to begin shortly after many airlines had cleared out a large number of free airline miles, many of which had accumulated on credit cards. An AmEx spokesperson told Credit Card Management, ‘‘There are a lot of inconsistencies in Visa programs because they vary from issuer to issuer . . . . We feel it is important to set the record straight. And with many frequent-flier miles having just expired, we felt it was a good time to remind people of the benefits of Membership Rewards.’’ AmEx’s free airline miles came with no expiration date.
The print effort, which began in February, declared, ‘‘Visa says they’re everywhere, but isn’t it more important to have a card that helps you with just about everything?’’ One of the print ads showed an American Express card next to a Visa card. The ad listed mocking descriptions of Visa’s services, including ‘‘No medical referrals, but rounded corners for safety.’’
A second television spot, ‘‘Grand Canyon,’’ featured another unlucky traveler. This Visa cardholder was on his way to Las Vegas to see Steve Lawrence and Eydie Gorme but en route encountered problems in the Grand Canyon. He lost his wallet, dropped his camera into the canyon, and then crashed his rental car into a billboard as Lawrence and Gorme passed by on their tour bus, uncorking a bottle of champagne. In this spot American Express challenged Visa’s purchase protection plans, rental car insurance services, and lost card assistance, implying that its own services in these areas were superior.
The spot ‘‘Virtual Reality’’ featured a male, played by the unlucky traveler from the Grand Canyon, standing in a store and wearing a virtual reality headset. In his fantasy he danced with a beautiful woman, but just as they were about to kiss, he was jarred from his dream by a store clerk who informed him that he was over the spending limit on his Visa card and thus could not continue with his virtual reality session. A struggle over the headset ensued, and the police arrived. This ad questioned Visa’s credit limits, in turn emphasizing that American Express cards had no preset spending limits.

Visa obviously was not pleased with the American Express ‘‘Competitive’’ campaign and in July 1997 filed a complaint with the National Advertising Division (NAD) of the Better Business Bureau, hoping to put a stop to the airing of the ads. Visa claimed that the AmEx spots were misleading because the advertising implied that Visa did not offer any of the services discussed in the campaign. Visa argued that many of its cards offered various services, including medical and legal referrals, purchase protection, and airline mileage programs. David Sandor, a Visa spokesman, told American Banker, ‘‘Millions of Visa cards offer the enhancements AmEx claims Visa doesn’t have.’’ Advertising Age indicated that 85 million Visa Gold cardholders received free medical and legal services as opposed to 40 million AmEx cardholders who benefited from similar programs. The NAD reviewed Visa’s complaints and determined that American Express needed to change only a few words that could be considered confusing. AmEx was required to make it clear that some Visa classic cards did offer medical and legal services and that some cards also offered mileage programs in which the airline miles had no expiration date. AmEx spokesperson Emily Porter indicated to American Banker, ‘‘We are pleased that we just have to make some minor changes . . . . We see this as a victory.’’ Another AmEx spokesperson downplayed Visa’s complaints and explained to Credit Card Management, ‘‘We are not surprised Visa is uneasy with the spot . . . . Visa is not providing its members with products and services consumers want. We want to make it clear that we would like to provide those products to their members.’’
Viewers were not as unhappy as Visa about the ‘‘Competitive’’ campaign. The ‘‘Virtual Reality’’ spot was nominated for a best commercial Emmy Award for 1997, and ‘‘Paris’’ won an award at the 1997 Cannes International Advertising Festival. One cardholder, a victim of the purge of airline miles, said that the American Express ‘‘Paris’’ spot was especially effective. The cardholder told Credit Card Management, ‘‘Losing miles after spending years to build them is a maddening situation . . . . The ad also correctly points out that Visa issuers do little for their cardholders when it comes to travel services.’’ Other viewers may also have been swayed, for, according to Time, AmEx saw its market share increase from 18.3 to 18.9 percent during the first half of 1997, while Visa’s share dropped from 48.88 to 48.85 percent. AmEx stock shares had increased fourfold since 1993, and profits were on the rise.

No comments: