MKTG 361 Phase 2: Market Analysis for American Express

MKTG 361 Phase 2: Market Analysis for American Express

Group #6 Team American Express

By: Akshita Badola, Katrina Bargas, Michael Mendelsohn, Sofia Schena, Giorgio Thomas

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 MKTG 361 Phase 2: Market Analysis for American Express

Company and Industry Description

American Express is in the Credit Card Issuing Industry (NAICS 522210). The Credit Card

Issuing industry is in its mature stage of its lifecycle. The industry is growing in terms of

participants and the number of people who own credit cards is increasing. American Express is

experiencing a moderate growth in revenue as economic conditions improve. American Express

top competitors in its industry are Visa, MasterCard, and Discover.

Products and Services

American Express is a global services company that provides a range of products and services to

its customers and businesses. American Express Co. provides consumer services and global

commercial services. The global service company offers credit card products and travel-related

services to consumers and businesses. The services include merchant acquisition and processing,

serving and settlement, and point of sale marketing.

Environmental and Seasonal Trends

There are noticeable increased credit card usage phases throughout a typical year. Consumer

usage spikes from mid-November through late December correlating with the holiday season.

There is also a temperature drop during this time, which supports spending growth at indoor

shopping malls and online shopping. There is a substantial decrease in spending in Q2 (April 1

June 30), as consumers typically save for summer vacation during this time and children have

been in school for a while, so parents are not purchasing school supplies.

Unique Selling Proposition

American Express fees are high in comparison to its competitors as seen in Figure 1. To retain

customers, it must provide a unique selling proposition (USP), which is its rewards program.

Business customers can utilize The Pay with Points Program which allows membership reward

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 MKTG 361 Phase 2: Market Analysis for American Express

points to purchase travel expenses, including airfare, lodging, and transportation. Through

American Express sizeable outlet of partnerships, customers can purchase countless products

with reward points.

SWOTT Analysis

American Express provides customers with a large amount of reward points which can be used

towards travel, discretionary goods and repayment of credit card bills. As seen in Figure 2 this a

key strength of American Express. American Express offers points based on total spending not

volume of usage. This has helped American Express establish its prestigious brand name, by

attracting individuals with high income. As seen in Figure 3 the annual fee for American

Express most popular card is significantly higher than its competitors, something that many

consumers cant afford. This is represented in Figure 1 as American Express has the least

amount of cardholders compared to its competitors. This is because its competitors are providing

comparable benefits at a lower cost, a key weakness displayed in Figure 2. As seen in Figure 4,

this has led to a decrease in market share for American Express. Also there has been growth in

electronic currencies, a new form of payment which is a substitute for credit cards. This has led

to a decrease in global credit card use, a threat to American Express ability to attract new

cardmembers which can be seen in Figure 2.

Target Markets

American Express has 3 major target markets, the difference between each one is based on the

consumers age, income, and willingness to spend monthly. These 3 target markets make up

82.67% of total revenue so understanding their desires is key in driving our success.

Primary Market

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 MKTG 361 Phase 2: Market Analysis for American Express

As seen in Figure 5, our primary market are individuals spend between 3,000 5,000 monthly.

This market is responsible for 45.78% of our revenue. Since our primary market travels 40 days

a year, we want to provide benefits in that space, since that is the segment in which they spend

the most money. American Express cardholders receive 5x points for every dollar spent on

hotels and flights. Our strong rewards program incentivizes affluent customers to use their

American Express card more frequently.

Secondary Market

Illustrated in Figure 5, our secondary market is a younger population but still values being

rewarded for spending. This group enjoys eating out at restaurants and are frequent drivers so we

offer a card that provides them 2x points for food and gas spending. This group makes up

21.24% of our revenue so it is important that we appeal to their spending habits. More

importantly, they will graduate into our primary market, so we want to secure a lifetime

partnership with them so we can see continued revenue growth.

Tertiary Market

Most of these customers are very junior in their professional career and have lower monthly

spending, as shown in Figure 5. Since they dont have as much money to spend, they need to see

the diverse benefits of an American Express card. By providing valuable benefits early on, it

allows American Express to cultivate strong relationship with them early in their professional

career. Our tertiary market is an investment in our future revenue, so we want to provide benefits

that help them get their personal finances set early.

Competitive Analysis

Micro Competition

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 MKTG 361 Phase 2: Market Analysis for American Express

American Express competes internally to deliver the best credit card products and services by

maintaining strong and trusting relationships with corporate partnerships. If companies were to

stop accepting points as a form of currency, American Express could a lose a significant

customer base who take advantage of this benefit. Micro competition allows American Express

to internally grow as a company, so it can remain a top competitor in the credit card industry.

Macro Competition

At the macro level, American Express top credit card competitors are Discover, MasterCard and

Visa. They are competitors because they all also offer credit cards to consumers and businesses.

Figure 1 displays a breakdown of cardholders for American Express and the transaction fee that

its each company charges. Figure 6 provides detailed information on American Express,

Discovers, MasterCard, Visa, financial performance over the past 5 years. American Expresss

revenue has decreased, opposite of its competitors which has increased.

Top 3 Marketing Problems

In an increasingly competitive environment American Express faces constant marketing problem,

hindering its ability to grow.

First Marketing Problem: Competitors Increasing Reward Points

American Express has differentiated itself from its peers by providing premier benefits for its user base.

They have charge more money to offset their ability to compensate its users. Now its competitors are

providing cheaper cards with comparable benefits, which has lower American Express market share as

shown in Figure 4.

Second Marketing Problem: Fewer Merchants Accept American Express

When an American Express card is used at a store, the merchant encounters a transaction fee. American

Express fee is much higher than its peers, as shown in Figure 1. This has deterred many individuals from

acquiring a card because there are less places to use it.

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 MKTG 361 Phase 2: Market Analysis for American Express

Third Marketing Problem: Attracting Millennials

Millennials are driving our economy and American Express has a tough time enticing them to acquire a

credit card. Many Millennials like to save their money so there is no incentive for them to get a credit

card that rewards spending.

Suggestions

For American Express to remain the top credit card company in the industry, we need to

restructure our marketing strategies in a few ways:

First Suggestion: Reduce Discount Fees

It is important to remain an exclusive company for our loyal customers, and a decrease in

discount fees could positively influence potential customers to join, as more companies will

accept our credit card. While our revenue per transaction may decrease, we will see a rise in

revenue due to the growth in card members.

Second Suggestion: Develop More Corporate Partnerships

American Express needs to partner with the current most influential and prominent companies,

which will lead to an increase in credit card usage from all target markets. This will incentivize

more individuals to use their American Express cards so they can recognize the benefits.

Third Suggestion: Increase Customer Benefits

American Express prides itself on providing premier benefits for its customers. With an increase

in benefits from competitors, such as cash back, American Express needs to create new

incentives to gain new card members as well as retain current cardholders.

Conclusion

By implementing these suggestions American Express will be able to expand their services to a

wider group of consumers, specifically younger ones; helping American Express create a

lifetime partnership with consumers, ultimately driving its revenue growth moving forward.

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 MKTG 361 Phase 2: Market Analysis for American Express

Appendix

Figure 1

Competitor Cost Breakdown

Compa ny Us ers (in millions ) Tra ns a ction Fee
America n Expres s 40.0 3.5%
Dis cover 43.0 2.3%
Ma s ter Ca rd 87.0 2.6%
Vis a 118.0 2.4%

Figure 2

Strengths Weaknesses
- Prestigious global brand name - Lack of Debit Cards
- Over 50,000 employees and has strong employee retention - High fees for merchants
- Provides great benefits to customers, such as large amount of - Declining revenue growth
reward points

Opportunities Threats
- International expansion - Competitors increasing benefits to customers
- Rising interest rates - Rise of electronic currencies, a competitor to credit card use
- Credit Card breaches, driving individuals to use electronic
payment providers

Trends
- Personal debt increase
- Investment in cyber security
- Growth in e-commerce

Figure 3

Most Popular Card from Top 4 Credit Card Company Analysis

Compa ny Credit Ca rd Annua l Fee
America n Expres s Pla tinum 550.0
Dis cover It 0.0
Ma s ter Ca rd Dia mond Preferred 0.0
Vis a Quicks ilver 0.0

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 MKTG 361 Phase 2: Market Analysis for American Express

Figure 4

Market Share Breakdown by Top 4 Companies

Compa ny 2016 Ma rket Sha re % 2017 Ma rket Sha re %
America n Expres s 17.66% 16.38%
Dis cover 7.78% 8.15%
Ma s ter Ca rd 4.60% 4.93%
Vis a 13.90% 14.87%

Figure 5

Target Market Analysis

Money Spent Travel Days Educational
Target Market per Month Income per Year Degree Age Revenue %
Primary $3000 - $5000 $150,000 - $210,000 45 Undergraduate 40-55 45.78%
Secondary $2,000 - $3,000 $95,000 - $150,000 24 Undergraduate 35-50 21.24%
Tertiary $1,000 - $2,000 $70,000 - $95,000 15 Undergraduate 24 - 34 15.65%

Figure 6

American Express Discover Mastercard Visa

Year Revenue % Change Revenue % Change Revenue % Change Revenue % Change
2013 15,641.0 -2.50% 5,978.0 -27.30% 3,241.7 12.50% 9,994.0 13.00%
2014 16,414.0 4.90% 6,359.0 -13.10% 3,682.0 13.60% 10,964.0 9.70%
2015 17,340.0 5.60% 6,626.0 18.50% 3,770.1 2.40% 11,854.0 8.10%
2016 16,238.8 -6.40% 7,155.0 3.10% 4,228.9 12.20% 12,784.0 7.80%
2017 15,558.0 -4.20% 7,745.0 -5.00% 4,686.6 10.80% 14,125.8 10.50%

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 MKTG 361 Phase 2: Market Analysis for American Express

Works Cited

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GlobalNav

American Express Company. (2017). Company Details. Retrieved from Mergent Online

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Dwyer, B. (2012, January 26). American Express costs and discount rate. Retrieved September

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Holodny, E. (2015, September 15). Here's how much the average Amex, Visa, MasterCard, and

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http://www.businessinsider.com/amex-visa-mastercard-and-discover-card-owners-spend-

per-month-2015-9