YORK, Pa. (AdAge.com) -- American Express is unleashing a powerful weapon: a new unit that will harness transaction data for its 90 million cardholders to inform both marketing decisions and larger strategic issues.
The American Express Business Insights analytics and consulting arm boasts that it has customized business insights culled from its massive database. "Our data is unique — no one else has this level of detail," said Bill Glenn, president of Global Merchant Services at AmEx, and a former Pepsi and P&G marketing executive. "Other companies are doing lifestyle segmentation and modeling, but we're doing modeling off of transaction-level data."
AmEx already offers its partner merchants data to help develop insights such as where to advertise, where to put new store locations, and what model would best draw a response to an offer or service. But this new unit will widen the circle beyond those partners and drill down deeper to offer other insights. "More rigorous modeling" said Mr. Glenn, could be used for customer service management, product innovations, improved procurement and geographic expansion.
Transaction-level data is particularly valuable for its detail, as well as its ability to predict what people will spend on. Forrester Research analyst David Frankland said that while a person can say they like swimming, for a marketer, a stronger indicator is whether they join a health club with a pool. Joining a swimming club is even more predictive, and buying swimming gear is more predictive than that.
Transactional market-research data already exists, of course, and data companies with roots in the catalog industry, like DataLogix's NextAction Direct and Epsilon-owned Abacus, aggregate transaction data from across many retail partner sources.
Epsilon has a file well over 100 million people, "but we don't give the actual transactional data out," said Steve Cone, CMO, who said, "I wouldn't see AmEx as threat to our business. AmEx has been doing co-op mailings and promotions for a long time." He added, "Our list has transaction data from all types of credit cards, not just AmEx, but again we don't hand it out to retailers." But Forrester's Mr. Frankland said that the scope of AmEx's customer base and its well-known and trusted brand could distinguish the division from other market researchers. "American Express' breadth and depth gives them enormous scale. And the more scale, the more accurate the data would be."
The company would not disclose how much revenue it expects the consulting service will add to the bottom line, but Mr. Glenn said there is a "huge opportunity" for American Express Business Insights.
"I could imagine the early adopters would be direct marketers, then planners and strategists who are working on marketing and new products," said Mr. Frankland.
AmEx will continue its strict policy on not sharing personal data, so no consumer backlash is expected. Mr. Glenn said the company would not risk its brand reputation by compromising merchant and consumer trust. "The brand is, you could argue, our most-important asset," he said. "Their brand gives them the right to ask for permission to do this and think it will be handled properly," said Mr. Frankland.
Many consumers willingly sign up for loyalty programs where data is shared. More than 56% of people with credit cards are enrolled in loyalty programs, with almost half of those partner programs such as points for merchandise from a variety of retailers, according to the Direct Marketing Association.
Contributing: Michael Bush