Corporate Close-up: American Express (chart) AMEX'S NEWFOUND LOVE OF LENDING MERCHANT, CONSUMER REBELLION FORCED CHANGES

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Few symbols of the 1980s match American Express Co.'s fearless centurion, the ultimate icon of wealth, prestige and high-class consumption.

But in the more austere '90s, that symbol is under attack, and the centurion has had to take up some of the weapons of the enemy to fight back.

AmEx has endured an aggressive, sometimes painful cost-cutting program and a paring of non-core businesses. It's also employing the street-figher tactics of Chairman-CEO Harvey Golub to taunt pesky rival Visa USA in ads, while simultaneously mimicking many features that have made bankcards so successful.

It has tested a reduced fee card; added Membership Miles, a loyalty building rewards program for frequent fliers that boasts 2.2 million members; and reversed credit losses from Optima that stalled expansion of its lending business.

The AmEx card, first introduced on the heels of Diners Club in 1958, quickly became the pre-eminent travel and entertainment payment option, and funded AmEx's ambition to become a veritable financial and travel supermarket.

For years, and especially in the 1980s, AmEx maintained an arrogance toward bankcards. But in the early '90s, merchants rebelled against higher processing fees, forcing AmEx to discount one primary revenue source. And cardholders began abandoning AmEx, unwilling to pay steep annual fees when many other cards were free.

The core U.S. personal charge-card business has lost 1 million cardholders in each of the past three years, and the company expects attrition to continue-though at slower rates-for the near future.

Many AmEx customers decided bankcards offer better value, and some wanted the flexibility to finance their purchases, once heretical to AmEx.

"When I came here to run Optima, [executives] seemed to relate people who revolve to serial killers," said Frank Skillern, president of AmEx's Consumer Card Group. "We didn't think bankcards were our competitors."

Also, the advent of co-branded credit cards, dominated by trusted brand name marketers like AT&T and General Motors Corp., offered consumers rebates, rewards and other features that AmEx couldn't-or wouldn't-match.

AmEx is now expanding its Optima business with the first of a series of revolving products, Optima True Grace, a free card that offers a 28-day grace period on all purchases. An estimated $50 million marketing campaign includes TV spots starring Martha Stewart, who uses cut-up bankcards to retile her pool. The aggressive ad strategy provides a platform for more new products and signals AmEx's newfound love of the lending business.

"We've got to get people realizing we're in this business [because] it's exactly the opposite of what we stood for," Mr. Skillern said.

True Grace is expected to yield 800,000 customers by yearend, many new to AmEx. The company promises 10 to 15 niche cards in the next two years, most aimed at protecting the AmEx card from traditional credit cards, also carried by 88% of its cardmembers.

AmEx is also improving service. A major initiative, code-named The Plan, by June will allow the company to link separate accounts with consolidated statements and extra features, permitting an a la carte-style menu of service options.

Most ambitiously, powerful parallel processing computers managed by Epsilon, a Burlington, Mass.-based database marketing unit, will enable AmEx to slice and dice its cardholder base in hundreds of ways and offer highly segmented promotions. That capability, unmatched by Visa and MasterCard because they don't directly issue cards, has been slow in coming and isn't expected until late next year or early 1996.

The renewed focus on rebuilding AmEx's core card business, and its leading travel agency network through acquisitions, is no accident.

Management has nearly completed pruning business units, allowing it to streamline corporate staff and shave more than $1.1 billion in expenses. Since early 1993, AmEx has sold or spun off First Data Corp., Shearson Lehman Bros. and Boston Co. units; turned over magazine management to Time Inc.; and is exploring selling AmEx Life Assurance Co.

"It makes the company easier to understand, and allows management to focus on a core couple of businesses," said Guy Moszkowski, analyst, Sanford C. Bernstein & Co.

Remaining units will be more closely aligned with the core business, and next month, IDS will be renamed American Express Financial Advisors, a move backed by a major ad campaign from Ogilvy & Mather, New York. The goal is to have financial counselors benefit from the strong AmEx brand, while AmEx's card business hopes to gain by cross-selling services and promoting loyalty.

The jury's out on whether AmEx cardholders will turn to the company for investment advice, and other challenges remain. AmEx is still hamstrung by its relatively weaker merchant base and recently added retailers, such as Denny's and Kmart Corp., threaten to dilute the card's prestigious image. The biggest hurdle: the tricky process of adding new products that won't just steal customers from AmEx's existing cards.

Robert McKinley, a Frederick, Md.-based card consultant, wondered: "How do you do that without totally cannibalizing what you've built?"

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