In the face of that challenge, both Visa and MasterCard each spent about half that AmEx largesse. Still, Visa edge upward 0.4 percentage points to a 52.1% market share and MasterCard declined imperceptibly in share as AmEx grew 0.4 points to 16.5%.
Money down the drain? Not according to market watchers. "American Express is defending its position," says Gwenn Bezard, research director of Aite Group, a Boston consultancy, noting Visa and MasterCard are copycatting its products and creating offerings that are similar to what American Express has offered for years.
And that, namely, is its longstanding lock on customers who spend big on travel and entertainment-a lucrative market for banks to penetrate. And now banks can, following a court ruling in late 2004 that gave AmEx the same rights to co-market and team with banks. The company in 2005 inked a deal with MBNA and several other banks to offer its card, an arrangement Visa and MasterCard have enjoyed for years.
But AmEx is not chasing the mass market in co-marketing ventures. "They are protecting their brand by having strict parameters around the messaging on any American Express product" so as not to dilute its customer base, says David Poe, managing director at consultancy Edgar, Dunn & Co.
That particular market is money in the bank in an industry facing constant erosion in profit margins. "This used to be a business that had ROI of 5% or 6% twenty years ago," says James Accomando, president of credit-card consultancy Accomando Consulting. "It is now about 1.7% to 2% and dropping."
American Express "has to be a louder voice and get out there on a more frequent basis to make sure they penetrate through the clutter," Mr. Accomando says, adding "They still have to spend more per customer, but they are also making more per customer based on their pricing model. There's still more cachet to having an American Express."
Meanwhile, Visa and MasterCard are attacking the market with new or augmented messages. Visa, switching from BBDO Worldwide to TBWA/Chiat/Day in 2005, this year launched a new ad campaign, "Life takes Visa," and MasterCard has added an interactive twist to its "Priceless" work by McCann Erickson that encourages customers to fill in the blanks and write their own "Priceless" campaign.