American Express is under the knife, as it cuts $1 billion in spending with the end of its Costco and JetBlue co-branded cards. The cutback will probably cut into many of the forward looking promotion and marketing projects that Amex underwrites with Facebook, Twitter, Foursquare, Uber, Pinterest and others.
It will also lead to the departure of many executives – Leslie Berland, EVP, Global Advertising, Marketing and Digital Partnerships, for one, is rumored to be headed to Twitter as CMO – where she would be able to work with Buy Buttons, coupons and other promotions to fan commerce that would supplement or compete with Amex efforts. In this case, the use of Twitter and other social media to fan commerce will seem a whole lot easier than directly fulfilling sales and ecommerce.
For Amex, however, it is not all bad. If we want to be cheerful about it, the looming cutbacks also represent a great “focusing” opportunity for the company, which is perhaps the most aggressive digital marketer in the field with mobile-oriented initiatives for deals, loyalty, prepaid cards and wallets.
The company and its premium model have actually been under stress for some time — even before the loss of the two reseller deals (Costco alone represented 10 percent of Amex revenue). While there is Apple-like seamlessness in Amex as the acquirer, the issuer and the network, many merchants have been hesitant to pay the .5 percent Amex premium over other credit card issuers – especially after Amex moved away from its exclusive emphasis on the wealthy and rolled out the Bluebird debit product with Walmart and other value cards to compete for the high volume of underbanked customers.
Given the cutbacks, we wouldn’t be going too far out on the limb to predict that Amex won’t be underwriting major promotions from major merchants in the near future. This past holiday season, we already saw Amex end its subsidy of Small Business Saturday purchases (which went from $25 in 2013 to $10 in 2014 to zero in 2015).
One could argue that Amex has already incubated its digital offerings, which launched in 2011-12 out of a distinct business unit designed to “challenge the status quo.” Indeed, these efforts may not really require additional financial support. We know that a good promotion these days still results in tens of thousands of sales – Amex definitely remains an inviting publisher for deals . But they are no Super Bowl.
As for the focusing opportunity? That would be for Amex to reimagine itself as a marketing machine for its merchants – something that is well underway. That could mean a series of acquisitions (I might speculate that could mean one of the SMB loyalty plays, Big Data companies – Amex was an initial investor of Radius Intelligence–, or even a social media power, such as Twitter, Yelp or Foursquare).
At Money2020 in 2014 – more than 14 months ago — CEO Kenneth Chenault telegraphed the company’s next moves. When it comes down to payment innovation, it all comes down to one thing: Merchants want to grow sales. Does the innovation “help merchants meet customer needs?” he asked. “Do they provide incentives for changing customer behavior?”