Groupon says its focus is on the bottom line, rather than top-line growth.
American Express Co., a credit card powerhouse since the 1950s, is becoming a big name on the Internet. While other card companies are toe-dipping their way online, AmEx is taking the plunge-and its cardholders are following. A year ago, American Express introduced the Blue card, equipped with a chip that gives it smarts. Today nearly 2 million consumers own the card. They are big online users who like technology, electronics, music, low card pricing and shopping online. Nearly 60% of them use it to buy merchandise on the web, according to research earlier this year from Atlanta-based Brittain & Associates.
And the interesting part is that Blue is only a year old. For e-retailers who do not accept American Express, it might be time to consider it, while keeping an eye on Blue’s evolution. One year after a massive marketing campaign to support the launch of its chip-based Blue card, the company continues to drive home the online message, a big part of which promotes online shopping.
Acknowledging the shift to online shopping, AmEx in October 1999 introduced its Blue card. And what a product: no annual fee and a 0% introductory interest rate that jumps to a fixed rate as low as 10.99%. The card has its own rewards program called Blue Loot that features palm pilots, Sony Playstations, Motorola two-way radios and Geartec backpacks, for both online and offline card spending.
Aside from attractive pricing and rewards, the card promotes online shopping, giving cardholders an online wallet, the smart chip and an online card reader for their PCs. The reader accesses the chip to securely provide sensitive details for automatically filling out online shopping forms with shipping, billing and card information.
Rounding out the major features are an online shopping guarantee, in which cardholders are not responsible for unauthorized charges and special online discount offers that are communicated via statements and email. The card also encourages users to go online to check card balances, download statements, check Blue Loot points and access other AmEx financial management tools such as retirement planning or debt reduction. The company encourages consumers to sign up for the card online by restricting Blue Loot rewards to those who apply via the web site.
Show me the money
But for all its vaunted and highly touted online features, analysts say the initial draw to the Blue card was low pricing. “Security, although consumers mentioned it, clearly played second fiddle to pricing,” says Bruce Brittain, president of Brittain & Associates. Although the Internet may not have been the main attraction to Blue, the web draw still has potential. “The name of the game for AmEx is how to get people to think of the AmEx card as the card to use online,” Brittain says. “The Blue card gives them the image of being ahead of the curve on e-commerce.”
A card this stacked full of online features is bound to make some impact and market observers say it has. AmEx shook up the banking industry by beating Visa, MasterCard and Discover to the market with a major chip-card product to be used online. At the time of the Blue launch, the card associations had done little to develop a consumer chip product other than to conduct various closed-system stored-value card tests, most of which were not terribly successful. Now they are touting their own nascent ewallets (see sidebar).
While the numbers may still be small in terms of the overall credit card market-Brittain estimates 2 million Blue accounts, which AmEx executives will not confirm but also not deny-the card may be having an impact on online payments. In the third quarter 1999, just as the Blue card was announced, 28% of all Internet users said they had paid online, according to CyberDialogue. By second quarter 2000, 38% had paid online, a jump CyberDialogue Senior Analyst Sam Callard says may be due in part to Blue card promotion. He notes that while Visa and MasterCard cards count for the majority of online payment, the smaller AmEx card base represents a significant portion of online transactions because a higher percentage of AmEx cardholders are shopping online.
Brittain estimates Blue will have upwards of 4 million accounts by year’s end. Richard Quigley, vice president of credit card marketing at AmEx, says the company is pleased with the Blue card’s progress. “We’re trying to deliver on the implicit promise that the product is evolving and reflects the changing needs of cardmembers,” says Quigley.
One measure of Blue’s success is research showing it has attracted a new audience for AmEx. Nearly half of Blue cardholders did not have AmEx cards before Blue, reports Brittain, who also says 45% of Blue cardholders stopped using other cards or replaced another credit card. Brittain notes that such big issuers as Citibank, First USA, Chase Manhattan and MBNA are suffering attrition to the Blue card, which underscores AmEx’s power to become a force in cards used online.
AmEx hopes to retain cardholders by continually pushing the card’s features. “We’re trying to make sure that cardmembers know the benefits of the card’s additional security and that using the wallet helps them more quickly complete order forms,” Quigley says. AmEx also promotes its Offer Zone discounts, which give AmEx cardholders across the board discounts at various merchants, many of which are online. A recent statement stuffer listed Barnes & Noble.com, Costco.com, Clinique Online, Kozmo.com and Drugstore.com. AmEx also sends email to all cardholders regarding various online and offline merchant discounts.
But while AmEx uses online tools, it has not abandoned the tried-and-true card marketing methods that get consumers to act on offers. Christopher Keenan, director of marketing at Hockessin, Del.-based consultants De Novo Corp., says AmEx has struck a sophisticated balance between integrating email marketing and direct mail.