SWOT Analysis: American Express

SWOT Analysis of American Express Organization:

Strengths

1. Diversity -

The company has added different products and services over the years. This diversity has made it able to spread financial risk over different channels. From business cards, to airline and city specific rewards cards, American Express has a credit card that caters to all needs.

American Express is a very different arrangement from other credit card organizations. Not only do they have their own payment system, but they also issue their cards directly to customers. If a card says American Express on it, you know instantly who issued it, what payments system it utilizes and everything else about the card.

From an organizational standpoint, American Express has a complete horizontal scale across payments, which gives them diverse opportunities to grow their business and drive innovation in the marketplace.

2. Innovation -

The company history is a study in innovation. It has pioneered many of the financial products we take for granted today, and consistently found ways to improve delivery of its services. Reward cards and cards which are affiliated with specific stores are common as well as travel rewards.

In relation to marketing, there have been several examples of innovation within the AMEX corporation. American Express has long been known for its inventive advertising. From ‘Mr Wong’ and ‘Don’t leave home without it’ to the ‘Membership Has Its Privileges’ campaign of the 1980s or the highly visible participation of Jerry Seinfeld and Tiger Woods as American Express spokesmen in the 1990s and beyond, advertising has long played a role in American Express’ sustained recognition. American Express takes a holistic view of its brand positioning and today’s advertising campaigns reflect the company’s innovative range of products and business solutions and its unique ability to provide its customers with access to unique experiences and privileges.

3. Global reach & presence –

American Express is one of the most recognizable brands in the global economy. With a global market, all developed countries in the world are home to American Express Service centers.

Total cards in circulation in U.S.

(Through year-end 2010, unless otherwise noted)

American Express credit: 48.9 million (Source: AmericanExpress.com)

Purchase/transaction volume

Issuer purchase volume

(Through year-end 2010)

American Express: $131.1 billion (Source: American Express)

Discover cards: $92.5 billion (Source: Discover)

MasterCard credit: $479 billion (Source: MasterCard)

MasterCard debit: $333 billion (Source: MasterCard)

Visa credit: $809 billion (Source: Visa)

Visa debit: $1.05 trillion (Source: Visa)

4. Travel services operations –

With a variety of travel cards, American Express appeals to consumers who are constantly on the move. Reward points and encouragement through offers and deals ensure that American Express cards are used all over the world

5. Brand loyalty –

American Express has a large consumer/client base. Within this group is an overwhelming majority that continues to use the service as their major financial facility.

Customer satisfaction.

J.D. Power and Associates 2010 Credit Card Satisfaction Study Rankings

American Express

Discover

US Bank

Wells Fargo

Chase

Barclaycard

Bank of America

Capital One

Citi

HSBC

Weaknesses

1. Financial Credit Crisis -

Credit and financial businesses are at the mercy of the credit market as well as consumer confidence. If consumer spending is off, as it is right now, and credit is tight, profits will be down.

SAN FRANCISCO (MarketWatch) -- Credit-card company American Express Co. said Thursday it "is seeing signs of a weaker U.S. economy" that is impacting its cardholders' ability to make purchases and pay their bills.

As a result, American Express AXP -0.12% said in a statement that it will take a pre-tax charge of approximately $440 million in its fourth quarter, due to a combination of lower spending and higher delinquencies and loan write-offs.

American Express shares fell nearly 6% to $46.02 in after-hours trading.

American Express is one of a number of credit-card companies suffering through the current credit crisis

New York-based American Express, which is expected to report its financial results Jan. 28, said that as a result of its fourth-quarter charge, it now expects earnings for the period to be 70 and 72 cents a share, a decrease from earnings of 73 cents a share in the same period a year earlier.

For the full year, American Express said it now expects earnings between $3.38 and $3.40 a share.

"We did see some negative credit trends among U.S. consumers during December, particularly in California, Florida and other parts of the country most affected by the housing downturn," American Express Chief Executive Kenneth Chenault said in a statement.

In addition, American Express cautioned that tough times may be ahead for 2008.

The company said it now "expects that growth in Cardmember spending will slow in the year ahead." It said it's assuming billed business growth worldwide to grow between 8 and 10 percent during the year, which will "represent a decline from the levels American Express has been generating in recent years."

2. Size -

The credit crunch has caused American Express to take measures to limit their default rate and minimize losses. As one of the largest credit card companies, they receive a great deal of attention in the press. This could end up hurting their corporate image many years after the economic crisis has passed.

Opportunities

1. Stability -

American Express remains a relatively stable financial service company in comparison to some of its counterparts. This could be a tremendous plus for them when the economy begins to recover, and customers have fewer choices in the industry.

2. Limit Risk –

Taking steps to limit risk, and becoming a leaner company could help the company to become even stronger.

3. Expansion into China –

China UnionPay and American Express announced that they have signed a memorandum of understanding that calls for both companies to explore the expansion of their current cooperative activities.

For the past several years, China UnionPay and American Express have reportedly cooperated within China where American Express Cards run on the China UnionPay network. This new agreement will establish working teams to develop potential new areas of cooperation between the two companies within China and in markets outside of China.

Established in 2002, China UnionPay is the bankcard association in China. As the pivotal role of China's bankcard industry, China UnionPay is responsible for operating the unified inter-bank clearing and settlement system in China and developing the international acceptance network for UnionPay cards.

Financial deals for this new deal have not been revealed.

Threats

1. Regulations –

Tighter regulations and government intervention could make the financial services industry much less profitable in the future.

2. Macro Effects –

As the US economy begins to affect the global economy, American Express may find itself a victim of anger and backlash around the world.

American Express business credit card list. Project Documentation

- Business Green Rewards Charge Card

-Business Gold Rewards Charge Card

- Executive Business Charge Card

- Business Platinum Charge Card

- Platinum Business Credit Card

- Platinum Business Freedom-Pass Credit Card

- Business Membership Rewards Card

- The Plum Card

- Blue for Business Credit Card

- Blue Cash for Business Credit Card

- Simply Cash Business Credit Card

- Costco True Earnings Business Card

- JetBlue Business Credit Card

- Gold Delta SkyMiles Business Credit Card

- Platinum Delta SkyMiles Business Credit Card

- Starwood Preferred Guest Business Credit Card

Topic 6 - Continued

For all products, a value proposition is a necessary attachment.

"This product is worth ________ to this target segment because ______________________________________________"

The price/worth should be a $ value or a relationship to competing products and the "because" statement should be a description of the value perceived by the target customers.

Asset-revenue generating efficiency (ARGE):

- Optimise return by stimulating revenue from highest yield segments.

- Manage price also to optimise the profit mix and return on assets employed.

- Allocate volume/capacity and price differently to different segments and behaviours

- Manage prices through optimised yield.

Strategies for managing demand:

- Use price to regulate demand (damper in peaks to stimulate in troughs)

- Stimulate forward commitments

- Modify time/product offers

- Adjust communication strategy to demand patterns

Topic 6 - Pricing In Financial Services

Competitive pressure forces prices down whilst economic pressure and cost structure forces prices up to create a discretionary price region that businesses can use to set prices. The natures of services makes value hard to communicate and the nature o demand makes volumes and pricing hard to estimate. Additional prices must have additional value and prices include quality comparison and ability to solve a problem.

Value can change due to:

- increasing competition

- time elapses

- power of legislation, education and communication

Price discretion is the reward for good marketing which is effective when organisational and customer value is delivered. The price is "right" when perceived value outweighs perceived costs. Value occurs when perceived

value is equal to perceived cost. Actual price

= list price + added charges (discount + allowances + cost of credi/payment methods).

Pricing decisions rely on 2 factors:

Internal Factors:

- Marketing objectives

- Marketing mix strategy

- Cost

- Organisational Considerations

External Factors:

- Market and demand

- Competitor prices and offers

- Other external factors

There are 2 price demand relation ships for goods:

Most goods:

Whereby, as demonstrated, as price increases then quantity will decrease. The slope/gradient of this relationship is constant and ensure that for most goods, there is an appropriate level of quantity and price of goods on the shelves.

Prestige Goods:

When a prestige good is placed into the market if there is high demand then the quantity of items in the market will decrease. This occurs when the price of a good is low. When there is a intermediate price, then there will be a maximum amount of prestige goods within the marketplace.

Topic 5 - Branding and Brand Management

Benefits of brands to buyers:

- Provides lear information about quality and performance

- Speeds up decision making and identification

- Helps the customer to identity products and brands

- Tends to increase choice and variety

Benefits of brands to sellers:

- Can be legally protected

- Increases the efficiency of tracking, ordering, distributing etc

- Can become basis of loyalty

- Assits in marketing segmentation

- Provides a capacity for multiple positions

When marketed effectively brands tend to lead to better recognition, performance, customer loyalty and category membership. They will convey meaning as attributes, benefits, values, personality and uses. There is also a brand hierarchy:

1. Corporate Brands (Commonwealth Bank)

2. Family Brands and Product Class (Colonial; Comm Sec. Comm Insurance)

3. Product Brands:

- Product line (Flexible lifetime Super)

- Product type (Balanced Growth)

- Product item (Australian Equities)

Defining Brand Essence and Values:

The essence of a brand needs to be the central theme and overriding/main characteristic. Core values are other important factors that are essential in maintaining brand reputation and dynamics. For example, BMW brand essence would be driving pleasure and the core values would be BMW Dynamics, Civilised and Cultured.

Interesting Marketing Campaign

Below is an interesting analysis of the Apple Inc marketing strategy over the last 10 years.

"For several years Apple's product strategy involved creating innovative products and services aligned with a "digital hub" strategy, whereby Apple Macintosh computer products function as the digital hub for digital devices, including the Apple iPod, personal digital assistants, cellular phones, digital video and still cameras, and other electronic devices. More recently, the full impact of a very well throughout out brand strategy has come into focus - and one in which customer experience is central"

http://www.marketingminds.com.au/branding/apple_branding_strategy.html

Topic 4 - Continued

Topic 4: Ansoff Matrix

Market Penetration:

Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.

Market Development:

Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development.

Product Development:

This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.

Diversification:

This is where we market completely new products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that we remain in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.

Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for growth.

Topic 4 - Continued

Presented is a diagram which depicts the levels of a Product:

As demonstrated, there are 3 levels of a product. the Augmented product level contains initial and final phases such as delivery and after sale service. The actual product is the physical attributes and features of the product in question and the core benefit is the main and primary purpose of the product. For example the core benefit of a savings account is to "safely store money".

In relation to financial services, there are 3 broad options for financials service delivery:

1. Customer Visits the Site

2. Service provider goes to the customer

3. Transaction happens at arm's length

Aside from a core service, products offer supplementary services:

- Information (Facilitating)

- Order taking (Facilitating)

- Billing (Facilitating)

- Payment (Facilitating)

- Consultation (Supporting/enhancing)

- Hospitality (Supporting/enhancing)

- Safekeeping (Supporting/enhancing)

- Exceptions(Supporting/enhancing)

Example: Savings Account

Core - Safety of Cash

Sup 1 - Supporting Services (monthly statements, exchanges, etc)

Sup 2 - Online access, ATM access, etc

Topic 4 - Developing Financial Products and Designing Service Experiences

Topic 4:

Products are need-satisfying offerings of an organisation. Anything that can be offer for attention, acquisition used for consumption that might satisfy a want or a need is considered a product. It includes physical objects (goods), services, persons, places, organisations and ideas.

Services deliver a bundle of benefits to the consumer through the experience that is created for that consumer it is any activity that one part can offer another party that is intangible ad does not result in the ownership of anything.

Services are rendered

Goods are possessed

Unique Service Feature:

Intangibility

Resulting Matching Problems:

1. Service cannot be stored.

2. Cannot protect services through patents.

3. Cannot readily display or communicate services.

4. Prices are difficult to set.

Strategies to Solve:

1. Stress tangible cues

2. Use personal source

3. Stimulate word-of-mouth communication

4. Create strong organisational image

5. Use cost account to set prices

6. Engage in post purchase communication.

Unique Service Feature: Inseparability

Resulting Marketing Problems:

1. Consumer involved in production

2. Other consumers involved too

3. Centralised mass of services is difficult.

Strategies to Solve:

1. Emphasise selection and training of public contact personelle

2. Manage expectations

3. Use multi-site locations

Topic 3 - Segmenting, Targeting and Positioning Financial Services

Segmenting is the process of dividing a potential market into distinct subsets of consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix.

Process in segmenting;

1. Identify - Groups of key customers

2. Target - Those who offer value

3. Position - Their minds through the use of the 7 P's (these were detailed in an earlier post)

A marketing segment is a relatively homogenous group of customers with similar characteristics, wants or needs that is likely to respond similarly to a given marketing mix. Segmenting allows a group to understand customers better and aids in more efficient resource allocations which leads to a more effective strategic focus. They need to be homogenous within and heterogeneous between. they need to be measurable, substantial and actionable numbers

Segmenting can be done by:

- Geographic

- Demographic and socio-cultural

- Psychological or psychographic

- Behavioural or attitudinal

There are also several options for targeting:

- Concentration on a single segment (niche)

- Selectively specialising

- Specialising by product

- Specialising by market

Interesting Twitter Marketing

Just as a break from marketing theory, I have posted an interesting article about companies embracing new media and social network sites in an attempt to boost sales. This article reviews 5 of the most inspired and effective ad campaigns that have been released via the social media outlet Twitter.com. There are several genius and very innovative ideas presented and is a good example of how marketing theory is put in practise. These adds incorporate all the theory listed previously and is very effective in positioning the user/viewer:

http://thenextweb.com/socialmedia/2011/05/15/successful-twitter-campaigns/

Topic 2 - Continued

Influences on Consumer Choice:

There are 7 influences that affect a consumers buying decision process:

As demonstrated in the digram, there are many factors to consider. This diagram is not compete though and fails to recognise Personal influences such as age and life cycle stage and current occupation and level of education. It also does not recognise economic situation and fiscal situations. A diagram which incorporated these would be more holistic and thorough.

Topic 2 - Consumer and business buying behaviour, service culture and customer experiences

Consumer buying behaviour is quite systematic and follows a streamlined process.

This topic covers a lot of process digrams and flow diagrams which show the thought/action process and influence process of a buyer and business.

Buyer Decision Process:

As demonstrated a buyer follows these 5 steps when interacting with the idea and process of buying a product

Roles in Consumer Buying Process:

As presented there are 5 Roles in the consumer buying process. These roles are all important when a consumer decides to buy a product and most be considered when a market strategy is developed and presented. If the actions of this roles are not taken into consideration then the market strategy will not be successful and be rather inefficient.

Topic 1 - Continued

Marketing Strategy and Planning Sequences

Strategic Company Planning:

1. Define organisational mission 3. Set up organisational objectives

2. Conduct Situational Analysis 4. Select Appropriate Strategies

LEADS TO

Strategic Marketing Planning:

1. Conduction Situation Analysis 4. Select market target and determine demand

2. Develop Marketing Objectives 5. Design Strategic Marketing Mix

3. Determine positioning/differential advantage

LEADS TO

Annual Marketing Planning:

Prepare annual marketing plan for each major project and company division

Marketing objectives must follow specific rules/guidelines: SMART

Specific

Measurable

Actionable/Achievable

Relevant (to your mission, vision and direction)

Time Bound

Implementation and Control are important aspects of marketing strategy. They need to be conducted slowly and carefully:

"A mediocre plan well implemented will always achieve more than a brilliant plan poorly implemented"

There should be a close relationship between planning, implementation and evaluation in the strategic management process:

Planning - Deciding now what the firm intends to do later, including how and when it is going to do it

Implementation - Putting into action the activities outlined in the plan to support the strategy and tactics

Evaluation - Checking the degree to which the organisation has reached the goals outlined in its plan.

Course Revision from Topic 1 - Marketing Strategy

Below is a summary of Topic 1 - Marketing Strategy

Marketing Strategy is based on 4 key questions:

- Where are we now? (Analysis of current/future strategic position)

- Where are we going? (develop viable future goals and objectives)

- How will we get there? (develop strategies and action programs to get there)

- How will we know we are on track? (implement measuring and monitoring systems)

These questions all need to have a developed system of checks to ensure they are appropriate:

The 5 C's:

- Context

- Company

- Customers

- Competitors

- Collaborators

7 P's:

- Products - People

- Prices - Processes

- Place/distributions - Physical Evidence

- Promotion/communication

There are some very important elements/components in a marketing strategy plan:

- Executive Summary - Marketing Strategies List

- Situation Analysis - Action Plans

- Performance Review - Profit/Loss Statement

- SWOT + Key Issue Analysis - Controls

- Critical Assumptions - Contingency Plans

- Objectives

A SWOT Analysis is sometimes appropriate when trying to analysis a plan and interpret any short comings.

Positive (+) Negative (-)

Internal Strengths Weaknesses

External Opportunities Threats

Tutorial 2 Presentation

Below is a summary of my tutorial presentation which was presented to the group on 09/08/2011:

HSBC marketing services in China and Response to McKinsey Study

Survey Results:

- Increase in local bank preferences has risen by at least 13% which could indicate that clients prefer the security and comfort that they receive when at a local bank branch.

- Internet banking has increased dramatically. Obviously due to the sharp/recent spike in technology adoption from banks. The jump also indicates that there is a preference towards convenience and those transactions and transfers are no longer important enough to require a trip to the bank. Probably just easier too and smart-phones are very popular.

- Consumer loyalty has changed too. Clients try to spread funds through a variety of different banks. Perhaps shows that they would rather diversify to reduce risk if another CFC was likely to occur. Rich especially

Possible HSBC Reactions to Results:

- In 1865 opened in Shanghai and Hong Kong and then in 1980 opens branch in Beijing. Big Gap.

- HSBC is named 'Best Foreign Commercial Bank in China' by Finance Asia for the fifth consecutive year (2001-2005).

- In response to the results it would be wise to develop a strategy that focuses on the individual and how each individual customer is important and will receive all necessary attention and time. Perhaps similar to the ANZ campaign that ran on TV here.

- Ensure to keep customers loyal by catering to the online banking trend and ensure their current net bank application is efficient, easy to use and widely available across several platforms.

Week 1 - Overview and Global Imporance

Week 1 for MKTG2003 was delivered a basic overview of the course and marketing as a general principal. From a holistic view-point, marketing is just trying to persuade people to buy things. The first lecture (apart from describing the course essentials) showed the importance of marketing in the global economy and demonstrated the importance of marketing to ensure consumer integration.

MKTG2003 - Marketing for Financial Services

Welcome!

James Chisholm here and I am ready to blog about my marketing course at ANU.

I am currently 2 weeks in to the program and already heavily interested in the content. Marketing for financial services uses real-life examples to to demonstrate consumer and business models, process diagrams and decision trees. The course lectures runs every 2 weeks and tutorials will run every week. I will update this blog every week and outline appropriate and important information from the lectures and from the tutorials.

The course is taught by Craig Tapper and my tutorial is run by Nikita Samoylov.