For marketing professionals working with prestigious brands, there seems to be a desire to keep the brand aspirational and desirable. You can see how this allure is built from the old Marlboro Man campaign to the slick ads to promote luxury leather goods and fragrances. Whilst it may work to build brand image, but all the efforts may not equate to business growth without adhering to the right framework. Yes, I’m talking about building mental availability and physical availability.
Let’s highlight an example.
I’m old enough to remember how we used to rely on cheques and traveller’s cheques. In the old days, when you didn’t have the cash on hand to pay — or when you needed to send a payment through post, you could include a personal or a bank cheque for the recipient. Similarly, if you wanted to travel to a different country without carrying a huge wad of bank notes, you could get some traveller’s cheques. When you arrived in your destination, you could exchange these cheques with the amount in local currency.
The arrival of charge cards and credit cards changed the landscape enormously – Diners Club was launched in 1950, followed by American Express and Visa in 1958 — and subsequently, Mastercard (1966). Diners Club and American Express launched charge cards, which essentially means that you would enjoy up to one-month of free credit and you must pay the full outstanding balance by the due date. Visa and Mastercard released credit cards, which allowed customers to pay any amount between the minimum payment to the full outstanding balance by the due date. If you choose to use the credit facility by not paying the full amount, then you would be charged some interest for the next billing cycle, and so forth.
When American Express was launched, it was positioned as a premium product – something you would aspire to have due to the prestige attached to the brand and the product. The renowned advertising agency, Ogilvy & Mather was also instrumental in the growth of American Express cards in the 1970s when they created the slogan “The American Express Card – Don’t Leave Home Without It”‘. This prestigious image was build and maintained successfully around the world — that by the mid-1990s, I would still secretly admire when one of my peers would flash out his AmEx charge card to pay for food and drinks – when I only had my Visa credit card.
Because I started my career with Citibank, N.A. in Indonesia in the mid-1990s in their Cards Business, I learned a lot about the credit card industry. Citibank was credited as the bank that introduced and developed the credit card industry in Indonesia and many other Asian countries. My first role was to manage the customer database for marketing campaigns: segmenting, slicing and dicing customer data to pick those to receive offers: vouchers, gifts, free supplementary cards, credit limit increase, or an upgrade — based on the criteria set by the Credit and Risk Management and the function manager.
Creating moments of delights
Before I continue, let me introduce you to two important terms in the card industry: issuing bank and acquiring bank. Issuing bank is the bank that releases and manages the credit card account, whereas acquiring bank is the bank that manages the Electronic Data Capture (EDC) terminals at a specific business accepting the credit card transaction. So, if you have a Visa credit card from Citibank – then Citibank is the issuing bank, and if you happen to shop for grocery at a shop with a Visa terminal managed by HSBC, then HSBC is the acquiring bank. Visa would have a more complete view of your transaction and the kind of products or services that you purchased, so would Citibank. On the other hand, HSBC would have a truncated view – they wouldn’t know the details of the account holder, but only about the the transaction details.
For much of American Express history, they were the issuing and the acquiring bank before they allowed banks to release their own-branded American Express cards. This closed loop environment created a great ability to build customer loyalty. If you have an American Express card, the terminal could print out vouchers and offers that are tailored to you at the point of transaction, creating the moment of delight for you as the customer. This is more challenging for Visa and Mastercard credit cards, as the issuing bank may not be same as the acquiring bank.
Customer loyalty or acquisition?
Little that I knew then, that these two different ecosystems would now prove as an example on the importance of penetration and physical availability in brand growth.
Because Visa and Mastercard allowed banks to release their own credit cards, they grew rapidly around the world. Through very much a decentralised system, each bank was given the freedom to acquire more customers and grow their business. Whilst there may be some differences for those working closely in credit card industry, the difference between Visa and Mastercard for the end consumers is probably similar to choosing Oral-B or Colgate, Pepsi or Coca Cola. It’s just a brand.
Contrast this to American Express who for a while continued to rely on the prestige and allure of the brand, before they dipped their toes by releasing credit cards in the late 1990s – and then finally allowing banks to release their own American Express cards in the new millenium. Once you’re in their book, American Express typically did a great job in delighting their customers through these on-the-spot offers and through customised offers in their monthly statements to build customer loyalty. Their Rewards Program was used as a model for the many loyalty programs adopted by banks all over the world.
All dressed up and nowhere to go
I had my first American Express card when I worked in Singapore – despite working for a bank with their own Visa and Mastercard credit cards, I exercised my repertoire purchasing behaviour. I even hang on to the card after I moved to Australia, and then subsequently got a local American Express card. I still have my AmEx card, nearly twenty years later – but I don’t know for however long.
It’s hard for me to use my AmEx card when many businesses don’t accept the card, even on online transactions – or would impose extra fee for the privilege. I don’t have this issue with my Visa or Mastercard. It’s a serious issue of physical availability.
I don’t know how many end consumers out there who still remember American Express from their earlier history as a ‘prestigious brand’. For most of us who merely use our credit cards to transact, it is merely a means to an end. With more payment options in recent years, there may be more customers who would also question the need to hold on to the card.
Don’t be outrun for the sake of being exclusive
Motley Fool reports that 52% of Americans have Visa, 43% have Mastercard – but only 17% have American Express credit card. This is American Express’ home turf — the number is probably more dire elsewhere. It’s difficult to think about how American Express can turn this around, if they don’t address the issue of physical availability, i.e., card acceptance.
Let’s see the bigger picture.
A common question that I’m asked sometimes is how the Laws of Growth would apply to premium brands. By all means, continue to create the aspirational allure of the brand – like how Chanel continues to weave the magic around Chanel No 5. However, they allow potential buyers to grab a bottle from department stores, online, and from duty-free stores. This is also similar to niche fragrance brands like Creed or Frederic Malle — or Veuve Clicquot champagne. They are still considered premium, despite their wider availability. Now imagine if these brands are only sold in exclusive boutiques in Paris or London, despite the millions of potential buyers who have the means to buy them. (Note: If you want to read more of how the Laws of Growth apply to the luxury brands, you can read How Brands Grow – Part 2).
Of course, there is always the fear that when the brand is made more widely available, it will lose its allure and image. However, if you have to choose between keeping the allure of an exclusive image by tightly controlling its distribution and availability — and smartly managing this luxury image whilst wisely allowing buyers to access and buy the brand, wherever and however they choose to buy … I know which one I would pick.