Explore The Products And Benefits Of American Express Credit Cards

Introduction to American Express

The American Express is a US based Multinational Company which deals in financial services. It was founded by Dow Jones in 1850. The main products company are charge card, traveler’s cheque and credit card. American Express is best known for its credit card.

American Express card is also known as Amex card. The American Express deals in an electronic payment card which is issued and processed by American Express. Cards are available for individual, corporate consumers and small businesses in the US and all around the world (American Express, 2018)   

In 2016, out of total dollar volume of credit cards transactions, the transaction of American Express Credit card was 22.9%. In December 2017 Company had 112.8 million card users which include 50 million card users in US, each card consist average yearly spending of $18,519 (American Express, 2018)  

                                                                                                            (Source: Phillips, 2012)

The basic idea of Woodruff customer value hierarchy is satisfying the need of customers. Before introducing any service and product in the market the company needs to decide the level of satisfaction, the said service and product are going to provide to the customers. Satisfying customer value is a key to Woodruff customer value hierarchy model.   

1. Service/Product attributes: The fundamental of this level of hierarchy is how service or product going to satisfy the need of customers if they consume it. The bottom layer of woodruff customer value hierarchy also includes characteristics of the product or service which company is going to introduce in the market. It contains only those characteristics or attributes which are necessary for product or service to function.  
2. Consequence layer: This level of woodruff customer value hierarchy includes expectations of customers from the service and product. The attributes are decided to satisfy the needs of customers. So when buyers buy the product they normally assume that the service or product may contain those attributes which they are expecting.
3. End state: This stage includes additional features, attributes, benefits those are related to service and product which provide a competitive advantage to the company. In other words, we can say that it includes those additional attributes which customers not expect from the service and product. But if they come to know about those additional attributes they will surely buy the service and product (Yajing, 2014).  

                                                                                                  (Source: Carnie, 2018)

Holbrook consumer value model represents those characteristics or attributes that provide consumers a level satisfaction and value to their money which they spend on buying service and product. It contains the concept which indicates a position of maximum consumer value proposition for the customer segment of interest.

1. Intrinsic and Extrinsic: By Intrinsic we mean the value proportion of the product is archive from the intrinsic functions of the product. And by extrinsic we mean the additional functions are need by a customer to fulfil the requirement of a product to satisfy the need.
2. Self-oriented and other-oriented: It is a distinction corresponds that whether product providing value because of its benefits to the user or because of the reaction of others.
3. Active and Reactive: It is a distinction about whether there is a manipulation to the product by the user or the user by the product (Gallarza and Holbrook, 2017).

Comparison Between American Express and Visa Credit Cards

The two models Woodruff Customer Value Hierarchy and Holbrook Consumer Value are put together to get customer value proposition from American Express cards. With the help of Woodruff Customer Value, the American Express come to know about what customer want from the service or product, what they expect and what all additional services they want to be associated with the product. After knowing the expectation of the customer it becomes easy for the company to compete in the market. To get the advantage over competitors the American Express can add some additional feature which their competitors are not using.

And with the help of Holbrook consumer value model, The American Express will be able to known consumer values in three dimensions from Intrinsic and Extrinsic Company will know that is customer is getting value from the main feature of card or by additional features provided by the company. From Self-oriented and other-oriented, the company will know that the consumers are getting value by using cards and benefits they are getting by keeping a card or by positive reaction they are receiving from other persons while using a card. From Active and Reactive the company may come to know whether their cards are manipulating the uses or the users are manipulating there cards. These two models are really helpful for American Express to achieve the high level of customer satisfaction by incorporating ideas generated by these two models. As per a known fact if the consumers are satisfied and get value out of the service and product it consider to be a key of success for every business.

Visa is an American based Multinational finance company which facilitates electronic fund transfers in every part of the world. Visa does not issue cards it provides financial institution with visa branded payment products. Visa is a second largest card payment organisation.  

Visa and American Express are the best known companies in the credit cards issuing business. Both offer numerous benefits as a part of their package.

Visa and American Express do different things. Visa is a payment processing system, cards are not directly issued by Visa to the customers, but it allows other financial institutions to brand their card as Visa so the user can use those cards on Visa payment processing system. American Express is a payment processing system but it also issues cards directly to customers, finance payment and processes the transfers. American Express is a credit card. This means customers will pay the full balance of the card each month. Visa is a charge card that means you can carry a balance on the card month to month.  

Market Share and Fees of American Express and Visa Cards

Visa makes money from interchange fees they charges from banks to use their system. American Express makes most of their money from interest charges and fees.

Visa earns money by charging interest on average daily balance and American Express earns money from annual fee.  

American Express has no pre-set spending limit. Visa has a hard limit and it charge fees for exceeding the limit (Ryan, 2016). 

Visa is a huge company, it has 16% market share worldwide and there are 2.5 billion Visa cards are floating in more than 200 countries. In contrast American Express has much smaller market share worldwide, they have 117 million cards active in total.

Visa and American express both charge interchange fees from the banks that use their payment system, so surcharge for both of these cards still exist. Card issued by American Express has not reduced their surcharge because it is a closed system that the RBA does not regulate.

To platinum cardholder, Visa offers like emergency assistance services, discounts on dining, tickets of major concerts and sports events. For visa cardholder travelling overseas, it provide various facilities like a discount on airfares and tour packages, offers good exchange rates, direct conversion in local currencies. American Cardholders also receive offers like fine dining deals and concerts and sports event tickets. 

American Express card has cash back offers on a purchase that may be up to 3% while Visa rarely offers cash back. Visa card offers generally come with no annual fees.

American Express is not as widely accepted as Visa. This makes it customer to have Visa card on international travels (Rubin, 2018)

                                                                                                      (Source: Consumerfu, 2018)

Value proposition refers those features which specify why a consumer should use a service or buy a product of a company. These features convince potential buyers to buy the particular service or product and get satisfaction. A value proposition is a promise by a company to its customers.      

• Safety: Making payment with credit cards is easy and quick. In case of fraud, you are not out of money immediately.
• Points and rewards: Many cards work on a points system where a customer can earn up to five points by spending $1. In addition companies will offer special 3 months promo period where spending in a certain category like restaurants, transportation by which customer can double or triple their credit points.
• Cash back: Many banks offer cash back if customers use their cards to make payment of monthly bills or grocery purchase. Online shopping portals too have cash back offers on various products.
• Grace Period: Main advantage of credit card is a customer can defer their payments till their bills are due. Bank offer a grace period of 50 days for paying back their dues (Alaswad, 2013). 

• Accepting credit card can boost sales: Shoppers like to make payment quickly without writing a check or run to ATM for cash. When merchant takes its business from cash only to accept cards, its potential customer increase significantly. If more customers are attracting toward your business it automatically increase sales.
• Credit cards encourage impulse buying: If the customers are making payment through card many studies indicates customer surely do impulse purchasing.
• Improve cash flow: Credit card transactions are processed electronically, and the amount deposited directly to a merchants bank account it leads to no more waiting for checks to clear, no waiting to collect from customers that means less cash to handle.
• Credit cards are crucial if merchant is doing online business: If a merchant is engaged in e-commerce business it becomes essential for him to take online payment through cards.
• Convenient for customers: Customers always want to choose a most convenient method for payment. Paying through credit card is not only convenient but easy also.
• Set up of accepting credit cards is quick and easy: If a merchant is ready to process credit card sales it will take only 24 to 48 hours.
• Inexpensive business expense: Machine which accepts credit card is not expensive. Every size business can afford it (Alaswad, 2013). 

The above stated two value propositions of credit card sector are benchmark for American Express which will help the company in getting a competitive advantage. If American Express serves what they have promised they will lead the market. A satisfied customer is an asset to any business and every business want the increase in this asset. To increase the number of customers the American Express needs to provide maximum benefits to its customers in comparison to its competitors in a market.

Rewards and Value Proposition of American Express and Visa Cards

For a unique value proposition, mainly the consumers seem to have more credit card choices. American Express provides option to its customers with a huge range of cards: 

(Source: American express, 2018)

The main criterions of value proportion are fulfilling expectations of customers and provide value to the user of service and product. And if the American Express wants to incorporate a new value proposition in it business that should be improving the Reward points and Cash back system. Chase Freedom and U.S Bank Cash+ competitors of American Express are giving 5% cash back to the customer where American express is providing only 2%- 3%. 

Another competitor Huntington Voice Card also providing special benefits to its customer like late fee grace allowed without incurring fee, no penalty rate even if customer are late with their payment and no foreign transaction fees (Marks, 2017)

So it is important for American Express to make changes in its reward points and cash back policy and provide more benefits to customer. By this customer will feel that they are getting full value by using American Express card and they will not switch to other brand and new customers also get attracted toward it.

Value criteria for American Express card are it provide wide range of card option with lots of different benefits attached, which will really help the customer to choose card as per his/her requirements.

The Best American Express Credit Card for each spending needs are:

• Premier Reward Gold is best for flexible Travel rewards,
• The Platinum Card is best card for premium travel rewards,
• Platinum Delta SkyMiles Credit Card is best for Airline travel,
• Starwood Preferred Guest Credit Card is best for Hotel rewards, and
• Starwood Preferred Guest Credit Card is best for overall American Express Card (The Points Guys, 2018) 

• Process to implement new proposition plan
• Management planning: To make changes in the reward points and cash back policy system the top level management of the company will make a plan which will include the full details of changes. They will decide is the change in rewards system policy will maximises the value proposition to the card users or not.
• Employees meeting: When the senior level decides to implement the policy they will take a meeting to know the views of employees on the policy. They take a brain storming section to select the best process to implement the policy.
• Select process: When the Brain storming section ends the management will get many ideas for implementing the reward changing policy. Out of the bulk of ideas the management will select the best way to implement the plan (De Toni, Fornasier and Nonino, 2015)

• Risk management: Before introducing the new Reward policy in the market the company need to consider all risk factors which may affect the implementation plan.
• Develop a Marketing strategy: After considering all factors the marketing team will make a marketing strategy to promote and position the new reward policy in the market.
• Select the promotion strategy: Select the strategy of promotion to advertise the reward change policy and make consumer aware about the valuable changes in the Reward system.
• Select medium of promotion: To make people aware about the reward changing policies a good sort of advertising medium is required. The best and affordable medium with mass reach is to be selected.
• Survey: Company can also plan survey among the customer to know about their views in respect of reward policy.
• Select the date and launch the plan: In this step the reward policy is ready to lunch in the market. Management will select date to lunch the change.
• Feedback: When the new changes are made in the reward policy of the company and launched in the market, then the management need to take a feedback that is product are doing good in market or need some more changes.

• Update policy: When Reward policy get change it become necessary for company to make changes in its previous policy and update its documents.
• Make the related Partners aware: It is important for company to make its related parties and partner aware about the changes.
• Find the source of funding: If company is going to increase its Reward points and Cash back plans they need finance and for that they need to select the good source of funding.
• Make changes in their software: When the policy is going to change the company need to make changes in their internal software.
• Provide training: Company need to organise a short training section for employees. In the training section they will be taught about the new changes made in the company software.
• Make changes in the Application form: The application forms both physical and online are need to be change according to the new change policy.
• Feedback: After making all changes within the organisation the management of company will take feedback from employees. 

References       

Alaswad, A. (2013). The Value Proposition of the Smart Credit Card. Isaca journal 2 [online] Available from https://www.isaca.org/Journal/Blog/Lists/Posts/Post.aspx?ID=166. [Accessed on 5 May 2018].

American express, (2018) Featured Cards. [Online] Available from https://www.americanexpress.com/in/content/all-cards/#in [Accessed on 5 May 2018].

American Express, (2018) Who we are. [Online] Available from https://www.about.americanexpress.com/oc/whoweare/ [Accessed on 5 May 2018].

Carnie, B.W. (2018) Design effectiveness: Building customer satisfaction and loyalty through design.[Online] Available from https://www.researchgate.net/figure/Typology-of-Consumer-value-Holbrook-1999-p-12_fig5_303442706 [Accessed on 5 May 2018].

Consumerfu, (2018) Visa vs MasterCard vs American Express. [Online] Available from https://www.consumerfu.com/visa-vs-mastercard-vs-american-express [Accessed on 5 May 2018].

De Toni, A.F., Fornasier, A. and Nonino, F., (2015) The impact of implementation process on the perception of enterprise resource planning success. Journal of Business Process Management, 21(2), pp.332-352.

Gallarza, M.G. and Holbrook, M.B. (2017) A multidimensional service-value scale based on Holbrook’s typology of customer value: Bridging the gap between the concept and its measurement. Journal of Service Management, 28(4), pp.724-762.

Marks, E. (2017) High Expense Means Card Marketing Must Be More Than Rewards. [Online] Available from https://www.westmonroepartners.com/Insights/Newsletters/Co-Brand-Card-Trends-2017 [Accessed on 5 May 2018].

Phillips, L.A. (2012) Customer Value Hierarchy Model.[Online] Available from https://www.researchgate.net/figure/Customer-Value-Hierarchy-Model-Woodruff-1997-P-142_fig2_239795092 [Accessed on 5 May 2018].     

Rubin, J.P. (2018) Visa, AmEx, MasterCard, Discover — What’s the diffe. [Online] Available from https://www.creditcards.com/credit-card-news/help/differences-visa-mastercard-amex-express-discover-6000.php [Accessed on 5 May 2018].

Ryan, T.J. (2016) What’s The Difference Between Visa And AMEX?.  [Online] Available from https://www.canstar.com.au/credit-cards/whats-difference-visa-amex/ [Accessed on 5 May 2018].

The points guys, (2018) Choosing the Best American Express Card for You. [Online]Available from https://thepointsguy.com/guide/how-to-choose-the-best-amex-for-you/ [Accessed on 5 May 2018].

Yajing, S. (2014) CUSTOMER VALUE HIERARCHY BASED CUSTOMER DEMAND ANALYSIS IN PERSONALIZED SERVICE RECOMMENDER SYSTEM. Journal of simulation 7(7). pp. 77-84. [Online].  Available from https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.137.9184&rep=rep1&type=pdf. [Accessed on 5 May 2018].

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