American Express: The Tarnish on a Once-Vaunted Brand

December 19, 2013

Once upon a time, qualifying for an American Express card meant something. There was a certain prestige to “membership” — you were never a mere cardholder — due to the stringent creditworthiness requirements.  When my first AmEx card arrived some 30 years ago, I considered it my official admission into full adulthood.

American Express once set the benchmark for customer service, answering calls with live agents on the first ring and always readily available to support members with their billing disputes.  And their advertising was once persuasive and unforgettable. You would be hard pressed to find someone of my generation who doesn’t remember Oscar-award winning actor Karl Malden’s television spots for American Express Travelers Checks exhorting, “Don’t leave home without them.”  Its “Membership has its privileges” tagline is still influencing headline writers, even though the company dropped the campaign some 13 years ago.

American Express bolstered its reputation for exclusivity with the subsequent introduction of its Gold and Platinum cards, which carried higher annual fees but considerably more membership benefits. But in the late 1980s the company decided to expand its brand by offering a credit card (the “Optima” card), rather than just its traditional charge card. From there, other marketing initiatives to further leverage their  brand followed, some of them quite questionable or downright illegal.

There were the dubious gift cards, and, of course, the company’s egregious violation of consumer protection laws that ultimately resulted in an $85 million settlement. And while the company is still broadly perceived as being a high-end brand, it now keeps some decidedly mainstream company. Whereas it was once hobnobbed among the ritziest of hotels and restaurants around the world through its exclusive charge card arrangements, it is now partnering with credible but far less glamorous companies like WalMart and Foot Locker.  Indeed, it’s no longer even the sole purveyor of the AmEx brand, partnering with more and more third-parties to offer co-branded cards.

To see the latest threat to the perceived prestige of the American Express brand, just look up in the sky.  When American Airlines and USAir complete their merger, American Express’ Platinum card will no longer be accepted in the airport lounges of the combined carrier, eliminating a major benefit for people (like me) who signed up for the card primarily because of that access.  New York Times travel columnist Joe Sharkey already has written two columns (see here and here) suggesting the card is no longer worth the hefty $450 annual fee.  Underscoring how possibly fearful American Express is of massive cancellations, Mr. Sharkey has received reports that American Express is offering some Platinum cardholders as much as $500 in credits not to bail.

I agree with Mr. Sharkey – the Platinum card doesn’t offer sufficient benefits to justify such a hefty annual charge.  The card’s travel agency service hasn’t been useful for me, as I find cheaper airfares and hotel rates when researching on my own. Those room upgrades I’m eligible to receive at hotels (when available) rarely materialize.  And let me tell you, the days of giving card members the benefit of the doubt in the interest of good client relations are looooooong over.  I’ve had occasion to question unauthorized and other questionable charges on my account, but American Express provided no help or support, other than sending me some emails and form letters telling me my claim was rejected or suggesting I contact the merchant myself.

American Express has dramatically cut back on its once gold plated customer service, even for Platinum cardholders. The wait times to speak to a Platinum card representative can sometimes be mind numbing. Indeed, I recently sat on hold for nearly 15 minutes before an agent came on the line. Those “due to unusually heavy call volumes” messages aren’t all that unusual, but the problem here may be that American Express just cut too many employees.  It speaks volumes that Nordstrom, a company known for its stellar customer service, allows its credit card holders to hit zero at any time and get someone on the line; Platinum members have to hit zero repeatedly to get a live agent. Oh, and there is no fee for a Nordstrom VISA card.

Leveraging a brand, as with leveraging a balance sheet, carries considerable risk if the expansion into new markets sullies the brand attributes on which a company built its reputation.  American Express, of course, can argue that it is still ranked as one of the world’s best global brands.  And therein lies another lesson, a paraphrase of a saying coined by Mark Twain: If a company can firmly establish a reputation for being an early riser, it can sleep in till noon.