Question 1
American express issues its cards directly to their customers and also deals directly with the businesses that accept its cards. This is as opposed to Visa and MasterCard that issue their cards through banks and also uses the services of banks such as Chase Bank and Bank of America to deal with the merchants. This strategy has given American Express a unique opportunity to be able to deal with customers’ complaints as they have access to the transactions and also to the merchants that offer their cardholders services, something that Visa and MasterCard cannot do since they have no direct relations with their cardholders or merchants. This has had a positive impact on customer retention as problems are solved in house making it convenient for their cardholders. Customer acquisition is also positively impacted because of the promise of easy dispute resolution and good reviews from existing cardholders.
America Express charges its merchants 2.5% per transaction while Visa and MasterCard charge 2%. While this may look like a disadvantage, the extra revenue enables America express to give its cardholders more rewards and promotions that are of great value thus having a positive impact on customer retention. These customers then spread the good word of the numerous benefits they get from America Express leading to higher customer acquisition.
Question 2
This project allows cardholders to share their ideas and have other members vote and comment on the idea where the winning idea receives some money. The project has had a positive impact on American Express’s profit margins because it enables customers to create an emotional relationship with the company, this leads to customers using the company’s services more often and also makes them give positive reviews to their friends leading to new customers. All this leads to more profits for the company which is evident from the steady increase of its revenues through the years.
The project has increased the cardholder’s social relationships as they interact with each other often; support each other’s ideas this create a sense of community and togetherness. This leads to new social relationships and strengthens existing ones.
Question 3
This forum provides support for businesses that use American Express. The services range from advice from entrepreneurs, economic crisis survival tips and recently an idea hub that is open everyone including those who are not cardholders plus an advertising page known as Connectodex.
OPEN forum enables merchants to create an emotional relationship with AMEX which is key to merchant retention as they feel like the company truly cares about them as it wants to them succeed. Connectodex provides a platform for merchants to advertise their businesses and OPEN’s Facebook page enables merchants to redeem points in exchange for Facebook advertising. The fact that the Ideas Hub of the new OPEN Forum is open to everyone means that it has the potential to attract new merchants which is proved by the 350% annual growth rate of the forum. This forum enables American Express to attract and retain merchants which is important and beneficial for them as 55% of its revenue comes from merchant fees.
Question 4
This program offers deals to cardholders from registered merchants via Facebook with the promise of a discount after they charge it to their accounts and share it with their friends. This has a positive impact on the profits of American Express as it leads to more purchases from registered merchants who pay a transaction fee to the AMEX. This effect is amplified by the act of sharing the deal with friends as people more likely to purchase something if their friends have purchased it. This means more transactions and therefore more revenue from merchant fees while keeping the merchants happy.
Since this program involves sharing of deals purchased on Facebook, it has a positive impact on the social relations of cardholders. Cardholders want to see what deals other cardholders are purchasing and also find out opinion about those deals. This process of sharing and commenting creates new relationships and strengthens existing cardholder relationships.
Question 5
MasterCard or Visa cannot replicate the Link/Like/Love program because they do not have direct relations with their cardholders or merchants. It would therefore be impossible for them to offer deals to their cardholders since they do not have direct contact with them and they are not aware of the services that their merchants offer.
Question 6
The Broad Strategy
This strategy enables American Express to increase its sphere of influence and presence on the internet by taking advantage of other platforms that it is not currently using such as Yelp and LinkedIn.
Since these platforms are available worldwide, the strategy will enable American Express to reach out to its international cardholders since it is an international brand that is available in many countries.
Since different platforms have different functions, this strategy will enable American Express to offer unique services and offers to its cardholders through the different platforms.
The Deep Strategy
This strategy will reduce the cost of acquiring American Express cards because it entails the creation of more offers to members who successfully convince people to acquire American Express cards.
Merchants will be enabled to create more coupon less offers through various platforms which cardholders can redeem at their stores, this will generate more income for American Express.
It will increase customer retention as this strategy involves rolling out more cardholder offers and rewards, this will also increase company revenues.
Question 7
I would not advise her to use it since her business is small and it is therefore more likely to incur losses.
She should consider that while this daily deals might bring customers to her restaurant most of them are usually bargain hunters who would never pay the full price for those deals, this makes them one time customers making the whole exercise, whose point is to attract new customers futile.
The fact that her restaurant is small should also be considered since the deals could potentially bring in large numbers of clients who she cannot accommodate.
The Groupon deals consist of giving the customers a 50% discount while sharing the other 50% with the service provider; this could potentially cause her restaurant to incur a lot of losses since it will only earn 25% yet she is giving 100% of the service.
Question 8
So as to retain the new customers she should design an in house loyalty program which will give the customers an incentive to visit her restaurant again when they will pay the full price this maybe in the form of a loyalty card that accumulates points that can be redeemed for some prizes.
She should set up a minimum amount of money that should be spent for the Groupon discount to become active. For example she could say that milkshakes will be offered at half price but that will only be applicable if the customer purchases a meal first. This will enable her restaurant to keep making money while getting new customers.
