In this piece, Mr. Andrews posits that AmEx is putting its brand at risk by introducing a prepaid product that lacks the exclusivity associated with the AmEx brand:
Given the strength of its brand, it’s surprising that American Express is considering diluting it. Its new Serve prepaid cards appeal to a much more downmarket group than its existing customer base. Does that matter? Well, imagine Cadillac or Rolls Royce launching a middling-quality sub-compact model, or Apple bringing out a cheap, low-tech, low-price PC. It’s pretty much bound to rub some of the shine off the brand for its existing core customers.
Of course, American Express employs some of the smartest marketers in the world, and they’re acutely aware of this. That’s why the American Express name appears only in small letters on the Serve website, and on the back of its prepaid cards. But is that enough? On Dec. 21, MarketWatch quoted Dan Schulman, who heads up American Express’s enterprise growth group:
‘There’s a large segment of the population that would love to be an American Express customer but for whatever reason felt they couldn’t qualify and therefore didn’t apply, or did apply and just didn’t have the credit history to be able to do that.’
That implies that the company intends its new Serve customers to be attracted by the main brand’s prestige, which is largely based on exclusivity. And it’s hard to see how you can make that sell without at the same time signalling to existing American Express customers that you’re watering down that exclusivity — the very quality that many of them value most highly.
Brands are fragile things, and it’s easy to kill them stone dead. Remember Oldsmobile, MBNA and Digital Equipment Corporation (DEC, which was once second only to IBM in computing)? Few expect American Express to follow these into marketing’s answer to Arlington. However, many marketers are going to be watching closely to see how easily the company negotiates this particular tightrope.”
Of course it was product failures that killed the Oldsmobile and DEC brand (not poor brand management) and MBNA was relatively well positioned until acquired by BoA, who then purposefully diminished the MBNA brand. So a question that may be more to the point is this: Can AmEx avoid damaging its brand while it captures the cream of the prepaid market leveraging its reputation for excellent customer service? As Mr. Andrews said “Of course, American Express employs some of the smartest marketers in the world, and they’re acutely aware of this.”