Category Archives: American Express

AmEx encourages consumers to tweet for cash


Or coupons, anyway. American Express has launched a promotion encouraging its cardholders to “sync” their card with Twitter. Then, if you want to load coupon-type discounts onto your AmEx card from merchants, you simply have to tweet a #hashtagpromotionoftheday to your Twitter followers, and AmEx will automatically reward you with a discount on your card.

At first glance this may seem cool, until you consider the user experience. Say you and I are friends via Twitter and #heysave$10onMobilgas! we’re having a conversation online and #dontmiss10%offpantiesatVS our conversation seems somewhat #$1friesatMcDs! different perhaps. Better yet, as you scan the broader stream from all the people you follow on Twitter #paperonsaleatStaples! the overall ecosystem seems somehow #morefreefriesatBurgerKing changed.

From a marketing standpoint, this is brilliant, because it costs merchants almost nothing (discounts are a form of price framing in which prices can be jacked up and down for a perceptual benefit only) and could spur demand for both incremental sales and AmEx usage. French-fry sellers and American Express both get upticks.

But for social media users, an intrusion of paid, unexpected marketing messages could diminish their experience. MySpace went south after becoming too crassly commercial. Facebook grew to immense popularity by being careful not to overload users with advertising (Zuckerberg famously rejected banner advertising in his initial launch years, and eventually created a more subtle ad format off to the side). Now, Twitter is trying to catch up in advertising revenue with in-stream intrusions. The question is whether the blurring of the traditional hard line between paid advertising and unpaid human/editorial content, by asking participants themselves to spray marketing messages, is damaging to a network in a way that will eventually reduce usage, audience, and viability.

We could be wrong. Maybe tweeting #thisoffermeansmoretomethanyou will make us all more popular.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.


Why does Facebook avoid mobile ads? It wants to be your wallet.


Here’s a blindingly obvious puzzle: Facebook doesn’t run ads on mobile. Digiday’s Mike Shields asked why last week, noting that with 250 million Facebook users logging in from iPhones and other smart handsets, it seems curious that Facebook would skip potential millions in advertising revenue.

Why, oh, why, is Facebook missing ads on mobile? We believe it has a bigger move in mind — to become your digital wallet. Cell phones, you see, are about to undergo their hottest revolution since they got hooked into the Internet, and there are billions of dollars for the players who can be first to train consumers in the “digital wallet” marketplace. Here’s the scoop:

1. Both the next-generation Apple iPhone 4S and Droid phones will likely support NFC, the “near-field communication” short-range signal that allows consumers to wave a phone in front of a cash register to transfer payments. (Google has told its developers that it will launch dozens of NFC Android phones by the end of 2011; we can’t imagine Apple will be left behind.) Soon, instead of supporting communication, cell phones will also hold the money that supports your livelihood.

2. NFC phones will revolutionize payments. Consumers will dig them, just as you now love your iPhone camera and video instead of lugging around an SLR, and merchants upset with high credit-card percentage takes from each transaction will be open to a new, handier, lower-cost way to get paid. (Ever have a retailer turn down American Express due to its fee structure? You’ve seen the market opportunity.)

3. Yes, there will be tons of competition for the new smart-phone-wallet space. American Express launched Serve in March to tap consumer funds from banks across multiple devices; AT&T, T-Mobile and Verizon formed a joint partnership called Isis to support mobile NFC transactions; expect Apple and its iTunes payment system to leap into the space, too.

So, why could Facebook beat them all? Because of its user base. PayPal makes nearly $4 billion in revenue a year from only 94 million active users buying stuff online; imagine what Facebook could do with 250 million social-networking addicts glued to their handsets. We outlined in Bloomberg Businessweek in March that Facebook has all of the pieces in place to support financial transactions, including Facebook Credits (a virtual currency) and Facebook Payments (a payment system incorporated to support “all lawful business”).

All Facebook needs is the mobile hardware, and that’s coming by Christmas. Facebook has a choice: It could clutter up its tiny mobile interface with ads, potentially turning off mobile users, or it could include a new beneficial service that helps users make payments with cell phones, while charging an invisible, small slice to merchants. Hmm. Which would you Like?

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Image: jirotrom

Barclays’ Visa Black Card has a $495 annual fee. Should you, too, raise prices?


Our first thought after opening the mail to see an invitation to the Visa Black Card of Barclays Bank Delaware was, Wow, a credit card with a $495 annual fee, do these guys know we’re throwing a recession here? After chuckling, we then did the math, and realized a direct-mail piece that cost $0.50 and had even a low 0.25% response rate would attract accounts at a $200 cost per sale — meaning the $495 fee would pay off quickly even if almost no one responds. The Black Card, if you missed it, is Barclays’ slightly downscale version of the black AmEx Centurion Card, a hyper-elite credit tool that allows you to basically buy your own private island. Barclays’ edition comes with a concierge service that can help you find things like rare books, perhaps useful when alone on that island.

If all of this seems pre-economic-apocalypse-bubble-ish, there is an important lesson here: Perhaps your organization, too, should raise your prices. Barclays is simply positioning credit as an elite club, with a compilation of value-added services that might seem expensive to us, but to others is just akin to dropping $500 for a good night out. There’s no harm here; only those willing to pay will reply, and then pay well they will.

This strategy is called price differentiation, charging some customers more for the same basic service — as seen in every airline seat configuration. The guy and lady in first class get a glass of wine and a few extra inches of room, and in exchange for that $5 freebie they pay hundreds of dollars more for the same miraculous transport from NYC to LA.

Price differentiation is extremely efficient. It feels unfair at first, so play this game: Imagine you are trying to sell an old Beatles record. To your wife, it’s worthless; to a collector who realizes it’s a rare edition, it’s worth $5,000. The collector will get much more perceived happiness from it, so if you find him and charge a small fortune, you both get an equitable transaction. In any supply of goods, some value the supply more than others — shouldn’t they pay more for the privilege?

Walk into a grocery store and see this in action. The woman in front of you pulls out a coupon and gets 50 cents off a can of soup. You don’t. You’re busy, you don’t have time to clip coupons, so you value the discount less. You and that lady have just paid two different prices for exactly the same can of soup. The grocery store has optimized its profits by wringing more cash from you than her. And you both feel OK about it.

Charging similar customers differently for nearly the same product or service is a fine way to raise margins. In a perfect world, you might charge each customer a unique price. The trick is to attract the best customers willing to boost your profits without upsetting the masses. We say, try a Visa Black Card.