At stake is the business of millions of frequent flier cardholders. This is the type of customer that issuers covet: creditworthy big spenders who are willing to pay an annual fee for miles.
According to conventional wisdom, U.S. Bancorp should be the underdog. It lost a 14-year cobranding contract with Northwest Airlines Corp. after the carrier was acquired by Delta Air Lines Inc., which has a longtime cobranding partner in Amex.
And Monday Amex plans to unveil a wide-ranging, multimedia advertising campaign to persuade U.S. Bancorp cardholders to switch to its Delta SkyMiles cards.
"It will be full surround-sound, on television, on radio, online, on banners in airports," David Rabkin, the vice president of Delta consumer cobrands for Amex, said in an interview last week. "We'll be pretty loud throughout the summer."
But industry experts are reluctant to count U.S. Bancorp out. The Minneapolis company is converting the Northwest WorldPerks card accounts next month to a multiple-airline reward program. Such programs are often less attractive to frequent fliers, because they cannot combine miles earned from the card with miles earned from an airline, but U.S. Bancorp is positioning its new "FlexPerks" program as a response to consumer frustrations with traditional airline rewards — and with flying in general. For example, on flights purchased with reward points, U.S. Bancorp will credit cardholders up to $20 for "nuisance fees," such as checked-baggage or food charges.
"We're in effect reallocating the revenues that otherwise would have been shared with an airline, and we're re-investing those dollars to enable our customers to get on planes," said John Owens, the senior vice president of retail payment solutions at U.S. Bank. "Are we going to lose some customers? Yeah, but we're probably going to gain some new customers that have an affinity for the value proposition that we're putting out in the marketplace."
Observers said such features will reinforce U.S. Bancorp's image as a sound and consumer-friendly institution at a time when Amex's finances and reputation have deteriorated, at least in the public eye.
"This is kind of an economy of austerity and back to basics, and in a good way, U.S. Bank is a back-to-basics bank. And I think consumers get that about their brand," said Campbell Edlund, the president of EMI Strategic Marketing Inc., which advises financial institutions. "Almost all bank and credit card brands are pretty battered, but in the current battering, U.S. Bank has done very well."
On the other hand, American Express "is a luxury brand, and that may be a challenge they have to work with in this environment," Edlund said.
Amex has attracted a high degree of criticism in the past year for cutting credit lines, raising interest rates and, in one highly publicized case, offering some cardholders $300 to close their accounts.
"We have gotten attention this year for some of the actions that we've done," Rabkin said. "We want our customers to continue to push us to that higher standard."
Amex is "pivoting" its marketing tactics to address consumer concerns about spending during the recession, which are affecting even the company's wealthy core customers, he said.
