First of Two Parts

With messages ranging from boosterism to mudslinging, and relying on celebrities including Martha Stewart and Jerry Seinfeld, credit card companies spent more than $700 million on advertising in 1996.

To these organizations, advertising is the "killer app," the most proven way to build a brand and coax cards into consumers' pockets. Among the bank card associations and their nonbank competitors, a pecking order has evolved based on the relative effectiveness of their advertising strategies.

Visa's unflagging "Everywhere You Want to Be" campaign is still going strong after 13 years, still credited by company officials with keeping Visa's market-share measures ahead of all others'.

But a few clouds of change are hovering over the card advertising front: American Express Co. has been taking more on-air potshots at Visa, and MasterCard, perennially in search of a strategy to match its rivals', is narrowing its search for a new ad agency.

The stakes are getting higher as more card products get into circulation and company rivalries intensify.

"All you have to do is open your mailbox to see that the marketplace is much more competitive and fragmented than it has been historically," said Gail Wasserman, an American Express spokeswoman.

"There was a time when there were actually people saying you should go out and shop for a card," she said. "Today cards will come to you, and you can decide what will meet your needs."

Mail solicitations are easy to ignore, but prime time television is where the mega-marketers focus their creative flourishes.

"If you're looking at the success of the card business over the last couple of years, advertising is one way to get there, one way to demonstrate the value to the customer," Ms. Wasserman added.

American Express and Visa have been airing their public tiff on and off for more than a decade, since Visa began pitting itself against the nonbank company by using the signature line: "They don't take American Express."

American Express has periodically hit back with guerrilla tactics. During a Visa-sponsored Super Bowl a few years ago, "Saturday Night Live" comedians Jon Lovitz and Dana Carvey played customers whose experiences varied depending on the type of card they used. And during several Visa- sponsored Olympic Games, American Express ran ads to counter the impression some consumers had that only Visa cards were accepted in the cities hosting the games.

This year, with no specific provocation, American Express has formulated three commercials in which a hapless Visa customer encounters a variety of disasters because of the features his card lacks. Two of the three ads have aired-one with the actor visiting Paris, and another the Grand Canyon-and a third will run soon. More anti-Visa spots are slated for later this year, Ms. Wasserman said.

The ostensibly humorous commercials have received mixed reviews. Credit card consultant Frances Dale, president of Entandem in Sterling, Va., wondered why American Express started going negative: "Why? Isn't there a more positive story to tell?"

"Humor is something you have to be a little bit careful with," Ms. Dale said. "Sometimes it trivializes what you're trying to say. It just seems like Amex might get more bang for their bucks if they were to take another angle."

K. Shelly Porges, a principal at San Francisco-based Porges/Hudson Marketing Inc., agreed that American Express fares better when it runs "leader-oriented" ads that spotlight its bragging points.

"An attack ad is typically something that a No. 2 or No. 3 is famous for-like Avis," Ms. Porges said.

In 1984 when Visa came out with "Everywhere you want to be" and began slamming American Express, it did so to gain what Ms. Dale, who worked at Visa then, called "the halo effect." By playing the underdog, Visa gained the sympathy vote.

Today, Visa is more than happy to play the overdog.

"Their attacks on Visa simply acknowledge that Visa is the gold standard in the industry and that they would just like to be considered as part of the competitive set," said Michael A. Beindorff, Visa U.S.A.'s executive vice president of marketing and product management.

"We're flattered by that," he added, "but I think they probably ought to turn their attention away from Visa and focus on Discover, because Discover is rapidly gaining ground, and American Express could find themselves in the fourth position, not the third position."

After American Express launched its "Paris" ad in January, Visa sought to have the spot taken off the air, claiming it was inaccurate. American Express modified the message-changing, among other things, the image of the card to look exactly like a real Visa-and continued to run them. The "Grand Canyon" ad debuted during the National Basketball Association playoffs this spring.

Ms. Wasserman said the anti-Visa ads were "not a response to Visa" but were "aimed directly at the consumer, to say there really is a difference between these two products." She said customers respond positively to the humor.

"Our research shows that these commercials actually prompt a reappraisal of the American Express charge card, which is exactly what you want to do," Ms. Wasserman said. "You want to say there are a number of attributes that the American Express card has that you might have thought your Visa card had, but it actually doesn't."

Ms. Wasserman said the ads "run in bursts, then disappear."

The strategy dates back to 1994, when American Express adopted a more "outward focus" and launched its Optima campaign featuring cooking doyenne Martha Stewart.

"Today we look at the external marketplace much more than we used to, and one way that it's expressing itself is in more aggressive advertising," Ms. Wasserman said.

Visa, too, has stepped up efforts recently. This year's push for the Visa Check Card has added a new dimension to its global advertising.

"We see (displacing) cash and checks as the biggest single opportunity we have to grow our business," Mr. Beindorff said. "Ultimately, people will come to see Visa as the world's best way to pay, as opposed to the world's best credit card."

Visa has had only one ad agency since it first took its work to an outside shop in 1984: BBDO Worldwide of New York. Visa executives said the stability of that relationship contributed to the successes they have enjoyed.

Mr. Beindorff denied that MasterCard was a focus of Visa's antagonism. But John Bennett, the former Visa executive who worked with BBDO on the enduring ad strategy, said the opposite was true: By slamming American Express, Visa was seeking to set up a rivalry that pushed MasterCard off the radar screen.

"American Express has never been the objective-the target-of Visa," Mr. Bennett said. "That's something that people have not clearly understood. Many people look at the campaign as outsiders and say, "Well, Visa's taking on American Express.' That's not true at all." (See page 12.)

MasterCard's most recent campaign-"Smart Money," by the agency Ammirati Puris Lintas-didn't connect with consumers. As it did in 1992, the card association sought a new agency. The two still in the running are McCann- Erickson Worldwide and Messner Vetere Berger McNamee Schmetterer/Euro RSCG.

"While we're in the midst of a review, we really don't have a strategy," said MasterCard spokeswoman Marianne Fulgenzi. "All we're really doing right now are tactical things ... just making sure that the brand is out there."

What MasterCard does have is "an aggressive branding strategy," which Ms. Fulgenzi said was meant "to build our brand into one of the 10 most respected in the world."

One slogan MasterCard has been using while biding its time is "The future of money."

David Bonalle, MasterCard's vice president of global brand development, said the words are not meant to be futuristic: "To us, the future of money is making people's lives better now, and we want to be the leaders in that process. So essentially, what they would have gotten in the future, they're getting today."

MasterCard's missteps have fed Visa's glee. At Visa, Mr. Beindorff said: "You see MasterCard searching for an advertising agency, struggling for a place to live. You see American Express throwing rocks at Visa. You see Visa breaking new ground with debit cards, and you see Discover continuing to gain ground on American Express."

The Discover card organization, now part of Morgan Stanley Dean Witter, has, like Visa, maintained the same slogan and agency for a while. Its relationship with DDB Needham and the "It Pays to Discover" motto are both eight years old.

"We are positioned as the card of value," said William Hodges, executive vice president and general manager of Discover.

Mr. Hodges said Discover has never considered running ads that knock the competition. Its slogan has "served us very well," he said. "We have a very high callback of that tagline, and it seems to be very meaningful to people."

He also said Discover has no specific goals to outstrip American Express, just to "grow our business as much as we can."

In terms of advertising, "I think we're shifting emphasis a little bit more toward a focus on the brand and the brand name, and a little bit less in terms of delivering the functional features of the card," Mr. Hodges said. "The emphasis is a slight change-it's not like we're abandoning what we do."

None of the card company representatives interviewed would talk about their advertising budgets. But figures were available from Competitive Media Reporting of New York, which gathers information from the Publishers Information Bureau and from artificial intelligence computers that continuously watch television.

The company put total 1996 ad spending by the industry at $736 million. It estimated Visa International outspent its rivals, pouring $220 million into all media. American Express spent $164 million, Discover $105 million, MasterCard $99 million, and Citicorp $56 million.

In the first quarter of 1997, American Express topped out at $55 million, compared with $46 million for Visa, $16 million for Discover, $15 million for MasterCard, and $7 million for Citicorp.

"There are a lot of credit card companies and brands, but the huge majority of the spending is limited to a few companies," said Lynn Fava, a researcher at Competitive Media Reporting. "Network television is especially strong for the big brands."

Ms. Fava said the top card companies dedicated 46% of their budgets to network TV last year, and 49% in the first three months of this year.

"Ninety percent of advertising comes from the top 5% to 10% of the brands," Ms. Fava said. "There are a few very big brands, and then a lot of little brands that are filling in niches."

The banks that issue cards are more likely to use newspapers, magazines, and radio than to spring for television commercials. At Chase Manhattan Corp., for example-which Competitive Media Reporting listed as the eighth- largest 1996 advertising spender, at $12.7 million-TV advertising is confined to local markets.

"We spend more on direct mail than we do on broadcast media," said Drew Otocka, senior vice president of credit card marketing at Chase Manhattan.

Some television spots are running for Chase's cobranded cards with Wal- Mart Stores and Shell Oil, in markets that Mr. Otocka described as "important" to those companies.

Most banks consider television advertising a waste: Their card products often have stringent credit criteria that the vast majority of television viewers would not meet. By contrast, the card associations and nonbank card issuers seek the maximum "impressions" they can get through mass media.

"It's too expensive if you have to throw out 90% of the people who are going to call you to ask for the product," Ms. Wasserman said. "If today at American Express we have 15 different products we can offer you, if you call in and don't qualify for one card, we can give you a different one instead."

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