In an industry distinguished by a copycat mentality, Dean Witter, Discover & Co. has cultivated a "lone ranger" image.
"You could either say that they have been slow to respond to the leading trends or have chosen not to follow," said Shelly Porges, a credit card consultant.
Perhaps both notions are true.
Dean Witter, after steadfastly ignoring an industry trend of product proliferation, has started cranking out an array of specialized cards to supplement its mainstay Discover Card. The aim: to attract new types of customers and still keep the Discover engine humming.
The company is also entering the cobranding fray-quite belatedly. Though rivals have been striking these deals at a frenetic pace for the past few years, Dean Witter has been content to rely on its own considerable marketing muscle.
Indeed, the company has marched to its own drummer since the launching of Discover in 1986. Back then, some predicted it would not turn a profit because it didn't have an annual fee.
The naysayers were proven wrong by January 1988 when the Discover Card reported its first profit. It went on to become the single largest credit card with 35 million customers. It has $28 billion of outstandings today.
Thomas R. Butler, who heads up credit cards for Dean Witter, said he draws inspiration from a Lucite plaque his staff gave him marking that triumphant day in 1988.
On the plaque, industry icon Spencer Nilson, who publishes The Nilson Report, a 27-year-old newsletter on the card business, is quoted as saying the Discover Card would not be profitable.
Today, most cards don't carry an annual fee, and Discover's other key feature, a cash-back rebate on purchases, is also widely imitated.
"I think, quite frankly, that we were successful with the Discover Card strategy because it wasn't one everyone else was pursuing," said Mr. Butler in an interview at the Riverwoods, Ill., headquarters of Dean Witter's card unit, Novus Services Inc. He is Novus' president.
A former Army captain, Mr. Butler, 54, said "the road less traveled" would serve aptly as Dean Witter's future and past motto.
But even as the company sees itself as deviating from the rest of the pack, it has embraced the market segmentation strategy that is sweeping the card industry.
Dean Witter, recognizing that the Discover Card alone could not capture the market share it seeks, launched a marketing campaign in 1995 designed to attract more and different types of customers.
It developed a brand strategy for Novus, whose logo is easily identifiable by shoppers checking to see which cards a merchant accepts. This allowed the company to wriggle out from under the Discover Card umbrella and create brand identities for new products.
Those products, so far, include:
Bravo, a credit card that offers two credit lines, and unlike the Discover Card targets people who don't pay their balances in full each month.
Private Issue, three credit cards that feature celebrity artwork and offer several pricing schemes.
National Alliance for Species Survival, Dean Witter's first affinity card.
Mr. Butler characterized the new products as "additive" to the Discover Card.
"We have not diverted the dollar resources from the Discover Card for the new cards," said William L. Hodges, executive vice president of Novus brands marketing. "We didn't go into this new strategy because we have a franchise that is flagging."
In fact, the Discover Card is being heavily marketed with a new ad campaign, begun in August. Called "Make a Statement," it features such celebrities as actor John Lithgow, tennis pro Michael Chang, and singer- comedienne Liz Torres, who reveal what purchases they recently made using their Discover cards.
The campaign is designed to imbue the card with an upscale image.
Mr. Butler said the idea of using celebrities to communicate credit card features reflects the "People magazine era" of which corporate America is increasingly becoming a part.
The celebrity route has paid off.
Almost half of Dean Witter's new account growth comes from the new brands, which are generating 15% of total receivables after only a year of pursuing the Novus strategy. Total managed card loans rose by 15%, to $36.6 billion, in 1996.
Even the company's critics concede that Dean Witter is an effective marketer.
"I've always said that the Discover Card is one of the worst cards in the market, and yet it has some 40 million cardholders and is still growing," said Robert B. McKinley, president of RAM Research Group, a card tracking firm in Frederick, Md.
Marketing prowess aside, Dean Witter has some formidable challenges ahead. It has been trying for more than a year to land a cobranded deal. Having entered the cobranded-affinity card game much later than its competitors, the company is finding it difficult to catch up. It has bid on hundreds of deals but has launched only one such card.
"When First USA said they were getting into that business some years ago, they were quiet for an awfully long time before they announced any deals, and now I understand why," said Mr. Butler.
Expanding the merchant network is another major priority.
Last year, 425,000 Novus merchant locations were added, the single largest addition in the past four years. William R. Simmons, an 18-year veteran of Dean Witter who took over the merchant services business as executive vice president in December 1995, is largely responsible for the surge.
He said the company exceeded its goals last year by 20%, signing such well-known merchants as Eddie Bauer, Blockbuster Video, Spiegel, and Tiffany.
"We are accepted at locations where over 90% of the retail transaction volume is done," said Mr. Simmons.
Still, Novus cards come up short in the travel and entertainment sector, and they are not accepted abroad. Analysts say Dean Witter's goal this year is to break into international markets.
But Mr. Butler would say only that the company is working on international market penetration "from a planning perspective."
Dean Witter's public support of American Express' battle in Europe against Visa last year is one indication of the direction it is headed.
When American Express challenged Visa's plan to adopt a rule that would ban its European members from issuing American Express cards, Dean Witter sent a letter to the European Commission, which governs competition issues.
The letter supported American Express' position that Visa would be violating competition laws in Europe if the commission did not prevent it from enforcing such a ban.
On another front, most observers say Dean Witter is taking a back seat in the contentious battle between the bank card associations and American Express because it lost its 11-year legal battle to become a member of Visa U.S.A.
But clearly, Dean Witter will benefit from American Express' aggressive swipes at Visa and MasterCard. At issue is the card associations' right to determine with whom their members do business.
"American Express has chosen to be more vocal in terms of their approach, but that is just a difference of style," said Mr. Butler.
Style and corporate cultures are not the only differences between the two card giants.
On the 77-acre campus in Riverwoods, replete with duck ponds, a state- of-the-art gymnasium, auditorium, and cafeteria, Novus executives said their ideas about partnerships with banks are different from those of American Express.
While American Express ultimately wants banks to issue its cards, thus leveraging American Express' brand equity, Dean Witter is appealing to banks based on its lack of brand equity in the Novus mark. Dean Witter believes the strength of its Novus network is its generic quality.
Industry watchers are skeptical of Dean Witter's ability to attract bank partnerships, in part, because the company has done little toward that end.
"I don't think the Novus brand has that much value to bankers," said Michael Auriemma, president of Auriemma Consulting Group.
It is not the Novus brand that banks should focus on but their own card products, Mr. Hodges argues. Bankers should think of Novus simply as a less expensive system than the Visa and MasterCard networks.
"We think the individual card brand will be the driving force in the market for the next 10 years," said Mr. Hodges, who joined Dean Witter in 1985 from Citicorp.
"We don't spend $100 million a year on Novus," he said. "We choose to spend the money promoting specific brands" like Private Issue and Bravo.
Mr. Hodges' point is that banks spend too much supporting the Visa and MasterCard brands. Bankers would keep more of their profits, he believes, by developing a card without the Visa or MasterCard logos and by using the Novus merchant network instead.
"Would you rather spend your money on what you want to spend it on or send it to headquarters to have the associations spend the money?" he asked.
Dean Witter would benefit from such an arrangement because the greater volume on its network would decrease the costs associated with handling merchant transactions.
Mr. Butler tempered his statements by conceding that Dean Witter has not actively pursued partnerships with banks. Mr. Hodges added that Dean Witter is "totally interested in doing business with banks; it is a question of how and when we get there."
In the meantime, some industry experts are not as confident of Dean Witter's prospects.
"There is no way they can gain market share because bank cards are growing so fast," said Mr. Nilson of The Nilson Report. "Everyone is losing market share except Visa."
The Novus executives took Mr. Nilson's opinion in stride.
"Things are changing all the time," Mr. Hodges said. "Just because you are big today, it doesn't give you an inalienable right to be there forever."
