Making a Splash

  By the looks of their spending, card issuers and the major card brands harbor a deep and abiding belief in the power of advertising. The industry's top 20 advertisers shelled out a combined $2 billion to get their messages across to the American public last year, with American Express accounting for roughly one-fourth of the total.
  But big advertisers are not content to talk with just anyone. Spending shifts and interviews with marketers indicate a growing desire to focus on individual consumers or small groups instead of on the masses.
  Poring over figures provided by TNS Media Intelligence, a British-based company that has tracked U.S. media spending since 1926, observers point to the increase in spending for ad space in newspapers and magazines as part of a drive to reach a better-defined audience.
  "Issuers know exactly what kind of people read which publications," says Megan Bramlette, an associate at Auriemma Consulting Group Inc., Westbury, N.Y. "They have precise demographics. They can target, target, target." She provides the example of a business card issuer buying ad space in a trade magazine that reaches entrepreneurs over the age of 45 because a business model has pegged that niche as profitable.
  All told, the top 20 ad spenders dug into their pockets and came up with $590.5 million for print ads last year, up 51% from $391 million in 2004, according to TNS.
  Because of more careful spending, the outlay for Internet ads fell 36%, to $106.5 million last year from $166.7 million in 2004, TNS tracking shows. The decrease also falls in line with the penchant for narrowing the focus to individual consumers, experts say.
  In 2004, advertisers were throwing money at the Internet, inundating Web users with messages both relevant and irrelevant, says Bramlette. By last year, they were learning to match the behavior that consumers show in their Web surfing with personally meaningful banners and pop-up ads, she says.
  Bramlette expects the industry's outlay for Internet advertising to increase this year, a projection supported by top marketers at the card associations. The associations, those marketers say, are spending lots of time thinking about what works online.
  While issuers and the card associations invest more dollars and more thought to concentrate on smaller numbers of consumers, they are continuing to spread the word to the general population. Spending on TV dipped slightly, to $1.35 billion last year from $1.4 billion in 2004, according to TNS.
  TV reaches the most consumers. But while it works well for branding, TV does not do so well for product-specific messages, says Tom Britz, senior principal at Thomas Marketing Group, a consultancy in Whitefish, Mont.
  However, TV ads breed brand-reinforcing familiarity that bumps up the response rate to the more focused messages of direct-mail and telemarketing offers, says Stephen Drees, president of the Cincinnati-based Allegiant Group Inc. Expect a significant but not a "killer" improvement in response rates after hitting the broad audience with branding messages, he says.
  Radio advertising remains something of a stepchild in the industry, says Bramlette. "Radio is a medium people are scratching their heads about," she says, noting that listeners often divide their attention between radio and another activity-from driving to brewing a pot of coffee.
  Just the same, radio spending could gain strength as satellite radio expands and issuers test the market, says Bramlette. At any rate, radio will be less expensive but less effective than TV as a means of reaching broad audiences.
  TNS says card advertisers spent $30.2 million last year on radio time, up slightly from $29.8 million in 2004.
  Outdoor advertising, the messages conveyed everywhere from billboards to placards on subway cars, suffers partly because not many agencies do a good job with the medium, says Bramlette. She says advertisers get just a moment and no more than eight or so words to make an impression as a motorist speeds by or as a pedestrian saunters past.
  Spending in the outdoor category rose 39%, to $16.5 million last year from $11.9 million in 2004, according to TNS research.
  Viewed as a horse race among the top 10 advertisers, AmEx vaulted to first place among card advertisers last year from the fifth position in 2003, while CitiGroup Inc. did the opposite, falling from first to fifth in ad spending, according to TNS. The other companies in the top 10 have stayed at or near the same positions for the last three years, TNS data show.
  Bank Push?
  In making it to the top of the industry's ad spenders last year, AmEx lavished $519.8 million on ads, says TNS, up 64% from $318 million in 2004 and 74% from $298 million in 2003. AmEx far outstripped last year's second-biggest spender, Visa USA, which racked up $329 million in ad spending, TNS says.
  AmEx's whopping outlay last year may represent an attempt to saturate the nation's consciousness with the "My Life. My Card" theme. The campaign, launched in May 2004, describes how celebrities use AmEx cards to enhance their lives. Actors Robert DeNiro and Kate Winslet have been among the subjects.
  "'My Life. My Card' is the company's first umbrella campaign to support all issuers of American Express-branded cards," John Hayes, AmEx chief marketing officer, says in a company report. No individual cards are depicted in the ads, which allows all issuers to benefit, Hayes says.
  Members of Visa and MasterCard International got the right to issue AmEx cards in late 2004, when the U.S. Supreme Court upheld lower-court rulings that lifted association policies preventing them from doing so. That litigation and the subsequent decisions by some banks to issue AmEx cards was the most important factor in the AmEx spending increase, contends Britz of the Thomas Marketing Group.
  "I attribute the change less to the new ad campaign and more to the support they're giving to the banks that are now issuing American Express," Britz says.
  AmEx has to advertise its own new products and its brand to benefit issuing banks, says Drees of The Allegiant Group.
  While AmEx spending soared, Citigroup slashed its budget by 24%, plummeting from the industry's top spot in 2004, when it laid out $411.7 million, to the fifth spot last year at $314.7 million.
  In 2004, Citi blitzed the nation with TV ads carrying the identity-theft theme. The spots, which appear less frequently now, feature innocuous-looking victims on screen talking with the voices of the thieves who stole their cards and spent lavishly.
  Citi Woes
  Meanwhile, Citi moved its offices and had some management changes, Britz points out, suggesting that the resulting state of flux may have prompted Citi to reduce or suspend ad spending for a while.
  At the same time, Citi reported weakness in its credit portfolio, another circumstance that coincided with the decrease in ad spending, says Drees.
  MBNA, meanwhile, ratcheted up the advertising with huge increases, leaping from $8.5 million in 2004 to $39.2 million last year, according to TNS. The outlay for TV rose from $252,000 in 2004 to $19.4 million last year, TNS says.
  Britz says he sees the MBNA advertising blitzkrieg as part of a successful attempt to increase brand awareness and to lift stock prices. He notes that MBNA used to promote itself by omitting its name from the front of co-branded cards. Now the company displays a new logo and proclaims in ads that, "If you're into it, we're into it."
  Positioning for its recent merger with Bank of America also may have helped prompt the ad-spending increase, says Britz.
  MBNA, like other former monoline card issuers, also has had to diversify into other financial services, including savings plans and loans, says Drees. Moreover, with 5,000 cobranding relationships, he says, MBNA has tapped all the large or obvious partnerships and no longer can depend on that part of the business alone for growth.
  Meanwhile, other issuers and the card brands remained steady in their rankings among the industry's top ad spenders. Visa, for example, was the second-biggest spender last year at $329 million. In 2004, the card association came in third, spending $340.4 million, while it finished second in 2003 with an outlay of $319 million, TNS says.
  In February, Visa introduced the brand's first new tagline in 20 years, substituting the new slogan "Life Takes Visa" for the venerable "It's Everywhere You Want To Be" ("Visa Adds 'Life' with New Ad Campaign," March). The new catch phrase has meaning on two levels, suggesting wide acceptance of Visa cards and the need to use the plastic to live life fully, says Susanne D. Lyons, Visa executive vice president and chief marketing officer.
  Visa switched taglines because the old message conveyed only the wide acceptance of the card, says Lyons. Though the company is still preaching card acceptance, it also is embedding the idea that Visa's payment products enable users to meet everyday responsibilities and to fulfill lifelong dreams, she says.
  Despite heavy emphasis on the new campaign, overall Visa ad spending probably will increase only about 10% this year, says Lyons. The mix will change, however, with more dollars devoted to newspapers and magazines this year. "We think this campaign works well in print," she says.
  Although online ad expenditures remained a small percentage of the Visa ad budget, totaling $8.1 million last year, the association is working to learn how to use the medium more effectively and how to measure the results, says Lyons.
  MasterCard, meanwhile, continued to spend about the same as Visa on advertising. MasterCard ranked third in industry ad spending last year, forking over $322.8 million. In 2003, MasterCard ranked fourth, spending $326 million versus Visa's $340.3 million.
  MasterCard began shifting attention to the Internet with the launch in January of priceless.com, a Web site where the brand hopes to build a dialogue with cardholders through two-way communication. The site will change each week, says Amy Fuller, MasterCard group head of Americas marketing. "It's a weekly guide to life's experiences," she says of the site. "We are serving as an experiential editor for our consumers-a way to connect people with interesting places to eat, travel, and cool things to buy and to wear."
  MasterCard will maintain a strong presence on TV and in print, where it can reach large numbers of consumers efficiently. Often, however, the association will use those ads to direct consumers to the priceless.com Web site, Fuller says.
  While MasterCard shifts its attention to the Internet, Capital One appears likely to keep betting on TV ads. No one else in the industry favors television over print as strongly as does Cap One, the TNS data show.
  Cap One barbarians continue to pillage the homes of consumers clueless enough to use competing cards in the "What's In Your Wallet" campaign, while comedian David Spade still emphasizes the "No" in the "No Hassle Rewards" promotion. Both themes resonate with consumers, showing up as parodies in political campaigns, consultants say. Last year, Cap One spent $310 million on TV ads but just $2 million on print.
  However ad spending is sliced, though, advertisers face trade-offs. Discover officials, for example, say they keep rates relatively low by maintaining a more modest ad budget than some of the other leading card brands.
  Discover parent Morgan Stanley spent $81.6 million on ads last year, down 2.5% from $83.7 million in 2004, says TNS.
  Wherever the ad money goes the card industry will continue to fine-tune its media mixes. The shift toward niche targeting appears likely to continue as well.
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