The Strategy Behind Amex Small Business Saturdays and Double Points Through End of Year

Have you stopped to wonder why Amex has been so interested in promoting ‘Shop Small’ where they’ve given rebates in the past for spend at small businesses and now is offering double points across most consumer and small business cards for spend at small businesses through end of year?

American Express is using this promotion to win over small merchants and get them to accept American Express. (HT: Alan H.)

For those small retailers still on the fence about accepting AmEx, the card issuer said on Monday that it’s launching its largest rewards program ever to sweeten the deal. Beginning this week and continuing through the end of the year, card members can earn double rewards when they shop at eligible small businesses, the company said in a statement.

American Express is working to reach acceptance parity with Visa nad MasterCard. They’re currently giving up income streams from spend at dry cleaners, for instance, although I’ve just changed cleaners myself and my new one does take American Express.

American Express has added 1.6 million small businesses to its payment network in the past two years. They want to both show small businesses the value of accepting American Express (whose cardholders have historically tended to skew higher income and higher spend) and show consumers that they can use cards at small businesses (I almost hadn’t even thought to ask my new dry cleaner).

Howard Grosfield, executive vice president of U.S. consumer marketing, said that the company has “crossed an enormous and accelerated threshold in terms of the number of small merchants that are accepting.”

“We’ve really doubled down over the last couple of years,” said Grosfield.

For American Express, their small business marketing isn’t ‘feel good’ branding — it’s looking for new sources of revenue.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’ve found that my dry cleaners, as well as other small businesses in my community, are listed on the Shop Small map from Amex however they do NOT accept Amex. Not sure how this is permitted as the terms clearly state they must accept Amex in order to be listed. Amex needs to validate these locations to avoid confusion.

  2. “Have you stopped to wonder why Amex has been so interested in…”?

    Yes, and what came to mind was that AMEX ‘got spooked by the highly successful launch of the Chase Sapphire Reserve visa and is trying desperately to remain competitive to avoid being left in the dust”… 😉

  3. No @DCS the Shop Small initiative predates the launch of that card product. While improvements to their Platinum cards, that compete directly, may be a competitive response this is much broader — a search for new revenue streams — not at all driven by one premium card from a competitor but by Amex’s overall competitive position.

  4. I think the obvious question is whether anybody sees MS opportunities in this promo. I’m still struggling to wrap my mind around it…

  5. @Gary — You’re right that the Shop Small initiative predates the launch of the CSR. What is new and may be in response to the CSR is the aggressive drive to make the initiative more appealing by offering sweeter deals…

  6. @Gary — No doubt, but they seem to have gotten a louder wake up call after the highly successful launch for the CSR (as some analysts noted), since losing various accounts to competitors did not elicit the latest frenzy…

    What ever the reason, that it got AMEX to pitch their products more aggressively with sweeter deals is a Good Thing for loyalty game players.

    G’day.

  7. Amex still makes life difficult for the small retail business who gladly accepts the card thru Square. It is impossible for us to get on the Amex map or get listed in their online promotions — only active Amex merchant accounts get those perks. We have, however, succeeded in ordering balloons/posters/banners and the spiffy Amex shopping bags. We can’t get a response from Amex mgmt even after a number of (pleasant) calls to their 800 support number requesting equal treatment and a callback. So, Gary, I’m still wondering “why Amex has been so interested in promoting ‘Shop Small’ ” but not so interested in promoting a Small Shop.

  8. I’ve got a violin shop, a tattoo parlor, and a bunch of small greasy spoons on my list. Along with a half dozen pet hospitals, several lumbar yards, and a towing service. My favorite discount wine shop, which has never taken AMEX due to excessively high fees, is on the list, but still does not take AMEX. For me this whole program is a bad joke, and I don’t find myself amused in the least. It’s a major fail as a marketing program.

  9. The promo worked for me. I tried a small restaurant, bakery and a hardware store that I would not normally have shopped at.

  10. This straight from the Wall Street Journal:

    “J.P. Morgan Chase, for instance, is seeing huge demand for its new Chase Sapphire Reserve card. The company hasn’t given exact figures on how many customers have signed up, but it does say that it hit its first-year sales goal in just two weeks and can’t physically produce enough cards to keep up with demand.

    That should be worrying for AmEx since the Sapphire Reserve card is a direct competitor to its premium Platinum card. Both feature rich travel benefits in return for a high annual fee. AmEx recently moved to improve the Platinum card’s travel rewards. On Wednesday, its chief financial officer told analysts to expect higher marketing expenses for the Platinum card in the fourth quarter.

    AmEx’s fundamental disadvantage is that it specializes in charge cards that don’t carry balances over time. That means it doesn’t earn the high interest rates that other issuers like Chase do, making it difficult to match their generous awards offers.

    Until AmEx solves that problem, investors should treat any rallies in its shares with skepticism.”

    Not only does the above support my claim that the CSR seems to have given AMEX their loudest wake up call yet, I find the paragraph before last and conclusion quite interesting, in that it may explain why it has been and will probably remain difficult for AMEX to match the generosity of Chase’s offers. Unlike Chase, AMEX does not earn much money from interest payments because many of its cards are “charge cards” (pay in full, no balance allowed, ergo no interest earned) vs Chase’s “credit cards” (pay over time, balance allowed even encouraged by bank, loads earned on interest). Chase puts the interest money back into pitching their cards with generous offers, AMEX does not have any such “slush funds” to thow around…

  11. @DCS no, it doesn’t. We’re talking about ~ 100k card signups, and some of those traded off with other cards and still others were from existing Chase customers meaning the spend traded off. Sapphire Reserve has done very well since launch, but that’s not driving Amex’s small business strategy. Amex is looking for new growth areas, and small business acceptance has been an area of weakness for them historically. This has NOTHING WHATSOEVER to do with Sapphire Reserve.

  12. @Gary — I am not sure what exactly you are contesting or what you think I am saying when the evidence is clear. You’re trying to make an arbitrary distinction between business and non-business AMEX cards, when the basic point here is that AMEX got a wake up call after the CSR directly challenged its flagship “Platinum” card. Then with Chase planning to also make a play in small business cards arena with sweeter deals, AMEX is clearly spooked, and the CSR’s success has a lot to do with. There is no argument about that. Just do random search on the subject to settle it in your own mind!

    For instance, here’s Bloomberg on 19 October 2016:

    “JPMorgan Pressures AmEx With Richer-Reward Business Card

    JPMorgan Chase & Co. is continuing its push to snag wealthier credit-card users and gain market share by introducing a top-tier small-business card with richer rewards than products from rivals.

    Called Chase Ink Business Preferred, the card offers users an 80,000-point signing bonus when it rolls out later this year, according to Pam Codispoti, president of branded cards for the New York-based bank. Business owners earn 3 points a dollar for the first $150,000 spent on travel, telecommunications, shipping and advertising on social-media and search engines. Purchases after that limit or in other categories earn 1 point per dollar.

    “The credit-card space is incredibly competitive, and we want to be aggressive in investing in the best products,” Codispoti said in a telephone interview. “Customers tell us the way they’re marketing their products and services is changing — they’re spending more on things like Facebook paid search. To have the opportunity to earn triple points on that is important to them.”

    Banks have turned to fee-rich credit cards as stubbornly low interest rates crimp profits elsewhere. The frenzied competition has forced them to boost spending on incentives, debut rewards-heavy products and bolster existing offerings. In August, JPMorgan made waves when its new Sapphire Reserve card became available with a 100,000-point signing bonus. The escalating card wars have become costly — American Express Co. lost its largest co-brand relationship with Costco Wholesale Corp. to Citigroup Inc. after it couldn’t come to an agreement with the retailer on fees.”

    ——————-

    G’day.

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