American Express is discovering that catering to the wealthiest customers can be highly rewarding, even for a credit card provider that already serves affluent clients. The company has recently redirected its marketing focus towards its revamped Platinum card, which comes with an $895 annual fee, while shifting away from promoting no-fee cash back cards, as disclosed by CEO Stephen Squeri to analysts following the company’s fourth-quarter earnings report.
This strategic move is designed to augment overall spending levels, given that high-end consumers are still flourishing. This approach is beneficial as it results in rising fee revenue from premium cards and a reduction in loan defaults, company executives explained.
"We have the ability... to be really flexible with our marketing investments, and we saw a tremendous demand for premium products, particularly the Platinum card," Squeri stated.
"The overall portfolio is slowly getting more premium [as] the Platinum portfolio is growing at a very fast pace," he added.
AmEx's strategic shift is a recent illustration of the so-called "K-shaped" U.S. economy in action, where affluent consumers continue to spend freely while others are more cautious with their expenses. Data from the card company reveals that interest in high-end products and luxury experiences is on the rise, whereas purchases in basic categories are growing at a slower rate.
During the quarter, spending at luxury retailers increased by 15%, purchases of business and first-class airfare climbed 9%, and spending at luxury hotels was up 12%, CFO Christophe Le Caillec shared in an interview with CNBC.
Conversely, general spending with airlines and lodging rose modestly by 3% and 5%, respectively, indicating that the wealthiest cardmembers are primarily driving these results.