American Express is discovering that prioritizing the crème de la crème of its clientele can be lucrative, even for a credit card provider catering to the affluent.
The company has recently redirected its marketing focus to its revamped Platinum card, which comes with an $895 annual fee, drawing back from promoting no-fee cash back options. CEO Stephen Squeri shared this shift with analysts following the company's fourth-quarter earnings report.
This strategy aims to elevate overall spending levels, as well-off consumers continue to prosper. This approach is said to result in higher fee revenue from premium cards and lower rates of loan defaults, according to company executives.
"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.
This shift in AmEx’s strategy illustrates the ongoing "K-shaped" recovery in the U.S. economy, where wealthy consumers continue their spending sprees, while others tighten their belts. Data from American Express indicates an accelerating demand for high-end products and luxury experiences, as opposed to slower growth in basic categories.
During the quarter, CFO Christophe Le Caillec mentioned to CNBC that spending at luxury retailers surged by 15%, business and first-class airfare purchases increased by 9%, and luxury hotel spending rose by 12%.
Comparatively, overall spending on airlines and lodging grew by 3% and 5% respectively, highlighting that the spending habits of the richest cardholders are driving these results.