Last year’s announcement that Costco would not renew its 16 year partnership with American Express sent a wave of concern throughout the credit card industry. The idea that a complex and long standing relationship, which means so much to both companies, could be systematically untangled, means that no partnership is sacred and every contract is under threat. Not only did Costco negotiate lower interchange fees, but it came away with a significantly improved value proposition for its card – a consistent theme across many new co-brand launches where new partnerships have been established.
Here are four recent examples:
Costco switches from American Express to Citi/Visa (2016)
Key Improvements: Better earn rates on gas, restaurants and Costco purchases
Launch campaign: Letters to existing Costco cardholders were mailed in March/April 2016 outlining the benefits and features of the new Costco Anywhere Visa Card by Citi. New Card Agreements summarizing pricing and terms were subsequently mailed in May followed by the cards themselves ahead of the June 20th transition deadline. To date no new customer acquisition activity has been observed as Citi continues to focus on a smooth transition of the business from AmEx.
JetBlue switches from American Express to Barclays/MasterCard (2016)
Key Improvements: Better earn rates at JetBlue and no annual fee
Launch Campaign: JetBlue’s launch campaign was an omnichannel effort spanning TV, digital and print including direct mail and email. On May 25th, JetBlue sent approximately 5.5 million emails introducing the card to TrueBlue Members and generating a 23% Read Rate according to Mintel ePerformance/eDataSource. This is low compared to the 28% Read Rate that JetBlue typically achieves, but the campaign still generated a significant amount of attention due to its sheer scale.
Amtrak switches from Chase to Bank of America (2015)
Key Improvements: Better bonus points and earn rate at Amtrak plus a low intro APR and One-Class Upgrade
Launch Campaign: Emails promoting the “all-new” Amtrak Guest Rewards MasterCard exclaim “Ta-dah!” and “Whoa.” introducing “a new look, a new name, new benefits and new technology.” Emails started hitting Guest Rewards member inboxes in September 2015 while a direct mail acquisition campaign was launched in December the same year with both channels ramping up in 2016.
GM Canada establishes new partnership with Scotiabank (2015)
Key Improvements: Better earn rates with no earnings cap or redemption limits, plus 50 bonus GM earnings (worth $50 towards a new vehicle)
Launch Campaign: The new GM card was announced in September 2015 with a direct mail acquisition campaign launched that same month promoting “one of Canada’s richest rewards programs.” So far Comperemedia has only observed promotional efforts for the no annual fee version of the card which offers a 5% GM rebate on up to $5,000 worth of spend. The $79 Visa Infinite version of the card which offers a 5% rebate on up to $10,000 worth of spend is the lead offer promoted at www.gmcard.ca.
What we think
As co-brand contracts expire, partners are negotiating better terms for interchange and improvements in their cards’ overall value propositions. Card marketers may be able to reduce the threat of renegotiation by proactively overhauling features and benefits in advance. No partnership can be considered sacred in the post-AmEx-Costco environment particularly if the June 20th transition from American Express to Citi is executed seamlessly. Launch campaigns for co-branded credit cards have become increasingly sophisticated and omnichannel in nature with email as a driver of acquisition.
Andrew Davidson is SVP/Chief Insights Officer for Mintel Comperemedia. He is an expert in data-driven cross channel marketing intelligence, consumer behavior and global trends. As a thought leader and expert speaker, Andrew has consistently predicted the evolution of payments marketing for the past 23 years. He speaks at high profile industry events and has presented at conferences in the US, Canada, Australia, New Zealand, Hong Kong and Taiwan. Andrew is passionate about the global role of payments as the first step on the path to financial inclusion.
