process of shrinking operations and staff, reducing the work force by 4,800, or almost 9%. With the conviction of a priest and the strategic battle plan of a four-star general, Chenault often went to deliver the message of the company’s restructuring plan and corporate layoffs in person. “The focus in the early ’90s was frankly one of survival…we were falling off a cliff,” he reflects. “But you can’t stand still and say the objective is to survive in the long term. You have to say that the objective is to win.”
By 1993, Chenault was named the new president of Travel Related Services. He reworked the unit’s strategy, creating a line of card products that would appeal to a range of prospects, including students, senior citizens, basketball fans and frequent fliers. The company developed a combination of proprietary cards and forged “co-branded” deals with such outfits as the New York Knicks, Delta Air Lines and Credit Lyonnais, the French bank. As a result, the number of card products in force increased roughly 1,500%, from four to 60 within a few years. Today, the company has over 100 different types of proprietary cards in addition to those issued by its 47 partners worldwide. And its American Express Rewards program-in which cardholders can earn points that can be later exchanged for goods and services-increased the number of customers and card usage. The novel, highly successful strategy, which other firms tried to emulate, brought the company roughly 7.5 million domestic and international enrollees. “Ken was the force behind the company launching Rewards,” says Alfred Kelly Jr., president of Consumer Card Services. “He saw that we were losing customers to some of our competitors. Now, 10,000 cardholders per week join Membership Rewards. It is by now the biggest rewards program in the world.”
Secondly, the new product was a “premium” that AmEx could offer merchants. Chenault has spent a great deal of time wooing merchants who sought to defect. Next to reducing its discount rate, from its all-time high of 3.5% to its current rate of 2.73%-still almost 1% higher than what Visa or MasterCard charges-the Rewards feature has had a tremendous impact. The number of merchants that accept AmEx cards has grown from a mere 30,000 in 1993 to more than 7.2 million worldwide this year. The next step: increasing the number of supermarkets and retail outlets where AmEx customers can use their cards.
A major beachhead was bringing the huge discount retailer Wal-Mart into the fold in November 1995. “Frankly, we were unable to come to a relationship with American Express,” says Steve Hunter, director of investor relations for Wal-Mart. “Over the past few years, however, they’ve come up with solutions that were beneficial for merchants, whether it’s cost, operational efficiencies or positioning. It’s indicative of the evolution of their business and servicing a much broader market and merchants such as Wal-Mart-all with the idea of serving their customer,” he explains. Today, Wal-Mart generates more than $1 billion in sales with American Express.