The Motley Fool crew is no ship of fools. We're putting Mom first, and so should you. Check out all of the Fool's Mother's Day articles.
Thanks to years of prudent investing, my mom retired at age 58, and now she travels wherever she wants. On Saturday, she left for a two-week vacation to China. While she's done quite well on her own, there's always room for more investment ideas, and my choice for her is American Express
Millions of people like my mom have built tidy nest eggs in anticipation of enjoying the next phase in their lives. That's the sweet spot for American Express. Keep in mind that the company's average spending per card is more than four times that of MasterCard
American Express' rewards programs have been the key to this success. For each dollar spent, a cardholder gets a point, with no caps or expiration dates. One cardholder used 4.1 million points to charter a private jet, while another from Mexico used 8.3 million points to buy a Mercedes. If you earn 93.2 million points, you can purchase an exquisite diamond bracelet. The idea is to stimulate more spending, increase retention and attract high-income customers. American Express calls it the spend-centric model.
Competitors are jumping into the game, but it's not easy. American Express has spent 16 years developing its own rewards system. Roughly a thousand employees in the division build proprietary databases, secure partnerships, and refine risk-management techniques.
American Express charges merchants relatively high fees to support its rewards programs. Despite some resistance, merchants realize they have little choice, since American Express' customer base is too important to ignore.
The company has grown increasingly aggressive in partnering with companies such as Citigroup
With a 156-year-old brand that's associated with quality, American Express should continue to gain ground internationally. American Express also has its own global processing system for transactions, making it much easier to bolt on new rewards options while better tracking cardholders' spending patterns. That data is incredibly valuable in crafting new initiatives and responding to customer needs.
I'll definitely run this article by my mom when she gets back from China. If nothing else, it'll be good to get some insight from a world traveler and a key member of American Express' target customer base.
Further Foolishness has its privileges:
- American Express Expresses Concern
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- Join the Billionaire Boys Club