What's in a brand? Any investor who follows the Dow Jones Industrial Average (^DJI 0.40%) knows how important a strong brand can be -- and how damaging it is when a company's brand becomes tarnished. The index has undergone many changes over the years, and many of these changes were enacted in response to the diminished value of one brand or the strengthening of another.

When the automobile became a common sight on city roads, the Dow responded by adding the strongest auto manufacturers to its exclusive list. The rise of a consumer culture prompted the Dow's inclusion of the most popular department stores. Companies that develop and market advanced technology have found a place in the Dow's ranks in every era from the Electric Age onward. Branding mattered then, and it matters even more today.

Today, we'll be taking a look at the brand behind American Express (AXP -0.62%), a Dow component since 1982 and Interbrand's 24th-most-valuable global brand of 2012, to better understand how it was built and how it has helped create one of the world's largest companies.

Building brand value
Thanks to a decade's worth of data from the Interbrand consulting firm, we can analyze AmEx's branding successes (or failures) over the past 10 years relative to some more standard corporate measures. We'll also dive into some of AmEx's pivotal public moments to see how those moments helped build a brand to stand the test of time.


Sources: Interbrand, Morningstar, and Wolfram Alpha.

Over the last decade, AmEx's market cap has grown 20%. Its annual revenue (with its most recent trailing-12-month revenue serving as 2012's result) has grown by 24%. The company's latest brand value is 8% below its value a decade ago. The discrepancy between AmEx's rather tepid financial growth and its slightly reduced brand value has much to do with the financial crisis, which caused Interbrand to reduce the company's brand value by 32% in a single year.

Behind the brand
AmEx has been rebuilding its brand value for the last two years while also undertaking the difficult task of post-crisis recovery. In 2010, at its brand-value low point, Interbrand still made sure to point out that AmEx "weathered the financial crisis fairly well" and that "its revenue model is much less at risk than competitors'." At the same time, Interbrand still called the company's efforts to pay debt-laden cardholders small rewards for zeroing out their account balances "an embarrassment".

This year, AmEx gets high marks for topping the J.D. Power credit card customer service rankings since 2007 and for its commitment to small-business outreach. AmEx has always placed much higher on Interbrand's list than Visa (V -0.23%), which ranks 74th and whose brand is valued at less than a third of AmEx's. MasterCard (MA 0.07%) barely ranks, having just broken into the list at No. 94 this year with a brand worth just more than a quarter of AmEx's.

Visa gets dinged for systems failures at the Olympics and identity theft issues, and MasterCard also gets called out for data breaches. However, when payment processor Global Payments (NYSE: GPN) was hacked earlier this year, the danger was spread across all four major card networks. The worst brand damage fell on Global Payments, as Visa immediately removed the company from its list of preferred processors.

Bank of America (BAC -0.21%) created the first modern credit card, but AmEx is the brand still most closely identified with the format, particularly when it comes to an image of exclusivity that allows it to "charge and justify an annual fee," as Interbrand said at the company's 2010 low point. Even in the beginning, the company focused its branding efforts on exclusivity. AmEx's first card came with an annual fee $1 higher than early competitor Diner's Club, and within five years a million cardholders were willing to pay up for AmEx service.

Visa has five times as many card members as AmEx, and MasterCard has more than three times as many, but AmEx earns more each year than either competitor because its status-conscious card members also happen to be big spenders. Collectively, AmEx cardmembers make more than $500 billion in purchases each year.

It's also worth pointing out that AmEx has avoided virtually all public blowback from the TARP bailout that greatly damaged Bank of America's image, despite the fact that it received one of the larger bailout packages of any financial institution not called "too big to fail." On a bailout-to-assets basis, AmEx actually got a larger package than Bank of America. AmEx's card members are willing to let it slide.