The key of implementing a focused differentiation

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The key of implementing a focused differentiation strategy for American Expressis to offer products and services that customers perceive as different in ways that are alsoimportant to them. In order to remain a leader in focused differentiation strategy,American Express needs to continue to offer its card members exceptional customerservice and the perceived prestige and status. American express is often associated withaffluence and exclusivity, and its average annual spend per cardholder tended to be higherthan that of American Express’ competitors. The average annual spend per card increasedat a double-digit rate from 2009 to 2011, growing from $11,505 to $14,124.11. BecauseAmerican Express’s overall business strategy of focused differentiation is successful,American Express has annual gross revenues of $33 billion while Visa earns just $14billion per year, while American Express has just 107 million cards compared toVisathat has more than 2 billion cards in use worldwide. Below is a table that shows selectedfinancial highlights of American Express.2American Express
American Express: Bank 2.0American Express’ Bank 2.0, on the other hand, targets people who are unbankedor underbanked. These are the people that live paycheck-to-paycheck and pay 10% oftheir income on fees and interest to complete everyday transactions. The idea of Bank 2.0is to provide these people with a platform that they would conduct the bulk of theirfinancial activities, such as direct deposit of paychecks, wiring money, and cashingpaychecks. This idea will expand American Express from a brand of exclusion toinclusion. It is a prepaid model, in which it is different from the postpaid dispersal ofcredit and will be more accessible than the traditional AXP product. Because Bank 2.0has very minimal fees and targets a specific segment of people (unbanked orunderbanked), Bank 2.0’s business-level strategy is focused cost leadership, whereas theoverall American Express’ business-level strategy is focused differentiation. Therefore,Bank 2.0 does not seem to fit in the overall business-level strategy of American Express.However, as a business grows, American Express needs to attract more customers.As Chokshi puts it, “why wouldn’t you want to serve more people?” For Bank 2.0,volume is the key and it will be able to bring American Express more customers and raiseits brand awareness.How does Bank 2.0 stand up against the competitors in the industry?Bank 2.0’s target customers are mainly the underbanked. They are:»Constantly engaged in financial transactions outside of the traditional bankingsystem»Being attracted by many other competitors, such as Green Dot»Being offered mobile and digital technology as alternatives to traditionalbanksThese underbanked customers mainly use prepaid products. The purchase volumeon US general-purpose cards by type is as below:3American Express

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