American Express (NYSE:AXP) is looking to ride the wave of social media that has enveloped the world. The company said the customers who frequent social media websites are likely to spend more if they get good service, as it announced the results of its survey: “American Express® Global Customer Service Barometer”, earlier this month.  The survey also indicated higher advocacy rates from tech savvy customers as websites like Facebook and Twitter allow users to broadcast their views about the quality of service they received from a company. American Express competes with Visa (NYSE:V), MasterCard (NYSE:MA) and Discover Financial (NYSE:DFS) using a spend-centric model and a closed-loop network.
The impact of social media, has been felt across all walks of life, as the phenomenon has been spreading rapidly through all corners of the world. We believe American Express, with its advanced analytical department is in a prime position to capitalize on the vast marketing potential that this revolution has to offer. The company will look to increase its brand awareness and thereby increase the number of cards in circulation worldwide. However, caution must be exercised as the survey revealed that customers are more likely to share their views on a negative experience than a positive one.
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Customers will be encouraged to purchase more as online advertising through social media sites gains popularity and is accessible to a larger number of people. Social networks also lead to higher accountability for merchants, banks as well as manufacturers as any negative publicity online is likely to spread like wildfire and have a higher impact on brand image than ever before. Customer relations have reached a new level as an increasing number of people use online media to address service inquiries.
We expect credit and debit card companies like American Express to see increased transaction volumes as customers can make online purchases from the comfort of their home through e-commerce websites like Amazon (NASDAQ:AMZN), or on the go, through mobile payments (See Banks and Wireless Carriers Get Serious About Mobile Payments) and instantly share their experiences through the internet.
We currently estimate a price of $51.25, 14% below the current market price.Notes:
- Social Media Raises the Stakes for Customer Service, American Express Press Release, 2nd May, 2012 [↩]