Value Proposition to Customer Assignment

Value Proposition to Customer

VALUE PROPOSITION 1
Contents
First Part:...............................................................................................................................................2
American Express Card:....................................................................................................................2
Customer perceived value of credit card............................................................................................2
Woodruff Customer Value Hierarchy................................................................................................3
Holbrook Consumer value model......................................................................................................4
Second Part............................................................................................................................................6
Compare and contrast between American Express and VISA...........................................................6
Two Value Propositions of Credit Card Sector..................................................................................8
Third Part.............................................................................................................................................10
Existing value proposition...............................................................................................................10
New Value Proposition:...................................................................................................................12
Value Criteria:.................................................................................................................................13
Implementation of New Proposition................................................................................................13
References...........................................................................................................................................16

VALUE PROPOSITION 2
First Part:
American Express Card:
The American Express is a US based Multinational Company which deals in financial
services. It was founded by Dow Jones in 1850. The main products company are charge card,
traveler’s cheque and credit card. American Express is best known for its credit card.
American Express card is also known as Amex card. The American Express deals in an
electronic payment card which is issued and processed by American Express. Cards are
available for individual, corporate consumers and small businesses in the US and all around
the world (American Express, 2018)
Customer perceived value of credit card
In 2016, out of total dollar volume of credit cards transactions, the transaction of American
Express Credit card was 22.9%. In December 2017 Company had 112.8 million card users
which include 50 million card users in US, each card consist average yearly spending of
$18,519 (American Express, 2018)

VALUE PROPOSITION 3
Woodruff Customer Value Hierarchy
(Source: Phillips, 2012)
The basic idea of Woodruff customer value hierarchy is satisfying the need of customers.
Before introducing any service and product in the market the company needs to decide the
level of satisfaction, the said service and product are going to provide to the customers.
Satisfying customer value is a key to Woodruff customer value hierarchy model.
The Woodruff customer value hierarchy model includes three steps these are:
1. Service/Product attributes: The fundamental of this level of hierarchy is how
service or product going to satisfy the need of customers if they consume it. The
bottom layer of woodruff customer value hierarchy also includes characteristics of the
product or service which company is going to introduce in the market. It contains only
those characteristics or attributes which are necessary for product or service to
function.
2. Consequence layer: This level of woodruff customer value hierarchy includes
expectations of customers from the service and product. The attributes are decided to

VALUE PROPOSITION 4
satisfy the needs of customers. So when buyers buy the product they normally assume
that the service or product may contain those attributes which they are expecting.
3. End state: This stage includes additional features, attributes, benefits those are related
to service and product which provide a competitive advantage to the company. In
other words, we can say that it includes those additional attributes which customers
not expect from the service and product. But if they come to know about those
additional attributes they will surely buy the service and product (Yajing, 2014).
Holbrook Consumer value model
(Source: Carnie, 2018)
Holbrook consumer value model represents those characteristics or attributes that provide
consumers a level satisfaction and value to their money which they spend on buying service
and product. It contains the concept which indicates a position of maximum consumer value
proposition for the customer segment of interest.
Holbrook Consumer value contains three dimensions these are:

VALUE PROPOSITION 5
1. Intrinsic and Extrinsic: By Intrinsic we mean the value proportion of the product is
archive from the intrinsic functions of the product. And by extrinsic we mean the
additional functions are need by a customer to fulfil the requirement of a product to
satisfy the need.
2. Self-oriented and other-oriented: It is a distinction corresponds that whether product
providing value because of its benefits to the user or because of the reaction of others.
3. Active and Reactive: It is a distinction about whether there is a manipulation to the
product by the user or the user by the product (Gallarza and Holbrook, 2017).
The two models Woodruff Customer Value Hierarchy and Holbrook Consumer Value are put
together to get customer value proposition from American Express cards. With the help of
Woodruff Customer Value, the American Express come to know about what customer want
from the service or product, what they expect and what all additional services they want to be
associated with the product. After knowing the expectation of the customer it becomes easy
for the company to compete in the market. To get the advantage over competitors the
American Express can add some additional feature which their competitors are not using.
And with the help of Holbrook consumer value model, The American Express will be able to
known consumer values in three dimensions from Intrinsic and Extrinsic Company will know
that is customer is getting value from the main feature of card or by additional features
provided by the company. From Self-oriented and other-oriented, the company will know that
the consumers are getting value by using cards and benefits they are getting by keeping a card
or by positive reaction they are receiving from other persons while using a card. From Active
and Reactive the company may come to know whether their cards are manipulating the uses
or the users are manipulating there cards. These two models are really helpful for American
Express to achieve the high level of customer satisfaction by incorporating ideas generated by

VALUE PROPOSITION 6
these two models. As per a known fact if the consumers are satisfied and get value out of the
service and product it consider to be a key of success for every business.
Second Part
Compare and contrast between American Express and VISA
VISA
Visa is an American based Multinational finance company which facilitates electronic fund
transfers in every part of the world. Visa does not issue cards it provides financial institution
with visa branded payment products. Visa is a second largest card payment organisation.
Contrast between American Express and Visa:
Visa and American Express are the best known companies in the credit cards issuing
business. Both offer numerous benefits as a part of their package.
Visa and American Express do different things. Visa is a payment processing system, cards
are not directly issued by Visa to the customers, but it allows other financial institutions to
brand their card as Visa so the user can use those cards on Visa payment processing system.
American Express is a payment processing system but it also issues cards directly to
customers, finance payment and processes the transfers. American Express is a credit card.
This means customers will pay the full balance of the card each month. Visa is a charge card
that means you can carry a balance on the card month to month.
Visa makes money from interchange fees they charges from banks to use their system.
American Express makes most of their money from interest charges and fees.
Visa earns money by charging interest on average daily balance and American Express earns
money from annual fee.

VALUE PROPOSITION 7
American Express has no pre-set spending limit. Visa has a hard limit and it charge fees for
exceeding the limit (Ryan, 2016).
Visa is a huge company, it has 16% market share worldwide and there are 2.5 billion Visa
cards are floating in more than 200 countries. In contrast American Express has much smaller
market share worldwide, they have 117 million cards active in total.
Visa and American express both charge interchange fees from the banks that use their
payment system, so surcharge for both of these cards still exist. Card issued by American
Express has not reduced their surcharge because it is a closed system that the RBA does not
regulate.
To platinum cardholder, Visa offers like emergency assistance services, discounts on dining,
tickets of major concerts and sports events. For visa cardholder travelling overseas, it provide
various facilities like a discount on airfares and tour packages, offers good exchange rates,
direct conversion in local currencies. American Cardholders also receive offers like fine
dining deals and concerts and sports event tickets.
American Express card has cash back offers on a purchase that may be up to 3% while Visa
rarely offers cash back. Visa card offers generally come with no annual fees.
American Express is not as widely accepted as Visa. This makes it customer to have Visa
card on international travels (Rubin, 2018)
Comparison between Visa and American Express
Visa American Express
Travel Accepted in more than 200
countries
Emergency services available
Accepted in 140 countries
Rewards points can be used

VALUE PROPOSITION 8
24/7
Emergency card replacement
service available in 1
business day
on the Amex travel site
Security To detect fraudulent card
usage monitoring services are
available
Zero liability protection also
applies, but not at ATM
transactions
Monitoring services available
to detect fraudulent card
usage
Fraud protection covers user
without deductions
Customer Services V.me digital wallet service
launched in North America
and in Europe for customers
Mobile app and alerts
through email and text
available for customers
Returning/Exchange 90 days protection from theft
and damage
Extend warranty if
manufacturer’s warranty is
under 3 years
90 days protection from theft
and damage
Extended warranties for one
year on merchant warranties
up to 5 years
(Source: Consumerfu, 2018)
Two Value Propositions of Credit Card Sector
Value proposition refers those features which specify why a consumer should use a service or
buy a product of a company. These features convince potential buyers to buy the particular
service or product and get satisfaction. A value proposition is a promise by a company to its
customers.
1. Value proposition of credit card to its cardholders:

VALUE PROPOSITION 9
 Safety: Making payment with credit cards is easy and quick. In case of fraud, you are
not out of money immediately.
 Points and rewards: Many cards work on a points system where a customer can earn
up to five points by spending $1. In addition companies will offer special 3 months
promo period where spending in a certain category like restaurants, transportation by
which customer can double or triple their credit points.
 Cash back: Many banks offer cash back if customers use their cards to make payment
of monthly bills or grocery purchase. Online shopping portals too have cash back
offers on various products.
 Grace Period: Main advantage of credit card is a customer can defer their payments
till their bills are due. Bank offer a grace period of 50 days for paying back their dues
(Alaswad, 2013).
2. Value proposition of credit card to Merchants:
 Accepting credit card can boost sales: Shoppers like to make payment quickly
without writing a check or run to ATM for cash. When merchant takes its business
from cash only to accept cards, its potential customer increase significantly. If more
customers are attracting toward your business it automatically increase sales.
 Credit cards encourage impulse buying: If the customers are making payment
through card many studies indicates customer surely do impulse purchasing.
 Improve cash flow: Credit card transactions are processed electronically, and the
amount deposited directly to a merchants bank account it leads to no more waiting
for checks to clear, no waiting to collect from customers that means less cash to
handle.

VALUE PROPOSITION 10
 Credit cards are crucial if merchant is doing online business: If a merchant is
engaged in e-commerce business it becomes essential for him to take online payment
through cards.
 Convenient for customers: Customers always want to choose a most convenient
method for payment. Paying through credit card is not only convenient but easy also.
 Set up of accepting credit cards is quick and easy: If a merchant is ready to
process credit card sales it will take only 24 to 48 hours.
 Inexpensive business expense: Machine which accepts credit card is not expensive.
Every size business can afford it (Alaswad, 2013).
The above stated two value propositions of credit card sector are benchmark for American
Express which will help the company in getting a competitive advantage. If American
Express serves what they have promised they will lead the market. A satisfied customer is an
asset to any business and every business want the increase in this asset. To increase the
number of customers the American Express needs to provide maximum benefits to its
customers in comparison to its competitors in a market.
Third Part
Existing value proposition
For a unique value proposition, mainly the consumers seem to have more credit card choices.
American Express provides option to its customers with a huge range of cards:

VALUE PROPOSITION 11
Purchase intro
APR
Balance
Transfer Intro
APR
Regular APR Annual Fee
Blue cash
everyday card
0% (15 months) 0% (15 months) 14.49%- 25.49% $0
The Amex
everyday card
0% (15 months) 0% (15 months) 14.49%- 25.49% $0
Blue Cash
Preferred Card
0% (12 months) 0% (12 months) 14.49%- 25.49% $95
Premier Rewards
Gold Card
N/A N/A N/A $0 intro, $195
after first year
Platinum card N/A N/A N/A $550
Gold Delta
SkyMiles
N/A N/A 17.24%-26.24% $0 intro, $95
after first year
Blue Delta
Skymiles
N/A N/A 17.24%-26.24% $0
Simply Cash 0% N/A 13.74%-20.74% $0
The Blue
Business
0% 0% 12.74%-20.74% $0
Business Gold
Reward card
N/A N/A N/A $0 intro, $175
after first year
The business
Platinum card
N/A N/A N/A $450
Starwood
Preferred Guest
Business credit
N/A N/A 16.74%-20.74% $0 intro, $95
after first year

VALUE PROPOSITION 12
Card
Gold Delta
Skymiles
Business Credit
Card
N/A N/A 16.74%-20.74% $0 intro, $95
after first year
Platinum Delta
Skymiles
Business Credit
Card
N/A N/A 16.74%-20.74% $0 intro, $195
Business Green
Rewards Card
N/A N/A N/A $0 intro, $95
after first year
The Plum Card N/A N/A N/A $0 intro, $250
after first year
The Hilton
Honors
American
Express
Business card
0% (12 months) 0% (12 months) 17.24%- 26.24% $95
Delta Reserve
for Business
credit card
N/A N/A 16.74%-20.74% $450
(Source: American express, 2018)
New Value Proposition:
The main criterions of value proportion are fulfilling expectations of customers and provide
value to the user of service and product. And if the American Express wants to incorporate a

VALUE PROPOSITION 13
new value proposition in it business that should be improving the Reward points and Cash
back system. Chase Freedom and U.S Bank Cash+ competitors of American Express are
giving 5% cash back to the customer where American express is providing only 2%- 3%.
Another competitor Huntington Voice Card also providing special benefits to its customer
like late fee grace allowed without incurring fee, no penalty rate even if customer are late
with their payment and no foreign transaction fees (Marks, 2017)
So it is important for American Express to make changes in its reward points and cash back
policy and provide more benefits to customer. By this customer will feel that they are getting
full value by using American Express card and they will not switch to other brand and new
customers also get attracted toward it.
Value Criteria:
Value criteria for American Express card are it provide wide range of card option with lots of
different benefits attached, which will really help the customer to choose card as per his/her
requirements.
The Best American Express Credit Card for each spending needs are:
 Premier Reward Gold is best for flexible Travel rewards,
 The Platinum Card is best card for premium travel rewards,
 Platinum Delta SkyMiles Credit Card is best for Airline travel,
 Starwood Preferred Guest Credit Card is best for Hotel rewards, and
 Starwood Preferred Guest Credit Card is best for overall American Express Card
(The Points Guys, 2018)
Implementation of New Proposition
 Process to implement new proposition plan

VALUE PROPOSITION 14
 Management planning: To make changes in the reward points and cash back
policy system the top level management of the company will make a plan
which will include the full details of changes. They will decide is the change
in rewards system policy will maximises the value proposition to the card
users or not.
 Employees meeting: When the senior level decides to implement the policy
they will take a meeting to know the views of employees on the policy. They
take a brain storming section to select the best process to implement the
policy.
 Select process: When the Brain storming section ends the management will
get many ideas for implementing the reward changing policy. Out of the bulk
of ideas the management will select the best way to implement the plan (De
Toni, Fornasier and Nonino, 2015)
Plan of new proposition will implemented externally as well as internally:
1. Externally:
 Risk management: Before introducing the new Reward policy in the market the
company need to consider all risk factors which may affect the implementation
plan.
 Develop a Marketing strategy: After considering all factors the marketing team
will make a marketing strategy to promote and position the new reward policy in
the market.
 Select the promotion strategy: Select the strategy of promotion to advertise the
reward change policy and make consumer aware about the valuable changes in the
Reward system.

VALUE PROPOSITION 15
 Select medium of promotion: To make people aware about the reward changing
policies a good sort of advertising medium is required. The best and affordable
medium with mass reach is to be selected.
 Survey: Company can also plan survey among the customer to know about their
views in respect of reward policy.
 Select the date and launch the plan: In this step the reward policy is ready to
lunch in the market. Management will select date to lunch the change.
 Feedback: When the new changes are made in the reward policy of the company
and launched in the market, then the management need to take a feedback that is
product are doing good in market or need some more changes.
2. Internally:
 Update policy: When Reward policy get change it become necessary for company
to make changes in its previous policy and update its documents.
 Make the related Partners aware: It is important for company to make its
related parties and partner aware about the changes.
 Find the source of funding: If company is going to increase its Reward points
and Cash back plans they need finance and for that they need to select the good
source of funding.
 Make changes in their software: When the policy is going to change the
company need to make changes in their internal software.
 Provide training: Company need to organise a short training section for
employees. In the training section they will be taught about the new changes
made in the company software.
 Make changes in the Application form: The application forms both physical and
online are need to be change according to the new change policy.

VALUE PROPOSITION 16
 Feedback: After making all changes within the organisation the management of
company will take feedback from employees.

VALUE PROPOSITION 17
References
Alaswad, A. (2013). The Value Proposition of the Smart Credit Card. Isaca journal 2 [online]
Available from https://www.isaca.org/Journal/Blog/Lists/Posts/Post.aspx?ID=166. [Accessed
on 5 May 2018].
American express, (2018) Featured Cards. [Online] Available from
https://www.americanexpress.com/in/content/all-cards/#in [Accessed on 5 May 2018].
American Express, (2018) Who we are. [Online] Available from
http://www.about.americanexpress.com/oc/whoweare/ [Accessed on 5 May 2018].
Carnie, B.W. (2018) Design effectiveness: Building customer satisfaction and loyalty through
design.[Online] Available from https://www.researchgate.net/figure/Typology-of-Consumer-
value-Holbrook-1999-p-12_fig5_303442706 [Accessed on 5 May 2018].
Consumerfu, (2018) Visa vs MasterCard vs American Express. [Online] Available from
https://www.consumerfu.com/visa-vs-mastercard-vs-american-express [Accessed on 5 May
2018].
De Toni, A.F., Fornasier, A. and Nonino, F., (2015) The impact of implementation process
on the perception of enterprise resource planning success. Journal of Business Process
Management, 21(2), pp.332-352.
Gallarza, M.G. and Holbrook, M.B. (2017) A multidimensional service-value scale based on
Holbrook’s typology of customer value: Bridging the gap between the concept and its
measurement. Journal of Service Management, 28(4), pp.724-762.
Marks, E. (2017) High Expense Means Card Marketing Must Be More Than
Rewards. [Online] Available from

VALUE PROPOSITION 18
https://www.westmonroepartners.com/Insights/Newsletters/Co-Brand-Card-Trends-2017
[Accessed on 5 May 2018].
Phillips, L.A. (2012) Customer Value Hierarchy Model.[Online] Available from
https://www.researchgate.net/figure/Customer-Value-Hierarchy-Model-Woodruff-1997-P-
142_fig2_239795092 [Accessed on 5 May 2018].
Rubin, J.P. (2018) Visa, AmEx, MasterCard, Discover -- What's the diffe. [Online] Available
from https://www.creditcards.com/credit-card-news/help/differences-visa-mastercard-amex-
express-discover-6000.php [Accessed on 5 May 2018].
Ryan, T.J. (2016) What’s The Difference Between Visa And AMEX?. [Online] Available
from https://www.canstar.com.au/credit-cards/whats-difference-visa-amex/ [Accessed on 5
May 2018].
The points guys, (2018) Choosing the Best American Express Card for
You. [Online]Available from https://thepointsguy.com/guide/how-to-choose-the-best-amex-
for-you/ [Accessed on 5 May 2018].
Yajing, S. (2014) CUSTOMER VALUE HIERARCHY BASED CUSTOMER DEMAND
ANALYSIS IN PERSONALIZED SERVICE RECOMMENDER SYSTEM. Journal of
simulation 7(7). pp. 77-84. [Online]. Available from
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.137.9184&rep=rep1&type=pdf. [A
ccessed on 5 May 2018].