Sometimes the "Lifetime Value of a Customer" Can be Zero
The story of one man's life-long grudge against American Express.
I’m not really one to hold a grudge - perhaps that’s because of my sometimes-failing memory - I simply can’t remember who I’m supposed to dislike. But, I have nurtured a healthy disdain for American Express, for over thirty years.
Why, you ask? Well, you’re in luck - I haven’t yet prepared a column this week, and this seems to be as good a time as any to air my grievances.
Our story begins, as I said, more than thirty years ago. I was a (relatively) young man, nearer to the beginning of my professional career than to the end, with two young sons at home, and with a long list of retail purchases ahead of me.
One day, while at the office, I received a phone call from someone in the customer service department (this was before corporate America rebranded this function, “Customer Care,” or “Customer Experience Management,” or “Support Ninjas,” in an attempt to make the job appear sexier to potential staffers) at American Express, who, much like the actor in a TV commercial appearing at that time, wanted to appear helpful and proactive, and assist me in staving off disaster.
If you’re of a certain age, you’ll recall the TV spot in question: a helpful customer service representative (or, “support ninja,” if you like) with a credit card issuer - maybe it was Citibank, perhaps Chase Bank, I don’t remember - calls a cardmember, and indicates that they have noticed an unusually large number of transactions on the member’s credit card recently, and they wish to confirm that the transactions are bona fide, and have been duly authorized by the cardmember. The cardmember gets a warm and fuzzy feeling from the call, and appreciates that his credit card issuer cares so much about him that they are looking out for his best interests.
For an alternate take on credit card customer service, please view this classic Saturday Night Live sketch from 1991, featuring Phil Hartman and Roseanne Barr - although the quality is not great - when stealing content from Youtube, you take what you can get - regardless, it’s comedy gold!
Well. . .my experience with American Express was slightly different than the interaction depicted in the original TV spot, although not that far away from Phil Hartman’s experience with Roseanne Barr. As I said, I received this phone call at the office (back then, that was considered to be an intrusion on one’s employer’s personal time, and would have been considered to be a significant customer service faux pas), and the opening was quite similar to the TV spot. I was prepared to get that warm and fuzzy feeling from the call, after I indicated to the customer service representative that, yes, we had recently been traveling, and, as a result, had utilized our American Express card more than was typical for us.
In the next breath, the representative said that she would be cutting-off my card access. Wait, what? I asked her why? and she responded that they had noted a habit of late payments on the account. If you had an American Express card back then, you may recall that their monthly bills did not feature a due date at all. So, I asked her what my due date for paying the bill was. She told me that it was “around the 15th.” I told her that I was sure that I reliably paid the bill “around the 15th;” she was unmoved, and left me stunned by the exchange, as we hung up with each other.
Coincidentally, or, perhaps not so coincidentally, my monthly American Express bill arrived in the mail a few days later, containing a charge for their annual fee, which may have been $35.00 or $50.00. Around the same time, I received my monthly Discover Card bill. Discover Card, in an attempt to differentiate themselves from other credit card providers at the time, did not impose an annual fee, but, instead, provided “cash-back,” in the form of a percentage return on consumer spending incurred - I think they pioneered this concept, which remains in use today with many credit card issuers.
Struck by this obvious contrast in cardholder management strategies, I called the American Express customer service department, because I believed they would also recognize the striking difference between their approach, and Discover Card’s, and offer a solution of some sort.
As I deftly climbed the hierarchy chain in my call with them (you know, “May I speak with your supervisor?”), I reached a manager of some sort who was unlikely to pass me further upward. I pointed out to Mr. Low-Level Manager that a competitor of theirs was offering me “cash-back” on my purchases (sans annual fee), whereas American Express not only didn’t provide me with “cash-back” on my purchases, but they were assessing me an annual fee for the privilege of using their card.
My simple, yet elegant pitch was this: “I’m a (relatively) young man - you waive this annual fee, and I’ll keep my American Express card, and use it all over town, for years to come - restaurants, retail stores, hotels, airline tickets, you name it. Or, you can choose not to waive this annual fee, and I’ll cut-up the card, and send it back to you, and you will never see me again.”
His response was priceless: “Harrumph! Our card is not a credit card, it’s a membership card.”
I retorted, “You’re a hunk of plastic!”
Thus began my life-long grudge against American Express, except for a brief period some years ago, when I stored my employer’s corporate credit card in my wallet, a card which happened to be an American Express card.
And, I find that I’m not alone. I recall reading a news story a few years ago regarding a customer who was making a purchase at a well-known American retail chain - the customer presented his American Express card to the sales clerk, who quietly asked if the customer might have another card he might like to use, say a Visa, or a Mastercard, inasmuch as American Express assessed processing fees on transactions to retailers at a percentage rate significantly higher than all other credit card issuers.
The customer took umbrage at this suggestion, given that he was a senior executive with American Express at the time. He may have threatened to suspend the privilege granted to the retail chain to accept American Express cards in payment transactions - I’d call that a win for the retail chain, instantly boosting its bottom-line.
Did I ever get a call from Discover Card, you may wonder? Why, yes I did. Many years ago, while purchasing tires for my car, with my Discover Card, the sales clerk had called Discover Card, I suppose to verify my credit limit (because, even back then, tires were screamingly expensive). He unexpectedly handed me the phone, and said, “They want to talk to you.”
The Discover Card customer service representative asked me if I had recently purchased clothing from Mr. Maurice’s Solid Gold Fashion Emporium (or, something like that), in Brooklyn. Having never visited Brooklyn at that point - my lone visit to Brooklyn since then was quite by accident - I was returning to lower Manhattan via subway from Midtown, one Thanksgiving Day, after viewing the Macy’s parade, and ended up on the wrong line. But, a subway platform in Brooklyn was as far as I got, and I didn’t get a chance to visit Mr. Maurice during that sojourn.
Apparently, my card had been compromised, and Discover Card noticed the aberrant activity, and wanted to alert me to it - I got a warm and fuzzy feeling. . .and “cash-back!” Take that, American Express!
For those of you who were anxiously awaiting the math segment of this column, here it comes: the average life expectancy of a U.S. male right now is 76.1 years, which suggests that I have roughly 14 retail-spending-filled years ahead of me; add those years to the 30 years already in the can, and, if my math is good, that’s 44 years in total; let’s say, conservatively, that spending averaged $500/month (many months, particularly during the growing family phase, in which we added a daughter, and a dog, and a cat, no doubt exceeded that average, but some months we exercised unusual spending restraint - well, there may have been one month during that stretch - no, scratch that, there wasn’t - I was thinking of another family entirely), which amounts to $6,000 per year; this hypothetical spending thus translates to $264,000 in lifetime value. I say “hypothetical” because American Express has not had, and will never have, access to that value.
Rather, American Express’ lifetime value for me can be calculated as follows: 44 years with annual spending of $0 per year: that equals zero, for those of you keeping score at home. Solid business decision, American Express!
Reader Interaction Opportunities
Do you feel compelled to offer your two cents on this column’s topic? Feel free, free, free to do just that right here.
Hey! If you enjoyed this column, why not subscribe now? That way, you’ll never miss the latest Rule of Three offering. And, it’s free, free, free!
Or, perhaps you’d like to share this column with a friend. Also, free, free, free!
Or, perhaps you’d like to provide a point of entry to that friend to the entire world of Rule of Three. Yep, you guessed it, free, free, free!