Co-branding: how does marketing make banking cards desirable?

We have seen that 3 major brands are competing in the credit cards market and we have highlighted their main value proposition, branding strategies and tactics to gain visibility.

This article will focus on co-branded cards, that have appeared to be issued frequently in the last decade.

Co-branding? What are we talking about ?

We define co-branding in this sector as a card branded by a network (Amex, Mastercard, Visa) that is issued with a commercial firm (airlines, department stores, supermarkets). 
It has turned out to be a great way to increase brand awareness for both credit cards issuers as well as companies willing to enhance loyalty.

Co-brands have appeared in virtually every industry. There are thousands of co-brand and affinity programs in the market (well over eight thousand in the US).The value-added features as well as financial benefits linked to these cards have become very attractive over time – it is recognized as an effective accelerator for helping merchant partners gain exposure and strengthen loyalty.

How do you partner with a company or a card brand?

Credit card brands partner with segmented companies but companies partner as well with targeted partners regarding their customer profiles.The rule is this one: a card brand has to be aligned with its customer needs, its behavior and its habits.
The scheme that has been acknowledged and respected has been for years since the 1980s:
- Common credit card issuers as Mastercard & Visa partner with lifestyle and “everyday expenses” companies (Walmart co-branded Visa cards, BP co-branded Mastercard...)
- Companies targeting Upper middle class consumers go Amex and partner with airlines and department stores as their consumers tend to spend high amount of money and need comprehensive wealth management solutions.

Co-branded AmEx are interesting as they seem to have an appropriate value proposition to their customers.If we focus on the Air France-KLM co-branded AmEx that gives you 2, 4 or 8 free qualifying flights (depending on your tier) that are helpful to maintain or upgrade your frequent flyer status, therefore being highly-attractive to frequent upper-class flyers.We can assume AF-KLM has partnered AmEx to both be recognized as an “upper-class” service provider and keep the “high-end” image of AF-KLM as it is.

Air France - KLM co-branded American Express

But credit cards are going global and issuers need to adapt their partnership strategies. As AMEX is growing slowly in emerging economies – its high commissioning requirements are making its life uneasy. Mastercard and Visa have therefore jumped in the airline market in emerging economies.

Saudi Airlines co-branded Mastercard

Garuda Indonesia co-branded Visa

Today, most of the emerging countries airlines have gone Visa or Mastercard to allow attraction to potential customers to use cards that are not facing acceptance issues.

We can then claim that co-brand is today a challenging market in the loyalty programs where Visa, Mastercard and AMEX are competing to offer the most interesting ROI (with their membership reward policy) to their customers while earning money. Having a loyalty card drives you loyal to the brand and eager to spend more for specific products/services, therefore making it profitable for the network and the companies.

Nonetheless, this market could face “market saturation” with a bunch of companies offering it and at this point, segmentation is important to be spot-on while addressing customer needs. We will certainly face some changes in the next few years...!

http://www.firstannapolis.com/articles/co-brand-cards-in-it-together-the-top-25-global-players?status=success http://www.mastercard.us/merchants/cobrand-cards.html
http://usa.visa.com/merchants/grow-your-business/marketing-solutions/co-branded-cards/index.jsphttp://www.crmtrends.com/CreditCardPrograms.html