Amex and Foursquare...the odd couple?

 Why would a credit card company and Foursquare, a social media outlet,  join forces?  It seems like an unlikely couple, right? Ahh…but at closer glance, this seemingly “odd couple” could just be the next big thing in partnerships.

We’re all familiar with American Express, right?  A 160-year old company, the “world’s most trusted brand” and the “world’s largest card issuer by purchase volume.” But what is Foursquare? Foursquare is a free app that lets your network of friends know where you are by checking into locations or businesses. Launched in March 2009 by Dennis Crowly and Naveen Selvadurai, the company has grown to 25 million users worldwide with over 100 employees as of September, 2012. Now you have the “411” on the companies, so why are they partnering?

Why partner?

“Andrews (1971) claimed that the strategic actions of firms are the outcome of a match between a firm’s existing competence and the availability of new opportunities” (Gulati, p. 294).  If you take a look at how social media has changed the face of business and customer interaction, it is easy to see why companies want in on the action.  According to a Fast Company article by F. Manjoo (2011), companies are “feverishly working to get consumers to ‘engage’” on social media platforms and they’re spending the money to do it. “According to BIA/Kelsey, a media consulting firm, companies spent about $2.1 billion on social-media advertising in 2010; the number is projected to grow to nearly $8 billion in 2015” (Manjoo, 2011). 

What’s in it for American Express?

 American Express has a history of partnering. And who wouldn’t want to partner with them? They’re a well-established company with a wealth of connections. They have a healthy balance sheet and deep pockets.  So, what don’t they have…a social media network.  As Gulati (1998) points out “Sociologist have suggested that the most important facet of an organization’s environment is its social network of external contacts” (Gulati, p. 295).  By partnering with Foursquare, American Express gains access to 25 million users and 1 million businesses. In addition, this platform gives Amex a way to “communicate” with these customers. "This is about AmEx changing the way that we engage our customers,” says Edward Gilligen, vice chairman for Amex (Raice, 2011).

This partnership with Foursquare also gives Amex access to more tech-savvy customers.  “AmEx customers rang up roughly $100 billion in online transactions last year, and the company's online spending is growing at a rate of 20% versus 15% for its overall spending.” (Raice, 2011).

Amex can increase its response rates on merchant offers. As “American Express Vice Chairman Edward Gilligan told the New York Times, ‘Foursquare offers brought a higher response rate than anything else we’re doing.’” (Thompson, 2011).

Here’s how it works:

• link your AmEx and foursquare accounts;
• check in at a participating store and tap ‘load to card’ on the Special; and,
• pay with your AmEx card.

 

 

There’s no cutting out coupons or showing your phone to the cashier. The savings are automatically credited to your account within a few days.

So the big push for Amex to join forces with Foursquare has nothing to do with financial gain. It’s about being where customers are and engaging with tech-savvy customers. And, as Gulati (1998) points out, conditions of mutual economic advantage are necessary but not sufficient conditions for the formation of an alliance (Gulati, p. 301).

What’s in it for Foursquare? 

“Membership has it’s privileges” and foursquare wants in. Although the social media outlet won’t be benefiting financially from the partnership, it does help “legitimize foursquare as a platform and could draw other, more lucrative deals in the future” (Thompson, 2011).  This speaks to the phenomenon Gulati discusses in Alliances and Networks.  Here, Foursquare will enhance their own attractiveness in the marketplace with a “high-status” partner like Amex (Gulati, p. 301).

Another attractive aspect of the partnership in Foursquare’s eyes is the “access to a variety of sources of knowledge” (Gulati, p. 301).  This partnership can provide Foursquare with access to Amex’s network of partners. And, because Foursquare partnered with this big credit card giant, they have credibility with other businesses…something the company needs since it has a very limited history.  Access to Amex’s network could prove very lucrative for the social media player. “Beyond the immediate reasons they have for entering into a relationship, the connection offers the parties an option on the future, opening new doors and unforeseen opportunities” (Kanter, p. 97).

The element of trust also plays into the partnership’s attractiveness. This partnership mirrors Sabel’s definition of trust, “mutual confidence that no party to an exchange will exploit another’s vulnerabilities” (Barney & Hansen, 1994). What does Foursquare have to lose in this agreement, really? Amex has a proven track record of success, a great reputation, and an extensive network. How or in what way would Amex exploit Foursquare’s vulnerabilities? And, why would they? What’s the point? Amex wouldn’t tarnish their reputation in the marketplace. So, from Foursquare’s point of view, the partnership could be seen as “weak form trust” where exchange vulnerabilities do not exist (Barney & Hansen, 1994).  Although, I doubt the two companies created a partnership without some form of governance because in this day an age governance of agreements is more than just a simple “hand shake.”

“Membership has its privileges.”

The Amex / Foursquare partnership is one of collaboration where each partner “value[s] the skills each brings to the alliance.” Sure, they are each getting something from each other as part of an exchange: Amex gets access to customers and can engage with them on an interactive platform; Foursquare gets validity of its product/service offering and potential access to Amex extensive network. But, at closer examination, this alliance is one of collaboration and fated for future success.

Using the “Eight I’s That Create Successful We’s” criteria for successful partnerships, Amex/ Foursquare passes with straight “A’s” (Kanter, p. 100):

A	Individual Excellence – both companies have entered into the alliance with positive motives
A	Interdependence – both companies have “complimentary skills” and need each other to accomplish their objectives
A	Information – it appears that both companies are communicating openly as their agreement is still in place
A	Integration – both companies are “teachers and learners” integrating their specific skill set knowledge (social media and partnership experience)
A	Institutionalization – the Amex / Foursquare relationship appears to be “formal with clear responsibilities and decision processes” that “cannot be broken on a whim.”
A	Integrity – both parties appear to have mutual trust.

This seemingly “odd couple” has clearly made a case for partnerships and is still going strong.

References

Barney & Hansen, (1994). "Trustworthiness as a source of competitive advantage."

Strategic Management Journal, Vol. 15, pp. 175-190.

Carr, A. (2011, June 23) With AmEx Partnership, Foursquare May Prove Social

Media's Real ROI. Fast Company.  Retrieved on Oct. 6, 2012.

http://www.fastcompany.com/1762726/amex-partnership-foursquare-may-

prove-social-medias-real-roi

Gulati, R. (1998) Alliances and Networks. Strategic Management Journal. Vol. 19,

p. 293-317).

Kanter, R. (2010). Collaborative advantage: The art of alliances. Harvard Business

Review. pp. 1-16.

Manjoo, F. (2011, June 22) Does social media have a return on investment? Fast

Company. Retrieved on Oct. 6, 2012. http://www.fastcompany.com/1760849/

does-social-media-have-return-investment

Raice, S. & Sidel, R. (2011, March 4). AmEx teams up with Foursquare. Wall Street

 Journal. Retrieved on Oct. 6, 2012. http://online.wsj.com/article/SB100014

24052748704076804576180841727743146.html

Thompson, C. (2011, June 22). American Express partners with foursquare for

nationwide deals. af about Foursquare. http://aboutfoursquare.com/american-

express-sync-foursquare/