New York – On The Money: Credit Cards To Perfect Targeting Programs

New York – Credit card companies are taking the next step in using their points programs to influence what millions of customers buy, going as far as influencing what color blender you might purchase.

American Express is piloting a program that will allow merchants to reward customers for purchasing specific items at their stores, starting with online merchant Boxed.

AmEx is starting small: giving bonus rewards points to Boxed customers who buy Dove soap, Planters nuts, Cheerios cereal and a handful of other items. But AmEx expects to open the program to nearly all their merchants in the coming months.

Customers will benefit by expanding the number of ways they can earn points. The program also helps Amex, by giving merchants another reason to keep accepting American Express cards, which tend to be the most expensive for merchants to process.

Credit card companies have long been able to reward spending at particular types of merchants, using what are known as merchant codes. That’s how credit cards are able to give extra points or cash back on gasoline, travel, hotels and other broad categories.

But targeting individual items on a store’s shelf was a tough barrier to break. Merchants’ inventory systems are different from company to company. AmEx says they were able to solve the problem using blockchain technology developed by Hyperledger. It enables AmEx and merchants to generate product-targeted offers while allowing merchants to keep their own inventory management systems.

Beyond promoting specific items, the change will also let American Express and its merchant customers target promotions to very specific customers. Merchants could use the program as an inventory management system, creating promotions for certain items they need to sell or want to clear off their shelves — like an odd colored blender, for instance.

“They can create programs based on a time of day, day of the week, by incentivizing a customer to download their app. The number of ways merchants can reward customers with Membership Reward points will be exponentially increased,” said Chris Cracchiolo, who heads up the Membership Rewards program for AmEx.

The new program differs from another that American Express has run for several years known as Amex Offers. That program offers coupons or additional reward points to customers who spend money at a particular merchant. While American Express customers are targeted for a particular offer based on their spending behavior, AmEx Offers were never able to target specific products.

Credit card companies also want to influence how customers spend their points. HSBC started a pilot program earlier this year that sent marketing emails to 75,000 customers using algorithms developed by St. Louis-based company Maritz. A portion of customers received an artificial intelligence-recommended category of credit card reward — travel, merchandise, gift cards or cash back — while the rest received standard marketing emails. Roughly 70 percent of the targeted customers who ended up redeeming their points chose the recommendation generated by the computer.

While AmEx will largely leave it up to merchants to decide what products to promote, certain categories like tobacco, liquor and firearms will be banned.