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Boston Boycott Case Study

“Negotiator squashes spread of Boston boycott to D.C. pulling-the-plug on potentially catastrophic revenue loss for American Express”

The Challenge

During the summer of 1991, a group of restaurateurs in Boston became dissatisfied with the fees they were paying American Express for credit card transaction processing and made the decision to boycott American Express Card acceptance at their establishments.

American Express Card when evaluated purely based on merchant fees charged without any consideration given to the spending behavior of the cardmembers themselves appears to be one of the most expensive payment vehicles a merchant could accept for payment.

American Express was extremely alarmed at this turn of events and sent their local market team to meet with these merchants to understand their issues and attempt to resolve the problem.

The Journey

This boycott was devastating to American Express’ revenue stream in the Boston market and spreading from the restaurant industry to other industries in the market. Additionally, the potential damage to the company if this boycott spread beyond the Boston market would be crippling.

Many of the restaurateurs in the Boston market also owned locations in the Washington Dc market so it wasn’t long before the merchants in Washington were threatening to boycott as well.

At the time I was responsible for all of the high-profile restaurants in the Washington market. I met with these merchants frequently to work with them to streamline their transaction processing procedures and to brainstorm and develop marketing campaigns that would shift share away from their competitors…and ours.

The Discovery

Quite frankly, the whole issue was a bit terrifying. If this thing really exploded my job could be on the line.

I forced myself to step back from the situation and approach it from an analytical standpoint.

What had really happened with these merchants? They thought we were gouging. “Big fat American Express was just charging them premium prices because they always had and thought they could.” They just weren’t going to stand for it anymore!

The Solution

So why did some merchants accept the cards happily and these merchants become so unhappy?

In my determination, we had become a bit complacent and out-of-touch with the marketplace.

We were not effectively reinforcing the value of our cardmembers to the merchant community. They perceived us as the premium priced payment vehicle that was not delivering premium value. Our price in fact was not out-of-line when measured against the incremental value we brought to the merchants. The problem was we were not reinforcing the point effectively with merchants.

The Result

I sharpened my pencil, dusted off my calculator, and hit the road.

Within the period of 1 month, I met with every merchant in my market with the specific objective of crunching their numbers to demonstrate to them how much value in the form of incremental revenue we really did bring to the table.

It was one of the best months I spent in my job. Not only was I able to thank these merchants for their business further securing the relationship, but I also became an expert at financial analysis and showing incremental value in numbers merchants could understand…and appreciate.

This very basic proactive move diffused the spread of this boycott from Boston to Washington, strengthened my relationship with these merchants, and helped them understand the actual financial value of taking the American Express card. This tactical move also resulted in me being elected to the Board of Directors of the Washington, D.C. Restaurant Association.