George Waters
Encyclopedia
George Waters was a pioneer in the credit card industry who is credited with transforming the American Express Card into a global brand and the flagship product of the American Express Company. Upon his retirement from American Express in 1980, Waters was bestowed with the title, “Father of the American Express Card.”
George Waters graduated from the University of Indiana in 1938 and was hired by IBM
in its sales and marketing program. During World War II, he joined the Army Air Forces where he served as Deputy Chief of Staff in the Office of Statistical Control. During the war, Waters led a team that used some of the earliest computers to keep track of planes, the weather and results of combat missions. Many noted postwar executives came out of the Office of Statistical Command, including Robert S. McNamara and others who became known as the Whiz Kids.
After the war, Waters served as the President of the Massachusetts Steamship Authority, a ferry service between Cape Cod, Martha’s Vineyard and Nantucket. Waters eventually sold the business to the State of Massachusetts. He went on to become an Executive Vice President in charge of marketing at Colonial Stores, an Atlanta based supermarket chain.
American Express
entered the credit card industry in 1958 with its own product, a purple charge card for travel and entertainment expenses. By the time Waters was hired in 1961, The American Express Card was number two in the industry behind Diners Club, still unprofitable, and management was unsure about what to do with the business. They considered merging with Diners Club and also forming a joint venture with Hilton Hotels. The Card at that time was primarily accepted in restaurants, as hotels, car rental companies and airlines were either reluctant to accept credit cards or issued their own cards.
Soon after his arrival in 1961, Waters recognized several problems. The division had grown so fast that internal controls for monitoring card activity and service establishment payments were weak. Too many card members were not paying their bills on time and the company was not charging enough relative to the services that it was providing to their card members and service establishments. Waters plan for reviving the business was based on positioning the card as a product that was not for everyone. He teamed up with mathematicians at MIT to develop algorithms to track card spending activity which avoided the need for credit limits and allowed card members to establish their own responsible spending patterns. Drawing on his Air Force computer experience, he installed a data processing system that kept track of card activity and improved accounting controls. Next, he terminated card members who were not paying their bills on time – approximately 1/3 of the card base. He then raised the annual card fee to $8.00 from $6.00 and he raised the discount rate - the percentage of the sale that the service establishments had to pay American Express – from 3% to 7%. To make the discount rate more palatable to merchants, Waters drew upon his supermarket marketing experience by partnering with merchants in a cooperating advertising program. Waters proposed to give back .5% of all charge card volume to merchants to fund cooperative ads that helped service establishments advertise their products, accompanied by the little blue box Amex logo at the bottom of the advertisement.
The strategy soon worked. On the strength of its advertising and growing list of participating businesses, The American Express Card became profitable by 1962 and in 1964, American Express saw its volume of charged sales surpass Diners Club
.
But there was still more work to be done. The card was still not widely accepted by airlines and hotels. But Waters soon convinced American Airlines to drop their card and accept the American Express Card. Soon afterwards, all other major airlines followed. Next, Waters negotiated an exclusive arrangement with the American Hotel Association and soon thereafter, the card became broadly accepted at hotels in Europe and throughout the world.
Throughout the sixties and seventies, Waters went on to build the brand and expand the franchise globally. With American Express CEO James D. Robinson, they commissioned Andrew Kershaw at Ogilvy and Mather to come up with an advertising tag line for the business. Ogilvy came back with the highly successful slogans “Do You Know Me” and “Don’t leave home without it.”
By the time Waters stepped down as Executive Vice President and President of Travel Related Services in 1978, The American Express Card was accepted worldwide at every major travel establishment. The American Express Card had 9.5 million members, was generating close $1 billion in revenue and the Card accounted for the largest share of the company’s net income. Still today, The American Express Card remains one of the most recognizable global brand names and the leading profit center for the company.
George Waters graduated from the University of Indiana in 1938 and was hired by IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
in its sales and marketing program. During World War II, he joined the Army Air Forces where he served as Deputy Chief of Staff in the Office of Statistical Control. During the war, Waters led a team that used some of the earliest computers to keep track of planes, the weather and results of combat missions. Many noted postwar executives came out of the Office of Statistical Command, including Robert S. McNamara and others who became known as the Whiz Kids.
After the war, Waters served as the President of the Massachusetts Steamship Authority, a ferry service between Cape Cod, Martha’s Vineyard and Nantucket. Waters eventually sold the business to the State of Massachusetts. He went on to become an Executive Vice President in charge of marketing at Colonial Stores, an Atlanta based supermarket chain.
American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
entered the credit card industry in 1958 with its own product, a purple charge card for travel and entertainment expenses. By the time Waters was hired in 1961, The American Express Card was number two in the industry behind Diners Club, still unprofitable, and management was unsure about what to do with the business. They considered merging with Diners Club and also forming a joint venture with Hilton Hotels. The Card at that time was primarily accepted in restaurants, as hotels, car rental companies and airlines were either reluctant to accept credit cards or issued their own cards.
Soon after his arrival in 1961, Waters recognized several problems. The division had grown so fast that internal controls for monitoring card activity and service establishment payments were weak. Too many card members were not paying their bills on time and the company was not charging enough relative to the services that it was providing to their card members and service establishments. Waters plan for reviving the business was based on positioning the card as a product that was not for everyone. He teamed up with mathematicians at MIT to develop algorithms to track card spending activity which avoided the need for credit limits and allowed card members to establish their own responsible spending patterns. Drawing on his Air Force computer experience, he installed a data processing system that kept track of card activity and improved accounting controls. Next, he terminated card members who were not paying their bills on time – approximately 1/3 of the card base. He then raised the annual card fee to $8.00 from $6.00 and he raised the discount rate - the percentage of the sale that the service establishments had to pay American Express – from 3% to 7%. To make the discount rate more palatable to merchants, Waters drew upon his supermarket marketing experience by partnering with merchants in a cooperating advertising program. Waters proposed to give back .5% of all charge card volume to merchants to fund cooperative ads that helped service establishments advertise their products, accompanied by the little blue box Amex logo at the bottom of the advertisement.
The strategy soon worked. On the strength of its advertising and growing list of participating businesses, The American Express Card became profitable by 1962 and in 1964, American Express saw its volume of charged sales surpass Diners Club
Diners Club
Diners Club International, founded as Diners Club, is a charge card company formed in 1950 by Frank X. McNamara, Ralph Schneider and Matty Simmons...
.
But there was still more work to be done. The card was still not widely accepted by airlines and hotels. But Waters soon convinced American Airlines to drop their card and accept the American Express Card. Soon afterwards, all other major airlines followed. Next, Waters negotiated an exclusive arrangement with the American Hotel Association and soon thereafter, the card became broadly accepted at hotels in Europe and throughout the world.
Throughout the sixties and seventies, Waters went on to build the brand and expand the franchise globally. With American Express CEO James D. Robinson, they commissioned Andrew Kershaw at Ogilvy and Mather to come up with an advertising tag line for the business. Ogilvy came back with the highly successful slogans “Do You Know Me” and “Don’t leave home without it.”
By the time Waters stepped down as Executive Vice President and President of Travel Related Services in 1978, The American Express Card was accepted worldwide at every major travel establishment. The American Express Card had 9.5 million members, was generating close $1 billion in revenue and the Card accounted for the largest share of the company’s net income. Still today, The American Express Card remains one of the most recognizable global brand names and the leading profit center for the company.