Free Custom «MasterCard International» Essay Paper

MasterCard International was one of the global sponsors of the World Championship Soccer and the 1998 World Cup. Indeed, MasterCard benefited from the sponsorship program considering the fact that this program helped in marketing its name and products globally. However, its bid to renew the sponsorship program of the 1999-2002 soccer championship was threatened by various issues. The International Sponsorship Limited issued a notification that MasterCard would be required to pay twice the amount it had paid for the previous package if it was to renew its sponsorship program. In addition, some of the major events had been eliminated from the program. However, it is apparent that MasterCard can rely on other strategies to market its products such forming alliances with its member banks and other advertising campaigns, for instance the priceless, which indeed has generated controversies as to whether or not MasterCard should continue with the sponsorship program. Furthermore, it is noted that more than half of its revenue is generated from its United States region, where soccer is not considered as a popular event.

There are some possible solutions, which can be adopted by MC in sponsoring the soccer events. The possible solutions will be carefully weighed against budgetary constraints, competition arising from the demand for sponsoring, reduced package benefits as well as the unfair cost allocations to various regions. One of the solutions is renewing the sponsorship at a higher cost or forgoing the renewal option. In regard to product, the sponsorship offers an exceptional reach globally of MasterCard products and services, as a portion of the costs of the mass media. By adopting this solution, MC would also have benefited from the promotional activities, distribution channels as pricing advantages. The other solution is allocating cost based on regional revenues and the number qualifying teams. The proposed solution is for MC to renew the sponsorship, despite the high fees charged .In conclusion, firms should take advantage of soccer events, such as the World Cup to advertise their brands owing to their high audience globally.

MasterCard International was considered as one of the 12 global sponsors of the World Championship Soccer and the World Cup ’98. As a global payments franchise, MasterCard International operated as a nonstick and a non profit organization (Vanek, 2010). Besides, it did not provide cards; outline its annual fees, or annual percentage rates, nor did it request the merchants to accept its cards or determine discount rates. All of these functions were played by the financial institutions who basically took the responsibility of managing the relationships between the MasterCard, the consumers, and merchants. Its mission was to become the best payment franchise in the world by allowing members to offer superior value and ensure customer satisfaction, hence generating member profitability. Indeed, the success of the French team in the 1998 World Cup soccer finals was a big celebration to the MasterCard since this implied that their global payments franchise had actually done well.

Apparently, MasterCard’s products and name had reached masses through the use of a worldwide promotional program, which entailed the use of highly observable signage, the provision of affinity cards containing soccer themes, together with a collection of the localized programs, whereby various MasterCard’s member banks in about 71 countries increased the sponsorship (Vanek, 2010). Due to the remarkable results that had been attained in 1995-98 sponsorship, it was automatic that MasterCard would renew its sponsorship to fund the 1999-2002 soccer. However, the continuation of the sponsorship program was threatened by various problems. It is crucial that the problems are outlined and solutions to each of the identified problem is identified in order to ensure that the informed decision are made with regard to whether or not MasterCard should continue with its sponsorship program, as an approach to market its products and name globally. The previous results had indicated that the sponsorship program had actually helped to market the name and products of MasterCard globally.

Background

This case study looks at the various issues regarding the MasterCard sponsorship of soccer and identifies the key problems that are threatening the continuation of the sponsorship program. Indeed, it is apparent that MasterCard International has heavily relied on the sponsorship of the soccer events as an approach to market its name and products globally. According to Meltem Tekeli, who is the MasterCard’s Global Promotions and Sponsorships vice president, the outcomes of the 1995-98 sponsorship of the World Championship Soccer were actually remarkable, which spurred it to renew its sponsorship program in an aim to sponsor the 1999-2002 soccer championship (Vanek, 2010). The renewal discussions were initiated and started in May 1998, before the conclusion of the word Cup, and various issues were brought forward. Tekeli had to think over these issues and discuss them with the MasterCard staff before initiating the negotiation process. This was important considering the fact that most of these issues concerned the continuity of the sponsorship program, which was indeed considered as one of the most significant approaches applied to market the name and products of MasterCard globally (International Business, 2005 p. 7).

This case study analysis will basically focus on the key problems that could affect the continuation of the sponsorship program. However, when talking of the issues threatening the continuation of the MasterCard’s sponsorship program, it is crucial noting that the problems arise from the fact that the soccer sponsorship program was considered to be the best marketing strategy considering the fact that the 1995-98 packages had generated remarkable results. However, the continuation of the sponsorship program was a main concern considering the fact that it was required to pay double as much as it paid for the previous package if it was to renew its sponsorship. This raised various concerns considering the fact that various approaches had been suggested that could help it market its products other than the sponsorship program. The key problems are identified below.

Key Problems

One of the major problems threatening the continuation of the MasterCard’s Soccer sponsorship program is the fact that the International Sponsorships Limited, an agent that is basically charged with the responsibility of negotiating the FIFA sponsorship fees, issued out a notification that MasterCard was required to pay two times the amount it had paid for 1995-1998 package if it was to renew its sponsorship. This therefore means that MasterCard had to spend double the amount to market its name and products using the sponsorship strategy. In addition, the International Sponsorship Limited removed several events from the package, for instance the 2000 European Championships (Euro 2000), a sporting event that was basically rated as the third-largest globally following the World Cup and the Olympics (International Business, 2005 p. 9).

The other problem concerns the MasterCard’s funding. It is apparent that MasterCard obtained more than half of its revenues from its United States region. However, despite the fact that this is a key market in the world, soccer was not considered as the most popular event, and thus the Executives from the United States region were concerned with the value generated from the continuation of the sponsorship of soccer, considering the fact that they were paying a lot for it (Smith, 2004 p. 25). Furthermore, it is worth noting that the MasterCard was undergoing through a process of strategic realignment, a process through which MasterCard was enhancing strategic alliances with some of its largest member banks in various key aspects and business processes, such as marketing. It is therefore apparent that the member banks located in various countries around the globe would help in marketing the name and products of MasterCard, hence questioning the need for continuation of the sponsorship program. Furthermore, it is highlighted that the competition for the budget dollars was basically generated from the other global building initiatives compared to the sponsorship program. For instance, the Priceless campaign that had been launched in 1997 within the United States was considered as a highly successful marketing campaign as it attained remarkable results in 26 countries globally. However, despite the fact that the MasterCard sponsorship program actually helps in marketing its name and products, its continuation is actually questionable, considering the fact that this program requires significant funding. It is therefore imperative that a solution is identified in order to ensure an effective decision is arrived at, with regard to whether or not MasterCard should continue with its soccer sponsorship program.

Possible Solutions

As indicated above, most of the sponsors have for a long time view World Cup as the best moments to market their brand. This is due to the fact that the games are well-telecasted, hence reaching to large number of existing as well as potential customers (Lane and David, 2000 p. 8). One of the objectives of MasterCard was to leverage the firms’ investments beyond all the brand exposures through provision of a platform offering increased global marketing programs. It is notable that the 1998 World Cup was broadcast to at least 37 billion audiences, in more than 200 countries. This indicated a 14.24 and 11.78% increase in respect to the number of audiences and countries respectively in comparison to the 1994 Word Cup (“MasterCard”, 2010 p. 1). The perimeter signage exposure for the MasterCard Brand in the 1998 was approximately 11 minute, 54 seconds in over 64 matches. As compared to the 1994 tournament, this indicates a 30.2% increase in respect to the allocated time in approximately 52 matches. For the 1999 to 2002 World Cup season, which was to be co-hosted by Japan and South Korea, the increase in sponsoring fees to a tune of over $100 million, would have highly hampered the efforts for the company to create its brand awareness in these regions, bearing in mind that the region was just recovering from the 1998, Asian Financial crises.

At the end, the firm had to seek some possible solutions, which are to be carefully weighed against budgetary constraints, competition arising from the demand for sponsoring, reduced package benefits as well as the unfair cost allocations to various regions. Some of the regions included the U.S., the main market for MasterCard, as soccer is not regarded as a popular game. Further, the possible solutions were to be consistent with the marketing strategies adopted by MasterCard, such as price, product, promotions, as well as channels of distribution. Other considerations included the long-term benefits as well as the ease of implementation of the adopted solutions.

Renewing the Sponsorship at a Higher Cost or Forgoing the Renewal Option

These were two of the possible solutions, which would have been adopted by MasterCard. It is crucial to discuss the two of them simultaneously as the advantage of one option becomes the disadvantage for the other option. It is notable that there were many advantages of renewing the sponsorship of World Cup at a higher cost in relationship to the firms marketing strategies discussed earlier. In regard to product, the sponsorship offers an exceptional reach globally of MasterCard products and services, as a portion of the costs of the mass media. Based on this, this possible solution would have offered the firm a notable footprint in the Asia and Asia Pacific region, which was recovering from the 1998 Asian financial crises. There is also an increased pressure of MC prices in the U.S. market in relation to fees, interest rates among others. Therefore, the emergency of a less saturated Asian and Asia Pacific markets would offer MasterCard with profit, which could be used in offsetting reduced levels of revenues from the U.S., as a result of intense price competitions.

By adopting this solution, MC would also have benefited from the promotional activities. As indicated above, the 14.24 and 11.78% increase in respect to the number of audiences and countries respectively in comparison to the 1994 Word Cup, was a clear indication that the number of audience in 2002 World Cup tournament would have increased by a higher percentage (Lane and David 12).Through the 2002 World Cup sponsorship, MC would have significantly different its products and services fro those offered by close competitors, such as Visa. The continued sponsoring would have also offered MC with notable strategic alliances with some member banks in the Asia and Asia Pacific region, thus increased distribution channels. However, there are several disadvantages associated with this possible solution. For instance, the $ 100 million sponsoring cost could have increased the prices of products offered by MC. Further, Europay, a part of MasterCard’s intensive distribution networks, was independently sponsoring the Euro 2000. Therefore, MC may not find it appropriate to engage in additional spending, due to the fact that World Cup and Euro are soccer events attracting similar market segments (“MasterCard”, 2010, p. 1).

Allocating Cost Based On Regional Revenues and the Number Qualifying Teams

By adopting this as one of the possible solution, regions such as the U.S. would have received higher allocations as compared to Latin America among other smaller regions. However, this would have been unfair because soccer is not a popular game in the U.S. in comparison to Latin America region and other smaller regions where soccer is popular. By allocating cost based on the number of qualifying teams, this would have translated to cost allocations according to exposure levels to be received by every region (“Master Brand” 32). However, this possible solution would have meant that regions having smaller working capitals would have significantly been forced to absorb increased costs.

Proposed Solution

The proposed solution is that MC executives should renew the sponsorship so as to take advantage of the large audience drawn by this sponsorship. If the firm deemed this venture as extremely expensive, then the business could be forced to stick with Euro 2000, equivalent to 25% of the World Cup costs, hence reduced psychographic and demographic segments (Lane and David, 2000 p. 10). Although the refusal to renew the sponsorship or negotiating the costs would have reduced the firm’s operational costs, it was not the business best interests. Even though the cost of sponsoring was higher in comparison to other the World Cup, the $100 million was far below the amount allocated to the Olympics as well as guaranteed higher brand exposure. Further, failure to accept the sponsorship, could have allowed Visa to step in. In addition, the World Cup final, which was to be co-hosted in Japan and South Korea, would have enabled the firm to gain recommendable footprints in the Asia and Asia Pacific region, where brand awareness highly lagged below the desired levels (“MasterCard” 1).

It is clear that sponsorship of major soccer events, such as the World Cup, Euro Cup among others have remained one of the best opportunities for organizations to advertise their products and services. For instance, the 2010 World Cup final held in South Africa, was able to boost the sales volume of Coca Cola Company, despite the prevailing harsh economic times. Regardless of the high sponsorship costs associated with soccer events, businesses such as the MC should take advantage of this opportunity to increase their short and long-term sustainability (Lane and David, 2000 p. 20).