Case Study of Mastercard: Going Upscale

To attract these consumers, MasterCard will provide elite cards offering special perks, from 24-houra- day concierge services–running errands, arranging travel, booking tickets, and the like–to vip treatment at concerts and sporting events. Bankamerica corp has become the first credit card issuer to launch a world MasterCard. Like cards from rival American Express, the world MasterCard will charge a higher annual fee, which is $75. Not to be outdone, visa is working on a comparable card.

Targeting the wealthy has another benefit for MasterCard. Many of the millions of MasterCard holders are mired in debt and are failing to pay their credit balances, which results in losses for the banks in the MasterCard system. Furthermore, the ready availability of credit cards from numerous banks has conditioned consumers to shop for no fee and low fee cards–the best rates and rewards programs. These are actions that further reduce the revenue to MasterCard banks. By targeting the wealthy, MasterCard reduces its reliance on more debt-ridden, less loyal consumers. However, in targeting this upscale market, MasterCard pits itself directly against American Express.

Is Amex worried? Gail Wasserman, an American Express spokesperson, claims that Amex is not overly concerned. “history has shown that visa and MasterCard have often come out with cheap imitations of American Express products. They never are quite as good as ours.” Some industry observers remain skeptical that MasterCard can succeed with this venture. “no issuer in the world has committed itself to the same level of customer service that American Express has,” says David Robertson, president of the nilson report, a credit card research firm in California. He adds, “the crux of the matter is visa and MasterCard can’t control their member banks; and since the members have that flexibility, no matter what the product, it’ll be a variation of gold and platinum. Ultimately, it’ll all become middlebrow.” His comments raise another issue. So many member banks have issued gold and platinum MasterCard’s that the image, value, and status of such cards have been tarnished in the minds of Americans. In contrast, since its introduction in 1984, the American Express platinum card has dominated the market for very affluent card holders. Amex charges an annual fee of $300 and offers perks such as free upgrades at leading hotels and free companion tickets for customers buying a first- or business-class international ticket on selected airlines. There are only 300,000 to 400,000 platinum Amex cardholders, compared to the millions of MasterCard platinum cardholders. It stands to reason that, if necessary, Amex will defend its market fiercely and aggressively. And Amex has experience in serving this market, whereas MasterCard does not.

Questions for discussion

1. What segmentation criteria has MasterCard used in the healthcare, sports, and affluent market segments? What segmentation criteria are implicit in MasterCard’s selection of these segments?
2. How does MasterCard differentiate its offerings for each of these target segments? How has MasterCard positioned its offerings?
3. What competitive advantages and disadvantages does MasterCard have with its world MasterCard, targeted to the affluent?
4. In your opinion, will MasterCard’s world card be a success? Why or why not? What recommendations would you make for marketing the card?

References: Kristie Perry Dolan, “getting patients to pay,” medical economics, pp. 48-62; Stephen E. Frank, “burned by the masses, cards court the elite,” wall street journal, November 5, 1997, p. B1; and the following MasterCard press releases and other information found at the MasterCard web site, February 1998: “Mellon and MasterCard introduce breakthrough debit product as key to accessing medical savings accounts;” and “MasterCard expands popular Jordan grand prix formula one team sponsorship into global program.” ;Scribd.com

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