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Visa Sponsorship Marketing Group

rP os t CASE: SPM-5 DATE: 7/22/03 VISA SPONSORSHIP MARKETING op yo Visa was the world’s leading payment brand and its vision was to be “The World’s Best Way to Pay. ” In 2002, Visa-branded cards (credit; debit and prepaid; corporate; purchasing and business products)1 generated more than $2. 4 trillion in annual volume; totaled more than one billion cards worldwide, and were accepted in over 150 countries and territories.

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Visa was among the most globally recognized brands and it held 7. 1 percent share of global personal consumption expenditures (PCE). Its U. S. tagline, “It’s everywhere you want to be,” had become part of the American lexicon. Appendix A and Exhibit 1 provide summary information on Visa. tC Visa attributed an important part of its success to high profile sponsorships such as its Olympic Games sponsorship. Visa also sponsored numerous events such as the Rugby World Cup, Best of Broadway, the Toronto Film Festival, NASCAR, the NFL, the Visa Triple Crown, and the Paralympics, and has an international alliance with The Walt Disney Company.

In the fall of 2002, Visa announced its decision to extend its Olympic Games sponsorship through 2012. Its original sponsorship deal was structured through the 2004 games in Athens, but the sponsorship was extended because the partnership had become increasingly successful over time. The deal would extend a relationship between Visa and the Olympic Games that started in 1986. The company spent an additional two to three times that of the sponsorship fee it pays for advertising, promotions, and other efforts to maximize the value of the ponsorship – not an atypical amount for such sponsorships. 1 No Visa International was comprised of six regional operating organizations: Asia-Pacific; Canada; Central & Eastern Europe, Middle East & Africa (CEMEA); European Union; Latin America & Caribbean; the United States. Despite its global reach, Visa remained very much a local organization. Its regional offices had a high degree of operating and marketing autonomy. Visa felt that because its regional organizations were closest to their local markets, they knew best how to help member institutions serve their customers.

Do Debit products allowed consumers to access their checking or bank deposit accounts directly. Debit products gave consumers the choice to “pay now,” whereas credit products allowed consumers to “pay later,” and prepaid products to “pay before. ” 2 Personal consumer expenditure represented the market value of all goods and services purchased by households and nonprofit institutions, excluding the purchase of homes. In 2003, global PCE was at $19 trillion and was comprised primarily of cash and check payments.

Visa had an average annual increase in its share of global PCE of 12 percent over the prior five years. Victoria Chang prepared this case under the supervision of Professor George Foster as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2003 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: [email protected] stanford. du or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. du or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 2 Thomas Shepard, Visa’s executive vice president of international marketing, partnerships, and sponsorship, played a key role in convincing Visa’s six regional boards and its international board to allow Visa to extend its Olympics and Paralympic sponsorship. The sponsorship gave and would continue to give Visa and its member financial institutions (i. e. , banks and credit unions) exclusive marketing rights, including advertising and promotional use of the Olympic rings and other graphics.

Visa also would be entitled to exclusivity with transactions under Olympic control, including online transactions, ticket sales, and Olympic-themed events. SPONSORSHIP MARKETING op yo In the summer of 2003, Shepard and his team gathered at Visa’s International headquarters located in Foster City, California, to reflect on the impact and lessons of its past sponsorship activities. Specifically, they planned to discuss the current corporate strategy and through this process refine the existing sponsorship strategy. The current corporate strategy emphasized greater involvement in the field of entertainment.

An outgrowth was selecting and working with new partners such as The Walt Disney Company (2002). General Sponsorship Marketing No tC Sports marketing was an important marketing platform for many companies – see Exhibit 2 (Panel A). Sports sponsorship was often a key component of sports marketing. There were many ways to own/sponsor properties — by an event title or presenting title; a naming rights sponsor of sporting venues; a supporting level partner; a supplier and/or licensee; or a media sponsor; athlete endorser. In several instances, companies who did not officially sponsor events participated in ambush marketing techniques. Companies typically sponsored general properties and sports events to: 1) strengthen customer relationships, 2) acquire new customers, and 3) provide incentives for their retail distribution channels. 4 In 2002, global sponsorship spending reached $24. 4 billion. In the U. S. alone, companies spent $9. 4 billion on sponsorships in 2001. 5 According to Shepard, sponsorship marketing had increased in popularity due to globalization; new access points, including new media that allowed companies to reach consumers in very segmented ways; and convergence of the sports and entertainment industries.

Do Most major consumer brands leveraged sponsorship marketing to enhance their marketing efforts. For example, according to sponsorship consultancy IEG, in 2002, Anheuser Busch spent between $215 and $220 million on sponsorship marketing, PepsiCo. between $190 and $195 million, and Nike between $105 and $110 million. According to IEG, Visa, MasterCard, and American Express together spent $150 to $165 million on all types of sponsorship in the U. S. in 2001. Visa and MasterCard each spent $65 to $70 million, making them respectively the 11th and 12th largest spenders on sponsorship.

American Express spent $20 to $25 million and was ranked 49th. These figures only included the rights to purchase properties. Big-time sponsors such as these companies typically spent two to three times as much promoting their official 3 Ambush marketing was when companies who did not officially sponsor properties led consumers to infer that they were part of the official event through marketing, advertisements, or other marketing methods. 4 “Winning the Sports Sponsorship Game,” Bank Marketing International, June 24, 2002, p. 8. 5

Michael McCarthy, “Sports Sponsorship Game Heating Up,” USA Today, June 12, 2002, p. 3B. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 3 sponsorship status as they paid to get that official status. “The price of entry is what you pay for the property,” said Shepard. “Where you really start to spend, and reap the most benefits, is in the marketing tools that your constituencies need — the advertising programs, promotional templates, nd onsite efforts. ” William Chipps, senior editor of IEG Sponsorship Report, a Chicago-based sponsorship newsletter, agreed by stating that in order to be worthwhile, Visa’s total Olympic expenditure needed to be at least three to four dollars on marketing for every dollar paid for the sponsorship — and that did not include its media buy. “A company can sponsor an event, but the sponsorship isn’t going to do much for them unless they spend some extra money to activate it through consumer sweepstakes or client hospitality6,” said Chipps. Sports Sponsorship Marketing p yo Sports marketing was a particularly high-stakes game. In 2002, in the U. S. alone, companies annually spent $9. 4 billion on sports sponsorships. 7 In 2001, companies spent $6. 5 billion on sports sponsorships in the U. S. , up from $2. 1 billion in 1992. 8 In the U. S. sponsorship market, sports held the largest market share, or 69 percent of the total sponsorship market in 2001, up 10 percent from $5. 9 in 2000. 9 IEG expected sports sponsorships to increase in future years and to outpace the rate of growth in general sponsorship spending. tC

According to some analysts, sports marketing was more complicated than simply putting a logo on a shirt: “Part of the problem is that some clients and agencies think that the sport they align with will do the marketing job by itself. In reality, to be effective at sports marketing requires the same attention to detail as any other discipline. ”10 Andrew Hampel, managing director, Europe, of the sports marketing group, IMG, commented: “Sports sponsorship may give you the right to talk to customers, but if you want to say anything worthwhile about your brand, you have to engage them at a number of levels.

The starting point is always to identify your target audience and set your objectives. When you know what you want to do, choose a sport that you can afford and leverage it creatively through above-the-line advertising, PR, sales promotion, hospitality, and community tie-ins — just as you would do in any well-orchestrated non-sport strategy. ”11 No VISA SPONSORSHIP MARKETING STRATEGY AND PROCESS Visa sponsored events such as the Olympic Games, the Best of Broadway, NASCAR, NFL, the Visa Triple Crown, the Walt Disney Company, and the Paralympics – see Exhibits 3 and 4.

Shepard discussed how sponsorship could help Visa improve upon and alter its brand image: Do Within the payment service industry, we’re doing research that shows how consumers view the brand. We’ve learned that we are very relevant in the minds 6 Hospitality programs included free tickets, travel packages, and corporate events hosted by senior Visa management. Beyond sports sponsorships, companies spent over $27 billion on traditional sports advertising and more than $1 billion on endorsements and Internet advertisements. 8 Michael McCarthy, “Sports Sponsorship Game Heating Up,” USA Today, June 12, 2002, p. B. 9 “Winning the Sports Sponsorship Game,” Bank Marketing International, June 24, 2002, p. 8. 10 Andy Fry, “Beyond Branding—Sports Marketing is More Complicated than Putting a Logo on a Shirt,” Sports Marketing, March 29, 2002, p. 26. 11 Ibid 7 This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 4 of consumers and have a significant impact on consumer lifestyle. Visa gives people piece of mind and people use their cards everyday.

They believe we’re a quality organization, but we’re not perceived as unique. That’s what we have worked on and that’s what sponsorship can help us achieve. Visa’s sponsorship portfolio was also skewed [toward] male and low-end [markets] in some cases and we are balancing our portfolio as a result of this research. Periodically, Visa embarked on a “sponsorship refresh” where the sponsorship team made sure that its objectives paralleled Visa’s corporate objectives. “Our sponsorship marketing objectives are grounded in corporate objectives and executed through the brand value proposition,” explained Shepard. p yo Sponsorship Development Cycle Visa divided its sponsorship opportunities into three development cycles: 1) emerging markets (name recognition, branding, and product sampling), 2) maturing markets (name building, signage, advertising, public relations, and promotions), and 3) mature markets (presence, products, partnerships, and alternative media). In this final mature market category, Visa sought to differentiate its product from competitors. Sponsorship Selection Criteria and Internal Integration tC

Visa’s sponsorship selection criteria included the following: 1) brand fit, 2) usage stimulation on behalf of Visa’s members, 3) event history/credibility, 4) broad reach, 5) governing body control, 6) advocacy creation, 7) low risk, 8) event’s marketing plan, 9) ease of implementation, and 10) strong member interest. Shepard commented on the challenges of evaluating long-term sponsorship opportunities: “There are a lot of new payment schemes out there in the payments industry and looking out into the future to try to figure out what the landscape is going to look like is probably the hardest part of evaluating any sponsorship opportunity. Sponsorship Marketing Platforms and Marketing Mix Do No Shepard discussed Visa’s sponsorship marketing platforms and marketing mix: “The property Visa is associated with is all about creating platforms. From an advertising platform standpoint, we seek to build awareness and imagery and support member acquisition/usage. From a promotional platform standpoint, we seek to increase usage and partner with strong brands. From a corporate relations platform, we seek to enhance impact/reach of other marketing efforts, strengthen our corporate reputation and image, and improve employee relations through employee programs (e. . an event with Disney, Visa’s sponsor, to show employees why Visa decided to partner with Disney). From a product platform standpoint, we seek to showcase new technologies; launch new products; and develop infrastructure on site. ” (Exhibit 5. ) To implement sponsorship marketing platforms, Visa first conducted core/primary consumer research and then held an initial task force meeting and promotional briefing. It believed in developing a multi-agency “promotional platform” where various advertising agencies and internal onstituents developed and tested the marketing and promotional concepts as a team. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 5 THE OLYMPIC GAMES Overview op yo The Olympic Games transcended political and geographical boundaries to deliver international exposure, broad-based audience appeal, and a wide range of cultural and sporting events appealing to virtually every demographic.

For example, during the Olympic Games in Sydney (2000 Summer), more than 3. 7 billion viewers across 220 countries watched over 3,500 hours of coverage totaling 36. 1 billion viewing hours while athletes from 80 of the 200 countries participating earned 928 medals. During the Salt Lake City Games (2002 Winter), 2. 1 billion global viewers in 160 countries amassed 13. 1 billion viewer hours. Exhibit 6 shows U. S. television coverage and ratings for each Games since 1960. Despite recent Olympic scandals (see Appendix C), many corporations still continued to sponsor the event.

Indeed, many of the 10 worldwide sponsors had very long associations with the International Olympic Committee (Exhibit 2, Panel B). tC From 1988 to 2002, Visa USA had donated more than $9 million to the U. S. Olympic Team to help fulfill the dreams of America’s Olympic athletes and hopefuls. Although exact sponsorship figures were not disclosed, in 2002, TOP (The Olympic Partners) sponsors paid over $50 million for a four-year sponsorship cycle. Visa’s members received hospitality benefits due to Visa’s sponsor status, as well as a guaranteed number of rooms and tickets for member and client entertainment (e. . Visa had invited approximately 800 guests to Salt Lake City). Visa’s members could also sponsor an individual athlete or team, use the Olympic theme in marketing promotions (from TV advertising to product literature); or issue Olympic cards with the Olympic rings or a picture of the specific athlete or team they were sponsoring without paying extra fees. Since Visa began its Olympic sponsorship, its members had issued more than 21 million Visa cards bearing the exclusive Olympic rings. No

Shepard explained Visa’s rationale for sponsoring the Olympics: “We look at the equities that a property brings to us to develop our business. We seek out sponsorships that generate advocacy at the highest end of the consumer spending pyramid. If you look at the Olympics, it’s a perfect fit for us. Olympic brand equities include being at the pinnacle of its category; having universal appeal; standing for excellence; having broad-based consumer awareness and acceptance; having global reach with local impact and participation; and standing for leadership.

Visa’s brand equities of industry leadership; global yet local; accepted everywhere; innovative and modern; and service excellence parallel Olympic brand equities. Visa probably could work on innovativeness, though, because we’re not known as the most innovative brand. ” Do Matt Beispiel, former vice president for Visa said: “The key is that the Olympics really fit into our overall strategy, which is aligning Visa with the best. It’s a one-of-a-kind event, especially in this country, where Americans are enamored with the Olympic Games. Those five rings really are very, very meaningful.

Our hope, with all of our marketing efforts around the Olympic Games, is that all of the goodwill and good feelings that people have (in) [about] those five rings will attach to the Visa brand. ”12 12 Lisa Riley Roche, “Some of Visa’s TV Ads to Promote ’02 Games,” Desert News, April 6, 2000, p. E01. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 6 op yo In November 2002, Visa announced that it would be renewing its Olympic sponsorship through 2012.

As a result of the renewed agreement, Visa would be the exclusive payment card and official payment service for the four Olympic Games following Athens (Summer 2004). This included the Winter Games in Torino in 2006, the Summer Games in Beijing in 2008, the Winter Games in Vancouver in 2010, and the 2012 Games (locations yet to be determined). Shepard discussed Visa’s continuation of its Olympic sponsorship through 2012: “I presented to Visa’s six regional boards to get the international board to allow us to sponsor the Olympics through 2012.

They asked us, ‘Aren’t you subject to exorbitant fees to make sure that Visa owns the category in TV in the U. S. ’ and that’s something that we and other sponsors must evaluate. It is a costly opportunity. We cannot just look at the cost of the property. We have to look at the cost of the property plus the television rights that we have to acquire, the manufacturing of all the commercials that we have to do, etc. Millions of dollars were rolled up into this decision. The question is, how can we best leverage the property and how can we make a business case for sponsoring the property. Malcolm Williamson, CEO and President of Visa International said: “In the eight years following the Athens Games, Visa’s corporate sponsorship is expected to provide nearly $40 million in financial support to National Olympic Committees and through to the athletes in support of their quest to participate in the Olympic dream. ”13 According to Williamson, “It’s taken us a lot of time to get value out of that Olympic property. ” Over the years since 1986, Visa member banks have become more involved and derived greater benefit from the sponsorship.

Williamson believed that extending the sponsorship until 2012 would “enable these 21,000 banks to have the confidence to go on leveraging this property and recognize that we’re not going to change course. ”14 tC Evolution of Olympic Sponsorship Do No Shepard discussed the progression of Visa’s involvement with the Olympics: “We’ve raised the bar with the Olympics. When we first started with the Olympics, we were just trying to get our name out and use it as an advertising platform. Our sponsorship strategy has evolved to one with a global platform with local relevance; an integrated marketing approach; and n expanded window of opportunity beyond just the Olympic Games. ” Shepard continued: “In Albertville (1992 Winter), we started to engage and build marketing programs for all of our member financial institutions. We expanded member and merchant participation globally. In Barcelona (1992 Summer), we expanded Visa’s presence in the host city for the first time by engaging the merchant community and having onsite visibility with our own service centers. In Lillehammer (1994 Winter), it was the first time we rolled out a global corporate relations platform and really started to get visibility throughout the city and we began sponsoring teams.

In Atlanta (1996 Summer), it was the first time we did anything comprehensive on site with our products. We issued a stored value product [pre-paid cards] that was marginally successful. Our hospitality program, ATM infrastructure, and Customer Service Center hosting were all significantly larger than those at previous games. In Nagano (1999 Winter), we had overkill in terms of our visibility and we learned that we needed to have a comprehensive effort because at Nagano we 13 “Visa Extends Olympic Games Sponsorship for Eight More Years,” Visa Press Release, November 11, 2002. Visa Website: http://www. visa. com/globalgateway/gg_selectcountry. tml? retcountry=1. 14 “Visa Breaks Olympic Record for Sponsorship,” Bank Marketing International, January 22, 2003, p. 8. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 7 had five different Visa logos. Also in Nagano, initially only 6 percent of the merchants took Visa, but by the time we finished, we had a 1,000 percent increase in merchant acceptance of Visa cards. We also used Nagano as a platform and template for a lot of our other Asian activities. OLYMPICS INTEGRATED MARKETING PROGRAM For the Olympic Games, Visa focused on creating an integrated marketing program which included creating a central marketing theme; a look of the Games; member and merchant programs; advertising; promotions; public relations; athlete relationships; host city partner/presence programs; onsite activation capabilities; and hospitality. (Examples are in Exhibits 7 and 8. ) op yo Central Marketing Theme and Look of the Games For the 2002 Olympic Winter Games in Salt Lake City, Visa created an integrated marketing platform centered on a marketing theme, “You’ve got what it takes. Shepard said this central marketing theme “spoke to the core brand position of superior acceptance, to the athletes who were the core of the Olympics, to Visa cardholders, and to Visa employees. Visa’s look also complemented the Salt Lake Olympic Committees look and feel. ” Member and Merchant Programs and Promotions tC For the Salt Lake City Games, Visa created member and merchant programs in which 500 members around the world utilized Visa’s rights in the form of statement inserts, templates, and other promotional campaigns.

Members were its banks, credit unions, and other financial institutions issuing Visa products. More than 50 million statement inserts highlighting Visa’s Olympic marketing programs were distributed to consumers. Visa received an unprecedented 100 percent participation in its member programs from its top 12 U. S. members during the Salt Lake City Games. Of the top members, 75 percent conducted multiple programs that covered multiple lines of business (credit, debit, commercial, employee incentives, etc. ). Do No Merchants received indirect association with the Olympics through Visa.

For the Salt Lake Games, statement inserts included offers such as Olympics-related sweepstakes. Fifty-four member sweepstakes programs were also developed during the Salt Lake City Games. For example, each time cardholders used their Visa cards, they were automatically entered to win a trip to the Olympics. Linda Cullinan, a vice president of Intrust Bank of Wichita, Kansas, said it had chosen to ally with Visa over MasterCard in part because of the prestige associated with the Olympic Games. Intrust used some of the Visa Olympic promotional inserts in statements sent to its 100,000 card account holders.

Though Visa offered Intrust a better deal financially, “Visa’s standing in the market was the single most important factor in the branding decision, “followed by the promotions they run and the acceptability of those promotions,” she said. 15 In 1994 Visa also launched another worldwide public relations program effort called the “Visa Olympics of the Imagination,” a children’s art contest. Children ages 9 to 13 from various 15 Lavonne KuyKendall, “Gauging Value Has High Degree of Difficulty,” The American Banker, February 27, 2002, p. 1. This document is authorized for use only by Hadi Nejatian until May 2013.

Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 8 countries were invited to submit art around a designated theme. For the Atlanta Summer games, Visa asked children to invent and then illustrate an Olympic sport of the future, and write about how that sport would promote global peace and unity. For the contest in Nagano, children were asked to create artwork featuring a person they admired, engaged in a Winter Olympic sport. Winners received free trips to the Olympic Games.

For the Atlanta Games, the contest garnered positive coverage in more than 1,000 newspapers, print, TV, and radio outlets in more than 50 countries and Visa received approximately 600 million media impressions. Mike Sherman, vice president of corporate relations at Visa in San Francisco said: “That’s like getting a story in The Wall Street Journal every day for a year. ”16 op yo Merchant programs included online and offline efforts. During the Salt Lake City Games, merchants such as Federated, Nordstrom, CompUSA, and Gap. com participated in merchant programs by promoting trips to the Olympics if consumers used their Visa cards.

Prior to Salt Lake, merchants ordered over 1 million point-of-sale signs and over 15,000 merchants participated in merchant programs. Advertising tC Advertising was a significant part of Visa’s integrated marketing program. During the Sydney Games, Visa launched two television spots highlighting its Olympic ties during the Super Bowl (nine months early). Visa typically tailored its advertising to reflect the unique aspects of each Olympic setting. “As you go from Olympics to Olympics, each one has a different feel and tone. We try to develop a concept that suits each one,” said Beispiel. What we wanted to exploit this year [Sydney 2000] are the unique aspects of the Australia Olympics. The ‘dream with no boundaries’ theme is a way to capitalize on the magnitude and boundless nature of that continent. ”17 No Television dominated the advertising mix for the Sydney campaign. Visa purchased exclusive rights on the NBC Olympic broadcast and was the only advertiser in its category during the Games coverage on that network as well as MSNBC and CNBC. Visa also bought exclusive rights on the local NBC stations in the top dozen markets. Other advertising included radio, print, and online advertising.

Early Visa television advertisements highlighted places that accepted Visa but not American Express. This campaign was developed in 1985 by BBDO. “It was intended to separate the Visa brand from MasterCard,” said Beispiel. “We have both brands that functionally do the same thing and we needed to somehow separate the brands in the mind of the consumers to move our business ahead. ”18 Athlete Relationships Do Visa developed relationships with athletes around the world. In the U. S. , Visa had sponsored the ski team since 1986 and for Salt Lake, extended its athlete sponsorship into other sports such as snowboarding, bobsledding (e. . Jean Racine and Jen Davidson), freestyle, figure skating (e. g. 16 Visa Press Release, September 8, 1997, volume 53, issue 25. “Visa Kicks Off Olympic-Themed Campaign,” Bank Advertising News, February 21, 2000, volume 24, issue 4, p. 1. 18 Ibid. 17 This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 9 Sasha Cohen) and other athletes in the Paralympics. Visa also sponsored the Canadian bobsleigh team, the Russian hockey team, and the Japanese ski jumping team.

During the Salt Lake City Games, Visa directly tied athletes into its efforts through a “usage study” called “One Year, One Card,” with three hopefuls (two Olympians and one Paralympian). Each agreed in March 2001 to give up cash and checks as part of Visa’s “One Year, One Card” program. Two of the three (one out due to injury) successfully completed the program in February 2002, after spending a year writing no checks and using cash only for purchases under $10. Destination Marketing—Host City Partner/Presence Programs op yo

Visa was the first worldwide Olympic partner to launch “destination marketing” programs linked to the Olympic Games’ host cities. Visa’s strategy was to extend the benefit of its Olympics sponsorship beyond the actual Olympic Games: “We have been able to stretch the marketing window from the duration of the Olympics to a four to five year period,” said Shepard. “We have a worldwide sponsorship of tourism, merchants, and advertising, which never stops. ” Visa assisted its partners and members in creating local and regional incremental value and benefits around the Olympic Games.

Sydney proved to be the “gold standard” of Visa’s destination marketing efforts, according to Shepard. In Sydney, Visa generated more than $40 million in marketing value for Australia for the Sydney Olympic Games over the four-year period leading up to the Olympic Games in 2000. 19 Shepard stated: tC Sydney was our most robust case of generating volume for our Visa network of members. We still have partnerships from that time period that are around today such as the Australian Tourism Commission, the Sydney Convention and Visitors Bureau, etc. We’ve really penetrated the merchant community in Sydney.

Sydney became our gold standard. And we continued this effort in Salt Lake City. In Athens (Summer 2004), we’re looking to use Athens as a pan-European footprint, extending our reach beyond Greece. No In the Salt Lake Games, Visa created national television commercials that highlighted Olympic athletes and Utah as a destination during the Games. One spot titled “Surfing,” featured the Wasatch Powderbird Guides, a Utah-based helicopter ski and snowboard company. “We have changed our methodology in the 16 years since we first started sponsoring the Olympic games,” said Sherman. Do

Our campaign for the 1988 Calgary Olympics was all about branding and we focused on the 17 days surrounding the games. Then in 1994, we saw that Visa was going to have to adapt its marketing to make it closer to tourism and spread its efforts over a much longer period. We realized that we had to work with the Olympic city before, during, and after the Games in order to derive the best benefits for our members. We asked ourselves why host cities bid for the games and we realized the answer came down to showcasing the city to the world. Not only do the games bring tourists to the Olympic city, but also they create a large 9 Visa Website: http://www. visa. com/globalgateway/gg_selectcountry. html? retcountry=1. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 10 halo effect that lasts beyond the games. Prior to the 1992 Olympics, Barcelona was the 16th most popular tourist destination in Europe. In 1993, it was the third. There was a similar kind of lift in Australia after the 2000 games. 20

The Division of Travel Development in Utah, where the Winter Olympics took place in February 2002, stated: “One measurement of the improved visibility the state has received during and after the Olympics has been the sustained increase in visits to the Division of Travel Development’s consumer website, Utah. com. During February 2002, the number of visitors to the site increased by over 200 percent to nearly 700,000 visitors (compared to a typical month of 220,000). Since the conclusion of the Games, interest has remained high. The number of visitors to the Utah. om website has remained at approximately 400,000, nearly 80 percent above its pre-Games level. ”21 op yo Furthermore, during the Salt Lake Games, surrounding areas saw sales on Visa payment cards increase 30 percent over the same period in 2001, and 23 percent over the prior month. The Salt Lake Convention and Visitor’s Bureau reported that overall, 55 percent of reservations were made on Visa cards, up from 46 percent in 2001 and 41 percent in 2000. 22 “As an organization, Visa’s involvement in the Olympics went well beyond corporate self interest,” said Dianne Binger, president and CEO of the Salt Lake Convention & Visitors Bureau. Visa developed a true partnership with Salt Lake’s hospitality community. Their support helped to ensure the success of the Games, as well as our continued success as a world class travel destination. ”23 Onsite Activation and Marketing No tC Onsite marketing activities were also an important component of Visa’s integrated marketing program. At Salt Lake City, Visa had its ATM networks at or near all competition and noncompetition venues, including two mobile ATMs, 650 new point-of-sale acceptance terminals at Olympic venues, and a customer information center to help visitors with lost or stolen cards and Games-related questions.

Visa believed these efforts helped build consumers’ awareness and reinforced Visa as the payment brand of choice. Visa pointed to its improvements by showing that Visa’s volume throughout the Olympic venues at Salt Lake City exceeded the 2000 Sydney Games by more than $2 million, even though the Sydney Games were four times larger. 24 Shepard described onsite challenges: Do As a product platform in our sponsorship marketing platforms, we’ve used the Olympics to showcase a lot of our products from a Visa cash platform in Atlanta to a number of our mobile commerce solutions that we’re investing in right now.

However, we’re responsible for the infrastructure on site, which has the potential of becoming the program’s Achilles heel because a lot can go wrong onsite. For that reason, a lot of care and onsite management goes into creating and maintaining the systems. 20 “Visa Launches Marketing for 2004 Olympics,” Bank Marketing International, December 31, 2002, p. 4. Ibid. 22 Visa Website: http://www. visa. com/globalgateway/gg_selectcountry. html? retcountry=1. 23 “Visa Honored with Salt Lake Convention & Visitors Bureau Tourism Achievement Award,” Visa Press Release, July 11, 2002.

Visa Website: http://www. visa. com/globalgateway/gg_selectcountry. html? retcountry=1. 24 Becky Saeger, “Visa Has What it Takes at the Olympics,” Marketer’s Forum, April 2002, Vol. 6, no. 3, p. 30. 21 This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 ATHENS SUMMER GAMES 2004 rP os t p. 11 For the Athens Olympics, there would be 11 worldwide or TOP sponsors, each in a different product category.

As one of the worldwide sponsors, Visa was the exclusive payment card and official payment service of the Athens Games and would be the only card accepted at all Olympic Games venues for all official Olympic-related transactions. Visa planned to install a special Olympic ATM network and hundreds of point-of-sale acceptance devices at the International Press Centre, the International Broadcast Centre, and the Olympic Athletes Village. The Visa Service Centre (VSC) would provide multilingual emergency services and general assistance to cardholders.

Visa also sponsored the Visa Olympians Reunion Center where Olympians could congregate and relax. It had also planned to support teams such as the U. S. gymnastics, track and field, ski and snowboard, hockey, and figure skating teams. tC op yo In terms of its members, Visa planned to utilize the Games as a sponsorship platform by offering marketing tie-ins and opportunities for international exposure and image enhancement. Similar to Sydney and Salt Lake City, Visa planned to conduct destination marketing campaigns with the host city during future Games.

In November 2002, Visa and the Greek National Tourism Organization (GNTO) formed a global alliance to promote Greece worldwide as a key travel destination and showcase Visa’s sponsorship of the Athens Games. Visa planned to use advertising, direct mail, cardholder communications, and Olympic promotions in more than 50 countries to promote Greece as a travel destination. One program would feature the joint development and creation of an information booth to service visitors, providing information concerning tourist issues. Visa also planned to eature Greece on its “Visa Destinations” online travel site and planned to promote Greece with its hotel and airline travel partners. “We are packaging trips to Greece and to the Greek islands which can be offered as prizes to Visa card users,” said Shepard. No As an extension of its Olympic sponsorship, Visa also planned to sponsor the Paralympic Games in Athens in 2004 for the first time (Visa had supported the Paralympic Games in other ways at various other Olympics). Visa’s sponsorship resulted in the first Visa Paralympic Website, accessible to people with vision, hearing, and mobility challenges.

Visa’s members would help deliver the messages of the Paralympic Games (Pursuit, Strength, Inspiration, and Celebration). Visa hoped that its sponsorship of the Paralympic Games would create an affinity between its brand and the disabled community and their families worldwide. Shepard noted: “There are 750 million people worldwide with disabilities. If we can create something relevant for them and their families, we will be creating a partnership with them for mutual benefit. ” RUGBY WORLD CUP Do

The Rugby World Cup (RWC) was considered to be the third most-watched sporting event in the world behind the Olympic Games and the FIFA World (Soccer) Cup. In October/November 2003, 20 rugby union playing nations would contest the RWC in Australia. The International Rugby Board (IRB) had held qualifying matches over four years around the world to qualify the 20 nation participants. The first RWC was held in 1987 (Exhibit 9). This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860.

Visa Sponsorship Marketing SPM-5 rP os t p. 12 op yo The RWC was expected to lure 40,000 international visitors to Australia in 2003. Visa had been a sponsor of the RWC since 1995. Coca-Cola paid $3. 5 million to secure both the 1999 and 2003 World Cups. In May 2002, Visa renewed its RWC sponsorship as an Official Worldwide Partner and official payment service of RWC. It had planned to use the sponsorship to deliver unique benefits to its members and Visa cardholders, including providing up to 10,000 tickets for cardholders to win worldwide when Visa cards were used during merchant and cardholder promotions. With banks and branches in virtually every nation around the world, Visa’s members and merchants can effectively market the RWC programs and special offers to hundreds of millions of cardholders worldwide,” observed Shepard. “It will be our responsibility to provide our members with effective and profitable RWC marketing programs. ”25 Shepard also noted: “In 1999, we had RWC promotional programs underway in all major rugby markets from Australia to Argentina and from the U. K. to South Africa.

Visa members worldwide once more will have exclusive opportunities to use RWC 2003 in their Visa marketing, advertising, and promotions and provide unique offers to their cardholders and merchants. ”26 Visa also planned to use its ongoing partnerships with Australia’s tourism and convention associations to create even greater synergy with RWC 2003, promoting increased tourism to Australia. Visa planned to develop a joint program with the IRB (International Rugby Board) to develop a Visa/Rugby World Cup Classic TV series that would include four rugby legends, winning players and captains of 1995 and 1999 former Rugby World Cups.

The program would feature former great rugby players talking about rugby’s greatest moments and the program would be distributed worldwide. Visa promotions included international promotions that encouraged consumers to use their Visa cards to win trips to the RWC. In terms of corporate hospitality, Visa brought its merchant partners and members to the RWC. No tC Shepard discussed Visa’s rationale for sponsoring the event: “Visa recognized rugby’s great promise after we sponsored the 1995 Rugby World Cup on a regional basis and then globally for RWC 1999 in Wales.

It was a diamond in the rough in 1999, and has continued to develop as a valuable gem. The spirit and passion that rugby fans engender and the vast potential for marketing to its followers worldwide are what attracted us to this event. Rugby World Cup provides Visa with a major global marketing platform reaching some of our most important markets around the world. Visa plans to tap into the passion and spirit of rugby to deliver unique, highly visible business opportunities to our members and their merchants around the world. ”27 Do

Sheng Li, a sponsorship executive at Visa commented: “We use the RWC as more of a promotional platform versus our sponsorship of the Olympics, which is more of a brand vehicle for us. Thus we run a lot of promotional programs around the RWC. It’s a much less expensive investment for us compared to the soccer World Cup. We get a lot more value for our money with rugby since the rugby demographic tends to have a lot of spending power. ”28 25 Rugby World Cup Press Release, “Visa Renews 2003 Rugby World Cup Partnership,” May 21, 2002. http://www. rugby2003. com. au/. 26 Ibid. 27 Ibid. 28 Interview with Sheng Li.

Subsequent quotes are from this interview unless otherwise noted. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 13 Li discussed the challenges of working with the event: “The RWC is a fast growing event and is experiencing customary growing pains. For example, in the recent past, it had a minimal antiambush marketing program. We are working with them in this area, and we definitely understand what they are going through.

As a long term partner, we will continue to provide our support to make the RWC an even greater property. ” NEW ZEALAND ALL BLACKS op yo Visa secured sponsorship of the New Zealand All Blacks (rugby team) in advance of the 1999 Rugby World Cup. At that time, the All Blacks were considered a favorite to win. Visa hoped that the sponsorship of the All Blacks, combined with its sponsorship of the RWC would provide both local (All Blacks) and global (RWC) marketing platforms leading up to the RWC. However, the All Black sponsorship turned out to be much more of a challenge than Visa had originally expected.

Shepard stated: We wanted to sponsor the All Blacks but during the process, we couldn’t get the necessary access from them for appearances, relevant marketing programs, tickets or for other alignment opportunities, and most importantly they were not very proactive or effective in terms of ambush marketing protection. The All Blacks also did not seem to value what we were bringing to the table in terms of global network and communication so we mutually decided not to continue the sponsorship. In retrospect, we were also not engaged enough and didn’t get enough visibility in the marketplace for the property. tC

In February 2003, the All Blacks signed on MasterCard as its official payment card. In addition to Visa’s issues with the All Blacks, the New Zealand Rugby Union also caused much public controversy when in late 2002, New Zealand lost its bid to co-host the 2003 Rugby World Cup because it was unable to guarantee stadiums free from advertising ( see Appendix D). This loss led to an inquiry into the management of the New Zealand Rugby Union and a subsequent major management shakeup. No F. A. PREMIER LEAGUE Do In 1998, Visa began its sponsorship of the F. A. (Football Association) Premier League in England. The F. A.

Premier League was a competition involving 20 Premier League Clubs. These 20 included globally known “Super Clubs” such as Manchester United, Arsenal, Chelsea, and Liverpool. The league was formed in 1992 to increase popularity and interest in soccer within England. Visa’s sponsorship extended only to the League, but did not include the individual teams (clubs). Other sponsors could sponsor individual teams as well as individual matches. As a sponsor, Visa paid a set amount and received non-exclusive perimeter boards (signage at the matches), the rights to use the Premier League logo, and a certain amount of tickets.

Li commented: “When we first started working with the Premier League, it was not as strong as it is today. In addition, at the end of 1999, there was a lot of management turnover at the Premier League. The “Super Clubs” were the teams that our Members and cardholders were most interested in. However, we had difficulties creating team-related benefits through the League sponsorship structure, especially when we were trying to run promotions outside of the This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright.

[email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 14 U. K. For example, we ran a promotion in Asia to fly winners to England to watch a match between two high-profile teams, but the Premier League did not provide us with adequate assistance. We had to find tickets through other channels. All these factors led us to not renew our sponsorship with the Premier League in 2000. We preferred to focus at this time on other sponsorships such as the Olympics. ” op yo In addition to Visa’s sponsorship of the F. A.

Premier League, the company also signed a separate three-way agreement with the F. A. Premier League and Manchester United, as part of its greater F. A. Premier League sponsorship. Li explained: “When we first signed on as a sponsor with the Premier League, the League had included the Manchester United Platinum Club sponsorship package which secured the League sponsors’ boards and a certain amount of hospitality related to the most successful team. With the Platinum Club, sponsors could also sponsor one Manchester United match in the season. With that match, sponsors would get more tickets, hospitality, etc. SPONSORSHIP PERFORMANCE MEASUREMENT tC As sponsorships grew in popularity and became more expensive, sponsors began looking for ways to quantify event marketing value. One of the first techniques used was tracking televised logo time, i. e. , the amount of time a sponsor’s logo is visible to a television viewer. However, over time, marketing professionals have begun to question the value of this analysis, as flashing a company’s logo during an event may have been cheaper than running advertising during the event, but the two many not have been interchangeable in terms of effectiveness.

Companies have begun using a variety of research techniques to measure pre- and post-event results ranging from focus groups to onsite surveys. Do No Visa Performance Measurement Visa often used external consultants to quantify the value generated by the Olympic sponsorship to “persuade us first as a management team and the board second” that there is a business case for a sponsorship. The results showed that a sponsorship translated directly into tangible benefits such as brand recognition and market share and “has a significant value. 29 Since 1986, the number of Visa cards in issue grew from 137 million to just over one billion, while global volume grew from $111 billion to $2. 3 trillion. Since it started sponsoring the Olympics in 1986, Visa’s market share had risen by 33 percent, to 53 percent, the company said. “And when you gain the leverage from the member banks,” said Williamson, “it’s an amazing property [Olympics]. ”30 Moreover, during the span of Visa’s Olympic involvement, it had seen brand preference in the U. S. go up — it had seen its rating as “best overall card” rise to 50 percent. 1 Visa cited research showing that more than 66 percent of Americans thought Olympics sponsors deserved their business. “Obviously, not all of that is from the Olympics,” said Michael Lynch, senior vice president of event and sponsorship marketing. “But we’re finding that those who are 29 “Visa Breaks Olympic Record for Sponsorship,” Bank Marketing International, January 22, 2003, p. 8. Ibid. 31 “Visa Extends Olympic Games Sponsorship for Eight More Years; Most Successful Sponsorship to Deliver Support Through the Games of the XXX Olympiad in 2012,” Business Wire, November 11, 2002. 0 This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 15 aware of our Olympic sponsorship are more likely to use the Visa card than those who are unaware. ”32 According to Becky Saeger, executive vice president of brand marketing: “At Visa, we frequently review our efforts to ensure a return on investment for our members.

Since 1986, no single property has allowed us to build our brand and drive use better than the Olympic Games…. Since 1986, Visa volume has grown at a compounded annual rate of 16 percent. Unaided consumer awareness of Visa’s sponsorship after Sydney was an unprecedented 72 percent, and research shows sponsorship awareness drives Visa brand preference. Finally, the 2002 Games scored record ratings on NBC, enabling Visa to reach a larger, more diverse audience than ever before. ”33 op yo Visa measured specific campaigns as well.

For example, in 1992, it advertised that it would donate a percentage of each card transaction to the U. S. Olympic team. Transactions increased by 17 percent. Up until that point, Visa had never received more than a 3 percent increase from any advertising or promotional campaign that it had run. 34 Lynch said it analyzed its sponsorship spending carefully and was still bullish on sponsorship marketing, even at times where the economy was lagging. “What does end up happening is that a lot of the clutter will go away during times of adversity,” he said. It is an opportunity for the leaders to step up. It is important for us to deliver the proper message during those periods. ”35 Other Companies No tC Other Olympic sponsors such as Bank of America had their own ways of measuring performance. Bank of America had paid less than $55 million as a second-tier sponsor and started to advertise 100 days before the games, spending $60 million on ads alone. It built two branches on the Olympic grounds and brought 83 employees to serve visitors, but looked to Visa to provide ATMs under its category rights.

Bank of America measured its sponsorship performance through awareness boosts, stating that it had seen “significant increases in awareness” since the ads began, though “product sales will lag a little further behind. ” To gauge the boost, the company compared account generation and card use numbers for the current quarter with figures from the first and fourth quarters of the prior year. “All the research we’ve looked at says people perceive Olympic sponsors as leaders in their categories,” said Dockery Clark, Bank of America’s sponsorship marketing executive. 6 Do John Hancock started its Olympic sponsorship in 1993 (in the life insurance/annuities category). Since then, the company’s sales have increased 14 percent, while the insurance business had seen an industry-wide drop of 4 percent. By using trips to the Games as an incentive for agents and customers, Hancock calculated that its Olympic investment of approximately $40 million had 32 Miriam Kreinin Souccar, “Visa’s Sponsorship Gives it Inside Lane for Olympic Games,” American Banker, November 9, 1999, vol. 264, issue 216, p. 1. 33

Becky Saeger, “Visa Has What it Takes at the Olympics,” Marketer’s Forum, April 2002, Vol. 6, no. 3, p. 30. 34 http://www. onlinesports. com/sportstrust/sports13. html. 35 Lavonne Kuykendall, “War Jitters Aside, Card Giants Defending Sponsorship Deals,” The American Banker, March 25, 2003, p. 7. 36 Lavonne KuyKendall, “Gauging Value Has High Degree of Difficulty,” The American Banker, February 27, 2002, p. 1. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] arvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 16 translated into a $50 million increase in sales, a 21 percent net gain in purchase consideration, and a 53 percent increase in consumers who believed the Boston-based insurer to be a smart and cultivated company. Patrick Finnegan, an analyst for Moody’s Investors Service, suggested that Hancock’s international business was too small to justify a global sponsorship of the Games, however. “A 20 percent increase in sales — boy, that’s a stretch,” Finnegan said. When you buy life insurance, you don’t think about who sponsored the last Olympics. ” Replied Hancock’s Chairman and CEO, David D’Alessandro, “Do I attribute all this [growth] to the Olympics? No. Do I want to drop out of the Olympics to find out? No. ”37 THE FUTURE Do No tC op yo Visa had “raised the bar” during each of the Olympics it had sponsored since 1986. It had created an integrated marketing program that ranged from advertising to host city partner/presence programs. Visa had also learned much through its other sponsorships that had posed significant challenges, e. . , its sponsorship of the New Zealand All Blacks. In the summer of 2003, Shepard and his team gathered at Visa’s International headquarters located in Foster City, California, to reflect on the impact and lessons of its past sponsorship activities. Specifically, they planned to discuss the process of selecting and working with new partners and creating new alliances such as with the Walt Disney Company (2002); how to evaluate the effectiveness of Visa’s existing sponsorships; and how to apply lessons from its existing and past sponsorships to current and future sponsorships. 7 Craig Copetas, “Winter Olympics 1998: Despite the Enormous Costs, Sponsors Swear the Olympics are a Good Buy,” The Wall Street Journal Europe, February 18, 1998. This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 Appendix A Overview of Visa rP os t p. 17 op yo Visa was jointly owned by 21,000 member financial institutions (members) such as banks and credit unions worldwide. It was a private, for-profit ssociation whose members offered credit cards and other payment solutions for both consumers and businesses. Cards were issued by Visa’s member financial institutions, not by the Visa association. Its members also signed up (acquired) retailers, recruited cardholders, set fees and determined spending limits and interest rates on outstanding balances. A board of directors composed of representatives from member banks supervised each Visa region, and select members from each region composed the international board. Member banks elected the board and votes were allocated according to the volume of various products offered by members.

The board developed operating regulations, set transactions fees and interchange payments between members, developed system-wide innovations such as interchange technologies, promoted the association brand through advertising, and coordinated other system-wide matters such as fraud control. tC Visa products and services were offered directly by members to their customers. Visa did not issue cards; set annual fees on cards; determine annual percentage rates (APRs)38; solicit merchants to accept cards; or set discount rates. 39 Members managed the relationships with consumers and merchants.

Visa’s goal had been to create a brand that was a trusted seal of approval so that members could use Visa as a platform to meet their objectives. Member objectives included increasing consumer confidence, enhancing customer relationships, and driving usage in new markets. One service Visa provided members was an advanced transaction processing infrastructure, known as VisaNet, run by its Information Technology (IT) and processing subsidiary, Inovant, that processed over 5,000 transactions per second during its peak season (the holidays) and was capable of handling transactions denominated in 160 different currencies.

Average transaction approval time was under two seconds. Shepard elaborated on Visa’s relationship with its members: No Our 21,000 member financial institutions own us. We’re similar to McDonald’s who manage their individually owned franchises. Visa’s international role is to coordinate these six regions and try to provide innovative solutions for the properties that we have. Our primary job is to help members grow their business by offering them payment solutions; new payment technologies; dynamic, efficient, and secure processing services; and the global Visa brand.

Do John Ekoniak at Piper Jaffray said: “The organization stays incredibly focused on maintaining the difficult balance of providing rich services to its members, but not too complete, so as to allow members room to add differentiation as they compete with other members. The members and stakeholders are all competitors and feel that they compete most effectively with the help of the Visa association if it is a closed organization with all returns reinvested. ”40 38 The APR was the yearly interest charge on outstanding credit card balances.

The discount rate was the fee a merchant paid a member financial institution to process a purchase charged to a Visa card. 40 John Ekoniak, “The B2B Analyst,” US Bancorp Piper Jaffray Research, January 12, 2001, vol. 2, number 2, pp. 3-4. 39 This document is authorized for use only by Hadi Nejatian until May 2013. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. Visa Sponsorship Marketing SPM-5 rP os t p. 18 TRANSACTION PROCESSING

Multiple parties were involved in every Visa card transaction: 1) cardholder, 2) issuer: a financial institution that issued Visa cards and maintained a contract with cardholders for repayment, 3) merchant: an authorized acceptor of Visa cards for the payment of goods and services, 4) merchant bank: a financial institution that helped the merchant fulfill Visa card payments from customers, 5) Visa, whose members issued Visa cards and/or signed merchants to accept Visa, and 6) VisaNet: a network that acted as an authorization and clearing and settlement service to transfer payment information between parties which was run by Inovant, Visa’s IT and processing subsidiary. 41 op yo Processing a Visa card transaction was a two-stage process. The first stage was called Authorization, where an electronic request was sent through various parties to either approve or decline the transaction.

The next stages were Clearing and Settlement, where all parties settled their accounts and were paid. The Authorization stage included eight steps: 1) cardholder presents Visa card to pay for services, 2) merchant swipes Visa card, enters the dollar amount, and transmits an authorization request to the merchant bank, 3) merchant bank automatically sends the authorization request to VisaNet, 4) VisaNet routes the request to the cardholder’s issuer, 5) issuer approves or declines the transaction, 6) VisaNet forwards the issuer’s response to the merchant bank, 7) merchant bank forwards the response to the merchant, and 8) merchant receives the authorization response and completes the transaction accordingly. tC

The Clearing and Settlement stages included another five steps: 9) merchant deposits the transaction receipt with the merchant bank, 10) merchant bank credits the merchant account and electronically submits the transaction to VisaNet for settlement, 11) VisaNet pays the merchant bank and debits the issuer account, then sends the transaction to the issuer, 12) issuer posts the transaction to the cardholder account and sends the cardholder a monthly statement, and 13) cardholder receives the statement and pays issuer. 42 REVENUE MODEL Do No Visa’s revenue model included a series of fees from merchants who accepted Visa cards. Typical fees included 1) discount rate (a percentage of sale

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