Business 421

Consumer Marketing

Sheryl Hathaway

Russ Hull
Michelle Lagemann

Chris Moore

Jesse Nault

Table of Contents

Subject Page

Executive Summary 3

Product 4

Price 5

Place 7

Promotion 7

Future 9

Bibliography 11

Appendix 1 12
Appendix 2 14

Executive Summary

Visa International's marketing goals are focused on growth and future earnings of their products and service. Product and services are supported through the marketing mix: Product, Price, Place, and Promotion. Foremost, Visa's worldwide infrastructure enables convenient access and supports the three remaining P's. Product is essentially a uniform logo and service. Visa's Price is individually set by member institutions. Further, Promotion is focused towards respective community audiences, personal and commercial consumers.

In the late 1960's Visa began their campaign to become number one in the credit card industry. By concentrating on their research and development, and increasing the number of member institutions that offer Visa products, Visa International soon dominated the market. Visa is not only recognized as the number one card nationally but is accepted through out the world.

Pricing for credit cards is very competitive and Visa has developed a system to stay ahead of the competition. By allowing member institutions to set their own fee's and interest rates, Visa has maintained its competitiveness among other credit card companies. Visa's investment in research and development has allowed their advanced network system to be number one in processing and billing transactions while maintaining the lowest cost of the industry.

Visa's distribution is one of a kind. Their infrastructure has enabled them to be recognized and accepted throughout the world. Through their large infrastructure, banks and retailers promote the Visa logo as a means of payment and credit. It has grown into a general-purpose payment system from gas stations to dentist offices.

"Everywhere you want to be" easily sums up the promotion strategy of Visa. The combination of completion and collaboration by the financial institutions allowed Visa to be placed on 51.4 percent of every card in the world. Visa is promoting their ease of use, convenience and accessibility through subtle marketing. Dee Hock , retired CEO of Visa, says

"The better an organization is, the less obvious it is. In Visa, we tried to create an invisible organization and keep it that way. It's the results…that should be apparent."


The only tangible product that Visa has to market is a little plastic card with their logo on it. However Visa does market their service to banks and retailers to make the exchange of goods and services quick and easy for their customers. Banks and Retailers have many different demands that Visa must accommodate. Some of these demands are a company that is quick to make changes and has fraud proof cards that are easy to use. We will take a look at each of these different aspects and see what Visa is doing to market their product and their services to their customers.

Visa has been successful in offering unique service to banks and retailers, which contributes to Visa dominating the charge card market for the last 30 years. Visa's success is mostly credited to the Visa management structure. Its organic nature allows it to keep up with demand. This means that Visas structure is flat without a lot of upper management. For example Visa has only 1,500 employees who oversee 510 million cards in issue and 500 billion billings processed a year. An advanced computer system that Visa uses to process billings allows them to maintain a minimum of upper management to oversee employees. With this Visa can to offer a service unlike any other to their members.

When Visa fist started back in the late 1960's the fist cards they offered where plastic. At the point of sale these cards were run through a machine and a carbon copy would be produced and sent to Visas billing department. This being a good design but it had a couple of flaws. The first flaw was that stolen cards could be used at retail stores and there was no way for retailers to tell if the card was stolen. Another flaw was the process of running the card through the machine was so long and cumbersome that retailers preferred cash. The banks and retailers wanted something more efficient. So in 1979 Visa was first to market a new card that began eliminating fraud had quicker processing times and was more users friendly. Visa marketed a card that would have a magnetic strip and it eventually cut down on fraud by 85%. In the same year they also marketed a machine that retailers could lease or buy that would make the transaction of buying goods quicker. All retailers had to do were swipe the card through the machine the funds could be transferred and approved instantly. This made Visa almost as easy to use as cash.

Currently Visa is working on a customizable card that has a computer chip in it. This will enable the customer to set daily limits and cut down on fraud. Visas success is directly attributed to constant development of its card. This success has transformed it into the largest all-purpose payment system.


A major concern of the Visa marketing function is pricing the bank card product. The right price must be balanced between the value offered and the price level the market will bear, and between the cost of product delivery and the expectations of a reasonable profit from the revenue generated. Marketing must assess the value of customer benefits, the effects of competitor prices, and the requirements for profitability in order to advise their management on the appropriate pricing levels over time.

Each Financial Institution sets its own fees and interest rates. The institution profits from the interest charged and the yearly fee assessed. Cardholders can determine how much interest they want to pay. If an individual chooses to pay the balance in full within the grace period, there is usually no interest charge. If the cardholder pays less then what is owed, a balance is carried and interest will be charged on that balance.

The following are examples of how bankcard fees and interest rates can vary among different issuers. Seafirst bank has several options for their consumers who are interested in a Visa credit card. Seafirst offers what is called a Linked credit card and an Unlinked credit card. A linked credit card offers the following advantages; no annual fee, the interest rate is reduced to 15% and it also offers overdraft protection to those clients who have a checking account. An unlinked bankcard has an annual fee of $18.00 and the interest rate is 18%. If the card is a Gold Visa card, then the interest rate is 16.50%. American Express offers seven different credit card options. They have their standard American Express card that has a yearly fee of $55.00. A Gold American Express card that has a $75.00 yearly fee and their Platinum card, which is issued by special membership only, and has a yearly fee of $300.00. There are no interest rates on these cards, as they do not have a revolving balance. Full payment of the balance is due upon the first statement due date. The next four products are called the American Express Optima cards. There is the regular Optima card that has a yearly fee of $15.00 and the interest rate varies from 12.25 up to 21%. The Optima Gold card does not have an annual fee but has an interest rate determined by the number of American Express products a consumer has. The interest rate is lower if a client has additional American Express products. There is also an Optima True Grace card and the Optima Gold True Grace card. There is no annual fee on these cards and the interest rate is 17% if you have another American Express product. The Discover Card offers their members a no-fee card. The amount of use and the payment pattern of the cardholder determine the interest rate on the Discover card. The best rate that Discover offers their consumers is 17.5% and can go up to 22%. Discover does have a 2.5% transaction fee that they charge their cardholders.

It appears that Visa offers more product variety to their consumers, as well as other added benefits. Visa's annual fees and interest rates are more flexible than American Express or the Discover Card. The American Express Card is not as widely accepted as a Visa Card and does not give consumers the option of a revolving credit line. The Discover Card does offer consumers the option of a revolving credit line plus no annual fee, but there is also a requirement to purchase a minimum of $1,000.00 before the first anniversary of the issue date. Also if clients do not keep an impeccable payment history the interest rate also can be changed to a higher amount.

Interchange Fees:

Interchange fees are assessed to clients to compensate Cardholder Banks for the "free period" between settlement (and payment) to Merchant Bank for cardholder purchases and collection of purchase amounts from billings to cardholders. Fees flow from Merchant Bank to Cardholder Bank. An example is a purchase for $100.00 and the interchange fee is 1.5% plus .07 cents per transaction:

$100.00 X 1.5% = $1.50 + .07 = $1.57 Interchange fee

The Merchant Bank pays the interchange fee to the Cardholder Bank through a settlement system called Visanet. Dollar value received by the Merchant Bank for transactions sold to interchange is discounted to the Merchant Bank. The fee is income to the Cardholder Bank but expense to the Merchant Bank. Electronic based fees are called Electronic Interchange Reimbursement fees. These fees are handled in the same way as exchange fees. The fees are set by the national associations and adjusted periodically. The word Interchange refers to standardization for authorization and transaction settlement, as well as to the fee paid by merchant banks to Cardholder Banks.

Flow of Interchange Fee:

Cardholder Merchant Merchant National Cardholder Cardholder

Purchase Deposit Bank Association Bank Billing


Interchange Fee

Cash advances are the exception to the flow of the interchange fee. With cash advances, the Cardholder Bank reimburses, through interchange, the bank that made the cash advance to the cardholder.

There are several thousand Member Financial Institutions plus various Banks that offer Visa and other credit cards. Many offer a low introductory interest rate and no annual fee. The key issue that should be considered when applying for a credit card is what will the interest rate be after the introductory period is up and if an annual fee will be charged. Also, is the card as widely recognized and accepted as Visa is throughout the world? Visa has remained on top of the credit card industry by allowing each member institution to set their own pricing structure.


By now you have realized Visa isn't your typical company. Most companies' products can be purchased or used at a physical location. They also have a particular program to promote it, usually commercials. Visa is different.

The tendency for many companies is to want to become a monopoly in the product or service they provide. Visa's goal appears to be a desire to dominate and monopolize the world's exchange of monetary units. That synthesis seems harsh but let's look at their ways of expansion.

Visa has a number of product users. Retailers are banks and credit unions who are providers of Visa. Then there are two kinds of non-retail users, commercial and consumer users. Underlying all of these users is Visa's infrastructure.

Visa's infrastructure is very important. A wide variety of places to use Visa is just as important, if not more important, then the wide variety of places you can get Visa. Further, if a company wanted to dominate the world's medium for exchanging monetary units then they would have to facilitate this through: Development of infrastructure, introduction of the product, and promotion of its use and availability.

Visa expands their infrastructure and promotes their service to retailers and consumers in many different ways. Last June Visa International launched the Peony Jiao Tong Visa card in association with one of China's most distinguished Universities, the Shanghai Jiao Tong University. ICBC, the Industrial and Commerce Bank of China issued these cards. The first person to receive a card, out of 7,000 that day, was a graduate of the Shanghai Jiao Tong University and also China's President Jiang Zemin.

The card is a co-branded card, a card associated with a respectable name brand or institution. A similar card available in China is the Visa salary card. This has revolutionized payments for over 50,000 workers in two Shanghai steel plants. Other co-branded cards are associated with Shanghai Sincere Dept. Store and Guangzhou's Guangzhou Dept. Store. Richard Bailek, senior vice Pres. of Consumer Credit Products, says:

"Co-branding is an excellent marketing strategy to build customer loyalty, while providing benefits for the cardholder, the issuing financial institution and the co-branding partner."

Currently, Visa has 90 co-branded and affinity programs in China, Taiwan, Hong Kong, and Macau.

Visa is also working closely with a number of Golden Card projects sites. The Chinese government's Golden Card Project is an initiative to establish a domestic electronic payment infrastructure. This entails one national and twelve regional authorizations and settlement centers.

Another aspect of infrastructure and new product development is Visa's Cash Card. The card is either rechargeable or disposable, and acts just like cash. There are about 15 Visa Cash Programs world-wide, including: Hong Kong; Sydney and Gold Coast Australia; Wellington, New Zealand; Montreal, Toronto and Vancouver, Canada; Bogota, Colombia; Buenos Aires, Argentina; Spain; Atlanta and San Francisco, USA; Johannesburg, South Africa; and Berlin, Germany. There are also additional pilot programs announced in Tokyo; Taiwan; New York City; Campinas, Brazil; Bormio, Italy; and the United Kingdom.

Expansion into the rest of the world is very similar to here in the U.S. Visa signs on giants like: Seafirst, Bank of America, Bank One, First Bank, the once First Interstate Bank/ now Wells Fargo, First Chicago, First Tennessee Bank, First Union, Barnett, Mellon Bank, Norwest, Star Bank, U.S. Bank and Chase Manhattan. Also, all of these banks consider each other a major competitor.

Promotion, however, is very unique. Visa doesn't have just one campaign. In fact, a promotion here in the states is "Visa, everywhere you want to be." So, internationally, Visa promotes itself to personal consumers, commercial consumers, and retailers in various ways.

Of course, all over the world Visa uses printed TV and radio ads. Those are standard mediums. Unique ways of expanding their card and service empire is by promoting it via their commercial consumers and personal consumers. A good example is Shell, Texaco and Mobil fuel stations. Other links to commercial consumers and personal consumers, usually through providing discounts, are: Westin Resorts, Sam's Club, Bass, Bill Graham Presents, Bed Bath & Beyond, Damark International, Omaha Steaks, Payless Cashways, Service Merchandise, The Sharper Image, Staples and Wallpapers To Go, U.S. Postal Service, United Artists, Foot Locker, Sports Illustrated, the NFL, Palm Springs and Pebble Beach Resorts. That was the general advertising for the states; advertising around the world is similar, but oriented towards the respective audience.

Visa's Future

Visa International is working on several new technologies to remain competitive and to keep up with rapidly changing consumer demands. Visa International is also thinking globally in terms of their marketing strategies to ensure increased future market share and future earnings. With technologies rapidly changing and computer savvy consumers there is tremendous potential for companies who can offer new technological advances before or along with competitors. Visa International is working and will be promoting worldwide the following products and services:

  1. Visa Cash. Visa Cash is a stored value application that allows consumers to load money on a chip card then to use that chip card to access the pre-loaded money to pay for small-value transactions. Typical transactions may include pay phone calls, bridge or expressway tolls, parking fees and Laundromat services. There will be two types of Visa Cash cards: Disposable and Reloadable. Visa Cash is just one of several chip-enhanced services that will be marketed worldwide.
  2. Electronic Banking and Bill Payment. Visa Interactive, a wholly owned subsidiary of Visa International, has developed a PC-banking software allowing consumers to do their personal banking from their PC's. It was designed for consumers with limited technological expertise and was designed to be easy to use. This software allows financial institutions to brand and market their own services to their customers. Customers can pay bills, track and reconcile account activities at any time, transfer funds, verify account balance and exchange date with other programs such as Qiucken. Consumers will be able to pay utilities, insurance, credit cards and mortgages using this system. Visa's bill-payment enhancement creates a seamless, end-to-end electronic system for bill payment. This system should significantly reduce remittance-processing inefficiencies for participating financial institutions and organizations that bill for goods and services. With the growth in remote banking in the United States this system is expected to process a growing percentage of the more than 18 billion consumers and corporate bill payments annually.
  3. Voice Recognition Technology. This service allows bank customers to pay their bills by calling in and using natural voice commands. Visa hopes to change the way people pay bills. This technology features ease of use and Visa states that it will catch on because "people do not feel guilty taking up a computer's time."

Visa International is concentrating on their global positioning for future success as well. They have promoted Jan Soders who oversaw the successful "Visa. It's everywhere you want to be campaign". She will now apply the same aggressiveness to Visa's worldwide presence as competition heightens among all three major credit card brands. Visa's ad campaign for international markets will be targeted to specific cultures, regions and countries and will not use one campaign for the entire international market because no two international markets are alike. Visa will focus on establishing their brand image in the different markets. Visa will continue to use the television, as their main advertising medium because they feel it's the best way to reach the masses. They will also continue to sponsor the Olympics because it is an international event and they can provide more commonality among regions and countries through better-integrated marketing.

Visa International's marketing goals are focused on future growth and earnings of their products and services. They have focused on their future expansion by setting up the Visa infrastructure worldwide (place), allowing individual issuers to set the price to encourage competition (price), maintaining a uniform logo and service (product), and using several different types of promotions to retain brand/name recognition.


1. Krumme, Dwane. Banking & the Plastic Card. American Bankers Association. Washington, DC, 1987.

2. Thyfault, Mary E. "Just Say It and Pay It." Informationweek 610 (12/16/96): 96.

3. Fitzgerald, Kate. "Visa's Global Strategies to go Under Microscope." Advertising Age 67.42 (10/14/96): 55.

4. Derdak, Thomas. "Visa International Inc." International Directory of Company Histories 9 St James Press, Detroit, MI. (1994): 536-538.

Visa Expo, 4/12/97.

Appendix 1


It all started back in the late 1960s, when the credit card industry was on the brink of disaster. The forerunner of the Visa system (the very first credit card) was BankAmericard, which had originated a decade earlier as a statewide service of the San Francisco-based Bank of America. The card got off to a rocky start, then became reasonably profitable until 1966, when five other California banks jointly issued a competing product they called MasterCard.

Bank of America promptly responded, franchising BankAmericard nationwide. (In those days, banks were forbidden to have their own out-of-state branches.) Other large banks quickly responded with their own proprietary cards and franchise systems. A credit card orgy ensued: banks mass-mailed preapproved cards to any list they could find. Children were getting cards. Pets were getting cards. Convicted felons were getting cards. Fraud was rampant, and the banks were hemorrhaging red ink.

By 1968, the industry had become so self-destructive that Bank of America called its licensees to a meeting in Columbus, Ohio to find a solution. The meeting promptly dissolved into angry finger pointing.

Then came Dee Hock, a 38-year-old vice president at a licensee bank in Seattle. When the meeting was at its most quarrelsome, he got up and suggested that the group find a method to study the issues more systematically. The participants immediately formed a committee, named Hock chairman, and went home.

In June 1970, after nearly two years of brainstorming, planning, arguing, and consensus building, control of the BankAmericard system passed to a new, independent entity called National BankAmericard, Inc. (later renamed Visa International). And its CEO was one Dee W. Hock. He chose VISA because it had no national identity, was easy to pronounce in any language, and had no reference to any bank.

The new organization was indeed different: a nonstock, for-profit membership corporation with ownership in the form of nontransferable rights of participation. Hock designed the organization according to his philosophy: highly decentralized and highly collaborative. This design resulted from the need to reconcile a fundamental tension. On the one hand, the member financial institutions are fierce competitors: they (not Visa) issue the cards, which means they are constantly going after each other's customers. On the other hand, the members also have to cooperate with each other; for the system to work, participating merchants must be able to take any Visa card issued by any bank, anywhere.

That means that the banks abide by certain standards on issues such as card layout. Even more important, they participate in a common clearinghouse operation, the system that reconciles all the accounts and makes sure merchants get paid for each purchase, the transactions are cleared between banks, and customers get billed.

To reconcile that tension, Hock and his colleagues created the Visa bylaws that encourage them to compete and innovate as much as possible. Members are free to create, price, market, and service their own products under the Visa name. At the same time, in a narrow band of activity essential to the success of the whole, they engage in the most intense cooperation. This blend of cooperation and competition is what allowed the system to expand worldwide in the face of different currencies, legal codes, cultures, customs, languages, and political philosophies.

Visa has been called a corporation whose product is coordination. But what makes it different from other businesses is its organizational nature and it s product uniqueness.

Appendix 2


Title Page

Table of Contents

Executive Summary

Four P's


Appendix I

Appendix 2