The IOC and Fifa are both great for global brand-building, the World Cup in particular, with the global TV exposure it offers. But Visa’s challenge in most markets isn’t awareness, but relevance
Shaun WhatlingShaun Whatling is the CEO of Redmandarin, which provides strategic, analytic and planning services. Its Partners have assisted 15 TOP and domestic Partners, including five Partners of Tokyo 2020.
McDonald's exit from the top echelon of Olympic sponsorship created a media opening for anti-IOC narrative.
But the sponsorship issue that McDonald’s exit raises is not about the travails of the IOC, it's about whether or not the sponsorship of both the Fifa World Cup and the Olympic Games can be justified - at a combined annual cost of somewhere between $50 million and $100 million.
McDonald’s, Coca-Cola and Visa were in a highly exclusive subset of sponsors of both. And then there were two.
Steve Easterbrook, McDonald’s chief executive, clearly decided that the company’s energy and investment needed to be focused on its core product. But for Coca-Cola, with its heavy dependence on its main iconic brand and drink (increased by its recent move to a one-brand strategy), departure is simply unthinkable.
Nearly 90 years of Olympic heritage and over 40 with Fifa mean that both properties are completely institutionalised within the ecosystem of bottlers, distributors, major retail partners and brand teams.
Exit is often hard to countenance for any business, because it leaves such a huge gap
Exit is often hard to countenance for any business, because it leaves such a huge gap. Like Brexit. For Coca-Cola it's particularly unthinkable because of the huge impact it would have on every part of that system, and the immense challenges it would impose - in terms of global and national market budget management, brand and financial governance and operations across all parts of that system – to replace them.
But Visa’s business model and structure is entirely different. In 2016, it had over 54 per cent of global card transactions. The value of 2016 Visa transactions totalled $8.2 trillion. It has approximately 3.1 billion Visa cards in use and accepted by 44 million merchants. Unlike Coca-Cola, it is not a luxury, a treat or a comfort, it’s integrated within the daily fabric of our lives.
Now the IOC and Fifa are both great for global brand-building, the World Cup in particular, with the global TV exposure it offers. But Visa’s challenge in most markets isn’t awareness, but relevance. And a major quadrennial appearance on the global stage doesn’t deliver.
So the question for Visa has to be: do we need both and what is the opportunity cost?
Beyond the World Cup’s TV exposure, both properties offer promotional and incentive opportunities to drive card spend and recruit merchants and member banks. They both generate revenue from official merchandise and refreshment sales. The World Cup offers an exclusive ticket pre-sales window to Visa card holders, while the IOC contract notoriously allows Visa to impose its exclusive use on all ticket sales. For the London 2012 Olympics, this will have generated between £5 million and £7 million in interchange fees.
More significantly, the structure of the IOC’s bid city criteria offers Visa a direct opportunity to influence the payment infrastructure around the games, and an opportunity to showcase innovation which the Fifa World Cup doesn’t. London 2012 was used to accelerate the uptake of contactless payment technology. Visa used Rio 2016 as a platform for wearables, in the form of ‘the Ring’, a ring worn on the finger that allowed Team Visa athletes to make purchases by tapping their rings at enabled payment terminal.
There are no comparable examples from Visa’s World Cup sponsorship – and its ambassador for both the Olympics and the World Cup since 2012 has been now-retired Olympian Usain Bolt. Of the two, the Fifa sponsorship looks by far the most vulnerable.
Visa’s sponsorship portfolio has grown in recent years, in pursuit of diverse objectives
Interestingly, Visa’s sponsorship portfolio has grown in recent years, in pursuit of diverse objectives. In May 2015 it signed a partnership with motor racing’s Formula E series and in January this year, it launched into eSports with sponsorship of Germany’s SKGaming, before expanding into surfing in May with The Boardmasters Festival, described on Visa’s site as ‘part of Visa’s evolving sponsorship strategy aimed at engaging the millennial audience’.
Despite the millennial characterisation, Visa’s evolving sponsorship strategy looks driven by closer targeting and more regular relevance – where $100 million of rights fees from the IOC or Fifa could usefully be deployed.
When Fifa dumped MasterCard for Visa in 2006, it was hard to imagine what MasterCard could do next - because there was no substitute. Despite the $90-million compensation Fifa was obliged to pay to MasterCard, it looked as though Visa had dealt a major body blow to its rival by occupying the category with both the IOC and Fifa. And indeed, MasterCard has not been able to reassert its global stature on the sponsorship stage.
MasterCard’s post-Fifa strategy has predictably been to use sponsorship assets to deliver loyalty benefits and drive usage. And, although this delivers far less reach – it offers enviably more frequent relevance.
Visa’s memory, on the other hand of replacing Amex as an IOC partner in the late ‘80s will underscore the value that Fifa could hold for its challengers. Amex’s decision not to renew its IOC partnership unquestionably created a different trajectory for both Amex and Visa.
Fast forward to 2017: AliPay and PayPal are both growing aggressively. China’s UnionPay – larger than Visa already in cards issued and as of 2016 the largest provider by global transaction volume – still has a far smaller global network, which a Fifa partnership could build.
McDonalds’ decision to exit TOP was so momentous that only the CEO could ultimately confront it. Visa CEO Alfred F Kelly Jr will inevitably be faced with a similar challenge. Ironically, Kelly spent 23 years of his career at American Express, joining in 1987. As such, he will have personal memory of the notorious 1988 Calgary dogfight between both businesses that is now part of sponsorship ambush legend.
Despite the huge cost of Fifa sponsorship, and its relative inability to fulfil a useful marketing function for three years out of four, Mr Kelly will be a brave man indeed if he follows the sign marked exit.