The CMO Interview

Frugal Consumers Are MasterCard's Opportunity

Smarter About Purchases, They'll Seek Deft Brands, CMO Flanagan Says

By Published on .

YORK, Pa. ( -- How many of your consumers would tattoo themselves with your brand, for free?

A MasterCard customer in Canada did just that -- after losing a bet to his wife about her new credit card. His wife sent a letter to the company's Toronto office explaining what happened along with an 8 by 10 photo of her shirtless husband. Running down his side is the non-sanctioned ad, engraved for all time: "Flight to Toronto: $500." "Tattoo: $250." "Losing a bet and having your wife pick the tattoo: Priceless." Underneath it all: a large red-and-orange MasterCard logo.

MasterCard CMO Lawrence Flanagan
MasterCard CMO Lawrence Flanagan
MasterCard CMO Lawrence Flanagan hears stories like that all the time. Well, maybe not that extreme, but in the 12 years since its inception, customers have embraced the "Priceless" campaign from the marketer -- which spent $437.5 million in the U.S. in 2008, according to Ad Age's 100 Leading National Advertisers list -- as it has moved to pop-culture staple and global communication shorthand.

Still, tattoo-fanatic customers and YouTube spoofs are just one part of the MasterCard marketing story. For Mr. Flanagan, who reports to Gary Flood, president-global products & solutions, MasterCard Worldwide, it's the day-to-day marketing in the ongoing aftermath of the financial meltdown that keeps him busy. He's well aware that the tainted image of the entire financial-services industry affects his company, too. At a recent conference in New York, he told attendees that his industry now ranks with the tobacco industry in reputation.

MasterCard's net revenue for the six months ended June 30, 2009, was $2.4 billion, or essentially flat vs. the same period in 2008.

It's not just the economic meltdown that's knocking financial brands around. Social media and consumers demanding more financial control and security all mean an amplified role for marketing.

"It's the convergence of three things," he said in an interview at Ad Age's offices after the conference. "The economic meltdown that we've had for the past year and a half, banks' reputations sliding during that period, and the emergence of social media [with] the consumer having much more of a voice and impact in the conversation. The challenge is dealing with those three different factors."

However, that's not to say he's completely unhappy about the changing fate of financial marketing. In fact, words like "fun" and "opportunity" pepper his speech when talking about it.

Ad Age: MasterCard wasn't involved in the economic meltdown in same way as failed banks, but you get painted with the same brush. How do you respond?

Mr. Flanagan: I've been looking at the long-term impact. A lot of people are hopeful -- thinking the recession is over, so let's put it behind us and go back to the great times. And that's not going to happen. The impact on consumers -- because they had forgotten to take care of their own need for financial control and security because it's been so good for the past 10 years -- happened so quickly that it really was a shock to them. What you see now is this control on anything to do with their finances, and even beyond that, more a sense of consumer control. And that's probably going to last a long time.

Ad Age: You said that global frugality is not going to go away. What does that mean, and how do you deal with that?

Mr. Flanagan: The good thing is, people are still spending. The trend to electronic payments continues to grow, displacing cash and checks, so that part of it is good. What we're seeing is the composition of those transactions change. The frugal consumers are much more educated consumers. Social media is allowing them to be smarter as far as just doing more research, understanding the best values, being able to talk to peers to find out the best restaurant or the best thing to buy. The brands that will succeed will really observe that, listen to that and understand what that means.

Ad Age: You give a lot of good examples of consumers being connected, empowered and angry, including JetBlue passengers stuck on the runway. How do you prepare for that?

Mr. Flanagan: Consumers who would have issues before would try to get someone on the phone or try to write a letter. Now they have the ability to create a firestorm. But what we have to be able to do is respond quickly. We've built up a pretty good infrastructure of seeing all the conversations that are happening, from blogs and Twitter and social media and online.

Ad Age: What are the positives of social media for marketing in general? And what have you learned at MasterCard?

Mr. Flanagan: We have a couple hundred million cards in the United States. And the power of those people speaking to each other under the banner of MasterCard is powerful. So it's really that the consumer has become the brand. We have to provide that framework to allow them to have those conversations -- and a little bit of a backbone to realize that sometimes those conversations might go outside the framework.

Ad Age: You also said you don't own the conversation. That's a pretty tough pill for many marketers to swallow.

Mr. Flanagan: That's the big shift that's going on, which is actually kind of fun. I use the analogy of the three definitions of yourself: the way you see yourself, the way you think others see yourself and the way others really see you. It's almost like you're going from brand building to brand truth. Focus on those positive things that they really like, and address the things that they don't like. It's a much more effective marketing investment.

Ad Age: How do you keep "Priceless" relevant moving forward?

Mr. Flanagan: The foundation of "Priceless" is not based on an advertising execution; it's an idea that can be executed in many ways. From our perspective, it's a great position to be in. Our challenge and opportunity is taking it through different channels, keeping it fresh, and keep surprising consumers and redefining what's value to consumers.

Ad Age: Do you try to reflect trends, or what's going on in the culture?

Mr. Flanagan: The economic downturn was not a good thing, but from a marketer's position, our brand position has always been a values-based position. It hasn't been about conspicuous consumption or large transactions. So that's a position through strong economic times that worked for us very well, and as we went into the economic downturn, it became equally strong because our message has never been about it ends with a transaction, and you are what you buy. What we were being very sensitive to was the type of transactions and lifestyles we were showing -- we wanted to have much more of a grounded message.

Ad Age: It's hard to not overstate the importance of digital media today. Has MasterCard shifted more of its media spending to digital, or will you?

Mr. Flanagan: Generally speaking, we are increasing our spend in digital. This is in line with our overall media-channel approach recognizing consumers' evolving media habits and usage. Keep in mind that investment in digital covers different areas than we think of with respect to traditional media investment. It's not a 1:1 dollar exchange.

Ad Age: What keeps you up at night?

Mr. Flanagan: Things that I can't control, like the economic recovery and the unemployment rate. Today it's about controlling what you can and allowing for flexibility and the ability to align resources against the best growth opportunities.

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