Ravi Dhar Interviews Alfredo Gangotena, CMO of MasterCard

Alfredo Gangotena, Chief Marketing Officer of MasterCard Worldwide, visited campus on February 25th to share his insights on marketing trends with an audience of SOM students, alumni, and marketing practitioners at Yale SOM’s annual marketing conference, with a theme of “Marketing and Innovation in a Shrinking World.” During his visit, he was interviewed by Ravi Dhar, the George Rogers Clark Professor of Management and Marketing and Director of the Center for Customer Insights.



RAVI: I am delighted today to have with me Alfredo Gangotena, who is the chief marketing officer of MasterCard. He was on campus as one of the keynote speakers for a conference we had, so I thought I’d take the opportunity to ask him a few questions about marketing and MasterCard. So let me start, Alfredo, by asking you… MasterCard has obviously a lot of constituents, unlike many CPG businesses. You have the consumers. You have the merchants. You have the banks. And marketing is relatively sort of a small function or a new function in these companies. What do you see as the role of marketing in the overall value proposition that MasterCard has for any or all of these constituents that MasterCard has?

ALFREDO: Well, first of all, thank you Ravi to invite me. It’s a pleasure to be discussing you’re your students at this prestigious university. Essentially, I would say that the role of marketing is to link up the different constituents that we have in the operation. So as you said, people carry cards. What do they do with them? They buy products. Where does the money come from? From the bank. So we interconnect that circuit of those three players to essentially facilitate commerce around the world. If you think about it, today you can fly from, say, New Haven into somewhere in India, in Mumbai, and you can pay. You don’t need to carry the local currency. You can pay. Then you move on to Shanghai – you will be able to pay. If you go and end up in Canada, it’s the same story. So it’s an enormous network that seems to be working like breathing oxygen, but all of that is very complex.

So the idea, from the marketing point of view, is essentially to support the banks, support the merchants, support the consumer, so that they understand how to utilize the cards to the best benefit. In fact, if I take the case of a bank, because it’s a profit center, therefore they want to have their card to be used as the most. If I take a merchant like, say, McDonalds, who refused cards for many, many years for one simple reason, is that they thought people were too slow in paying cards, we invented the product that is called Pay Pass, and today is the fastest way to pay. Therefore, in a nutshell, marketing is all about understanding the consumer and their needs; understanding the banks and their needs; and understanding the merchants and their needs, and identifying, therefore, from that piece, what that product should be.

RAVI: So we also discussed… obviously, most senior marketing people like you say marketing is much more than advertising, which I totally agree with, but obviously MasterCard is really well-known for its “Priceless” campaign. So I wanted to ask you one thing. It seems like this campaign travels very well across the world. Maybe you can give us some insights about what is it about the campaign that makes it travel so easily? Is it the emotional…? Because normally when you talk about emotional connections that actually varies a lot more than if you’re talking about financial connections. So I wanted to ask you a little bit about that. And I also wanted to ask you how, if you’re refreshing the campaign, going into the future, what are the ways you’re thinking of sort of making it different or not changing? Maybe your thoughts on that?

ALFREDO: If I had a key message to give actually to your marketing students, yes, marketing is not just advertising, but it is essentially advertising. And I think many marketers forget that nobody else in the company but marketing is in charge of the 30 seconds of film or whatever you do on Facebook or Twitter. So if you don’t mind, I’ll turn it a bit around by saying that’s a critical profession. If I go and see a cardiologist, he has to understand the heart. Otherwise he doesn’t touch my body. Now the advertising of MasterCard which you refer to, “Priceless,” has been invented now 14 years ago. It’s running in over 120 countries in the world, in over 50 different languages. And, clearly, the reason why it has worked so well and is recognized is because we address essentially fundamental human matters with the advertising campaign.

Essentially, the slogan is there are things that money can’t buy – for everything else, there’s MasterCard. And MasterCard is simply there to facilitate the individual to access things that matter to them. For example, if the most important thing, after a year of hard work, is to go on holiday, you want to be able to access and have, create a priceless moment with your family. And it’s recognizing that, in this modern society, we evolved from buying things to feel important to, today, being much more in relationship with others, in understanding your family, understanding the important moments when you listen to Mozart, where you have an experience that otherwise you could not have, that becomes priceless to you. So the advertising has always tried to capture the fact that MasterCard is accessing you to something that you consider as priceless, which is an experience.

RAVI: Let me ask you sort of an interesting… so you find, obviously, your dream would be if nobody uses cash and everybody uses some kind of payment… electronic payment mechanism. But we still find people continue to use cash, even in the developed economies, certainly in the developing economies. I just thought, based on your experience, what do you find… what are some of the psychological barriers, and how they might be different in Asia versus Europe, Germany versus in the U.S., of people who are still reluctant to use these different devices, maybe credit cards more, debit cards, or other type of electronic transfer systems… payment systems, sorry?

ALFREDO: What is extraordinary is that cash has been invented something like 3000 to 4000 years ago, so it has had a pedigree of success, currencies all over the planet. But it is true that cards and electronic payments in general are taking over very fast. In developed countries, now, about 50 percent of your expenditures are on cards or electronic payments, which is enormously grown. The category in itself is exceeding 10 percent growth per year, just by the law of gravity movement. So a couple of points that are interesting – it is very hard to understand some of those barriers.

I’ll give you an example. Take Germany – second- or third-largest economy in the world today. You would think that the Germans would use cards every minute. Well, on average, they use it one time per month. And yet they’re surrounded in the south by the French, who use it for everything. There, one time a month is actually twelve times a month, okay. In the north, they have Denmark – even more so, 16 times a month. So how do you explain that Germany, super modern, is totally prehistoric when it comes to cards? It’s mind-boggling. Then you need to go into essentially the psychology of the issue. And what we have found is that, in Germany, the notion of, in a queue, pulling out your card, having to sign for it, essentially the time that it requires is socially not acceptable. It’s very hard to combat something where people are in the back and saying “so, what are you doing to hurry up?” Therefore, today, we think that the technology I mentioned earlier, which is tap-and-go, Pay Pass, where you just take out your card… actually people take just their wallet out, because the antenna transmits from the wallet, tap and go, may be a way to solve something that is so deep-rooted as social embarrassment.

Conversely, you go to the emerging markets. China opens up in 1985, roughly speaking, when Deng Xiaoping goes to Guangzhou. This is only 20 years ago. In 20 years, the Chinese have been able to deploy close to one billion cards – one billion cards in 20 years. Why? Because the enterprises do not want to give cash anymore to the people that work in factories, like we used to do in Europe. You know, every week you would have your salary. Instead, they send wireless these salaries on the cards. So in those markets you don’t need to have a bank account. It is a relationship between the company and the card, and the card is your bank. You go to the ATM machine. You withdraw cash and you’re done. Or you use your card to pay. So it is quite extraordinary to see that the emerging markets are actually leap-frogging economies that have developed for centuries, like Germany.

So the answer basically is very straightforward. The marketing department needs to understand the fundamental reasons that consumers have – not what they tell you, because they may not tell you the whole truth and only the truth – but go a lot deeper and watch, observe, go in supermarkets, understand what it is, and then you will get the “click.” And, therefore, work with the product department so that they invent the technology that allows you to overcome what seems to be a barrier, and then move on.

RAVI: You mentioned “leap-frogging” in the emerging markets, and that reminds me, normally in the West we had these products, let’s say the telephone. You had the land line and you had the, you know, different type of satellite phones, and then you had cell phones. Or we had the credit cards. Then we had the debit cards. And in the emerging markets, simultaneously, you’re seeing the launch of all these things. It’s as if there’s a time compression in which suddenly all these products are not being launched in sequence, but they’re being launched in parallel. And something tells me that it has to… you know, it must create a sort of different evolution than in the way we saw it in the U.S. or Europe. What is your sense of what it does to consumer behavior or adoption of product?

ALFREDO: Well, essentially, what we see is facilitating payment, facilitating payment – I repeat – is actually a huge impact element on the economies. I take Africa. Africa has been largely ignored by most industrial markets to do business with, for political reasons, instability of the government, you name it. But the country that has invented new technology of payment without the necessity of having a bank is actually South Africa. Why? Because, in South Africa, after the change of regime, seven million entrepreneurs started to spring everywhere. They need to do business. They need to sell goods. They need to be paid. But the banking industry had not followed the development, if you wish, of the entrepreneurship. So they said “fine.” The telco companies came in and invented, essentially, what we call the P-to-P payment, person-to-person payment, which essentially means if I have a phone and you have a phone, I can literally pay you via my mobile phone directly to you. It’s very much as if I had my own bank account and you came and you deposit money or I give you money. Now you don’t need anything physical. I simply transfer money to you. This was invented indeed in South Africa. We’re now testing it virtually all over the planet, most importantly in Brazil and the Philippines. And what we see is that these markets, because of their constraints, are inventing ways to beat the system. And therefore it’s getting reapplied, now, in the developed markets.

RAVI: So this sort of, this P-to-P example you gave in Africa, and there must be others, where traditionally we thought of innovations sort of first being launched in the West and then sort of taken out, stripping out some of the attributes and launching that in the East and the South, but now it must be changing. There are some parts that are being launched first in these countries and before they are even launched in the U.S. or in Europe.

ALFREDO: I don’t know if you have been in or lived in Hong Kong, but at 8:00 in the morning, Hong Kong is absolutely packed in the streets. It’s literally like this – you do not move. So no wonder that the first technology of tap-and-go was born in Hong Kong, not by a bank, not by MasterCard, but by a local entrepreneur. And he figured out, or at least he saw a business idea, if he could speed transportation, speed the underground payment, by even if it is 30 seconds, people would move faster. Therefore they would have a better, if you wish, circulation. That brand, which is called Oyster, was invented already 15 years ago. And we just are launching it now in the U.S. So I could argue that being a global company, like MasterCard is operating now in 210 countries, allows us to see developments all over the planet and take good ideas, moving them from one place to the next. Our CEO likes to call it “stealing shamelessly,” which, for a banker, has a sense of humor that, I think, is appreciatable.

RAVI: Well, in research also, you know, when we do research, you also see ideas in other areas and you can apply them to your area to study new questions. And we like to call that “intellectual arbitrage.” And let me ask you, you know, as a CMO I have to ask you about new media, social media, because everybody talks about it. What do you see, you know, what’s the… any thoughts on how the new media or social media is changing how you connect with your consumer or its importance or how it… the attention you pay to it? Where do you think it’s going? Any thoughts you have on that point would be interesting.

ALFREDO: I would say two major angles are coming through in my mind. The first one is how do you get to know about something that is good for you? In the last 30, 40 years we have all relied on television advertising. So you created a film, 30 seconds of film, passed on the message, and you as the consumer believed it, yes or no, and end up buying the product. But there is a bit of an arbitrary aspect to the advertising, because it’s obviously thought through, planned… sometimes actors, et cetera. In other words, there is not a sense of reality there. In social media, what you can see, and this is not nuclear science, people tend to believe their friends more than anybody else. So the young, their friends are their parents. A bit older, it’s their true friends. Therefore, the power of persuasion by actually trusting you, and that you advise me that this would be good for me to use, is a lot more powerful, we find, than today’s classical advertising.

So I guess this is the first route that this will take, which is essentially the power of communication of places like Facebook Google, et cetera – all the social media or internet-based – because of their extraordinary reach, not anonymously but with an individual or friend behind it. That is the first aspect. The second aspect is most brands tend to be foreign to yourself. You don’t tend to attach them to your personality. But a very small group, call it five percent… think about the five to ten most cherished brands – it can be a car brand. It can be a telephone, such as the iPhone, et cetera. But very few of those brands really make it to your top-secret personal lists. If that brand has made it there, it has one reason: mostly, an emotional connection – for example something that your father told you when you were five years old; or an endorsement of somebody you admire greatly at that time, a sports person; or now, more recently, what your friends are recommending. What we see, therefore, is that the brand cannot survive if it is a pure material product. It has to have a personality. It has to interact with you in your life. It has to be there at your fingertips when you need it really badly.

RAVI: Great. I want to end with asking a question for advice to MBA students who are going to go out in the world and have a career in marketing. You’ve had a very global career. So what kind of skill sets do you think the students of today need to be successful executives such as yourself?

ALFREDO: I would say, essentially, three mega-powerful points: First, an extraordinary ability to be strategic, simple-minded – single-minded, simple-minded. In other words, if you understand a brand, per se, but more importantly its strategic purpose, then you better write it on top of your office and every day that you come in, remind yourself of what that it is. If whatever you are working on satisfies to grow the strategy, well-done. If it is not, dump it. So that’s the first point. The second point is the opposite. I call it “KISS” – keep it simple, stupid. You may have a very sophisticated strategy, but if you cannot express it, say, in 30 seconds of film or with a very simple, executable idea, it will never work.

Why do people love the iPhone? It’s not just the look. It is the idea of the touch. It is idea of the simplicity, the convenience, almost a sensuality that is associated with the product. That’s what makes it magical. So it is KISS. The third piece is hunger of creativity. I usually would say to a marketing person if they like wine when I interview them. And they look at me “you are French, so why are you asking me that question?” But I say “do you like the wine half glass… half-empty or half-full, which way?” If they tell me “half-empty,” I am not recruiting. If they tell me “half-full,” I say “great – you are full of energy and you are recruited.” Why? Because a marketing person needs to be the engine of creativity, positive-ness, can-do attitude, and never take an obstacle as a reason not to move. You can leave that to the engineers. They can say no, but not you. You have to always be very positive. So, strategic, simple in the execution, and always pushing, pushing, pushing for more creative ideas.

RAVI: Thank you, Alfredo. Nice to have you here.

ALFREDO: Likewise.