MasterCard Halts Market Share Slide With Scenario Planning
The Problem
MasterCard, a major credit card company, once held a dominant market position US Market Share with only one primary competitor, Visa. They woke up one day and realized that, after six years of steady decline in revenues and market share, they had lost their leadership position. The company was stymied. Everyone was blaming each other. The erosion continued despite every effort to turn things around. Conventional wisdom, based on past experience, was not working. It was pretty desperate, nobody knew what to do, and it was feared that they would be out of business in the next five years if they couldn’t turn the “death spiral” around. Despite multiple initiatives to slow or reverse the decline, nothing seemed to work. Our work began with a more limited focus, but soon our objective became finding a solution to reverse the market share decline. It became clear, given the changes in the marketplace, that a new way of understanding the forces at play was necessary.

The Solution
The company called in the System Dynamics group of PA consulting as part of a larger project to change the company’s fortunes. System Dynamics (SD) and PA consulting were chosen because of their ability to look at the problem in a whole new way: people within in the company were thwarting each other’s efforts, and a more holistic approach for the organization was necessary. SD provided the necessary perspective by looking at the system as a whole, without losing crucial details.
Among the early modeling insights, was a simple recognition of the perilous situation in which MasterCard found themselves. The fact was that the company’s clients, credit card issuers, tended to focus all of their marketing efforts on the market leader, while ignoring the runner-up. In this case, when Visa was king, clients only promoted Visa’s product to the detriment of MasterCard. This was a case of a common systems trap called “Success to the Successful” and, if left unchecked, would surely have led to the demise of the less successful entity, MasterCard.
MasterCard also learned that there was a limit on spending due to minimal payments. Customers would not use the cards to the full advantage if they were not being paid off. Counter-intuitively, the best observed solution for this problem was to create a higher minimum payment, to allow for increased monthly spending.

We designed, built and tested a model of the US credit card industry and market–the cardholders, the choices they made using different cards, the businesses that accepted the cards. The model simulated MasterCard performance and that of each of the main competitors-Visa, Amex, Discover.
We tested ideas that came from all parts of the organization, but none had a significant and lasting impact. At one point they told us, “Just go experiment and let us know what you can find that WILL make a difference.” After several analyses, we identified four factors that when COMBINED would have that significant, lasting market share benefit being sought. A few discussions quickly identified “co-branding” (though we didn’t know what to call it then) as a strategy that would “pull all 4 levers”. We just described it as partnering with consumer-facing companies.
The outcome
PA consulting worked to collect real world experience, expert interviews, quantitative and qualitative data, and cultural factors. The information was cross checked, and at first, client focused. But a unique benefit of SD is its ability to scale upwards to encompass the entire market and capture the inherent complexities within the system. This model was scalable and could be moved from department to department to test a wide variety of initiatives. Hundreds of factors could be tested within the model’s nonlinear and time delayed system, to find the true leverage points which would allow MasterCard to regain and improve their market share. Consequently it was discovered that efforts such as increased value added assurance and increased issuer preference held the most value while conventional solutions like increased advertising held little leverage. This led MasterCard to be the first to market with the technique called co-branding, a partnership between a credit card brand and company, which allowed them to regain 6 points of market share.
Co-branding revolutionized the industry. Today, if you have a credit card, it is likely co-branded–the GM MasterCard, the Target MasterCard… Co-branding had the advantage of being a win-win-win… a win for the consumers, as the “points” gained by consumers provided noticeable discounts on their purchases…a win for the co-branders, who achieved higher customer loyalty as a result…and a big win for MasterCard, gaining almost exactly the market share and the timing predicted by the modeling. They hit the ground running and it was years before Visa and others could mount a similar set of alliances.To the MasterCard member banks the increase was worth billions in relative market share. Since then, co-branded cards have taken off in the United States and have redefined profits within the industry.
For MasterCard, System Dynamics changed not only the way the company saw itself, its competitors and its products, but it also helped drive the creation of an entirely new product line. MasterCard was able to efficiently understand their strategic resources and move on to a new field of growth by recognizing the key leverage points within their own system, identified thanks to the work done by PA consulting.
“In the end, everyone took credit for the work.”―Sharon Els
Modelers | Kenneth Cooper, Sharon Els, Jim Lyneis, David Starr |
---|---|
The Official Website | For added information, or with any questions, see CooperSDNetwork.com, or contact Ken via email: Ken.Cooper@CooperSD.com |
MasterCard Case: Part 1
(Narrated by Ken Cooper) 9:47 minutes
MasterCard Case Part 2 – The Back Story
(Narrated by Ken Cooper) 3:07 minutes
System Dynamics XMILE Webinars
On November 19, 2013 David Starr from Cooper Human Systems, and Sharon Els from PA Consulting Group presented their work in a webinar hosted by Steve Adler from IBM, and Karim Chichakly from isee systems.
This webinar was the third in the Big Data, System Dynamics, and XMILE webinar series jointly sponsored by IBM, isee systems and the OASIS XMILE Technical Committee. The series was showcase exemplar applications of System Dynamics in the areas of environment, business, health care, and public policy. (Nov 2013)
OTHER SUCCESSFUL APPLICATIONS
System Dynamics Helps Farmers Escape Poverty Trap in Guatemala
System Dynamics Helps Farmers Escape Poverty Trap in Guatemala EXECUTIVE Summary Guatemala holds the 4th highest global ranking for chronic malnutrition, and climate change is intensifying the challenges subsistence farmers face in providing food for their families....
Twinings Uses System Dynamics Games to Enhance HR Capability
Twinings Uses System Dynamics Games to Enhance HR Capability “Realistic simulation is a powerful approach to building capability. The business simulation developed [by Dashboard Simulations and Lane4] gave [Twinings staff] an experience that called for them to develop...
RSC Uses System Dynamics to Increase HVACR Sales Against the Tide
RSC Uses System Dynamics to Increase HVACR Sales Against the Tide “Using the proven Strategy Dynamic process focused our limited resources on organizing strategic issues, identifying the critical resources, and developing the insight to more rapidly create intuitive...
Upcoming Events

6th Annual System Dynamics Competition by the South Africa System Dynamics Chapter
System Dynamics Competition CORRECT TIME: 2 PM CENTRAL EUROPE The System Dynamics Society’s South Africa Chapter is hosting a System Dynamics Competition that offers participants the opportunity to learn new modeling skills directly from experts, collaborate...
Recent Posts
Book Signing & Book Swap at ISDC 2023
Book Signing & Book Swap at ISDC 2023 Learn about their books directly from the authors! Don’t miss out! Several book authors will join us at the Book Signing event at ISDC 2023. This event will be held live at the conference in Chicago, on Tuesday, July 25 at...
Webinar Highlights & Recording: Digital Twin Business Models for Strategy and Operational Management
Webinar Highlights & Recording: Digital Twin Business Models for Strategy and Operational Management We had the opportunity to delve into the world of business model simulations with industry experts Kim Warren, founder of Strategy Dynamics, and Martin Lycko,...
Webinar Highlights & Recording: System Dynamics Modeling with R.
Webinar Highlights & Recording: System Dynamics Modeling with R. System Dynamics is a powerful approach to understanding complex systems in various fields, such as public health, ecology, and economics. Prof. Jim Duggan, an expert in applying System Dynamics and...
Join us
OTHER SUCCESSFUL APPLICATIONS
System Dynamics Helps Farmers Escape Poverty Trap in Guatemala
System Dynamics Helps Farmers Escape Poverty Trap in Guatemala EXECUTIVE Summary Guatemala holds the 4th highest global ranking for chronic malnutrition, and climate change is intensifying the challenges subsistence farmers face in providing food for their families....
Twinings Uses System Dynamics Games to Enhance HR Capability
Twinings Uses System Dynamics Games to Enhance HR Capability “Realistic simulation is a powerful approach to building capability. The business simulation developed [by Dashboard Simulations and Lane4] gave [Twinings staff] an experience that called for them to develop...
RSC Uses System Dynamics to Increase HVACR Sales Against the Tide
RSC Uses System Dynamics to Increase HVACR Sales Against the Tide “Using the proven Strategy Dynamic process focused our limited resources on organizing strategic issues, identifying the critical resources, and developing the insight to more rapidly create intuitive...
Recent Posts
Book Signing & Book Swap at ISDC 2023
Book Signing & Book Swap at ISDC 2023 Learn about their books directly from the authors! Don’t miss out! Several book authors will join us at the Book Signing event at ISDC 2023. This event will be held live at the conference in Chicago, on Tuesday, July 25 at...
Webinar Highlights & Recording: Digital Twin Business Models for Strategy and Operational Management
Webinar Highlights & Recording: Digital Twin Business Models for Strategy and Operational Management We had the opportunity to delve into the world of business model simulations with industry experts Kim Warren, founder of Strategy Dynamics, and Martin Lycko,...
Webinar Highlights & Recording: System Dynamics Modeling with R.
Webinar Highlights & Recording: System Dynamics Modeling with R. System Dynamics is a powerful approach to understanding complex systems in various fields, such as public health, ecology, and economics. Prof. Jim Duggan, an expert in applying System Dynamics and...
Upcoming Events



6th Annual System Dynamics Competition by the South Africa System Dynamics Chapter
System Dynamics Competition CORRECT TIME: 2 PM CENTRAL EUROPE The System Dynamics Society’s South Africa Chapter is hosting a System Dynamics Competition that offers participants the opportunity to learn new modeling skills directly from experts, collaborate...