Wednesday, July 15, 2009

Sports Sponsorship


The competition during an Olympic Games or FIFA World Cup can be fierce, passionate, and dramatic, with archrivals stopping at nothing to gain an edge. This may seem to be a description of the elite athletic contests at these mega-events but rather it is applicable to the world of sport sponsorship!

Sponsorship has emerged as a marketing phenomenon worldwide, with corporate tie-ups ranging from the Olympic Games and Formula 1 to U2 tours and the Renoir exhibition. Globally, companies are expected to spend $US 44.4 billion on sponsorship in 2009 up 3.1% over 2008. Even in the current recession, European firms are projected to spend $12.1 billion in 2009 while there Asian counterparts are slated to infuse $10.1 billion into the sponsorship, an increase of 6.3 percent over last year.

Sponsorship is defined as the relationship between a sponsor and a property in which the sponsor pays cash or in-kind fee in return for access to the exploitable commercial potential associated with the property (IEG, Inc. 2003). Sponsorship is not a donation. A donation involves resources freely given with no expectation of anything in return. Sponsorship is a strategic marketing activity requiring resource allocation (usually cash) with expectation of return on investment.

Global giants- Anheuser-Busch, Coca-Cola, McDonald’s, and Miller although not directly linked to sports industry, are the top in terms of corporate sponsorship spending. This shows how corporate leverage sports sponsorship as one of the most potent promotional tool.

Among the most common reasons why corporations sponsor sport are:

  • Increase brand loyalty
  • Through sport, corporate sponsors seek to build brand loyalty by tying their products and services to the athletes, events and venues their customers care about.
  • Create awareness & visibility
  • The exposure sport properties receive in electronic and print media provides sponsors with vast array of publicity opportunities.
  • Change/reinforce image
  • Sponsorship can create, change or reinforce a brand image. For example, Volvo changed its boxy, conservative image by sponsoring the Volvo Ocean Race and introducing its new sleeker styled vehicles at harbors along the race route.
  • Drive retail traffic
  • Companies use the assets of their sponsorships to create traffic-building promotions. For example, F1 sponsors bring show cars and top drivers to retail outlets. Some fast food restaurants sponsor basketball tournaments and when the home team scores a certain point total, the game ticket stub can be redeemed for a free food item, which inevitably leads to additional store purchases.
  • Showcase community responsibility
  • Corporate social responsibility has become the prime factor that influences a person’s impression of a company – more even than brand quality.
  • Drive sales
  • Companies use sponsorship as a hook to drive sales.
  • Sample/display brand attributes
  • Sponsorship allows companies to showcase product benefits. On-site sponsor kiosks permit spectators to see, touch, taste, smell, and hear sponsor products.
  • Entertain clients
  • Hospitality services at sport venues are relevant to companies that value the opportunity to spend a few hours with clients and prospects and solidify business relationships.
  • Targeting
  • Sponsorship allows companies to hone in on a niche market without any waste.

Issues in Sport Sponsorship

There are several issues associated with corporate sponsorship of sport including ambush marketing, tobacco company tie-ups, and sponsorship during bleak economic times – each are briefly addressed in the following section:

Ambush Marketing
Ambush marketing refers to the intentional efforts by a non-sponsor to counteract or disrupt the effectiveness of a rival company’s official event sponsorship platform. Official sponsors and sport property managers consider ambush marketing to be unethical and poor form. In a highly competitive, profit motivated marketplace, others argue that ambush marketing is a necessary business strategy. Sport properties have gone to extreme lengths to protect their sponsors from ambush marketing tactics, including removal of billboard advertising of non-sponsors near sport venues, and prohibiting spectators from wearing clothing or other items that bear the name of non-sponsors.

Tobacco Sponsorship
There is a mismatch between the addictive nature of nicotine and other negative health risks of tobacco products and the positive benefits of sport participation, yet sport has been the most popular sponsorship forum for tobacco companies prior to 2005.Governments in Europe and North America

issued the “red card” to tobacco companies in 2005:Formula 1 severed ties with tobacco sponsors in 2004 (i.e., Marlboro Racing Team); NASCAR ended its association with the Phillip Morris Company (i.e., Winston Cup Series) and women’s professional tennis found a new title sponsor, dropping Virginia Slims for Kraft. Tobacco advertising is now banned in and near sport stadia in the U.S. and most countries around the world including India.

Sponsorship in a Recession
The economic recession in North America has hit motor sport sponsorship the hardest. In the midst of bankruptcy, massive employee layoffs, and federal government bailout, General Motors severed ties with Tiger Woods, withdrew its sponsorship of the 2009 Super Bowl, and scaled back its automobile racing sponsorships. Elsewhere, Bank Credit Suisse terminated its sponsorship of Formula One team BMW Sauber, having sponsored the team since 2001. ING will end its F1 sponsorship in 2010. Subaru and Suzuki withdrew from the 2009 World Rally Championship due to economic pressures. However, some companies have come off the sidelines and into the sponsorship game during the recession. Richard Branson’s Virgin has come on board as sponsor of Brawn GP.

The following section offers two vignettes illustrating the power of sport sponsorship in India. The first concerns with the Indian Premiere League (IPL) for Cricket, one of the world’s most profitable sport properties. The second vignette pertains to the Board of Control for Cricket in India (BCCI) and its rise to prominence and profitability through corporate sponsorship.

1 Indian Premier League
Sponsors’ dream; Spectators’ delight

IPL has emerged as a sports entertainment phenomenon like never witnessed before by an Indian spectator; the sheer magnitude of deals struck under the IPL Sponsorship Offerings umbrella is astounding!

All these revenues fall under the Central Pool, 40% of which will go to IPL, 54% distributed to franchisees and 6% to prize money. The money will be distributed in these proportions till 2017, after which the share of IPL will be 50%, franchisees 45% and prize money 5%.

World Sport Group (WSG) won the marketing rights from BCCI for their sporting extravaganza- the Indian Premier League by committing a whopping $1.026 billion spread over 10 years. WSG India is a part of the Singapore-based WSG, a global sports management, marketing and media company.
Venu Nair, president (South Asia), World Sport Group, said, “Ground signage’s provide continuous visibility to the sponsors throughout the match, unlike the short television commercials which come and go in a flash. We have a method whereby we can show exactly where and how the advertisers will get visibility for their brands” (Business World June 2008). According to an internal study done by WSG, an average cricket match gets a TRP (television rating point) of 5 to 6, while the IPL matches are expected to enjoy double the TRP, in the range of 7 to 10 every match. The company would achieve such a high rating by having live entertainment shows before, after and throughout the matches, produced by each of the franchisees. These shows would include performance by Bollywood stars and artist. “This would mean a perfect marriage of Bollywood and cricket, as both are the most popular forms of entertainment in India,” said Nair.
Unlike the earlier practice of allowing several sponsors in the same category to advertise on the cricket ground, these deals will allow the sponsors to have an exclusive presence in their business category. This would reduce the clutter of brands displayed on the ground. A sponsor such as Hero Honda, for example, would be the only automobile company to advertise on the ground. These deals do not include the 30-sec television commercials spots. Those would be sold by Sony Entertainment Television, which has won the rights to broadcast IPL.
WSG will also develop a special application for the mobile users. The users will be able to download thisvalue-added service (VAS) on their mobile and get live updates on the matches.

The number of brands an average Indian Consumer has been exposed to through the first two seasons of IPL has been remarkable. Moreover, the viewership which the television channels have experienced has been unprecedented as reflected by their TRP ratings. What this has meant is unparalleled exposure opportunities for a swarm of brands on board.

From Rags to Riches

Cricket is the unofficial national sport of India and the Board of Control for Cricket in India, or BCCI, is the apex governing body for cricket in the country. In the last 20 years, Indian cricket — like India itself — has been transformed. With the arrival of global television networks, mass-media coverage and multinational sponsors, cricket has become big business and India has become the economic driving force in the world game. For the first time, a developing country has become a major player in the international sports arena.

The wealth that BCCI is enjoying right now is astronomical and its income for the year 2008-09 is Rs 1000.41 crores. Things were not the same 2 decades ago. This kind of success was made possible by one man: Jagmohan Dalmiya.

It was in 1979 that Dalmiya first stepped into the corridors of power of the BCCI along with his friend-turned-foe I.S. Bindra. He became treasurer in 1983; the year the Indian cricket team won the World Cup.

Dalmiya, along with Bindra, can claim the credit for gaining the right to stage the World Cup in India in 1987, which brought big money into the subcontinent. Even then, BCCI books showed a deficit of Rs 81.60 lakhs in the early 1990s and things started looking bleak. It was then Dalmiya became the Secretary of BCCI and led the commercialization of the game through the ‘television rights revolution’ at that time, and recorded a profit within a year.

Since then BCCI has never looked back and the present status of this elite Cricket Board finds it to be the richest Cricket body in the world.

As discussed, sport sponsorship has evolved significantly over the years, transforming into a multi-billion dollar industry worldwide. The wave of sponsorship which has hit the Indian sporting arena in various forms – IPL, PHL and NFL etc. - taking sports to an altogether different level. In addition, athlete endorsements have also scaled new heights of late. The multi-million dollar transfer fees exchanging hands in the world of soccer is a fact well-known. This has offered marketers newer avenues to market their brands by associating with some of the more lucrative sporting personalities (and properties) that appeal to a similar consumer base as that of their products and with images aligning with that of their offering.
Although researchers around the world have done significant work in the area of sport sponsorship management, there remains much to be explored in terms of sponsorship effectiveness tools and evaluation metrics used by prospective sponsors while evaluating sponsorship proposal by a sport property. Such tools are valuable to sport properties and sponsors in determining whether a sponsorship was a “winner” or a “loser” for the parties involved.


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