Sponsorship Overview

My previous sports marketing terminology post covered some basic definitions of everything from affect transfer to the seven mechanisms of influence in sports sponsorship. This post, while still a cursory glance at sponsorship, lists some principle reasons why companies sponsor teams and events, criteria for choosing what to sponsor, and marketing strategies to pursue in conjunction with sponsorship.

Reasons for sports sponsorship:
· Strengthen customer relationships
· Acquire new customers
· Portray brand as unique or differentiated, relevant, active, relatable, or similarly related to the company value proposition
· Generate advocacy on a targeted tier of the consumer spending pyramid
· Provide incentives for retail distribution channels
· Create awareness and acceptance
· Correlate brand with goodwill and positive emotions of event

Sponsorship criteria:
1. Brand fit
2. Interest
3. Reach
4. Event credibility
5. Risk
6. Activation & implementation difficulty
7. Control by governing body

Integrated Marketing
1. Central marketing theme
2. Member programs
3. Merchant programs
4. Advertising
5. Promotions
6. PR
7. Athlete relations
8. Partner (team/host city/event) presence
9. Onsite activation

Competition Between "Traditional" and "Extreme" Sports

According to a recent SGMA International survey, the popularity of some extreme sports is much higher than many traditional sports. To compete with these adrenaline-sports and stay relevant to young fans, a traditional sports league’s general strategy should be to create a more exhilarant experience. The league should add visual appeal, integrate youth interests and youth brands, and create “extras.”

Many adventure sports—such as surf competitions, snow boarding, and mountain biking—are geared toward television audiences, since watching these events in a stadium setting is difficult. To compete for television viewers, a league should ramp up the visual thrills of its sport. On-screen score boxes with cartoons can add excitement, while virtual confetti and animated dueling robots are more likely to keep young people interested and engaged.

Visual appeal is not limited to television audiences. In-stadium, a sports league can create thrills by adding special-effects lighting, improved sound systems, and video boards in high-definition. The new cricket league, Twenty20, has gone further, changing uniforms, adding firework displays to the stadium experience, and dressing cheerleaders in sports bras.

Beyond visual appeal, a sports league needs to integrate youth interests and brands to compete against adrenaline-sports. By creating a presence on the Internet or in the world of video games that allows for a high level of interaction, leagues can construct a social milieu that appeals to a media-savvy generation while also branding their sport as “cool.” The NBA’s creation of a headquarters in Second Life is just one example of how a league can use online communities to generate interest.

And, although it’s understandable why some leagues choose large, unglamorous corporate sponsors (i.e. the NHL and Scotiabank, and MLB and Bank of America) these sponsors can put off young viewers. Better sponsorship choices include Sony Playstation and Mountain Dew: the sponsors of kiteboarding, wakeskating, longboarding, and other non-traditional sports.

Finally, adrenaline sports often emphasize style over statistics. For that reason, it’s important for a league to adopt events, stunts, or individual performances outside the scope of regular competition. Consider the slam dunk contest: this NBA competition allows participants a forum for individuality and style. It also appeals to a basketball subculture by showcasing moves and behavior not generally seen on the court. Similarly, all-star games, three-point contests, and field-goal competitions highlight the individual athlete over the team and can help leagues compete with sports that rely on freestyle play, tricks, and an alternative image.

Though a traditional league would benefit from a more exciting and relevant fan experience, it should be wary of upsetting fans who rely on the sport’s history and traditions. To avoid becoming another XFL, a league should court youth viewers without resorting to major format shifts, gratuitous behavior, or iconoclastic rule changes. If a traditional league can adapt to changing interests and technologies without isolating its core fan base, the league can compete with adrenaline-sports and stay relevant to a new generation.

[This post derives from my entrance essay to the Warsaw MBA program, originally written September 2007.]

Sports Terminology

Below is a compilation of sports business terminology.

Activation – The act of leveraging sponsorship to augment the impact on the target audience. For example, during Visa's recent sponsorship of the Olympic Games they spent $3 to $4 on marketing for every dollar spent on acquiring sponsorship rights (not including media buy).

Affect Transfer in Sponsorship – A non-conscious connection in which positive feelings for a sporting event or property transfers to a brand. For example, "I love the NFL so I love Pepsi." (The second mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Affiliation in Sponsorship – Consumers define themselves in part by their memberships and affiliations to various social groups, so highly identified fans see themselves as "members" of the team and act in ways to support the team. (The fourth mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Ambush Marketing – A marketing campaign by an organization with the goal of associating themselves indirectly with a sports event in order to gain the recognition and benefits associated with being an official sponsor (Sandler & Shani, 1989). An example of ambush marketing took place in the 2000 Sydney Olympics when Qantas Airlines used the slogan, "The Spirit of Australia" in imitation of the games’ slogan "Share the Spirit," despite Ansett Air being the official sponsor.

BIRGing – Basking In Reflected Glory. When a fan takes credit for a team’s success.

Blasting – A defensive mechanism similar to CORFing wherein a fan will attribute negative characteristics to the opposition. For example, after a loss to the Pistons, a Blazer’s fan might say, “The Pistons are from dilapidated Detroit, whereas the Blazers (and I) are from progressive Portland.”

Branding – The effort of distinguishing one product or service from a competitor’s product or service. Factors of branding include Brand Awareness (getting customers to recognize your sport product), Brand Image (building a customer’s belief in the product), Brand Equity (the value the brand adds), and Brand Loyalty (consistent preference of a brand).

Communication Communities in Sports – A segmentation of those who watch sports. The three Communication Communities proposed by Shoham & Kahle (1996) breaks the market into three groups:

1. Those who watch live sporting events (spectators)


2. Those who watch sports on TV (viewers)


3. Those who read about sports (readers)

Consumption Communities in Sports – A segmentation of those who participate in sports. The three consumption communities proposed by Shoham & Kahle (1996) breaks the market into three groups:

1. Those who participate in competitive sports


2. Those who participate in fitness sports


3. Those who participate in nature sports

CORFing – Cutting Off Respective Failure. When a fan distances himself from his team’s failure or loss.

Endorsement – The use of a (sports) celebrity’s name, likeness, or autograph in connection with the sale or promotion of a product or service. Fans might chose to buy the product in order to emulate the celebrity, in what is sometimes called “image transfer.” (Gardiner, 2006)

Event Management – The planning, organization, delivering, and management of an event. Typical tasks include management of ticket sales, sponsors, performers, permits, promotions, and budgets.

Experiential Consumption – When the consumer takes on an active role in the production and delivery of the consumption experience. Sports spectators are often active in their consumption of their experience, such as those who feel drained after watching a game or match. (Morgan & Summers, 2005)

Extreme Sports – Also called “Adrenaline Sports,” “Action Sports,” and “Adventure Sports,” these are sports with a perceived level of danger that often focus on performing tricks or stunts, and which are geared toward the individual rather than a team. The adherents of Extreme Sports are perceived to reject traditional marketing approaches. The X Games and Gravity Games are both examples of multi-sport events that feature extreme sports.

Fan Equity – What a fan believes he deserves for his loyalty. Also, the emotional bond that links a fan to a team. (McDonald & Milne, 1999)

Image Transfer in Sponsorship – The abstract beliefs about a property that transfer to a sponsor. An example of this is when a consumer feels that the personality of a brand takes on the personality of a property—as in Ironman watches (brand) taking on the toughness of an Olympic decathlon (property). Moderating variables include degree of similarity, level of sponsorship, event frequency, and product involvement. (The third mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Implied Endorsement in Sponsorship – This mechanism requires the consumer to infer that the property is somehow endorsing the brand. Athletes are a primary example of this, as in: "If Greg Oden is wearing those shoes then I'll jump higher if I wear them too." (The sixth mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Implied Size in Sponsorship – The perceived size of an event selected for sponsorship is a signal of the company's financial strength. Implied size acts as a heuristic (mental shortcut) similar to "price equals quality." (The fifth mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Licensing – The method of exploiting intellectual property by transferring the rights of use to a third party without the transfer of ownership. In sports this often means the use of a logo or trademark on merchandise, such as the use of a team-specific logo on a credit card.

Marketing Sports – Marketing a sports good or service directly to sports consumers. Selling tickets is a prime example of this.

Marketing Through Sports – Using a sports affiliation to market non-sport goods and services. Selling stadium naming rights is an example of this kind of marketing, and should not be confused with licensing.

Narrowcasting – Media messages directed at specific segments of the population defined by values, preferences, or demographics. Sports marketing strategists attempt to distinguish and separate the large groups of consumers that are brought together through sports.

Olympic Effect, The – An economic boom that affects the hosting city and country of the Olympic games. Examples of this include increased housing prices in London years before the 2012 games, and the creation of jobs brought on by the Beijing 2008 Olympics.

Parasitism in Sports – The act of taking advantage of another’s representation without authorization. For example, in 1977 the state of Delaware created a lottery based on the results of NFL games without permission from the league. (Moorman & Greenwell, 2005)

Primary Sports Roles – Those who participate in sports. (See Consumption Communities in Sports.) This is also called “direct involvement.”

Reciprocity in Sponsorship – The message of reciprocity is that the sponsor supports an event an individual consumer cares about, so the consumer will go out of his way to support the sponsor by purchasing the sponsor's product. (The seventh mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Relatedness in Sponsorship – The closer the relationship between properties and sponsoring companies, the easier it is for consumers to recall the sponsoring company's brand. For example, it is easier to remember that Speedo sponsored Olympic swimming than it would be to remember Coca Cola's sponsorship of the same property. (Pracejus, 2004)

Secondary Sports Roles – Those who act as listeners, readers, spectators, or viewers of sports. (See Communication Communities in Sports.) This is also called “indirect involvement.”

Seven Mechanisms of Influence in Sports Sponsorship – The seven mechanisms through which sponsorship can influence consumers. Proposed by John W. Pracejus, the mechanisms that sponsorship influences brand equity and brand positioning are, in order of cognitive elaboration needed: Simple Awareness, Affect Transfer, Image Transfer, Affiliation, Implied Size, Implied Endorsement, and Reciprocity. (Pracejus, 2004)

Simple Awareness in Sponsorship – The awareness of a brand's existence, or initial exposure to a brand. (The first mechanism of influence in sports sponsorship.) (Pracejus, 2004)

Sponsorship – A deal under which a sponsor pays a sport entity (athlete, event, league, or team) to promote the sponsor’s product or organization. The sport entity also often delivers advertising space and some level of exclusivity. (Andreff & Szymanski, 2006)

Sponsorship Recall – The recognition of a company's role as a sponsor. In a practical application: a non-leading brand must be prepared to spend more money than a leading brand to achieve high sponsorship recall. (Pracejus, 2004)

Works Cited

Andreff, W. & Szymanski, S. “Sponsorship, in Handbook on the Economics of Sport.” Edward Elgar Publishing, 2006. p 49.

Gardiner, S. “Sports Law.” Routledge Cavendish, 2006. p 433.

McDonald, M.A. & Milne, G.A. “Cases in Sports Marketing.” Jones & Bartlett Publishers, 1999. p 6.

Moorman, A. M. & Greenwell, T. C. “An examination of consumer perceptions of ambush marketing practices.” Journal of Legal Aspects of Sport, 2005. p 191.

Morgan, M..J.J & Summers, J. “Sports Marketing.” Thomson Learning Nelson, 2005. p 16.

Sandler, D.M. & Shani, D. “Olympic Sponsorship vs. ‘Ambush’ Marketing: who gets the Gold.” Journal of Advertising Research, August/September 1989, Cambridge University Press. p 9.

Pracejus, J. Edited by Kahle, L.R. & Riley, C. “Sports Marketing and the Psychology of Marketing Communication.” Lawrence Erlbaum Associates, 2004. p 175-186.

Works Consulted

Kobel, P. “International Report on Question B : Ambush Marketing Too Smart to Be Good ? Should Certain Ambush Marketing Practices Be Declared Illegal and If Yes, Which Ones and Under What Conditions?” International League of Competition Law. Accessed January 3, 2008.

The Top-Paid US athletes

Sports Illustrated released its annual listing of top-paid athletes today. For some, the findings are no surprise. For example, Tiger Woods holds on to the top spot, raking in more money than Phil Mickelson, LeBron James, and Floyd Mayweather Jr (ranked second, third, and fourth) combined. Also, NBA players made up 26 of the top earners (counting Amaré Stoudemire who was mistakenly listed as a baseball player).

However, the data leads to some interesting findings. Here are three observations:

The difference between low salary and high salary was small ($24.7 million, with a mean average of about $16.1 million and a standard deviation of $5.1 million) compared to the differences between endorsements (with a range of $104.9 million, a mean average of about $9 million and a standard deviation of $16.8 million). So while these top athletes’ salaries are relatively uniform, the amount of endorsement money they get is not.

This is illustrated more clearly in the following table.

The range in players’ endorsement money isn’t that surprising. What is more interesting is the relationship between race and endorsement. In a 1996 New York Times article David Falk, Michael Jordan’s agent, said “Very few companies call for athletes, and even fewer call for black athletes.” To see if that still held true, I divided the top 50 earners into two categories: Caucasian in appearance or not Caucasian (the second category includes Hispanic athletes like Alex Rodriguez). What I found was good news for those of us who hope for racial equality in sports: the mean salary for the Caucasian group was smaller than that of the non-Caucasian group. ($8.7 million vs $9.2 million). Moreover, when the top-sponsored athlete was removed from each category (Tiger Woods and Phil Mickelson) the sponsorship dollars still favored the non-Caucasian group ($5.9 million vs $6.1 million).

The above numbers seem to show that the business of sports has lost some of its racial baggage, since endorsements and salaries are higher for non-Caucasian athletes. But that’s not the whole story. If we start with the premise that salaries are a good indication of a player’s worth to a team, at least within his league (and I use “his” because a woman hasn’t yet broken the top 50 mark for earnings), then it should follow that the more talented athletes should rake in the greater share of endorsement dollars. But a closer look at the numbers shows that Caucasian and light-skinned athletes make more sponsorship money as a ratio of their salaries than non-Caucasians. Just look at the chart.

The ratio here is endorsements/salary, so a higher ratio indicates a greater amount of endorsement money over salary money. What we see is that, on average, a greater percentage of the Caucasian group’s total earnings come from endorsements. For an example of this, take two NBA players: Jason Kidd (white) and Jermaine O'Neal (black). Both make an identical salary, yet Kidd pulls in exactly twice as much money in endorsements.

Fifty data points is still a relatively small sample size, and the salary indicators point to an equal playing field, but these numbers should be a reminder to sponsors who use athletes in their marketing that the disparities that David Falk bemoaned may not have disappeared.

Hulu Hoops (and more)

Founded last August and debuting last month, Hulu might just be the future of TV on the Internet. A joint venture between Fox (News Corp) and NBC (GE), this little site with big backers bills itself as “a single source of free, on-demand programming from some of the most popular studios and online networks, helping viewers quickly and easily find and enjoy the premium content they are looking for.”

Hulu just added its first sports content this week, with content from the NBA and the NHL. Sure, the pickings are slim right now (there are only two NBA games up, they’re both months old, and they’re both Lakers games) but the site is just getting off the ground. The potential for this to be a sports hot spot is there.

Hulu now offers these sports features, free to everyone:

NBA
- 2 full-length games (including Kobe Bryant’s 81-point game)
- Daily Recaps
- Highlight reel: NBA 5-star plays
- Top 10 highlights

NHL
- NHL Best of The Week - Season 2007-08 (highlights the week's best assists, goals, saves, and hits)
- NHL Classics
- NHL Player Profiles 2007-08
- NHL Regular Season 2007-08

Action Sports
- Firsthand
- The 808 from Fuel TV

College Football
- The Boise State-Oklahoma battle in the 2007 Tostitos Fiesta Bowl

There’s no doubt that by the next time I log into Hulu there will be significantly more content. The real question is how NBC, Fox and their partners will transition these sports events from TV to online distribution. The current advertising model relies on short commercial breaks (with ads from Intel, Priceline, Direct TV etc), banner ads, overlays (promotional graphics that roll over the bottom of the screen) and maybe extra sponsorship dollars from events sponsors. Some games also offer a choice to viewers: to watch the game with commercials, or watch a two-minute advertisement at the beginning. (The Wizards/Lakers game is currently being shown with a preview for “Baby Mama.”)

The main obstacle for Hulu, going forward, will be whether it can attract other major content providers like CBS and ESPN. If Hulu can expand its broadcasting capabilities then it will be bigger than YouTube, bigger than social networking, maybe bigger than Google.


Notes:

NBC Sports broadcasts the Olympic Games (through 2012), the NFL, the NHL, Notre Dame Football, the PGA Tour, the USGA Championships, Wimbledon, the French Open, RCA Tennis Championships, the Dew Action Sports Tour, and more.

Fox Sports has broadcast rights to NFL games, MLB (1996–present), college football's Cotton Bowl, most of the Bowl Championship Series (BCS National Championship Game, Fiesta Bowl, Orange Bowl, and Sugar Bowl), and NASCAR. ‎

Samsung's Sponsorship Deal

The market researchers at TNS Global—a leading sports research company that provides information to over 300 sponsors—just released a case study confirming the sponsorship benefits for the Samsung Mobile brand in its pairing with the Chelsea Football Club. The full report is available here, but I’ve extrapolated some key points of interest:

Every month tabloids and newspapers print more than 100 photographs showing the Samsung logo or brand.

A Chelsea home game exposes viewers to 800 seconds (13 1/3 minutes) of Samsung.

Twenty-two percent of all soccer fans associate Samsung with a team, while 38% of Chelsea fans associate Samsung Mobile with an English Premiership club.

Samsung’s share of cell phone sales from August to January 2006 were double those seen for the same period in 2005.

Seventy-seven percent of Samsung Mobile users are quite or very likely to continue using the brand.

Of course the report doesn't comment on what Samsung paid for the sponsorship rights, but chances are they’re pretty happy. Chelsea FC’s support in London at the end of 2006 was nearly double what it was three years previously, and Chelsea is currently ranked third in the Premier League. On top of that, the cost of the 13.33 minutes of TV advertising might cost Samsung over a million dollars per game, were the company to pay for it 30 seconds at a time. (Calculated at $50,000 per 30 seconds, plus $350,000 initial production costs. In the US, TV ads could be 3 to 10 times that cost.) And that’s not even taking into account the 100 print photos/month, the value of which depends mostly on placement and circulation.