Corporations Love Sports

0 Comments | Insight on the News, Nov 13, 2000 | by Jennifer G. Hickey

Corporate sponsorship of star athletes and sports events is a booming business, which is having a huge impact on the fortunes of the companies and the sports involved.

The word "Olympian" elicits many images. The powerful grace of sculpted swimmers slicing through the water; the sprinters leaving the starting blocks in a burst of speed; the powerful Olympic Buick ... well, at least in the minds of the marketing team at General Motors Corp. In signing an estimated $600 million contract with NBC for the right to be known as the exclusive domestic car and truck of the Olympics, the company was responding to the problem that the median age of the Buick buyer of late has been 67.

According to Advertising Age, General Motors (GM) paid all of those millions for the right to be the exclusive car and truck sponsor of the U.S. Olympic team through 2008, as well as the sole domestic automobile advertiser during NBC's two-week Olympic broadcasts. And GM was not alone in laying out the gold in Sydney. The top 11 sponsors, including McDonald's, Nike and Coca-Cola, paid a total of $605 million, according to the lEG Sponsorship Report, a trade journal that tracks sports sponsorships.

Evidenced by the dollar signs registered during the Sydney Olympic Games (a 51 percent increase over the 1996 Atlanta Summer Games), as well as the groundbreaking $100 million, five-year contract extension inked between sports giant Nike and professional golfer Tiger Woods, sponsorship is becoming the hottest property in the marketing world.

In layman's terms, sponsorship is a cash (or in-kind) fee paid to a celebrity or, as in the case of the Olympics, the managers of an event, in return for exclusive access and/or endorsement. According to the IEG Sponsorship Report, sponsorships grew 12 percent in 1999 -- compared with a 6.8 percent increase in advertising and a 7.4 percent growth in sales promotion. As much as $8 billion will be spent in North America and $22 billion worldwide is expected to be paid out in 2000, with approximately 68 percent of the money going to sports figures and events, according to IEG Consulting, a Chicago company that determines the market value of sponsorships.

"Sponsors can play a major role in a marketing arsenal, but I would not limit it to media campaigns. Brand builders can be a platform through which you can build other programs and they can also serve as internal morale builders," says Dave Grant of Velocity Sports and Entertainment, which has negotiated deals with IBM and FedEx.

Point to practically any major city on a map of the United States to see the presence of corporate sponsors. Corporations are putting their names on stadiums and convention centers from Philadelphia's First Union Center (home of the National Hockey League's Flyers and the National Basketball Association's 76ers) to Landover, Md.s, FedEx Field (home of the National Football League's Washington Redskins). Citing FedEx Field, Donna Ramer, managing director at the public-relations firm of Makovsky & Co., tells Insight that it is as simple as "gaining exposure for their product in one of the more important markets."

While FedEx enjoys high name recognition, purchasing stadium rights can give even lesser-known entities much-desired advertising. Ramer cites 3Com Corp., the computer company that purchased the naming rights to then-Candlestick Stadium, host of the NFL's San Francisco 49ers. "Nobody really knew who 3Com was when they bought the rights. But it enabled them to get vital name placement and awareness. Companies want consumers to associate their product with a city," says Ramer.

But does the exposure gained from a celebrity spokesman or sponsorship contribute to the bottom line? The benefits can be measured in several different ways, from direct revenues to enhancement (or, in some cases, repair) of a corporate image. As his recent deal with Nike demonstrates, the most marketable figure currently is golf phenomenon Tiger Woods.

A self-described "Cablinasian" -- reflecting his Caucasian, black, American Indian and Asian roots -- Woods has reached across ethnic boundaries and outside of the golf world. Although his late 1999 agreement with GM's Buick unit has not yet affected its bottom line, company representatives insist they have received at least $1 million in free media and exposure to a targeted group -- the younger consumers who are embracing golf in numbers not seen before the emergence of Woods. In turn, hopes Buick, their image will change among younger buyers.

Golf has been booming in recent years. Woods' appeal is attributable to his virtual domination of the field and the impressive manner in which he has won the Masters, U.S. Open and British Open. Market analysts estimate the TV audience of an average tournament spikes 40 percent when Woods plays.

Even though golf is not an Olympic sport, GM featured Woods in several of its Olympic-themed TV advertisements. "The Olympic rings give you instant credibility all over the world," says Steve Burgay, vice president of John Hancock Financial Services Inc. of Boston, a worldwide Olympic sponsor. Apparently, Buick figured that using Woods and the Olympics would double their chances.