When Sponsorship and Racism Collide

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Corporate sponsors are distancing themselves from the Los Angeles Clippers after owner Donald Sterling’s racist comments. But with Sterling on the way out, how should they react?

The proverbial has hit the fan in Hollywood, and sponsors scrambled to evacuate over the Sterling controversy.

Sponsors of the Los Angeles Clippers were quick to strike after an audio recording of team owner Donald Sterling leaked last week containing racially insensitive commentary. More than a dozen corporate sponsors ended or suspended their relationships with the team in the days after this story broke.

Controversies like this one are nightmares for marketers and brand reps. Mercedes-Benz, CarMax, Virgin America, Kia and State Farm quickly put their public relations teams to work, citing the comments as offensive and (most importantly) inconsistent with the views and values of their respective brands. While this step is important due diligence in terms of damage control, cutting ties altogether sends an even stronger message – a sentiment certainly on the mind of NBA Commissioner Adam Silver when he announced that Sterling would be banned from the league for life and likely stripped of his ownership of the team.

The Clippers are one of the most exciting teams in the NBA in one of the largest markets in the country. Corporate partnership with the team has certainly been fruitful and could be again in the future, but swift action on their behalf may prove to be the best move for these aforementioned sponsors. Actions most always speak louder than words, and this situation was no exception.

Some of these companies may still be on the hook for sponsorship dollars, but promptly and publicly cutting ties with the scandal will save them even more in the long run. The longer you hold onto a sponsorship in a situation such as this, the greater the risk for decreasing public sentiment toward your brand. In an instant, years of work to promote brand recognition and loyalty can be negated. These negative associations can be extremely difficult to reverse.

So as a sponsor, are you ready for a scenario like this? Do you have a plan in place to save your brand from its divisive demise?

Performance Research has conducted extensive research on this very topic and presented details of their findings at IEG’s 31st Annual Sponsorship Conference in March.

Once such controversy detailed in the presentation was the Lance Armstrong/LIVESTRONG dynamic after Lance admitted to using performance-enhancing drugs after years of denial. Corporate sponsors including Oakley and Nike severed ties with Armstrong directly, but continue to support the LIVESTRONG foundation’s efforts. PR found that public opinion of Armstrong decreased after he admitted to doping, but the majority of respondents actually had an improved opinion of the LIVESTRONG foundation. In this case, sponsors were able to cut their losses by simultaneously ending their relationships with Lance Armstrong and increasing affiliation with a brand on the rise in LIVESTRONG.

MORE from IEG Presentation: Taking a Stand– How Consumers React When Sponsorship Turns Into Criticism And Controversy

NBA commissioner Adam Silver’s swift and decisive actions regarding Sterling certainly turned the tables and may very well present the Clippers organization in a stronger position than ever. Sponsors now need to rethink their plans to abandon their partnerships with the Clippers.

Both Kia and State Farm will continue to run national advertising campaigns centered on Clippers stars Blake Griffin and Chris Paul. The “Griffin Force” and “Cliff Paul” spots allow these brands to continue to cash in on the success of the team without the risk of a direct corporate partnership with the Clippers organization.

Maybe other sponsors will follow their lead, or simply wait out the storm before rekindling their relationship with the team. We will certainly be watching to see how these brands handle their partnerships with the Clippers in the near future.

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Why We Said NO to Sochi

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As many of you may know, Performance Research founders Jed Pearsall and Bill Doyle have been consistently attending & analyzing the on-site activities at Olympic Games for over 30 years.  In fact, Jed’s first Olympic event was “Miracle on Ice”- the legendary USA vs. USSR hockey game held during the 1980 Lake Placid Olympic Winter Games, where Jed’s Mom bought the tickets from a sidewalk scalper for just $25 each. 

Since Lake Placid, Jed has attended 13 out of the last 15 Olympic Games (Winter & Summer), with Doyle attending eight of his own.  This bi-annual pilgrimage has been a mix of business and inspiration, allowing us to provide observations and insights to sponsors worldwide, while also being reminded of how lucky we are to work in such a fascinating industry.

However, starting with the controversial and antagonistic laws against gay rights propaganda passed by the Russian government, we both felt we could not, in clear conscience, attend these Sochi Games.

Now, following weeks of reports of possible terrorism, U.S. Department of State warnings, reports of the near certainty of computer hacking against any and all devices brought into the country, and most recently the U.S. Department of Homeland Security bulletins to airlines warning of the potential threat of explosive materials being contained in toothpaste tubes, we are convinced more than ever that we made the right choice.   

Apparently we are not alone–  just yesterday TMZ reported that AB-InBev is not hosting its traditional “Club Bud” party at the Olympics, suggesting that the threat of terrorism is just too large even for corporate America.

While we are disappointed to not attend the Games, we are proud of our integrity that drove the decision.  And, we will always question the rationale of the IOC (especially when we could have been headed to competing bid city Salzburg, Austria right now instead of staying away from Sochi).  So for this Olympic Winter Games, for the first time in nearly three decades, you will be reading Performance Research updates (now tweets) written from the viewpoint of our couch instead of from the bleachers.

See you in Brazil!

More Links:

http://www.cnn.com/2014/02/06/world/europe/russia-sochi-winter-olympics/

http://abcnews.go.com/blogs/headlines/2014/02/sochi-visitors-report-hotel-horrors-dangerous-conditions/

http://www.globalpost.com/dispatch/news/regions/europe/russia/140203/6-openly-gay-athletes-sochi-olympics-russia

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Quicken Loans and Warren Buffett Team Up for Billion-Dollar Hype Machine

March Madness

Quicken Loans and Warren Buffet hope to make a sponsorship splash during this year’s edition of March Madness. Despite their lack of official NCAA sponsorship, the two seem poised to do just that.

March Madness is about to get even wackier this year, but at what cost?

The annual NCAA Men’s Basketball tournament of champions attracted 23.4 million television viewers last year, says CBS Sports.  Each year millions of armchair point guards try their hand at predicting the outcome of the 64-team bracket in local office pools.  However, Quicken Loans and Warren Buffett hope to initiate much more than water cooler bragging rights this year with what could be considered the mother of all guerrilla marketing tactics.

Quicken Loans founder and NBA owner Dan Gilbert announced a $1 billion prize to any fan that correctly predicts the “perfect bracket” before the 2014 rendition of the NCAA tournament.  This prize is being insured by Buffett, the world’s fourth richest man, through one of his companies – Berkshire Hathaway.  Essentially, Quicken   Loans pays Berkshire Hathaway to cover the billion-dollar prize, should someone enter a perfect bracket in the contest.

While the odds are astronomically low, the buzz is deafeningly high.  The question we ponder is how a brand like Quicken Loans can effectively own this considerable  amount of the positive energy surrounding the NCAA Men’s Division I Basketball tournament without paying to be one of the organization’s corporate champions and partners.

While Quicken Loans has sponsored the Carrier Classic, an annual college basketball contest turned outdoor spectacle aboard a US Navy aircraft carrier, since 2011, this does not garner them rights to the NCAA Tournament.  With this announcement, president and marketing chief Jay Farner hopes they can earn an even larger place in the heart of college basketball fans.  But at what cost?

It’s tough to argue the virtuosity of Quicken’s marketing ploy.  The buzz generated by the incentive of a billion bucks should make their investment worthwhile, especially since they are paying pennies on the dollar for Berkshire Hathaway’s insurance policy.  In fact, Quicken could emerge as one of the biggest corporate victors come tournament time.

Each March, companies amp up marketing efforts around the NCAA tournament in an attempt to increase brand recognition and drive revenues.  Busiest among them are NCAA’s official Corporate Champions AT&T, Capital One and Coca-Cola, whose support helps fund 89 different championships and over 400,000 college student athletes nationwide.

Quicken Loans, on the other hand, is not an official NCAA corporate sponsor, thus their promotion isn’t benefiting anyone but themselves, along with a very unlikely new billionaire.

Performance Research studies tell us that modern fans are much more likely to favor a brand when that brand’s sponsorship of an event or campaign adds substantial value to the user-experience, regardless of its “official” status.  In other words, if a promotion can engage consumers on a personal level it becomes considerably more effective.  Thus this billion-dollar bracket contest offers the potential for huge returns for Quicken Loan.

Rather than cough up the dollars necessary to be dubbed an “official” sponsor, Quicken opted for this unconventional move.  However, they will be garnering serious exposure from an event without supporting the organization responsible for putting it on.  There are positive benefits to real people being bypassed by this agreement.

The Billion Dollar Bracket Challenge may ultimately be the best business decision for Quicken.  We’re just not sure that it is the appropriate one.

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International Corporate Partnership Just the First Step in This Man’s Plan to Take the NBA Global

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Vivek Ranadive has surrounded himself with BIG talent, including Shaq, to help him transform the Sacramento Kings into a global brand.

Photo – @James_HamCowbellKingdom.com

Rookie NBA owner Vivek Ranadive made a name for himself by revolutionizing Wall Street in the 1980s.  After his Kings announced their first ever international corporate sponsorship for the Sacramento Kings, Ranadive is well on his way to similar transcendence in the NBA, or as he likes to call it: NBA 3.0.

Last week, the Kings announced a partnership with Indian development company The Krrish Group, who recently finalized a multi-franchise agreement to operate Sacramento-native restaurant chain Jimboy’s Tacos in India.  Their sponsorship deal with the Kings will include Jimboy’s promotions during game broadcasts, inside Sleep Train Arena and on all digital platforms.

Ranadive, the first Indian-born majority owner of an NBA franchise, is convinced the greatest growth opportunities for the NBA brand lie abroad, particularly in India.

This partnership is indicative of his success in bringing globally minded companies into the NBA sponsorship fold.

Ranadive’s efforts to increase the Kings’ presence in India include multiple games broadcast in the country, as well as a Hindi-language version of the team’s website.  Deals such as the one with The Krrish Group can only expedite the growth of the Kings as an international brand.

Although this partnership is the first for the Kings with a company based outside the country, it is certainly not the last.  The Indian consumer market has experienced dramatic growth in recent years, a trend that is expected to continue.

“India is fertile ground,” says Sam Amick, who covers the NBA for USA Today. “A big part of what [Ranadive] wants to do fits the NBA’s agenda. It fits what they want to do.”

Ranadive and his team, one that includes future Hall of Famer Shaquille O’Neal, plan to use technology and data to construct a winning product on the court and to establish the Kings as a prominent global brand.  His ambition is to make basketball the premiere international sport of the 21st century.  Technology, according to Ranadive, will drive the success of the NBA abroad.  He plans to expand social networks, giving fans an opportunity to participate and identify with sports in ways that have not been done before.

He calls this philosophy NBA 3.0, a complete alteration of the fan experience, particularly in the developing world.

“When I look at the business of basketball, it’s more than basketball,” he says. “It’s really a social network. You can use technology to capture that network, expand it, engage it, and then, obviously, to monetize it.”

Look for other franchises to adopt similar methods of targeting around the world, presenting sponsorship opportunities for international companies in American professional sports that were never before viable.

Professional teams and leagues are always searching for new revenue streams.  Ranadive hopes to set the precedent for establishing relationships with consumers on a global scale.  Should the NBA 3.0 system of fan interaction succeed, it will serve as the model for breaking into emerging markets such as China and India.

In order to connect with international fans, teams will seek partnerships with international companies to bridge the cultural gap.  The Krrish Group aims to be the first of many to align with the international growth of American professional sports.  In the coming years, similar corporate sponsorships from companies in emerging markets will prove the catalyst to booming global fandom for progressive franchises like the Sacramento Kings.

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Amid the Unrest in Brazil, Sponsors Are Encouraged to Share a Sense of Purpose

Protesters at the Confederations Cup made their opinions known this past June

Protesters at the Confederations Cup made their opinions known this past June

Millions of activists have been flooding the streets of Brazil in protest over the government’s decision to use public money to fund high profile athletic events such as the 2014 FIFA World Cup and the 2016 Olympics. At a time where education and medical standards are in decline, the people of Brazil are showing they believe that the R$15 billion real ($6.5 billion US) spent on new stadiums, security and infrastructure would have been better spent building modern schools and hospitals.

Regardless, the leaders of Brazil continue to go ahead with the events citing the economic benefits the country will receive by hosting them. The World Cup alone is expected to bring in close to R$115 billion real ($49 billion US), along with thousands of jobs to the Brazilian economy by the end of 2014.  Even though they will benefit economically from the event, the majority of Brazilians will still be unable to afford the high price of a ticket to watch a World Cup game. While FIFA has made an effort to make tickets more affordable, factors such as high inflation and a stagnating economy will prevent most Brazilians from attending.

The lack of discretion displayed by Brazilian forces during these protests has had the media placing doubts on whether Brazil is ready to host an event as big as the Olympics. With almost all of the Confederation Cup matches witnessing some type of conflict between security forces and protesters, the world can only wait and see if this trend will continue into the World Cup and Olympics.

All this unrest leaves us wondering whether or not there is an opportunity for sponsors to step in and play hero to the Brazilian public. Although there are the obvious economic benefits involved in a sponsorship deal, there is also an intangible benefit for a sponsor who is perceived to have gone out of their way to establish a good will program for people in need. It will be interesting to see if the top sponsors such as Coca Cola, GE, Atos, Dow, Omega, Panasonic, P&G, Panasonic, Samsung, VISA or McDonalds will adjust their efforts. By no means will sponsors be expected to solve Brazil’s socio-economic struggles, but perhaps a plan targeted at aiding some of the 21% of Brazilians living below the poverty line would be a good place to start.

Social media will also play a huge role in the coming months in determining how sponsors react to the political unrest in Brazil. Protestors heavily utilized this resource to organize their efforts in June, and should continue to use it to build momentum for their cause going into the World Cup. The impact of social media has already been felt at events like this. As we mentioned in a previous post, the call from thousands of LGBT supporters to boycott the Sochi Games revealed the amount of pressure that can now be put on events and sponsors by ordinary people. With a heightened awareness of social issues caused by social media, how can sponsors prevent themselves from becoming associated with the controversy that always seems to surround competitions of this caliber?

While the issues found in Brazil are more structural than the social controversy caused by the Russian government, they should be considered just as significant. Sponsors will likely try to shift this focus on to the basic themes of these types of games: equality, respect and courage. But when you consider the financial gains to be made by these companies, at what point do sponsors need to consider assisting the people of a country that are arguably just as responsible for making these events happen in the first place? Conversely, can the people rightfully expect sponsors to invest even more money just because they have deemed their government ineffective? If so, this would open the door to many more issues that could lead to unreasonable expectations being placed on sponsors in the future.

Our solution: TOP sponsors need to be dynamic and consider the variations necessary relative to the host’s sociological and economic climate.  Some of these sponsors are already adept at this, and not only put up the majority of funding for prestigious events, they often times stick around after the event has concluded to address local issues. Take for example the impact McDonalds has had in South Africa after the 2010 World Cup. Their Coach the Coaches program helped develop youth soccer in South Africa by educating coaches and provided equipment for young players. They also helped address issues in infrastructure by donating a bus to the local public transportation center (public transportation remains a central issue in the Brazilian unrest as well). And while a single bus won’t change the world, it shows a level of respect and appreciation to the community in which they were a guest. Perhaps at this point, perception will come down to how effectively sponsors are able to communicate to the people that they are making their best efforts to help.

In Brazil, it could prove to be crucial for sponsors who can make these games more about joining forces with the people of Brazil, rather than the ROI they expect to gain at the people’s expense. By addressing key issues, sponsors may have the opportunity to highlight the sense of humanity in their efforts.

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NASCAR seeks new partner for its B-level series

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Ricky Stenhouse Jr. will be sporting this new paint scheme powered by Nationwide for his 2014 Sprint Cup debut.

With Nationwide Insurance announcing that it will no longer continue its entitlement partnership with NASCAR’s B-level series, the nation’s top motorsports organization will have to find a new company that is willing to be the one of the major faces of a sport who’s interest has been steadily declining in recent years.

The decision by Nationwide to abandon its sponsorship wasn’t necessarily driven by poor performance. They have actually chosen to increase its overall investment in NASCAR sponsorships by increasing exposure on Sundays, where the fan base is about twice the size of its current Saturday series. Nationwide will be sponsoring up and coming Sprint Cup driver and two-time Nationwide champion Ricky Stenhouse Jr., continuing its TV ad campaigns featuring select Sprint Cup drivers, all while increasing its online media and good will efforts.

For Nationwide, this decision seems like a no-brainer. Several studies developed by Performance Research indicate that there are solid returns to be made from an increased commitment to NASCAR’s top series. Nationwide’s longstanding relationship with NASCAR and its fans acts as a testament to these findings. With that being said, who will be willing to step into Nationwide’s shoes when the sport has been surrounded by so much controversy lately?

One can’t deny the sheer amount of people that consider themselves NASCAR die hards. On average, the Nationwide Series has pulled in about 1.7 million viewers throughout the 2013 season. While these numbers are down from last season, 1.7 million viewers is still a great number to have on a weekly basis over a 10 month season. However, one has to be wary when you see the fact that NASCAR’s ratings have been on a steady decline since 2005, sinking to their lowest level in 10 years

Some consider this downturn in recent interest as a direct result of a 2011 rules change which restricts drivers to only earn points towards one series per season. This means the big time Sprint Cup names that typically draw in fans to the Nationwide Series are no longer a key part of the action each week. Given the one-two punch of a decline in ratings and fewer big name drivers, who knows how long it will take the series to gain traction with its fans again.

And what about the issue of integrity?  The recent allegation of race manipulation against the Michael Waltrip Racing team has seriously damaged the competitive spirit of the sport and may spell the end of MWR. NAPA Autoparts has already pulled their sponsorship, with more sponsors waiting until the dust settles at the end of the season to decide if they are willing to continue their efforts. This wasn’t the first time MWR has been caught cheating either… Anyone remember the fuel tampering scandal of 2007?

From the outside looking in, one has to wonder how much of this continues to go unnoticed. While the organizing authority has enforced strict penalties on the team involved in the latest scandal, nothing may be able to make up for the damage done to the public’s perception of the sport.

This news comes in light of NASCAR signing a multi-billion dollar TV contract with FOX and NBC. While these two recently established networks are more than happy to open its doors to so many racing fans, it begs the question, why have ESPN and TNT been so willing to give up one of the only sport that consistently competes with the NFL for viewers each week? Perhaps NASCAR’s fan base isn’t as stable as this new deal would suggest. With NASCAR’s ratings in decline, who could blame the two incumbents for not wanting to pay any additional rights fees in order to renew their contract?

Sports Business Daily released the terms and conditions for NASCAR’s new entitlement sponsorship, expecting the new sponsor to shell out around $30 million a year in rights fees, activation and media expenditures. At this price, NASCAR is guaranteeing unmatched fan loyalty. Our very own Jed Pearsall will attest to the influence a NASCAR title sponsorship will have on consumer behavior. In a previous study on NASCAR fans, he said, “NASCAR fans provide one of the highest levels of brand loyalty and sponsorship support of any one of the hundred or so sports and special events we’ve tested.” In any case, it would be safe to say that any prospective sponsors should carefully consider paying a premium to replace Nationwide as title sponsor of NASCAR’s B-level racing series.

Image Source GFR Racing

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International Soccer Sponsorship Provides GM with a Global Reach

Big things have been happening across the pond as October marked the signing of the largest jersey manufacturing deal in history. Manchester United has reportedly signed with Nike for £300 million over the next five years, giving Nike the right to manufacture Manchester United game kits (kits are apparel worn by football players during games) until 2019. This historic deal shatters the previous record held by Spanish football club Real Madrid and sponsor adidas, worth £248 million over eight years.

Not only does Manchester United receive a significant cash infusion, which is likely to be used for signing more star players to their roster, but also included in the contract is the right to sell the jerseys. Sales could generate another £15 million a year, pushing the potential worth of this contract close to £375 million.

The latest partnership with Nike isn’t the only record-breaking deal England’s most commercially successful football club struck this year. This past May, Manchester United worked a deal with Chevrolet for the American car company to become the principal sponsor of the team starting in the 2014/2015 season, replacing insurance company AON. The deal is supposed to run until 2021 and will be worth $559 million.

This deal doesn’t mean the end of AON’s involvement with the club. AON has partnered with Manchester United as the official sponsor of the team’s training facility and practice kits in a $240 million, 8-year deal. They will also assist the club with player analysis and risk management practices. While they were unable to secure the principal sponsorship again, AON’s reinvestment in the Manchester United brand speaks volumes about the marketing power of the world’s largest football club.

The partnership with Manchester United sponsorship solidifies GM’s position in the English Premier League. Chevy has also worked a deal as the official automotive sponsor of Liverpool. The deal with Manchester United did not come without controversy for the American auto brand. GM’s Global Chief Marketing Officer, Joel Ewanick, resigned the day before the Manchester United deal was announced. It has been said that the deal with Manchester United was the breaking point for GM, which asked Ewanick to resign on his own terms.

While there is much doubt in the GM camp regarding the value this sponsorship will bring, they cannot question the global reach their new partnership will extend to them. With over 650 million fans in nearly every country on the planet, Manchester United’s brand is recognized by millions of people all over the world. Receiving that kind of exposure will certainly bring Chevrolet a new level of awareness globally, especially among the 325 million Manchester United fans in Asia alone. Pair those numbers with the current trends in the auto industry outlined by the current KPMG report, and the Manchester United / Chevy partnership seems like a match made in heaven.

It should come as no surprise that Asia is slated to become the world’s next big market for autos. As rapidly developing countries such as China and India begin to witness an increase in the purchasing power for their ever growing middle class, the demand for quality, name-brand automobiles should provide the auto industry with plenty incentive to shift the focus of their global supply chain to Asia. GM has already positioned itself to take advantage of this growth by establishing an Asia-Pacific headquarters in Shanghai, as well as developing several manufacturing plants throughout China, Russia, and India. Three countries that, when grouped together, are expected to surpass the US in automotive sales in the next 5 years.

These moves mark a significant shift in the corporate philosophy of GM, showing that in order to maintain their expansive share in the automotive market, a serious effort needs to be made to get the attention of the people living in developing areas. Although the team at GM recognizes that there is foreseeable future in the Asia-Pacific region, bringing awareness to these people will come at a cost for the American auto giant.

In order to fund their global football initiative, GM has been forced to cut spending on domestic advertising and sponsorships. Last year it was forced to eliminate advertising on Facebook and even cut their ad in the Super Bowl. While their new sponsorship with Man U and the One World Futbol Project paints Chevy in a positive light to footballers everywhere, GM could appear to be neglecting the needs of its own city.

As we mentioned in a previous post, Detroit is desperately seeking a corporate sponsor for its new hockey stadium. However, with a price tag of $650 million, a new stadium for only the US’ 3rd most popular sport pales in comparison with the Manchester United deal. Although soccer fans around the globe will begin to recognize Chevy, this iconic symbol of American ingenuity may risk losing the support of the city that fondly refers to itself as Hockeytown, and built the company up to where it is today.

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