Category Archives: Current Events

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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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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Oracle stages remarkable comeback, but it’s still New Zealand’s Cup

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While Oracle Team USA may have defended the America’s Cup, they hardly represented the United States as they chose to field only one American sailor. Meanwhile, it was truly a national effort for the Kiwis as even the government gave its support to the America’s Cup challengers, providing $36 million dollars in funding for the program to bring the cup back to Auckland. The people of New Zealand were equally responsible for making this storied competition happen. Not only did their tax dollars fund a large portion of the team that was made up of 80% Kiwis, but the marine industry in New Zealand developed and manufactured most of the innovative technology that was showcased in the cup.

Many New Zealanders have to be wondering about the future of Emirates Team New Zealand. With this latest effort turning out to be unsuccessful, the country will not receive the NZ$600 million dollar boost to the economy it has received in its previous two defenses of the cup. The program’s shortcoming poses a tough question to policymakers in New Zealand: do they continue to spend public money at a potentially unsuccessful program, in a time where the country is considering austerity measures in other areas of government?

The effects of an America’s Cup victory, and defense, are clear to tourism in New Zealand. Contributing about NZ$15 billion to the nation’s GDP annually, tourism in New Zealand has typically seen a 12.5% increase in international visitors when they have the cup. However, this industry has been known to struggle in the absence of the Auld Mug.Image

As you can see, tourism rates in New Zealand were booming after Team New Zealand successfully defended the cup in 2000. When they were unable to defend the cup in 2003, growth in the tourism sector became stagnant and was further decimated by the global recession.

Even though the Kiwis were unsuccessful in this past run, they received a great deal of press from competing for the America’s Cup. Domestically, nearly a quarter of the New Zealand population watched the first weekend of racing. The cup was also broadcast in over 170 countries, bringing exposure to an untold number of international viewers. The United States had over a million people watching each of the first two races. However, these numbers were short lived when viewers dropped from one million to about a quarter million viewers per race for the rest of the series. While Team New Zealand sponsors such as Emirates, Nespresso, Toyota, Omega and Camper expected a greater return in the US considering how much it cost to invest in an America’s Cup campaign, they may have gained the respect and admiration from the famously loyal New Zealand sailing community for making one of the most prestigious and thrilling events in America’s Cup history possible.

With global economic conditions seeming to improve as of late, press from the America’s Cup may have provided the push that will cause New Zealand’s tourism figures start to grow again. While they may not realize the same growth rates as the early 2000s, we’re hoping the New Zealand government will realize a great enough return to justify sponsoring another challenge.

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When Can Stadium Naming Rights Turn a Corporation into a Hero?

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Corporate America: These fans could be cheering just as mightily for your brand soon enough.

Despite the crippling economic situation in Detroit, it seems like it is “all systems go” for the construction of a new home for the Red Wings in the city affectionately known as “Hockeytown.”

Although the City of Detroit filed for Chapter 9 bankruptcy in July in the largest municipal bankruptcy filing in the United States, a state board declared a unanimous vote the same week approving plans for a new downtown hockey arena.  The $650 million project will be funded, in part, with an estimated $285 million in tax dollars – even though the city is in an estimated $18-$20 billion in debt.

Detroit has become a place where police, on average, take an hour to respond to calls for help and 40% of streetlights are powered off in an attempt to save money.  Vacant buildings and empty schools litter the landscape of the former industrial powerhouse.  On the face of it, a new stadium dependent on public funding just doesn’t appear to be an appropriate allocation of property taxes given the dire situation of Detroit city services.

Advocates for its construction, however, view the 18,000-seat arena as the centerpiece in a development plan to inject life into the 45-block area linking midtown and downtown Detroit.  Michigan Governor Rick Snyder hopes the proposed retail, office, and parking space around the arena will create a better long-term environment for the city.

Completion of the area is anticipated for 2017, but to this point, there has been no public mention of any corporations vying for naming rights of the Red Wings’ new home.  The proposed arena would be home to one of the most storied franchises in all of professional sports and would supplant the Palace at Auburn Hills as the premiere indoor concert venue in Metro Detroit.  There is a lot riding on this venue, and it has the potential to breed a very positive influence on a very depressed city.  According to our research, this is the perfect situation for big business to find sponsorship success by playing the hero, rather than the exploiter.

In the first independent study of its kind, Performance Research revealed the critical “Naming Rights & Naming Wrongs” of stadium sponsorship.  When do companies get it right, you ask?  In situations such as this where there is a strong need for a new venue, and there is a deep appreciation for corporate contributions that help make the new stadium a reality, that’s when!

Some pertinent highlights from the study: Nearly 40% of respondents opposed the idea of changing the titles of existing stadiums and arenas to accommodate corporate naming rights, regardless of the reasoning.  However, companies that struck deals with new and developing arenas experienced a positive impact on public opinion with 6 out of 10 fans. Local supporters embraced named stadiums that were new because they often felt they benefitted personally as a result.  ‘Lower taxes,’ ‘more sports opportunities,’ and ‘lower ticket prices’ were the most appreciated benefits cited by fans.

Although hockey is not discussed, this intriguing USA Today infographic highlights the lucrative nature of stadium naming rights today.  Joe Louis Arena, Detroit’s current house of hockey, is one of only three in the NHL without a corporate sponsor.  Our prediction?  Look for the new Detroit arena to buck this trend and shop its naming rights this time around.  And, if corporate America is smart, they will surely listen.

If a corporate sponsor emerges to help facilitate Detroit’s new downtown developments, the results would be tremendous for everyone involved.  A city in desperate need of salvation would see government funding allocated where it is needed most.  The new venue and surrounding infrastructure would provide a well-timed ray of economic hope for Detroit. And its residents, as well as those outside of the area, will recognize that sponsor’s commitment in making it all happen with substantial PR gains in the process.

That is how to become a corporate hero in one easy step.  What’s not to like?

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LGBT Community Calls for Boycott of Olympic Sponsors

ImageRussian president, Vladimir Putin has led a series of harsh political actions against homosexuals over the past month, including passing one resolution that bans propaganda of all non-traditional sexual relations.  With Sochi set to host the 2014 Winter Olympic Games, worldwide protest of this reform continues to grow leaving many calling for the International Olympic Committee to demand retraction of Russia’s laws under the threat of boycott.

The IOC has promised that it would work to ensure members of the LGBT community, athletes and spectators alike, safe participation in the games without experiencing any discrimination.  In a recent statement, the IOC claims to have received “assurances from the highest level” of Russian government that the anti-gay propaganda law will not affect anyone participating in or attending the Games.  Despite these assurances, many remain skeptical.  Would you feel safe?

Human Rights Campaign President Chad Griffin recently challenged NBC Universal, which paid $4 billion for exclusive rights of Olympic coverage, to fully disclose Russia’s human rights violations during its broadcasts.  NBC’s response left much to be desired, as they agreed to “provide coverage of Russia’s anti-gay laws IF the controversial measures surface as an issue during the upcoming Winter Olympics.”

Social issues of this magnitude are typically not on the minds of corporate sponsors when they are inking multi-million dollar contracts.  Their concern lies in putting together innovative and effective campaigns that will maximize their ROI.  With the Sochi Games fast approaching, however, opposition to Putin’s war on the gay community is gaining steam.

In addition to the rampant and growing calls on Facebook for boycotting anything Russian, the latest target on social media is aimed squarely at Olympic sponsors.  The controversy will challenge companies like AT&T, Coca-Cola, General Motors, McDonald’s, Panasonic, Samsung, VISA, and Procter & Gamble that have made huge commitments to sponsor all that is positive about the Olympic movement.  However, with the unanticipated turmoil in Russia, they run the risk of being associated with the event for all the wrong reasons.  The controversial nature of this issue leaves them vulnerable to offending the LGBT community to the point where they may lose the group as consumers for years to come.

Coca-Cola, sponsor of the Sochi 2014 Olympic Torch Relay, has a longstanding history of support for LGBT events and causes.  Coke has repeatedly stood behind their statement that they do not condone intolerance of any kind.  Despite this, it has refused to weigh in on the controversy, claiming that it “does not take positions on political matters unrelated to our business.”

Olympic sponsors will continue to feel immense pressure to make a statement against Russia’s policies as the February Opening Ceremony nears.  The Olympics are almost always accompanied with some form of controversy.  This includes, most recently, protests against Beijing’s 2008 Olympic Summer Games due to China’s human rights track record.  However, given the recent passion surrounding LGBT equality and the proliferation of social media since 2008 the potential for an issue to directly impact official sponsors in this capacity is unprecedented.

Regardless of how this plays out, the bigger question for sponsors will remain.  What level of responsibility should sponsors of the Olympics bear?  Where do you draw the line between sports and politics?   Is there truly an effective reaction for sponsors to take that will satisfy anyone in situations like this?

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