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Sponsors Take a Stand

By opposing Indiana’s ruling and speaking out publicly of their support for LGBT inclusion, NCAA has set the bar for sponsors to react.

By opposing Indiana’s ruling and speaking out publicly of their support for LGBT inclusion, NCAA has set the bar for sponsors to react.

The hot topic this week centers on Indiana, but not just the NCAA Final Four that kicks off tomorrow. The controversial Indiana “Religious Freedom” law will allow businesses to turn away gay and lesbian customers and the NCAA, among other sports properties including NASCAR, are taking a stand against Indiana’s religious ruling.

In our 2014 IEG presentation we discussed corporate responsibility to social issues and how important it is to take a stand. People may not like what a brand sponsors, how a brand sponsors, or who sponsors and this negative reaction for decisions made can affect brand equity, rankings, and participation. Brands that say something, right away, fare better than brands that ignore the situation. We found that 44% of those surveyed felt sponsors should say something and be engaged in social issues.

We talked about these issues last year regarding both the Sochi Games and the LA Clippers – negative sentiment can be generated in an instant and tarnish a brand faster than it can be promoted. Controversies and reactions to those controversies continue to play a role in a sponsor’s brand health and sustainability.

By opposing Indiana’s ruling and speaking out publicly of their support for LGBT inclusion, NCAA has set the bar for sponsors to react. With the Final Four in full swing, and such strong opposition for this law, sponsors of the NCAA would fare best to issue a statement and quickly. If they can engage in this social issue to increase public sentiment and decrease the risk for negative associations, they may get more out of the Final Four than they imagined.

As the Final Four unfolds, we will be watching sponsors to see if they follow the NCAA’s lead or wait for the storm to pass.

photo credit: <a href=”http://www.flickr.com/photos/31355653@N07/8257073694″>Mason Plumlee | Duke Blue Devils vs. Temple Owls – Dec. 8th, 12</a> via <a href=”http://photopin.com”>photopin</a&gt; <a href=”https://creativecommons.org/licenses/by/2.0/”>(license)</a&gt;

Additional Links:

http://www.cbssports.com/collegefootball/writer/jon-solomon/25123924/ncaa-expresses-concern-over-indiana-religious-freedom-law

http://www.thenewcivilrightsmovement.com/davidbadash/nascar_becomes_latest_to_denounce_indiana_anti_gay_religious_freedom_law

http://www.sportingnews.com/nba/story/2015-03-29/indiana-religious-freedom-act-pacers-nba-statement-response-criticism-wnba-fever-mike-pence

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Cuba: Opportunity in the Midst of Challenges

When it comes to sponsorship, Cuban athletes as well as other aspects of the sports industry, could benefit from the recent renewed ties with the US and the talk of lifting the US trade embargo.

When it comes to sponsorship, Cuban athletes could benefit from the recent renewed ties with the US and the talk of lifting the US trade embargo.

Just three months ago, President Obama’s announcement that the US and Cuba plan to restore diplomatic relations has created a unique opportunity for US businesses, in particular event and sports sponsorship.  Major brands like AMEX, Nike, and Coca-Cola are waiting anxiously on the side lines to take advantage of opportunities as soon as the US trade embargo is lifted. This will not happen immediately or promise to be an easy transition, but offers prospects to change Cuba’s sporting industry.

All professional sports in Cuba were banned in 1962 and with the US trade embargo in place, US Companies have been forbidden from capitalizing on sponsoring all sporting events, Cuban athletes and facilities. Instead of advertising billboards surrounding the ballparks, portraits and slogans of Castro dominate the fields. No sodas or alcohol have been available at sporting events, and local food options have been scarce. Equipment is outdated and falling apart. Athletes keep a meager 20% of their salaries with the government pocketing 80%. Admission to games is free or for a nominal fee – Cubans come to simply enjoy the game.

“Sport is the victim of limitations of the embargo,” said Tomás Herrera Martínez, the director of international relations for Cuba’s sports ministry and a bronze medalist in basketball at the 1972 Munich Olympics. “Sport is one of the main rights of the people, but sometimes there have not been enough resources.”

For a country where sponsorship has been non-existent for the past 50 years, huge benefits exist for all those looking to get involved in Cuba’s sports and events market.  Infrastructure improvements and resource availability for hosting events will become possible. For example, if a financial service like AMEX sponsored the Cuban national baseball team, they could have the opportunity to bring banking basics to a large portion of the country through an in-person experiential form of marketing. IT companies could provide sponsorship and provide access to internet services, a foreign concept to most Cubans as less than 5% of the population has internet access.  Sporting events will help stimulate the economy and provide more jobs for Cubans. This could start as early as 2016 with a few Major League Baseball teams interested in an exhibition game during spring training.

Companies in the food and beverage industry will look to provide sponsorship and make their brands available at all sporting events too. Huge opportunities exist for sports merchandise as well as concessions at the stadiums. Coca-Cola, for example, is anxious to enter one of its last untouched markets. Like Cuba, Coke was banned in Myanmar for many years, and recently obtained its license to operate by creating value for the overall Myanmar economy.  It’s likely that Cuba’s new investors will look to Coca-Cola for guidance on entering a new market with due diligence and responsible business conduct.

Sponsorships could also provide important resources for the athletes, such as updated equipment, proper nutrition, and fair compensation. Just recently it was announced that Cuba’s Athletics Federation is now allowing athletes’ autonomy over sponsorships. The federation’s choice of brand for all athletes, regardless of their preference, has been German owned adidas until 2 years ago when track athletes started wearing Nike. This change has opened a door for US companies to sponsor Cuban athletes and increase their brand awareness in this emerging market. Nike is on the forefront of this change but Under Armor is looking for the next window of opportunity as these sponsorships spread to Cuba’s other most popular sports, baseball and boxing.

Despite doubts and obvious challenges with the Cuban government, economy, and infrastructure, this will be the new journey in sports and event sponsorship for US businesses.  Prospects will just have to be patient.

photo credit: Cuba Havana via photopin (license)
photo credit: Paralympics 2012 – 35 via photopin (license)

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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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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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Army Pulls Out of NASCAR Sponsorship

The US Army, a presence in the NASCAR experience for nearly a decade, recently announced that it will no longer sponsor a NASCAR team as part of its branding and recruitment efforts. At one point the Army was a primary sponsor of NASCAR. They moved to Stewart-Haas Racing to sponsor Ryan Newmann in 2009. In exiting their sponsorship of SHR, the Army is effectively cutting its sponsor relationship with the motorsport indefinitely.

It’s big news made bigger by the fact that the move comes just days before the House takes up an annual spending bill that includes language intended to prohibit military sponsorship of sports.

The language in that bill is a result of an ongoing effort on the part of Reps. Betty McCollum (D-Minn) and Jack Kingston (R-Ga) to ban the spending of defense dollars on sponsorships (they’ve targeted NASCAR sponsorship in particular). We’ve been following this political initiative with our Sponsor Eye since Rep. McCollum took up the issue in 2010, and subsequently lost a House vote to keep the military out of sport sponsorships in 2011. You can see some of our tweets about it here and here, with links to Wall Street Journal and USA Today pieces.

While we can’t be certain that the bill is the whole reason the Army made its decision to pull out of NASCAR, we have a hunch it played a not-so-insignificant role. In any case, it’s an issue worth our two cents.

Let’s look at the Reps.’ argument: they assert that the approximately $136 million sliver of the defense budget spent on sport sponsorship is wasteful, as it doesn’t garner enough return in recruitment numbers.

Before moving forward, can we take a step back and look at some math?

The 2012 Department of Defense spending budget is around $707 billion (that’s billion with a B). At $136 million allocated for sport sponsorship spending, Reps. McCollum and Kingston are making a big fuss about a %.02 savings. And at only $8.4 million going towards NASCAR sponsorship specifically, it’s an even smaller margin. With government spending at an all-time high, going to battle over such teeny savings seems pretty petty.

Decimal points aside, who are two politicians with absolutely zero background in sponsorship effectiveness to say that military sponsorship of sport — in particular, NASCAR — is ineffective on the grounds that the recruitment numbers aren’t there? The Army has exceeded its recruitment goals every year since it started its relationship with Stewart-Haas Racing. But that’s almost beside the point.

Having been on the inside of researching military sponsorships, we have seen enormous opportunities and in some cases, very strong return on objectives —but maybe the Reps aren’t focusing on the objectives that really matter.

The goal of a sponsorship is never about sales, or recruits, or numbers alone. Putting a  logo on the side of a race car isn’t going to suddenly bring a spike in sales or enlistees. Humans are more complex than that. Sponsorship is more complex than that. The Army’s relationship with NASCAR is — or at least, should be — about building national awareness and an emotional connection with fans, and not necessarily only those fans who are in their target recruit demographic of 17-24 year old males. There are older and younger siblings, parents, teachers, and coaches who love NASCAR, and who influence the life and career decisions of those they’re close to. When the Army builds an emotional connection with NASCAR fans, they’re not only reaching the people who show up at the event. We’d be interested to see if the sponsorship effectiveness report that influenced the Army’s decision took the more emotional side of the partnership into account, and looked at the Return on Relationship that NASCAR sponsorship is best at.

When government officials recently questioned the value of so-called “junk food” sponsors involved with the Olympics we were left thinking the same thing: politicians should stick to legislation, and stay out of making calls on sponsorship.

Image source.

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