Sports Sponsorship Issues - Term Paper Example

?Running Head: Sports Sponsorship Sports Sponsorship Introduction In recent times, there has been an increase in the need for sponsorship in both sports and recreation. The funding for the sports has not been confined only at the elite level but has also been at the grass-root. The growth in the sports sponsorship sector has been accompanied by the need for its better understanding with the view of maximizing its potential. There are many studies that have been conducted since the 1990s which are aimed at examining trends and opportunities in the sector. This paper is aimed at analyzing the extent of sponsorship by indicating what has been spent and by whom with the aim of arming the readers with the relevant information in planning for sponsorship. Sports sponsorship is a golden opportunity for companies to market their products on a large scale. Whenever companies align their products with the value of the sport, the result is that the customers associate the success of the brand with that of the sports team that they sponsor. The linkage of brands and the emotional connection that the target consumers have for particular sports in one of the largest market places in the world can have a profound impact on the market share of those brands. Brands and corporations can have the power to leverage upon the sponsorship of certain sports with the goal of building a long lasting relationship with the customers. The emotional bond that sports enthusiasts attach to the sports can be transferred to a brand if the sponsorship is right. Such bonds are not usually temporary and in most cases last for a lifetime (Dobson & Goddard, 2001). This presents the corporations with the perfect opportunity to capitalize on those opportunities by building customer loyalty which may be the cure for surviving economic uncertainty in the long term. Discussion TV programming now encompasses a vast diversity in terms of coverage of sports events. There are many channels that are now dedicated entirely on sports. Studies that have been done on the Spanish population reveal that 70% of them watch news where about 20% is dedicated to sport which is the same amount of time dedicated to politics (Garcia & Rodriguez, 2002). It is no wonder that sports stars now enjoy the same level, if not more, of prestige as do the politicians. Olympic Games and world football are the two major events in the world that drive people in a frenzy. These events easily bring countries where they are being held to a standstill. The previous events and most recently the Olympics in Beijing, previous world football events like the recent world cup in South Africa are some of the examples of the enthusiasm that is attached to sports. The physiognomy of a country changes rapidly due to hosting an international event. The Olympics for example changes both the physical as well as the economic standing of the country it is held in. PricewaterhouseCoopers, an audit firm conducted a study in 2004 which placed the impact of the Sydney Olympics as having been 2.78% of Australia’s GDP in that year. The 1996 Atlanta Games also accounted for 2.41% of the American GDP. Professional football also has a profound impact on the GDP of a country. In Spain, for example, the industry accounts for 1.7% of the GDP and rises to 2.5% when in relation to the service sector. With such immense numbers both in terms of revenue and the attendance by the people, corporations see it as a perfect opportunity to market their products. Real Madrid, a football club in Spain, is one of the most reputable worldwide. The election of Florentino Perez as its president had a profound effect on the club. He is responsible for the success of what was referred to as the Galacticos era or the Galaxy players. These players were world class and they were brought in order to improve the image of the club. Perez referred to the club as being both a brand and content. The brand was built on the human resources who included the players, coaches and the management team. Real Madrid does not recruit players to sell t-shirts; when the board of directors decides to recruit star players, what it is doing is to hand over to the marketing department a football player who has a set of assets with a high potential market value, though he is signed up as a player. (Kase et al, 2007) The management of the team argues that the acquisition of the best players in the world has a positive in the fact that the player contributes more to the club financially than he costs. The clubs image is fostered through this means leading to sales in clubs t-shirts and other merchandise. At the beginning of Perez’s tenure, the marketing revenues were relatively equal to the stadium collections. However, with the growth in the image of the club, the management began to diverge in order to increase the marketing revenues. It only took three years since the inception of this model for the club to be declared the richest in the world in 2006. The halo effect also ensured that there was no turnover in the area of sponsors. The club has a wide range of sponsors. At this time, they had sports clothing manufacturer Adidas, medical insurance company Sanitas, car manufacturer Audi, beverage producers Pepsi and Mahou-San Miguel, Unilever and Telefonica (Kase et al, 2007). The club claims that it selects its sponsors from among those that it feels it has shared values with. These include traditions, good reputation in the area of corporate social responsibility and in high standards wherever performance is concerned. The club?s main sponsor is Siemens Mobile which enjoys full worldwide rights and has its brand name splashed on all the clubs merchandise including the playing kits. The international sponsors that include Audi, Pepsi and Adidas enjoy a slightly limited number of rights worldwide. National sponsors enjoy only those rights that are within the national market which include Unilever and Mahou. There is something interesting worth noting in the area of sports sponsorship. This is the fact that the sport that has the largest number of followers in not usually the one that sponsors prefer. Furthermore, those sports that offer free advertising or those that have TV broadcasts are also not necessarily the ones preferred by sponsors. Assuming that every person is loyal to a single sport, it would follow that by sponsoring the top ten sports in a given country, then one might reach a large number of the target customers. A study done by the ASB in Australia indicated that there were 6.25 million people who attended sports events in 1995 (Madden, 2000). The top 10 sponsored sports accounted for only half the number of people that attended sports in that year. The data presented in the studies in the Australian sports industry suggests that the sheer immensity in numbers of attending sports enthusiasts does not attract sponsors. The number of people who attend certain sports in person may also greatly differ to the numbers who follow the events as spectators on television. The concentration of sponsors on certain sports more than in others is referred to as bunching. Certain types of sports attract sponsors more compared to others. The trends show that sponsors prefer events by men and also established sports. There is no indication as to whether team sports are preferred to individual sports and vice versa. The study of the Australian sports industry in 1995 indicates that soccer secured just over half the sponsorship that athletics did although the number of enthusiasts that attended the athletic events were insignificant in comparison to those that attended soccer events. Bunching is witnessed mostly in the motorsport industry where a large number of sponsors cram with a relatively low following in the number of enthusiasts attached to the sport. The desire for bunching may be due to the desire to thrive in the same environment as the competitors or in order to get special treatment in some events. Sports sponsorship is not usually a win-win situation for brands and the teams being sponsored. Many people think that the attachment of brands to a certain sports event is an easy way of marketing. The risk that is attached to this kind of sponsorship is immense. The BMW and Oracle team sailboat was eliminated in an event held in Valencia, Spain in May, 2007. The elimination occurred in the qualifying phase even before the event had begun. German media reported that the companies had lost $200 million in the failed venture (Ewing, 2007). The disappointment from such a failure was expected to result in the companies withdrawing from sponsorship of the events in the future. A worst-case scenario was the Deutsche Telekom case that was a nightmare from the company?s public relations point of view. This led from the sponsorship of a professional cycling team by the giant German telecommunications company that was in the center of a doping scandal. The scandal was compounded by the fact that former members of the cycling team and who were under the umbrella of the company?s T-Mobile had admitted that they had been using performance enhancing drugs in the 1990s. Team doctors, as they resigned, dealt a further blow to the company?s reputation when they admitted that they had administered the blood-booster referred to as EPO to the riders. This case and others like it have led to the dwindling number in sponsorship of cycling teams. The Discovery Channel withdrew from the sponsorship of the Lance Armstrong team even after the team won the event in 2005 (Ewing, 2007). Conclusion Sports sponsorship is an opportunity for companies to promote their products on the international and national market by tying them to reputable sports and teams. The enthusiasm that is attached to sports is usually long term and if companies can capitalize on this emotional attachment to these sports, then they can build customer loyalty for their brands which might aid in their survival in hard economic times. However, and despite the lucrative nature of the venture, companies must be aware that the investments have an aspect of risk attached to them and should therefore carefully plan them. References Dobson, S. & Goddard, J. (2001). The Economics of Football. Cambridge University Press: Cambridge Ewing, J. (2007). Sports Sponsorship: A Risky Game. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/globalbiz/content/jun2007/gb20070607_140258.htm on 23rd January, 2012 Garcia, J. & Rodriguez, P. (2002). The determinants of football match attendance revisited: empirical evidence from the Spanish Football League. Journal of Sports Economics 3(1), 18-38 Kase, K. et al. (2007). The proto-image of Real Madrid: implications for marketing and management. International Journal of Sports Marketing & Sponsorship 8(3), 211-242 Madden, J. (2000). Understanding sponsorship in sport and recreation. Sport and Recreation Business Information Series No 3 retrieved from http://fulltext.ausport.gov.au/fulltext/2000/vic/binfo3.pdf on 23rd January, 2012 Read More