Brand’s who clearly define goals with regard to an endorser have the best opportunity to find and secure the most appropriate and effective talent for the given objectives. Some of those goals are measurable, but others are far less tangible. It is important that the brand’s values are mirrored by the chosen talent. Brand authenticity is tough to fake these days and even if the talent resonates with the desired target audience, if the brand and the talent’s values are contradicting there is little hope of achieving the desired objectives. Choosing talent that can achieve the desired objectives while still upholding and promoting a brand’s core values is crucial.

Defining goals and objectives is often difficult due to the inherent struggle with measuring the effectives of an campaign. In determining what metrics are key performance indicators, brands need to dial into their goals and search for what kind of performance indicators are relative for the goals and objectives. Again, the more specifically a brand can define what it hopes to achieve with an endorser the better the brands chances are at finding performance indicators that can accurately track and measure the effectiveness of a campaign.

Jennifer Anniston and Smartwater…? Looks like a good match!

Dallas Mavericks’ owner Mark Cuban even went as far as to say that it is not a matter of “if” it will happen, but of “how much.” But will placing a logo on a jersey really be as valuable as some are projecting the costs?

Looking at a similar progression of stadium naming rights, the once hot new advertising space has been devalued and is now almost considered passé, as some of the U.S.’s finest new stadiums are having trouble placing a partner’s name on the building.

If a sponsor were to shift its sports spending from a naming rights deal to a jersey sponsorship, the only real benefit would be the increased visibility. Unless the sponsor also bought the rights to the team name, which is highly unlikely considering the already high barriers to increased sponsor exposure in certain areas, such as when the MLB tried to place “Spider-Man 2” promotions on the bases, it may not be as valuable as it is made to seem.

When a brand is affixed to a stadium, much like the Staples Center, the brand’s equity is increased due to the constant visibility and word of mouth benefits associated with going to an event at the facility as opposed to the game only visibility and deterioration of established sporting traditions that jersey sponsorships offer.

While jersey sponsorships may become the hot new way to advertise in sports, it is missing pieces to become truly valuable to a brand at the price it will command. It may make more sense for some brands to look towards naming rights deals as a comeback trend if many others rush to jersey sponsorships if and when a major North American league starts to offer it.

Last Friday, Darren Rovell made an interesting blog post on CNBC’s Sports Biz website. In his entry titled, “RIP Cooperstown,” he talked about how this year’s class has triggered concern about the popularity and relevancy of the Hall, especially because several star players who were caught using PEDs are not being inducted.

I have had the opportunity to visit the National Baseball Hall of Fame and it was quite an experience. Walking past the plaques of baseball greats such as Babe Ruth and Willie Mays create an atmosphere of respect and reverence. While I must admit Rovell brings an interesting point to the forefront, the Hall of Fame Selection Committee is correct in not allowing those who have cheated America’s pastime into Cooperstown.

There’s something to be said about playing the game the right way and performing at the highest level. If Cooperstown begins to let in the Pete Roses and the Mark McGwires, then it undermines the veneration that the Hall has established and continues to demand. Even though attendance figures may be struggling, baseball fans will lose respect for the game’s ultimate honor if Cooperstown decides that attendance is more valuable than reverence.

- Chris Cohen, Intern

Part III – The future

According to Phil de Picciotto, the president for athletes and personalities at Octagon, Woods’ scandal and the rising value of endorsement deals will lead to more companies pursuing insurance on their endorsement deals.  Woods’ situation is groundbreaking because he was previously considered too big to fail, and now that his image is tarnished brands are realizing that a scandal can hit any athlete.  Companies will also begin to push for shorter contracts in which compensation is more heavily based on incentives tied to athletic performance.  According to Bill Duffy, the chairman of BDA Sports Management, companies will also begin to more carefully examine potential endorsers through background checks conducted by private investigators.  Another possibility, although less beneficial for companies, is to companies to use former athletes instead of current ones to endorse their products.

As long as young people are given large amounts of money, fame, and power, there will always be scandals involving athletes.  Moving forward, companies need to recognize the gravity of the potential risks that endorsement deals present, and work to mitigate them.  The aforementioned Tiger Woods scandal is still relatively recent, and it will take many more months before determining if his endorsement career will end up like Kobe Bryant’s or like Barry Bonds’.  So far, many of his endorsers have kept him because he is so involved with their brands that terminating his contract would present immense risks.  However, if they had insurance on his endorsement deals, I doubt that many would stay with him.  Although not as frequently or believably as Bryant, Woods has issued public apologies for his behavior, and has worked to improve himself.  He has since resumed playing golf, and will attempt to repair his public image and regain some of his lost endorsement deals.  Only time will tell if he is successful or not.

Another high-profile athlete who will be facing many of these issues is Reggie Bush.  He has been involved in a four year long investigation by the NCAA into his alleged acceptance of improper gifts worth $300,000 while he was still an amateur at USC.  The NCAA recently announced sanctions against USC, and while Bush has so far received relatively little backlash, that could change if the Heisman Trust decided to strip him of his 2005 Heisman Trophy.  Bush has said very little about the investigation up to this point, and never met with investigators.  As Barry Bonds discovered, this is a very dangerous strategy to employ.  Bush has thus far not been damaged by his refusal to comment, but if he is stripped of the Heisman, his refusal to speak about the allegations for such a long period of time will certainly hurt his public image.  Bush currently has lucrative endorsement deals with companies such as General Motors, Subway, Adidas, and Red Bull.  While none have terminated his deals thus far, I am sure that they are all tirelessly thinking of how to respond to this issue.  If he is stripped of his Heisman, there will be immense public pressure to take action.

Filed under: Uncategorized ]]> http://proventures.wordpress.com/2010/07/15/handling-scandals-3/feed/ 0 ProVentures Reggie Bush http://proventures.wordpress.com/2010/07/08/handling-scandals-2/ http://proventures.wordpress.com/2010/07/08/handling-scandals-2/#comments Thu, 08 Jul 2010 17:16:16 +0000 ProVentures http://proventures.wordpress.com/?p=1102 ]]> This is the second post in a three-part series examining different ways in which companies can respond to scandals involving their athlete endorsers.  The last part looked at what companies can do when their endorsers are able to repair their images.

Part II – When the athlete has a complete downfall

Although this particular situation worked out well for most of Bryant’s sponsors, there are many situations where athletes are unable to repair their images.  For example, in the early part of the 2000s, Barry Bonds had endorsement deals worth millions of dollars with companies such as MasterCard and KFC.  He did this despite his reputation for shying away from fans and the media.  However, in 2003 he was accused of taking steroids as part of the BALCO scandal and in 2007 was indicted on perjury charges related to his steroid use.  While he has never been convicted of anything, his refusal to talk publicly about the issues only compounds the negative public opinion surrounding him.  He has handled the issue very poorly, and his sponsors received very little benefit, if any, from his endorsements.

In such a situation, there are things that companies can do to protect their investment in the athletes.  Many companies include morality clauses in their contracts so that they can terminate the contract in the event that the athlete does something that could damage his/her reputation.  However, these clauses are often a contentious point of discussion.  Athletes usually want a morals clause to give the company the right to terminate the contract only in the event that they are convicted of a felony.  This is because convictions usually take a long time to occur, and first-time offenders can generally agree to a plea bargain involving only misdemeanor charges.  However, companies usually want the right to terminate the contract after “any occurrence of moral turpitude.”  This broad language gives companies greater flexibility in terminating the contract.  Payments can also be structured in a way such that the company will only lose a minimal amount of money if the contract is terminated.  For example, by paying the athlete mostly at the end of the deal, the company is protected in the event that the contract must be terminated midway through the deal.

A recent area of growth has been insurance against endorsers getting involved with scandals.  This has been a rising trend recently, and requests for such insurance have greatly increased since Tiger Woods’ well-publicized scandal in late 2009.  While most companies have been purchasing insurance in the event of death or injury to their athletes for many years, insurance against public scandals is a relatively new concept.  According to Dan Trueman, who runs the enterprise risk department at R.J. Kiln & Company, there was an eightfold rise in inquiries into this type of insurance between September and December of 2009, around Woods’ scandal.  Generally, the more specific the language in the morality clause of a contract is, the more expensive insurance is.  This is because there are more possibilities in which an athlete could violate the clause.

An issue for companies involving this type of insurance is the amount of money that they should insure.  In addition to the actual dollar value of the endorsement contract, companies must consider the damage that scandals bring to their brands.  In the case of a specific product that is tied to a celebrity, companies can use the difference in sales prior to the endorsement and after the athlete started endorsing the product.  It is a safe assumption that this increase in sales is tied to the athlete, and that the company stands to lose that much in sales if the athlete is involved in scandal.  For example, Tiger Woods has a signature line of Nike golf shirts which saw a defined increase in sales after he started endorsing them.  However, it is more difficult to ascertain the amount of insurance needed when the athlete is involved in general branding around a company, rather than just endorsing a specific product.  For example, Tiger Woods was involved in general branding activities with Accenture, a technology consulting company.  Rather than involve him directly in branding specific services out of their broad variety of offerings, they involved him in general branding around their company.  It is much harder for them to determine the value that he brings to their brand, and in such situations it is therefore very hard to know how much insurance to purchase.  The seven publicly traded companies that had been sponsoring Woods saw a collective $12 billion loss in their market values in the month after Woods announced he was taking an indefinite leave from golf, and a sizeable percentage of that number is likely due to the Woods scandal.

Next: A look at the future of managing these types of issues.

This will be the first post in a three-part series examining different ways in which companies can respond to scandals involving their athlete endorsers.

Part I – When the athlete is able to repair his/her image

When Arnold Palmer signed the first known athlete endorsement deal with a soup company for $5000, few could predict that it would eventually lead to the nine-figure endorsement deals of today.  As hundreds of millions of marketing dollars are being poured into athlete endorsements, prominent brands are becoming increasingly tied to a particularly celebrity endorser.  Several brands, such as the George Foreman Lean Mean Grilling Machine, can attribute their success almost entirely to a celebrity endorsement.  Due to the vast power of celebrities to make or break a product or even an entire brand, they must be compensated accordingly.  However, as companies spend more and more money on these lucrative endorsement deals, there is a great deal they stand to lose if things do not go right.  Celebrities do not always have the most professional image, and indeed many prominent endorsers have had high-profile personal issues.  Companies stand to lose quite a bit when their endorsers encounter personal troubles – in addition to the money they pay the athletes, their brand is also tarnished, and they can potentially lose most of the additional revenue garnered from the endorsement, if not more.

However, in the event of an issue involving one of their celebrity endorsers, there are certain steps that companies can take to mitigate the damage caused to their brand.  It is often much easier if the athlete handles the situation properly.  For example, Kobe Bryant was charged with sexual assault in the summer of 2003.  At the time, he was a star on a team that had won 3 straight NBA titles, and had lucrative endorsement deals for brands such as Sprite, McDonald’s, and Nutella.  Shortly after the allegations were made, many companies, including Coca-Cola and McDonald’s, decided to terminate their contracts with Bryant.  Nike, which had signed Bryant away from rival Adidas with a 5 year, $45 million contract just before the incident, did not terminate him, although it decided to suspend use of his image and marketing his new shoes for a year.

However, Bryant and his team handled the situation very well.  He immediately issued a public apology, admitting that he did make a mistake, although he claimed that the encounter was consensual.  Throughout the investigation, he was cooperative, appeared often in public, and was extremely apologetic.  Eventually, the rape charges were dismissed in 2004, which corroborated Bryant’s story.  His basketball career was better than ever, as he was the NBA’s leading scorer in 2005-06 and the MVP the following season.  His endorsement deals returned very quickly, and there is almost no negative stigma associated with him today.  In 2007, his endorsement deals were worth $16 million per year, and in 2009 he was the world’s second highest paid athlete, having earned $45 million during the year.  He was featured on the covers of three major NBA video games and also appeared in a commercial for Guitar Hero.  Coca-Cola, which had previously terminated his contract to promote Sprite, even re-signed him to promote its Vitamin Water brand.  Nike, who he was still under contract with, began extensively promoting him again.

Both of these companies handled the situation very well.  Coca-Cola had an older contract with Bryant at the time of the incident, and had been using Bryant to promote Sprite for several years.  The company decided to terminate his contract because it was close to ending anyway, and it stood to lose a great deal by associating the Sprite brand with Bryant.  It then waited until his image was repaired, before signing him to a endorsement contract.  Nike, which had just signed Bryant, probably paid him a large amount of money up front.  Rather than terminate him, and lose all of this money with no return, they decided to continue paying him, but not use him in any marketing activities.  This proved to be a great decision, as they benefited greatly from his endorsement once his image was rehabilitated.  Bryant also gained other lucrative endorsement deals, such as with Black Mamba watches (pictured above).

Next Up: On Friday we will examine companies’ options when their athletes are unable to repair their image.

Visa sports sponsorship portfolio goal is simple—reach the most consumers possible. To accomplish this objective, the company has set up partnerships with the three biggest events on the planet, the World Cup, the Olympics, and the Super Bowl. Visa has created global campaigns that take advantage of the magnitude of these events and aligns the brand’s message with the unforgettable action.

The upcoming 2010 FIFA World Cup will have much of the globe’s attention and Visa will be there right along with each fan. Visa’s campaign, “Go Fans,” will be augmented by a digital activation of the sponsorship surrounding famous soccer broadcaster Andres Cantor’s over-the-top goal call. Visa will launch a customized YouTube channel where fans can upload their own goal calls with a chance to weekly prizes or a grand prize trip to the 2014 World Cup in Brazil, according to the Sports Business Journal. Supporting Visa’s aim to reach the most consumers possible, the FIFA-themed marketing campaign is being promoted in over 90 markets.

Similarly, Visa’s use and most recent marketing campaign for the other major global once-every-four-year event maximizes the payment services brand awareness throughout the world. Visa has been a partner of the Olympics since 1986 and is also a sponsor of the Paralympics. Visa’s “Go World” campaign continues the company’s easily adoptable geographic angle and supports every markets’ athletes. The company also enjoys the distinction of being the only card accepted at the Games. During the 17 days of the Vancouver Olympics, spending by international visitors tallied $115 million, a 98 percent increase from a year prior.

Visa sponsorship of the NFL allows for the company to create many unique opportunities for its card-holders, such as access to the Super Bowl, Pro Bowl, and NFL Draft. These sweepstakes engage fans and build brand awareness for Visa through the NFL’s vast popularity in the U.S. The Super Bowl and Pro Bowl provide Visa with an opportunity to use the events for hospitality for the company’s many partners that help drive Visa’s business since the company doesn’t sell anything itself, but relies on the sales of other companies’ products and services to drive its own business.

The ability to reach a mass number of consumers without regionalizing campaigns is a big part of Visa’s sponsorships. The company has aligned with the best and most prominent events in the world and has done a great job of activating around these events both through digital and traditional means. Visa has made a point to prove to consumers that “It’s Everywhere You Want to Be.”

Sports sponsorship brand assist/turnover (a final judgment on the company’s sports marketing portfolio): assist

Three of the top four sponsors of the Boston Marathon, Adidas, Gatorade, and Poland Spring, can target the marathon participants, who most likely have a need or interest in each company’s product. Increasing brand equity at an event of this magnitude can be accomplished through activating advertising campaigns, special events, premier signage location, and on-site experiential marketing that leverages the events large consumer population amongst the runners and fans.

Brands also have the opportunity to ambush official sponsors by signing a deal with a specific runner, such as what Nike did with Boston Marathon winner Robert Kiprono Cheriuiyot and with last year’s New York Marathon winner Meb Keflezighi. ASICS holds the exclusive footwear and apparel category rights for the New York race. Nike’s lone official major U.S. marathon sponsorship is with the Chicago Marathon.

Financial companies may play the biggest role in marathon sponsorships as John Hancock presented the Boston Marathon, while ING and Bank of America hold the title-sponsorship for New York and Chicago. The high visibility of the marathons in major metropolitan areas makes it a valuable partnership for increasing and enhancing brand awareness.

Brands that sponsor marathons also receive the added benefit of associating with a specific community. The loyalty to an area along with sponsoring an event that promotes good health can leave a lasting impression on consumers. There is a strong ability to connect with consumers through marathon sponsorships that many other sports don’t offer. Athletes, fans, and consumer merge in many instances at a marathon allowing for brands to reach a concentrated and specific section of the market without wasting resources on marketing initiatives that may not reach the intended target.

Sponsors can receive additional value when a celebrity decides to participate, increasing attention and coverage of the event, such as when Sean Combs ran the New York Marathon in 2002, Katie Holmes in 2007, and Ryan Reynolds in 2008 or Will Ferrell’s participation in the Boston Marathon in 2003 and Lance Armstrong competing in Boston in 2008 after spending the previous two years running in the New York race.

Marathons give sponsors the probability of a strong ROI. It’s a good cause with a large reach that is a high-performance and casual sport all rolled into one event. It has the ability to capture consumer attention, especially if a brand’s activation integrates several physical marketing aspects during the race, as well as taking advantage of digital tools to achieve maximum exposure.

Brands that sponsor marathons have one day to complete objectives, but successful activations will provide long-distance results.

The advent of reality TV has changed the landscape of television programming, now marketers need to tweak product placement as a tool in the marketing mix if it is to provide benefit in the future.

Product placement needs to be more hands-on and involved during the entire show if it’s going to get value from the investment. Donald Trump’s “The Celebrity Apprentice” on NBC provides opportunities for brands to incorporate a product into the subject of the episode with events revolving around the particular show’s sponsor. March 21’s episode featured the Kodak brand as contestants had the task of running a storefront. It provided a two-hour program long look at Kodak’s products and delivered a worthwhile message to consumers.

Product placement has the ability to drive sales, but seconds of exposure don’t do much in providing value and differentiation in today’s product saturated media world. Already involved with Ochocinco, Reebok, Motorola, and Degree all have an opportunity to take advantage of “The Tournament”, but it must be in a big way for it to be successful, much like everything Ochocinco does.

In the cluttered financial services segment, it is of upmost importance to differentiate one brand from a competitor. The Hartford uses five different sports sponsorships to target several specific demographics that are a high probability for seeking the Connecticut-based firm’s insurance and investment expertise.

The Hartford is a founding partner of the U.S. Paralympics since 1994. The company’s sponsorship is centered on an ability rather than physical limitation philosophy, which The Hartford has used to sell disability insurance. The Hartford’s corporate partnership with the NCAA gives the financial service corporation tremendous exposure during the month of March. The deal reaches thousands of alumni and promotes a commitment to education. The Hartford is the exclusive mutual fund sponsor with the NCAA; however State Farm holds the insurance rights in that sponsorship tier.

The company’s partnership with Richard Childress Racing will be continued for the 2010 season. The deal includes a full paint scheme on the Clint Boyer No. 33 Chevy for three races, in addition to being featured as an associate sponsor for the other 33 races. The Hartford will have its trademark stag on the Jeff Burton No. 31 Caterpillar Chevy, as well. The NASCAR sponsorship gives the Hartford the ability to publicize its automobile and home insurance to fans that develop strong brand loyalty to sponsors of their favorite drivers. Sponsorships of Kenny Perry and Elizabeth Janangelo serve as The Hartford’s entry into the PGA and LPGA Tour. The company can reach a wealthier demographic through golf, but its relatively small sponsorship of two mid-level golfers doesn’t do much to add to The Hartford’s sports sponsorship portfolio. The Hartford is also a partner of the Naismith Basketball Hall of Fame and a presenting sponsor of the Bob Cousy Point Guard of the Year Award, aligning the brand with the greatest players in NBA history.

The Hartford’s sports sponsorships are focused and directed at acquiring clients for certain services. Each sponsorship plays it role and aligns with the company’s mission while reaching a variety of potential customers.

Sports sponsorship brand assist/turnover: assist