Bad Behavior: Losing in Sport Sponsorship
It may be past but it's not over. A previous lead story.

By Alycia de Mesa
brandchannel.com
September 4, 2006

Floyd Landis, a recent example of an athlete caught up in a scandal, could have been the golden boy for Swiss hearing aid maker Phonak. The pro cyclist made a dramatic comeback in a particularly challenging stretch of the Tour de France to emerge as the winner and become only the third American to capture the title. The prestigious victory could have translated into a remarkable promotional campaign for Phonak, a rather obscure team sponsor—at least on a global brand level.

Instead, Landis was stripped of his title after testing positively for illegally high testosterone use, and Phonak became the sponsor heard around the world as it retreated from professional sports sponsorships. The firm announced a new strategy to sponsor the arts, where, presumably, the risks are more manageable (the proportion of artists on drugs notwithstanding).

Since Landis' fall from grace, it’s been widely reported that Phonak was confronted with charges of illegal drug use by its team members. As of August 2006, Phonak announced the dismantlement of its cycling team. Given these and similar train wrecks, why would any company want to risk millions of dollars in a sponsorship deal?

“Sports are a surrogate,” says Fred Popp, CEO and partner of SME Branding, a sports branding agency. “The brands are investing because it’s the closest way a brand can come to providing consumer experiences that [the consumer] can’t experience in everyday life. It’s essentially hero worship.”

According to Sport Business Associates, global sponsorship of professional sports teams in 2006 is estimated to reach US$33.6 billion—money spent in the hopes of creating more awareness and revenue for the sponsoring brand.

Total dollars spent just four years ago was estimated at $24.4 billion, so the numbers clearly reveal an upward trend for sponsorships. Increasingly, sponsors have become a significant part of the marketing mix for companies outside the traditional circle of athletic gear, beer, soft drink and fast food companies. Today’s sponsors are technology, insurance, media and financial services companies, to name just a few.

Of course, market research and due diligence help firms assess sectors and properties that may make for a good match. As Mike Paul, president of MGP & Associates, a PR crisis and reputation management firm, points out, some companies, such as truck makers, may want to be associated with, say, a notoriously rough and tumble football team if that image aligns with its own brand positioning. Other companies, such as Phonak, will pursue another route, such as a family-oriented association.

Unlike product placement, which briefly may leave a brand associated with a movie flop or failed TV show if things don't pan out, a corporate sponsorship stamps a brand image on pro teams or superstar athletes. Risks are high, and something—or someone—can always cause problems.

“There’s no question a sponsor is impacted by [these events],” Paul says. “It’s a matter of whether that impact is positive or negative... It’s a myth that all publicity is good publicity.”

The amount of risk a company is willing to take depends in large part on damage assessments. In the sports world, controversy isn't necessarily a bad thing, and some headline-grabbing incidents might even provide firms with a bargaining chip in closed-door negotiations.

For some companies, though, any price is too high. iShares, a brand within Barclays Group Investment, was slated to take over Phonak’s place as team sponsor in 2007 but declined following the scandal. Liberty Seguros, the Spanish unit of American insurer Liberty Mutual Group Inc., withdrew from sponsoring a Spanish cycling team after learning of its director’s involvement with a Spanish doping scandal implicating 60 cyclists.

Contracts containing clauses that precisely define ethical conduct are now the rule. Just prior to the Landis scandal, two other major-brand cycling sponsors announced strict new policies in an effort to manage the effects of doping incidents.

But with pro teams obtaining new viewership mediums—cable, satellite, Internet, mobile phones, etc.—sponsorships haven't lost their appeal, not as long as firms can reap the rewards of a multi-channel approach.

Billy Campbell, president of Discovery Networks in the United States, recently told the New York Times, that the marketing benefit of cycling sponsorship by his company had “paid off tenfold,” due largely to Lance Armstrong winning his seventh Tour de France last year. Armstrong wore a Discovery Channel shirt and helped promote the cable TV channel.

SME’s Fred Popp puts things in perspective: “Teams can have brand positionings and long-lasting legacies—but athletes are just mortal. The opportunity for these brands is to invest in decades of greatness [instead of] a few moments of an athlete’s life.”