‘Going for Gold in the Pool and on the Balance Sheet: Olympic Athletes and Corporate Sponsorships’
LEAD STORY-DATELINE: The Australian Financial Review, September 18, 2000.
If you're a male in your early 20s driving around the Gold Coast in a customised SV 99 Commodore Holden in early September 2000 - and you get to keep the car if you win a swimming race - you must be Grant Hackett! The car, painted 'Hackett Gold', was one of the 'inducements' in Holden's sponsorship agreement with the then Olympic hopeful - get the gold, keep the car.
Corporate sponsorship of athletes and sporting teams is not new however, the trend is now towards including significant performance-based components into these contracts. Inducements range from cars and all-expense-paid dream vacations to cash. According to Burbury and Whyte of The Australian Financial Review 'the bigger the win, the greater the booty from an estimated pool of $760 million spent annually on sports sponsorships'. Performance-based inducements also act as a form of insurance to sponsors - if an athlete does not perform at expected levels, financial and market exposure is reduced.
So, besides cars and vacations, what is an Olympic gold medal worth? Some sports sponsorship experts believe that, conservatively, a gold medal at the Sydney 2000 Olympics could be worth $4 million over 4 years - a cool but conservative $1 million per year. That doesn't include additional inducements for mention of the sponsor in media interviews or wearing of the sponsor's logo during photo opportunities. Or multiple sponsorships!
So why were companies prepared to pay this kind of money to Matt Shirvington (Adidas, Channel 9, News Ltd), Michael Klim (Qantas, Speedo, Westfield, Mazda, Nintendo, Braun), Susie O'Neill (Telstra, Westfield, Capilano Honey, Westpac, Qantas), Cathy Freeman (Nike, Qantas, News Ltd, Channel 7) or Ian Thorpe (Sydney Water, Qantas, Adidas, Mazda, Channel 7, Uncle Toby's, Omega, Westpac)? It's all about association (remember Pavlov and classical conditioning?) - associating their product or service with the success of the athlete, even before the premier event. In high profile sports, such as swimming or track in Australia, a broken record means that the sponsor benefits from the additional positive sentiment expressed by consumers about the athlete's success. How many Australians watched Ian Thorpe smash record after record both pre and during the Olympics and talked about it over coffee at work or home?
For sporting apparel and equipment companies, their products are often viewed by the community as being directly related to the athlete's success. When Cathy Freeman crouched in the starting blocks of the 400 metres in Sydney, the Nike body suit she wore not only give her a psychological advantage over her competitors; it also paved the way for lucrative Nike endorsements, with billboards of Cathy in the suit papering the Sydney CBD overnight. While Nike denies that they provided financial inducements to Cathy to wear the suit they spent millions developing, her win and post race comments that she really believed in the Nike Swiftsuit would have been worth whatever they might have paid. Another sponsor, Qantas, would also have been pleased when Cathy commented about how her performance has made people from all kinds of backgrounds who 'call Australia home' very happy.
Corporations are looking for athletes who also present well in the corporate world or have an image that appeals to a particular market. Cathy Freeman is intrinsically associated with 'Aboriginal Australianness' in the eyes of the world and Susie O'Neill's blond hair and blue eyes make her especially appealing in Asian markets.
As lucrative as these sports sponsorship contracts are, some athletes' managers see them as outdated, wanting instead to negotiate 'business relationships' such as share portfolios/options in recognition of the increased sales, profitability and media exposure the association brings.
Athlete managers also encourage their clients to register their nicknames, signatures or likenesses as trademarks to protect these valuable commodities and ensure that the athlete benefits from licensing revenue. Greg Norman turned his 'Great White Shark' nickname into a multi-million dollar business and Telstra has entered into a licensing/royalty agreement with Ian Thorpe for cordless phones and mobile phone accessories bearing his name. Other Australian elite athletes are hoping for similar success with trademarks such as 'Superfish' (Perkins) and a butterfly symbol (Madam Butterfly Susie O'Neill).
If this makes you want to put on your swimsuit, pull out the trainers or hop on your bicycle with dreams of multimillion dollar sponsorships, spare a thought for the 90% of Australia's 1400 odd elite athletes who do not receive financial endorsements or who receive a limited or less lucrative range of endorsements. Even though Michael Diamond won gold in shooting at the Atlanta Olympics, he only received endorsement contracts for Perazzi guns, RC shot shells and Uniserve mining equipment. It will be interesting to see what follows his gold medal performance in Sydney. And finally, recognise the talent and the time and work put in by the Perkins, O'Neills and Freemans before any company was even remotely interested.
Talking it over and thinking it through
Discuss the learning theory and principles that corporations should consider when deciding to enter into a sponsorship arrangement with a particular athlete.
Discuss the reference group factors that corporations should consider when deciding to enter into a sponsorship arrangement with a particular athlete.
When Michael Jordan announced his retirement in January 1999, Nike's share price dropped 5%. Explain why this happened and the particular challenges faced by corporations when they use athletic endorsements/sponsorships as part of their marketing strategies.
Survey five friends or family members to determine if:
a - they believe that athletic endorsements have an impact on their own consumer behaviour: if so, why; if not, why not? for all products or only specific types?
b - do they feel that the money paid to athletes is 'worth it' to the corporations: if so, why; if not, why not?
The training of many of Australia's elite athletes is funded by public money through agencies such as the Australian Institute for Sport. When these athletes succeed and enter into lucrative personal endorsement contracts do you believe they 'owe' something back to the Australian people? Why or why not?
Thinking about the future!
Form a discussion group with family or friends. Select two Australian athletes who were gold medal performers at the Sydney Olympics and still intend to compete; two Australian athletes who were medal winners at the Sydney Olympics who either have or intend to retire; and two Australian athletes who were 'up and coming' at the Sydney Olympics. Monitor both their athletic performances and endorsement contracts/potential in the run up to the 2004 Summer Olympics in Athens. What conclusions can you draw about the correlation between athletic performance and corporate interest? If you were a corporation who had spotted your 'up and comers' in Sydney and entered into sponsorship arrangements at that time, how pleased would you be with your decision?
Corporations use celebrity endorsers such as athletes because their target consumers like and admire them, identify with them, aspire to be like them, and will likely engage in behaviours (such as consumption) recommended by them. They build the association between their products and the positive aspects of the celebrity through their promotional campaigns using the same principles used by Pavlov to associate the bell with the meat to elicit salivation.
Form a discussion group with family and friends to explore how and why governments and non-profit organisations such as charities, religious institutions and universities could use celebrities, in particular athletes, as endorsers.
'A fortune in gold', The Australian Financial Review, September 18, 2000, pp. 30 and 31.
'Corporate athlete takes his share', The Australian, September 16 - 17, 2000, p. 14.