Adidas and sponsorship – when marketing takes a difficult call

Wednesday 27th, January 2016

There is recent news that Adidas is evaluating its sponsorship of athletics events. These are held under the umbrella of the international governing body, the IAAF of which Adidas appears to be the biggest sponsor.

When the big boys come out to play

The world of commercial sponsorships is a lucrative one for all involved – the individual athletes, the sporting federations, broadcasters and the companies involved. For brands, there is the favourable spin-off that comes from perceived brand associations with the finest sportsmen and women. This directly translates into brand revenue from the legions of testosterone-fuelled, sports-crazed fans.

It is no wonder then that the kind of money being forked out is eye-popping. Football club Manchester United is close to earning a billion a year from kit sponsorship alone. The more the mass appeal of the sport, the higher the stakes usually.

Brands have choices – and risks too

The choice of celebrity endorser is never an easy one. Mega-brands like Adidas, Nike and Reebok have plenty of athletes to choose from. A rough rule of thumb is that these deals are typically long-term deals; usually for five years or longer.

In that sense, the brand takes a conscious risk in evaluating an athlete’s potential and the possibility of getting a good return on its investment. Michael Jordan, Nike’s first celebrity endorser came on board sometime in the mid-eighties. Despite having retired over a decade ago, he still commands an annual US $50-60 million endorsement fee thus demonstrating his lasting brand value.

Another star who has had enduring value is Tiger Woods who was also a Nike signee when he went professional in the mid-nineties. Despite the occasional blips in his career owing to personal indiscretions, his personal brand value has remained strong after a temporary dip.

Playing it safe

Speaking of Tiger Woods, everybody remembers his revelations of extra-marital infidelity from a few years ago. The astonishing thing is that while some sponsors dropped him from their endorsements, there were others who stayed on.

Clearly, brands have a difficult choice to make here. To what extent does a celebrity endorser’s personal life impact the brand? If Tiger’s story is a case study, then clearly little. Brands have factored his performance on the course into their marketing mix, but his personal life clearly falls outside their area of concern. And that’s as it ought to be.

Others such as Accenture and Gillette dropped him. Surprising that Accenture took such a decision because its tagline ‘High performance delivered” seems like a perfect fit with all that Tiger represents!

Still, it is up to each brand to make its choices. Some brands (and their corporate cultures) are completely risk-averse, while others are smart enough to separate emotion from hard-nosed reality.

Adidas has withdrawn its sponsorship on the back of reports that there were far too many scandals relating to doping in international athletics competitions. There is also talk that the company was unhappy that Seb Coe, the IAAF’s President has a close relationship with Nike and has taken decisions that favour Nike.

While these may be convenient smokescreens, the plain and simple reason appears to be that Adidas was not getting its money’s worth. Athletics events are not mass spectator sports. A marketing savvy company like Adidas will inevitably look to maximising its returns, particularly when it is in a dog-fight with a much bigger competitor in the shape of Nike.

Unfortunately, such decisions are sometimes taken in response to considerations that would not stack up from a marketing perspective. For example, the company may see a corporate mandate in encouraging less popular sports and events. However, there is no real return in terms of payback with such events typically commanding lower viewership.

It is a good sign that Adidas has chosen to pull the plug on a ruptured relationship than continue to pour money into something that was no longer of value.

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