Slide1: The Fast Track to Marketing in China Mike Keymer Megan King Krittee Manoleehagul Amanda Weimer Ryan Young 2008 Beijing Olympics


2008 Olympic Sponsorship:Research Objectives: 2008 Olympic Sponsorship: Research Objectives Focus specifically on the impact of Olympic sponsorship on multinational companies. Seek to understand the marketing advantages and opportunities Olympic sponsorship provides for its owners, particularly in the specific context of the Chinese marketplace. Attempt to compare the value of sponsorship across firms that have widely-varying strategic goals. Gain better understanding of the numerous factors behind the decision to sponsor the Olympic Games.


2008 Olympic Sponsorship:Primary Research Questions: 2008 Olympic Sponsorship: Primary Research Questions “Under what conditions are the benefits of Olympic sponsorship most valuable?” Explore the strategic factors affecting sponsorship benefits Focus on both China and the international community. “Are the true costs and benefits of Olympic sponsorship quantifiable?” Examine the factors underlying the financial measurability of both costs and benefits.


2008 Olympic Sponsorship:Hypotheses: 2008 Olympic Sponsorship: Hypotheses Olympic sponsorship will be more beneficial for firms who are entering the Chinese market than for those who will not. Sponsorship benefits will be greatest for firms who are seeking similar worldwide recognition. At the “most quantifiable” end of the benefits spectrum- sponsoring firms will experience an immediate boost from the advertising blitzes from the Olympic Games. Non-monetary benefits will be very difficult to quantify but we are curious to learn how sponsoring firms systematically approach this problem. Due to the prestige of the Games and the economic climate of China- Olympic sponsorship provides a significant net benefit to the entities that make this commitment.


2008 Olympic Sponsorship:Olympic Marketing History: 2008 Olympic Sponsorship: Olympic Marketing History Prior to 1984, Olympic host cities were forced to underwrite the cost overruns. 1976 Summer Games left Montreal saddled with US$1 billion in debt (repayment to be completed in 2006) 628 sponsors and suppliers paid a total of US$7 million For 1984 Summer Games, Los Angeles was the only serious bidder U.S Olympic Games Organization head Peter Ueberroth proposed a new Olympic sponsorship model aggressively marketing Olympics should yield a profit for organizers model was heavily supported by a few dozen large sponsorships Ueberroth’s plan succeeded, and the 1984 Summer Olympics yielded a mammoth profit of US$223 million 1984 Los Angeles Summer Games


2008 Olympic Sponsorship:TOP Sponsors, Exclusive Product Categories: 2008 Olympic Sponsorship: TOP Sponsors, Exclusive Product Categories Life Insurance/Annuities Timing, Scoring, and Venue Results Services Audio, TV, Video Equipment Information Technology Services Information Technology Equipment Retail Food Services Consumer Payment Systems Film, Photographics and Imaging Non-Alcoholic Beverages Electricity Supply Protection Services Wireless Communication Management


2008 Olympic Sponsorship:Prior Research: 2008 Olympic Sponsorship: Prior Research Research into Olympic Sponsorship is highly limited No consistent methodology or conclusive evidence among studies Some try to identify key metrics like incremental sales, or changes in brand awareness and image Abnormal returns in sponsors’ stock prices around the announcement of Olympic sponsorship agreements (Farrell & Frame, 1997) concluded that sponsorship of 1996 Atlanta Games had an average negative impact on shareholder value Another advocates measuring the impact based on strategic objectives like raising brand awareness, appropriating certain brand values, developing customer relationships … staff motivation, and even developing a reputation as a responsible, caring company” (Osmon, 2004). Generally speaking, most studies have hypothesized a positive effect of sponsorship for a company (Pope, 1998).


2008 Olympic Sponsorship:Four Identifiable Cost Categories: 2008 Olympic Sponsorship: Four Identifiable Cost Categories Direct Cost of Obtaining Sponsorship Rights Promotion Costs Costs incurred by a sponsor while promoting its sponsorship of the Olympic Games. Value-In-Kind Contributions Goods and services provided directly to the Olympic committee Opportunity Costs Costs of foregoing a chance to sponsor another event Highly speculative estimates


Slide9: Direct Cost of Obtaining Sponsorship Rights Determined by IOC. Not officially released to the public Estimates ranges from US$40 – 60 million Ex: Lenovo paid ≈ US$65 million in sponsorship fee Exception: Omega only provides Value-In-Kind contributions Promotion Costs Marketing and advertising costs including staged events that showcase athletes and corporate banners. Determined by sponsors. Usually defined as multiples of direct cost of sponsorship fees (i.e. McDonald’s: 1x, Lenovo: 2 to 3x, Coke: 9x) 2008 Olympic Sponsorship: Costs are Quantifiable by Sponsors


Slide10: Promotion Costs (cont’d) Ex: Lenovo could spend up to US$130 – US$195 million Ex: VISA to promote credit education programs to help Chinese to understand benefits of using credit cards Value-In-Kind Costs Costs depend on products and/or services rendered by the sponsors Ex: Lenovo to provide, test, install, and maintain at least 13,500 PCs at the Games Ex: McDonald’s fed more than 300,000 athletes, coaches, officials and spectators at the 2004 Games in Athens 2008 Olympic Sponsorship: Costs are Quantifiable by Sponsors


2008 Olympic Sponsorship: Sponsorship Benefits: Key Findings: 2008 Olympic Sponsorship: Sponsorship Benefits: Key Findings No consistent methodology used by marketing managers to evaluate the benefits of Olympic sponsorship Inability to link changes in sales to specific causes, such as sponsorship promotions Cannot decisively say that an Olympic sponsor will realize financial gains in this endeavor In this respect, our hypothesis was incorrect Benefits are not easily quantifiable Interviews with TOP Sponsors’ executives reveal that non-monetary (brand) benefits are just as important as monetary ones Companies’ strategic objectives are most important determinant of perceived benefits


2008 Olympic Sponsorship: Primary Strategic Benefits: 2008 Olympic Sponsorship: Primary Strategic Benefits Develop international brand credibility for a local company Ex. Lenovo showcases its firm as a world-class PC player in hopes of driving global sales. Evolve global brand identity. Ex. McDonald’s leverages Olympic audience to launch “balanced” lifestyle platform to combat global negative sentiment toward the restaurant provider. Penetrate a new market. Ex. Visa wants to increase credit card usage in China through educating the Chinese consumer and increasing awareness of the product with sponsorship advertising.


Slide13: Exclusive marketing rights for one of the preeminent international events Affiliation with the positive brand image and values of the Olympic Rings Launching point for entry into new markets or local/international strategies Access to key strategic relationships within government and industry Scarce resource which provides distinct advantages over competitors The costs associated with the sponsorship are also high Acquiring the sponsorship (i.e., sponsorship fee, value-in-kind, etc.) The Olympic marketing campaign itself Additional costs incurred to realize the long-term benefits of the sponsorship BUT… The benefits of Olympic sponsorship for a firm are real and substantial 2008 Olympic Sponsorship: Conclusions


Slide14: Sponsorship Benefits – Sponsorship Costs = Net Value to the Firm Quantifying benefits from sponsorship is difficult No clear metrics to measure direct effects of sponsorship Dependent on strategic use of sponsorship The computation of costs should be easily determinable May be measured internally but not transparent to the public Indirect costs far exceed direct sponsorship fee No conclusive findings about sponsorship value Several hypothesized calculation methodologies applied in the past Both intangible benefits and dilutive effects exist Firm management must determine how the Olympic sponsorship can be utilized to further a specific strategy in order to realize the maximum return from its investment. 2008 Olympic Sponsorship: Conclusions


Slide15: International platform for strategic change International penetration into a local market Global expansion for a local brand Market Strategy Existing Position Target Goal China Example 2008 Olympic Sponsorship: Conclusions


Slide16: 2008 Beijing Olympics Questions?