Branding Strategy Insider

Sponsorships: Threatening Brands?

What is the link between financially strapped companies and expensive sporting tie-ups?

Back in 2004, in an earlier, more innocent age, Northern Rock was proud to spend £25m on sponsoring Newcastle United FC. Northern Rock chief executive Adam Applegarth looked ahead to five successful seasons together and spoke of 'a long-term relationship'. Barely three years later, everything had turned sour.

It was a similar story in 2007 for West Ham United. A £7.5m deal, worth £2.5m a year, was agreed by package holiday firm XL Holidays. But with two years of funding still to be paid, XL went bust and West Ham was left sponsorless. Last month, Manchester United suffered the same indignity when AIG announced that it would not renew its four-year sponsorship deal when it expires in 2010. AIG is also exploring options to terminate its current £56m deal. With 80% of the insurer owned by the US taxpayer and 97% of its shareholder capital lost, a glamorous global sponsorship looks a little incongruous these days.

Three big-money sponsors. Three business debacles. Coincidence? There are plenty more examples. Take Royal Bank of Scotland - currently the biggest business basket case in Britain. Aside from losing a whopping £28bn last year, RBS is also notable for the extraordi-nary largesse of its sponsorship department. Despite its imminent nationalisation, you could still spot the brand on Andy Murray's right sleeve in Melbourne last week, and it will be all over the British and US Open golf tournaments this summer. It's the main sponsor of the 6 Nations rugby tournament and its brand is proudly plastered across its own F1 racing car.

Could there be a link between the kind of companies that embark on gratuitous levels of sponsorship and those currently suffering the most in these difficult times? I think so. Their troubles are not being caused directly by their sponsorship deals - though the millions off the bottom line hardly help. The real connection is more indirect. Big, dumb sponsorships are always going to be popular with the kinds of companies that think big, and don't sweat the details.

Event Sponsorships: Forgetting the ROI?

It all started with a flash of American superiority and a bruised royal ego. In 1851, a yacht owned by the New York Yacht Club easily beat 15 of the fastest British yachts in a race around the Isle of Wight. Surprised at the result, Queen Victoria was reported to have asked who had come second and was politely informed: 'There is no second, your Majesty.' The America's Cup had begun.

After 156 years and 38 contests, the finally returned to Europe. In April of last year, yachts from 11 nations  began competing in Valencia to see who would eventually race the current holder, the Swiss yacht Alinghi. It always is a massive event, but arguably those with the most to lose are not the yachtsmen or countries involved. In fact they play an almost peripheral role compared with the companies spending nine-figure sums to associate their brand with the event.

As I walked around Valencia, Spain's newly designed marina it could easily be likened to visiting an exotic menagerie of big brands with some of the fattest marketing budgets on the planet. BMW and Oracle had joined forces with Allianz to sponsor the American yacht. A few meters away the French boat sponsored by Areva, the French nuclear power company. For reasons that weren’t immediately obvious, New Zealand's entrant was sponsored by Emirates. Most companies pay upwards of $100m to be a sponsor. Meanwhile, supporter brands such as Vodafone (the official phone network), Nespresso (the official coffee) and Adecco (the official HR supplier) were also stumping up millions to be a part of it.

With stunning locations adorned with glamorous yachting fraternity, it would be all too easy for marketers to lose their focus and fall into the ancient trap of assuming anyone spending this kind of money must know what they are doing. It is exactly these big-money events at which a marketer must maintain their ROI focus. How, we should ask, can a B2B software company such as Oracle justify spending that kind of money on a yacht race? What, we may wonder, is the link between nuclear power and yachting? And what has Emirates got to do with the Kiwis?