Is an Olympic Sponsorship Worth the Costs?

By Demitri Kalogeropoulos - August 3, 2012 | Tickers: KO, MCD, PG, DOW, V | 0 Comments

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The Olympic games give athletes a chance to run, swim, flip, and dive for the title of "world champion." But in between those spectacles of athleticism -- when the broadcast cuts away to commercials -- a different type of global competitor muscles onto the stage: the Olympic sponsor.

There are 11 multinational companies that make up the official list of worldwide sponsors to the Olympic games. And to get on this list they each pay a hefty premium for their places near the podium. For an outlay of close to $100 million, sponsors get worldwide advertising rights to one full cycle of summer and winter games. That's an expensive marketing spend for what amounts to 4 intense weeks of media.

In exchange for all that cash sponsors get access to an audience that numbers in the billions, a potentially huge boost to their brands, and near blanket media coverage in the host country. These companies also get to lock their competitors out of all these benefits, as sponsorships are exclusive to only one company per product/service.

Still, just as with the athletes they support, sponsors risk turning in a poor showing or even a high-profile flop. Just three years before declaring bankruptcy, Kodak had a coveted spot on this list, burning money that the company probably wishes it hadn’t.

With that in mind, let’s take a look at some of these sponsors to see if their investments make sense.

Rounding out the list are Omega (timekeeping), Panasonic (electronics), Acer (computers), Atos (IT), Samsung (wireless), and GE (everything else).

Financial costs

A few of these sponsors seem well suited to an Olympic-sized marketing investment. Coke, the longest partner of the games, lists consumer marketing as one of the company's "core capabilities" in filings with the SEC. Boasting an annual ad spend of over $3 billion, the company depends on marketing to differentiate itself from competing products, like PepsiCo's, to an extent that very few companies do. To that end, Coke has shelled out for a lock on the non-alcoholic beverage slot for the games since the program began in 1986, elbowing out Pepsi all that time.

Visa is a long term sponsor too and counts this investment, along with the company's World Cup commitment, as a pillar of the company's brand management strategy that (pdf) "creates a powerful opportunity to drive business, achieve maximum exposure and improve brand lift, global reach and local relevance." Visa has the global network needed to take advantage of a worldwide sponsorship like this. And it probably doesn't bother the company that it gets to lock competitor Mastercard away from the podium, too.

Next, with over 33,000 locations in 119 countries and an advertising budget approaching $800 million, McDonald's and its golden arches are also a natural fit for Olympic sponsorship. Association with the games helps MCD stress nutrition and provides an excellent stage for promoting its more healthy menu options. For example, at the company's Olympics site, MCD showcases food items under 400 calories.

And finally, one newcomer to the list seems like a good fit, too. Procter & Gamble is making its debut after rival Johnson & Johnson gave up the personal care/household products slot following the 2008 games in Beijing. P&G is using its new media platform in creative ways, including a huge ad campaign focused on moms that clearly aims to pull at the heart strings. As the world's largest advertising spender, with plenty of cross-marketing opportunities, P&G looks poised to make good use of its sponsorship.

Other costs

Also new on the list is Dow Chemical. The company sees huge potential benefits in the form of access to prized developing markets and the trillion dollar infrastructure build that will go along with it when the games come to Russia and Brazil in the next 4 years. But Dow's is an example of how Olympic sponsorships can also come with costs beyond dollars and cents.

The intense media focus brought on to the chemical company by its sponsorship of these "environmentally sustainable" games has sparked protests over Dow's links to the tragic chemical leak in Bhopal, India years ago. The company's tone-deaf reaction to the protests has merely served to feed the controversy. With an inside track to major infrastructure investment, Dow stands to gain the most direct benefits from sponsorship of the games. But, as the critical press surrounding Dow's sponsorship shows, this gambit is not without significant risks to the company's brand.

Bottom line

An Olympic sponsorship isn't cheap, and it can come with critical scrutiny that many companies would rather avoid. But under the right conditions sponsors can reap significant benefits -- and lock competitors out of the same -- from association with the Olympic games.

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