March 01, 2015
Getting Bang for the Buck in Sports Sponsorships
by Jeremy Gregg
Sports sponsorships have grown over the past few decades from a relatively unknown concept to one of the fastest-growing segments of the marketing industry. In fact, IEG—a global leader in sponsorship solutions with more than 30 years’ experience in the industry—forecasts that 2015 global sponsorship spending will surpass $57.5 billion.
Sports Marketing Fastest Growing
IEG reports that sports marketing is growing faster in North America than almost any other form of brand promotion. According to a January 2015 article from NY Sports Journalism on the just-released 2015 Sponsorship Report from IEG:
“Companies are expected to spend more on marketing and sponsorship deals this year than in the World Cup-Summer Olympics year of 2014. Sponsor spend by North American companies is projected to rise 4% in 2015 versus 2014. And even without such tent pole events as the Olympics, ad spend will grow 3.8% in 2015 driven by double-digit increases in digital spending, which should offset nominal growth for TV and out-of-home and declines in radio and print advertising.”
By contrast, other forms of marketing—including public relations, direct marketing and promotions—are only expected to grow 3.5 percent this year.
Herbalife signed an agreement in 2005 to serve as the official nutrition company of the LA Galaxy, a Major League Soccer (MLS) team based in California, for whom David Beckham famously played. And the company expanded that relationship in 2007 by becoming the official jersey and presenting sponsor. In exchange for cash to the team and products for the players, Herbalife now has its logo front and center on the chests of these globally recognized athletes.
In 2009, Amway announced a 10-year, $40 million naming rights agreement on Orlando, Florida’s brand-new city complex, which is also home to the Orlando Magic professional basketball team. This deal puts the Amway brand in front of millions of NBA fans around the world, in addition to the other types of events hosted at the arena. Clearly, companies are interested in making the sports marketing investment. But why?
The Pros’ Playbook
According to Kirk Wakefield, the author of Team Sports Marketing, there is a distinct difference between people who consider themselves loyal consumers of a product versus fans of a sports team. “Sports marketing is basic psychology,” he says. “We trust those we love; and if a company partners with someone or something that I already love, then I am more likely to trust them as well. Teams with jersey sponsors, for example, are generally very closely aligned with that sponsor, and fans can begin to feel the same way about the sponsor as they do the team.”
Sports marketing allows a brand to instantly tap into this community of consumers already deeply engaged with a complementary brand (i.e. what IEG refers to as the “exploitable commercial property”). For direct sellers, such relationships can be particularly effective ways to:
- Secure a high level of consistent exposure, often at a lower cost than doing so via traditional advertising;
- Build visibility among a devoted, and often rabid, fan base;
- Leverage the aspirational value of this other brand to complement their overall messaging;
- Most importantly, gain legitimacy and credibility by association with this trusted brand.
Ultimately, of course, what matters in marketing is no different than what matters in sports: delivering results that contribute to the overall success of the team. In the competition for customers, a growing number of direct
sellers are finding that sports sponsorships are part of a winning strategy.
Direct Sellers in the Game
In addition to the large companies such as Amway and Herbalife, smaller growing companies are also turning their attention to sport sponsorships. LifeVantage, a Utah-based dietary supplement company, has its name emblazoned on the jersey fronts of the Real Salt Lake Major League Soccer (MLS) team. While Salt Lake is one of the smallest markets in MLS, this particular deal is one of the league’s largest for a specific team, at $30 million over 10 years.
Another sports sponsorship recently brought a significant amount of exposure to the direct selling industry when AdvoCare announced that it was now the official nutrition sponsor for all of Major League Soccer (MLS). Beginning with the 2015 MLS season and extending through the 2019 season, this sponsorship is AdvoCare’s largest sports sponsorship and its first league sponsorship. As part of the agreement, AdvoCare Rehydrate will be the Official Sports Drink of Major League Soccer and will be featured on the sidelines of MLS games. The company first showed interest in MLS in 2012 when it became the first jersey sponsor for FC Dallas, and in 2014 AdvoCare extended that sponsorship through 2020.
AdvoCare also sponsors athletes in football, baseball/softball, basketball, bodybuilding, golf, hockey, lacrosse, motor sports and the Olympics with New Orleans quarterback Drew Brees as its national spokesperson.
Richard Wright, President and CEO of AdvoCare, states: “This is an incredible opportunity to share the AdvoCare vision of physical wellness with dedicated soccer fans across the nation. Soccer is a rapidly growing sport in North America and our partnership with MLS makes perfect sense as we continue to grow together.”
Already AdvoCare’s announcement has created positive ripple effects for other direct sellers. According to Brian McKinley, Vice President of Sports Marketing & Products for Herbalife, “the biggest news in sports marketing is the partnership between AdvoCare and the MLS. This is getting the attention of the overall sports industry; they are more aware of direct selling companies and are getting better at talking to us.”
Herbalife began their sports marketing program 12 years ago by sponsoring a small triathlon in LA. According to McKinley, the program grew to three or four different sponsorships over the next two years. The success of those early ventures spurred additional investment, and today Herbalife invests over $30 million in 250 different sponsorships. The largest investments are in the LA Galaxy, and in Cristiano Ronaldo, a professional soccer player with the Spanish club Real Madrid and the captain of Portugal’s national team.
|Amway’s brand is front and center on Orlando, Florida’s city complex, home to the NBA’s Orlando Magic.|
For McKinley, who has worked for Herbalife since the beginning of their sports marketing program, these sponsorships present a strong opportunity for addressing the direct selling industry’s greatest marketing challenge.
“On one hand, since most of our revenue goes to distributors, traditional advertising is cost-prohibitive,” he says. “So, we rely on distributors to do most of our promotions. And yet, once you get to the size of Herbalife, the reality is that effectively branding a billion-dollar business can be a challenge without traditional advertising.”
By turning to sports marketing, companies like Herbalife, USANA, Amway, LifeVantage and 4Life have begun to address this challenge while establishing a level of credibility that may not have been possible through traditional advertising. Yet, this success has come with some important lessons learned. Direct sellers who are new to sports marketing may benefit from considering the following insights from these experts.
Why Target Sports Fans?
Kirk Wakefield, the author of Team Sports Marketing, describes how sports marketing seeks to create an “Affinity Transfer” among sports fans. He describes why sports fans are likely to support companies that sponsor their favorite teams and athletes:
A fan of a team, even a losing team, will likely:
Sports marketing, he explains at www.TeamSportsMarketing.com, seeks to transfer that level of passion to the sponsoring brands.
Mastering the Fundamentals
Sports marketing presents an exciting opportunity, but it is not a guaranteed recipe for success, according to Herbalife’s McKinley. His first piece of advice to companies considering sports marketing is to ensure that these sponsorships are a “core component of an overall marketing strategy,” and not a strategy in themselves.
The experts at IEG agree, determining that sponsorships work best when leveraged with other forms of marketing, particularly digital, social and mobile platforms. According to IEG, this allows sponsorships to become:
“…catalysts in driving interest, engagement and enthusiasm for their partners’ digital, social and mobile platforms through their nearly unparalleled ability to provide relevant content. As more marketers discover the ability to drive positive ROI by integrating digital and sponsorship efforts, the effect should be stronger growth for both segments.”
|The MLS’s LA Galaxy with Herbalife as its jersey sponsor.|
McKinley’s second piece of advice is to adopt very strict requirements for what kinds of properties a company will sponsor. At Herbalife, it all comes down to one core ideal: authenticity. “We are opportunistic buyers,” McKinley states. “If an athlete believes in our products, we want to work with them. If the product does not work for them or their sport, the answer is ‘no’… no matter how big a star they might be.”
For example, Cristiano Ronaldo was initially a user of Herbalife’s products. As someone whom McKinley believes “embodies nutrition at its best,” Ronaldo was a natural fit for being an Herbalife ambassador. After that, it was simply a matter of negotiating the sponsorship like any other business deal.
“Money is certainly a factor, along with what marketing rights you can get. But we treat sponsorships the same as any other part of our business: It’s about the relationship. We have to know who they are, and they have to know who we are,” says McKinley. “We use the LA Galaxy and Cristiano Ronaldo as global partnerships that work more like traditional marketing. But for others, such as an Indian cricket player whom we sponsor, the benefits are more aimed at meeting a regional need.”
The fundamental strategy does not change with the size of the relationship, McKinley continues. “What changes is how we leverage it.”
|FC Dallas soccer player Zach Loyd endorses AdvoCare products|
A similar approach drives the success of the USANA’s sports marketing efforts, says Dan Macuga, USANA Chief Communications Officer. These efforts began over a decade ago as “a natural partnership between USANA and several Olympic athletes [thanks to] the evolution of health and nutrition in high-profile sports.”
“We evaluate and pursue partnering with high-character individuals that also happen to be some of the most elite athletes in the world. Their dedicated commitment to living a healthy lifestyle and consuming only the highest-quality products truly reflects the same standards we espouse as a brand. These qualities make for a fantastic fit when it comes to being ambassadors that best represent USANA.”
Amway’s primary goal through its sports sponsorship programs is to build brand equity, especially with people under 35 years of age, says Jackie Nickel, Amway’s Chief Marking Officer for the Americas Region. “By associating with a sport that people feel passionate about,” she says, “we are able to engage our business owners and the public in a relevant way. But it doesn’t stop there. We’ve found sports marketing to be a terrific way to begin a conversation and connect with people.”
A Marathon, Not a Sprint
Even with all of the fundamentals in place, sports sponsorships are not a promise for overnight success. Many of the direct selling industry’s strongest sports sponsorship programs took years to develop.
Calvin Jolley has witnessed this first-hand over the past 10 years while working as Vice President of Communications at 4Life. The company launched Team4Life in 2006 and now has 23 athletes involved in the program. ”We have a rather unique model of athletic relationship development; every one of our sponsored athletes originally came to us from the field in one way or another,” he says. “Our athletes were first customers of the product who have some kind of a relationship with a distributor.”
Jolley cites the example of Manny Ramirez from the Denver Broncos. Ramirez first began using the product after his wife, Iris, fell in love with the products and signed up as a distributor. That information came back to Jolley, who then spent time cultivating the relationship with Ramirez.
The only consistent guarantee for 4Life’s sponsored athletes is that the company will put them on autoship for their products. The company then just asks them to do what they do best on the court or on the field.
Scoring Major Points for Sponsors
Whether it is with one of their globally renowned soccer athletes or one of their more regionally recognized Russian players, Herbalife’s primary focus for its sports sponsorships remains the same: establishing credibility. “People trust Nike, Tylenol and Coke because they invest a half-billion dollars per year building trust. Direct selling companies can’t afford to do that,” McKinley states. He then outlines three critical goals that sponsorships can help direct selling companies to achieve:
- Establishing Credibility: Sponsorships are a stamp of approval from the sponsored team/athlete.
- Brand Awareness: Sponsorships soften the market for distributors and help them to attract customers.
- Tools for Distributors: Sponsorships provide high-impact marketing tools for distributors to build connections with customers (“unlike a 30-second spot on ESPN”).
“We are a person-to-person business with a high emphasis on training and nutrition expertise,” he continues. “These tools are crucial to that messaging.”
McKinley cites the LA Galaxy jersey sponsorship as a prime example of this. Not only are all of the LA Galaxy’s fans being turned into “walking billboards for our product,” but the jerseys are powerful tools to help Herbalife distributors build their own businesses. In fact, when the jerseys first became available, Herbalife’s own distributors purchased more than 60,000 of them. “The jersey says something different than other forms of Herbalife apparel. It is the embodiment of authenticity and credibility. It shows that the LA Galaxy chose us as much as we chose them,” states McKinley.
|Vemma’s Verve! Energy Lounge™ at US Airways Center, home of the Suns.|
At USANA, Macuga explains that they focus on the nature of their sponsorships to differentiate their sports marketing program. Macuga says that there are currently more than 700 “product-sponsored” Olympic and professional athletes that make up Team USANA. “That they are mostly product-sponsored is significant—it means these are not fiscal sponsorships. We provide them only with supplements and health products, and our athletes understand the value in that. Improving their health and performance is ultimately what the partnership is about.”
Macuga shares that USANA receives requests for product sponsorships every week from athletes all over the world. “Many of these athletes hear about USANA from their teammates or friends who have safely and effectively used our product. Because anti-doping regulations are so stringent, it’s important for athletes to only take supplements they know they can trust.”
“We’ve focused on gaining third-party credibility in every way we can. This makes us stand out,” Macuga explains. USANA then leverages its sports sponsorships to “prove our trustworthiness.”
Maximizing the Investment
IEG reports that the nature of sports sponsorships is also changing. Gone is the transactional model of sponsorship, replaced by the partnership model. “A growing number of sponsors are looking to establish partnerships that create incremental value for both parties through efforts such as developing content, collaborating on activation and creating new products. Because of that, smaller properties that continue to rely on the one-dimensional and transactional model of sponsorship… will remain at a disadvantage.”
Herbalife has found a unique way to leverage their sports sponsorships: The company’s sponsored athletes serve as a combination of R&D team and focus group, representing Herbalife’s most valuable consumers. “Our sponsored athletes try many of our developing products and offer critical feedback,” McKinley shares. Based in large part on these relationships, Herbalife has now launched a sports skincare line that could better leverage their sponsorships. “The LA Galaxy is now one of our biggest skincare users.”
|Team Herbalife takes on the 2014 Leadville Trail 100 Mountain Bike Race.|
Sponsored athletes also play an important role in Herbalife’s training program. From attending major training events to hosting meet-and-greets with top distributors, Herbalife’s sponsored athletes make as much of an impact within the company as they do outside of it. “When world-class athletes are involved, you can just sense it at the events,” McKinley says.
Andy Sutherden, Global Head of the Sports Marketing+Sponsorship practice at Hill+Knowlton Strategies, writes that sports marketing is also blurring the lines between commercial sponsorship and CSR (Corporate Social Responsibility).“Nowadays, the two often unite. Western Union’s exclusive activation of its Europa League sponsorship through an educational cause initiative called PASS is just one case in point. Based on a further insight that 87% of people around the world believe companies should place as much importance on the ‘interest of society’ as on the ‘interest of their business,’ expect a similar pattern in 2015. Clients will place social purpose at the heart of their sponsorship/partnership strategy, and the year will see the maturing of sports’ ‘third sector.’ ”
This blended approach to sponsorships is embraced at 4Life, Jolley explains. He says that the company has found ways to leverage their sponsored athletes to complement their other third-party relationships. This includes industry partnerships as well as the UNPA (United Natural Products Alliance), the U.S. Chamber of Commerce, the Better Business Bureau, and academic associations that offer scientific validation. Integrating 4Life’s sponsorships into all of their work “establishes us as authentic and creates a sense of credibility.”
Examples of Sports Sponsorships by Direct Selling Companies
Determining the ROI
One of the major challenges with a sports marketing program is measuring the specific return on investment. Since the sponsorship creates a multi-faceted relationship, evaluating its true worth is hard to accomplish other than simply looking at the company’s overall progress during the time of the sponsorship. Nickel states that Amway tracks a number of metrics to measure program impacts, including traditional PR impressions and engagements. “But we also look at internal metrics,” she says, “such as how much program content is being used by the business owners.”
Still, measuring ROI, like PR itself, can be a tricky business. This is a frustration that Wakefield describes well in Team Sports Marketing:
|U.S. short track speedskater and bronze medalist Travis Jayner endorses USANA products|
“For major sports and entertainment properties, sponsors spend millions of dollars to build brand equity. Yet, IEG tells us that 43% make no effort to determine if goals are met and another 39% spend one percent or less of the sponsorship budget to measure ROI/ROO. That leaves only 18% who might have a clue, or at least are trying to have a clue or two, whether or not the sponsorship investment is paying off. At the same time, sponsors count assistance in measuring ROI/ROO the No. 1 most valuable service that can be provided by properties.”
Jolley argues that, for 4Life, “the main ROI is credibility from a third-party voice: people without the incentive of a paycheck. How can you place a figure on that? What is the value of defending the industry’s trustworthiness and creating a sense of credibility in terms of the business opportunity? For supplement manufacturers like 4Life, athletes are the best way to do this.”
Similarly, Herbalife’s McKinley says that “sponsorships, and the sports industry overall, are not formulaic. It’s not one size fits all… yet in all of our sponsorships, we are focused on authenticity.” However, he states that one of the ways that he determines the success of sponsorships is through social media metrics that demonstrate whether members are actively engaging in the relationship.
“It’s never going to be traditional CPG marketing (Consumer Packaged Goods) in terms of numbers, but we know from the outset if a sponsorship will be successful,” says McKinley. While he does not cite specific numbers to any particular sponsorship, he states that “we’ve seen brand growth in each of the 12 years since launching our sports marketing program.”
|Madison Keys of the Women’s Tennis Association is ranked No. 20 in the world. (USANA PHOTO)|
Jolley agrees citing that sports marketing has helped 4Life to grow rapidly. “We have doubled in the last five years, from $150 million and No. 71 in the DSN Global 100 in June 2010 to $300 million and No. 41 in June 2014. While they certainly are not the only factor, sponsorships have played an important role in achieving that growth. And in 2015, we are positioned to grow to $320 million to $330 million.”
At Herbalife, there is not a specific part of the budget dedicated to sports sponsorships. McKinley explains that these costs are considered part of the advertising budget, all of which is included as part of the company’s cost of “equipping distributors.”
At USANA, Macuga states that the ROI is seen more from a global branding perspective. The athletes, he says are incredibly popular among the salesforce, providing fun and authentic stories that associates can share on social media. He says, “Our partnerships with these athletes and organizations also allow us to participate in some incredible events, such as the Olympics, and gain on-court/course branding seen by millions, on a global scale.”
For example, during the 2014 Winter Games in Sochi, nearly 200 USANA-sponsored athletes competed and recorded 30 podium appearances—13 gold, seven silver and 10 bronze. Macuga shares that if USANA were a country the company would have taken second place in the medal count right behind Russia.
The LifeVantage deal with the Real Salt Lake team creates high impact exposure as well, as the players appear on the field, and in appearances, including advertising, around the globe. LifeVantage’s name is associated quite intensely with the players and in prominent view on their chests.
Are Sponsorships the Right Call?
McKinley suggests that there is a simple way to know whether or not launching a sports marketing program is a fit for your company. He says, “Once you know what story you want to tell, it’s easy… . You find the right athlete or team to help you tell it. The major pitfall is not knowing your story.”
Macuga suggests that sports marketing is the best fit for a “product-driven, science-based” company like USANA, since athletes can speak authentically about the quality of products. “They can say that they work, and they feel comfortable taking them. It’s a strong message to stand behind if you’re in direct selling; it makes your job that much easier.”Jolley states that “there is no magic bullet. But these relationships with athletes can play an integral role at establishing credibility with distributors, customers, and the general public.” The key is to anchor the sponsorship in an authentic relationship with the product first. Above all, always be looking for the story—the stories are out there.