Many Ask If Olympic Sponsorship Is Worth Cost
Many Ask If Olympic Sponsorship Is Worth Cost
In a massive plaza in a shopping mall in central Beijing, Coca-Cola is certainly ready to celebrate its spending power. The entertainment zone is a shrine to all things Coke — a chance for China's masses to be a part of the marketing frenzy that is the Olympics.
Coke has spent an estimated $70 million to be one of the top 12 Olympic sponsors — and perhaps $5 million to $15 million more sponsoring the controversial torch relay.
Andres Kiger, senior director of integrated marketing for Coke China, refuses to even make a comparison with the 2004 Olympics in Athens.
"It's not accurate to compare just because of the size of the markets," Kiger says. "Proportionately speaking, I think Greece is the size of Beijing population-wise."
A Massive Market
China's massive market is the prize. Four thousand people a day pass through this zone, each clutching their free Cokes.
There is a stage show featuring, among other things, the Olympic mascots, young kung fu masters and a contortionist. By the end of the show, the crowd is going wild — singing their hearts out to the Coke ad, waving Chinese flags and cheering.
But some say this investment isn't reaping returns.
"We've done research in 10 cities throughout China and we've found most consumers have no idea who the actual official sponsors are," says Shaun Rein, head of the China Market Research Group. "We found 40 percent of consumers thought Coke was the sponsor, versus 60 percent for Pepsi."
Rein's research, carried out before April this year, indicates sponsors have been struggling. The top 12 spent $866 million to sponsor the games — around one-third more than on Athens. But he believes they've ended up inadvertently competing with the government.
"The government's going out and saying, 'Stop spitting on the street because of the Olympics,' " Rein says. "They're using the Olympics really as a trigger to reform China. Chinese consumers have been hit regularly for a decade with Olympic-themed messages, which makes it very difficult for the official sponsors to get their messages above the din."
'Beamed Up To Planet Olympics'
But on the streets of Beijing, all that has changed in the past month. Marketer David Wolf points out the city is missing something — billboards.
"The one thing we're not seeing is what we're used to seeing," Wolf says. "That's billboards and advertising all around us. They've just gone. They've been beamed up to Planet Olympics."
What he means is this: All ads by non-sponsors in major public places have been removed or covered up.
New regulations sprung on the advertising industry at the beginning of July also targeted TV and print ads, forbidding companies that are not official Olympic sponsors to use current Olympic athletes to endorse their products. One exception so far has been non-sponsor Nike, which signed a contract with the Beijing Olympic Organizing Committee to allow it to run its campaigns featuring Chinese athletes such as Liu Xiang.
But the ban will cost many advertisers dearly, having locked in their campaigns months ago. The official reasoning is the same as for the billboard ban: to make sure sponsors get their money's worth and to avoid ambush marketing.
Some of the best guerrilla marketing so far was a canny move by Chinese clothing company Li Ning: It sponsored the television commentators introducing the torch relay. This led many Chinese to incorrectly believe the company was an official Olympic sponsor. Chief Operating Officer Guo Jianxin says value for money is key.
"Li Ning is still a small company and also a fast-growing company," Guo says. "So it's only logical that we spend money where we can get the best return."
So Li Ning has chosen to sponsor individual teams. It has renewed its contract with the Spanish basketball team and is also the first Chinese company to promote an American side — endorsing the U.S. pingpong team.
In this economic climate of belt-tightening, many now believe Olympic sponsorship deals might start dropping in price.
"To an extent, yes, this is the high-water mark," Wolf says. "China is the great game. China is where everybody wants to be. And so much of the reason people are sponsoring these games is to make a lasting impression on the Chinese government and the Chinese people."
And so the sponsors enter the final stretch of their record-breaking campaigns. In business, as in so much else, Beijing hasn't hesitated to use its authoritarian tendencies to protect the games — in this case the sponsors' investments.
But London may not be willing to take such draconian steps. So far only eight out of 12 of the top sponsors have signed up for the 2012 games. And with the Internet threatening broadcasters' dominance, some analysts are even beginning to ask if the economic model that sustains the games could be under threat.