The Olympic Baby

We were a little surprised when we saw the IOC was planning on reforming its Rule 40.

Rule 40 currently imposes commercial purdah on Olympians for nearly a month around the Games, preventing any use of name or likeness in association with non-Games partners. Penalties for contravention include disqualification and stripping of medals (although the reality is closer to a rapped knuckle for the superstar breaches that are the legends of ambush: Johnson, Christie, Phelps)

There’s a popular case for change. Dozens of athletes launched a Twitter campaign – #WeDemandChange2012 – during the London Games, to urge an end to the rule. Rule 40 limits the commercial potential of athletes at the greatest moments in their season or even their careers. Only the very top athletes, sponsored by official Games partners, would make real money in Olympic years.

But a change is still surprising. Not only because the IOC is a conservative beast…but because this reform is potentially … radical.

The premise is to allow pre-existing marketing campaigns based on Olympians to continue, providing they are ‘generic’ ie non Olympic. But as we saw clearly in the controversies about Scotiabank’s 2010 and Honda’s 2012 campaigns, it can be extremely difficult to differentiate between ‘generic’ and Olympic marketing. The strict IP of the IOC and Games are well-protected: the marques and designations. But … mood, colours, words even.: Champion, heroic, pride… The Olympic brand is way too big to be reduced to a few protected terms.

So it’s difficult to see how ambush marketing would not be encouraged by this move. And while simple cease and desist letters are effective in blocking flagrant breaches of Olympic legislation, rights protection teams would struggle to cope with multiple negotiations of the protracted sort required by the more subtle approach of a Honda or Scotiabank.

Although LOCOG successfully restricted the ability of non Partners to use outdoor or field marketing in ambush, Games-time clutter across multiple channels is also a real risk, with the threat of Atlanta-style backlash against excessive commercialism.

But it will be the NOCs around the world who are most likely to suffer, with the dilution of their main asset. Brands will have the option to steer clear of bulky rights packages and head, instead, straight to the athletes.

And the potential is for so many brands to develop ‘non-Olympic’ campaigns that official sponsors will have to reassess the value of official Olympic turf. Or for undesirable or controversial brands to tarnish the halo of the Rings. How much did Bodog offer Tiger? Any ISFs who already accept gambling partners will be hard-pushed to take a stand when the same brands turn to athletes…

The change surely has the potential to shift the entire Olympic sponsorship landscape. Sponsors in the Olympic family will be faced with the need to develop stronger, more differentiated sponsorship propositions. The marketing landscape would be shaken up, there’s no question about that.

An apocalyptic picture. Life rarely pans out exactly as predicted, but here at Redmandarin, we’re left asking ourselves: which is the baby and which is the bathwater?

Red Thread

Sponsorship as organisational change-driver

For Redmandarin, a full 90% of client briefs relate to deepening brand engagement. This might be expressed as re-positioning  shift of audience focus, reappraisal, building NPS or advocacy, but, ultimately, it comes down to people feeling warmer about the brand.

But there’s another objective which surfaces much more rarely – organisational change.

And sponsorship’s potential is enormous.

We came across some great examples in our research for Working the Olympics.

Visa and Samsung are the textbook studies for Olympic brand transformation, but a less well known example, is AMP, in Sydney 2000. AMP is an Australia-based financial services company, formerly the Australian Mutual Provident Society, which was a non-profit life insurance company. In 1998, it was demutualised and listed on both the Australian and New Zealand stock exchanges.

American CEO George Trumbull had been employed to manage the listing and drive it hard. In his words: ‘I took Olympic partnership to be a deliberate, all-encompassing transformation tool that would reduce the time I would need … from 10 years down to 5.’ And he used the Sydney Games very successfully to drive the internal cultural transformation from an older style, older world business to a very contemporary, sharp, highly-focused, customer-centric model.

VW China, similarly, used Beijing 2008 to drive dramatic internal culture change. VW China began as a joint venture with the Chinese government, which saw its market share drop from 50% to 15% as it emerged from the aegis of government protection into a new commercial landscape – with the liberalisation of the Chinese market.

So VW China used the Olympics as a tool to rally the organisation, 40,000 people, to a new level of competitiveness – in what they actually called the Olympic restructure programme, embedding Olympic terms, thinking and targets across the entire business to increase responsiveness, flexibility, customer-centricity and raise performance levels. Again, with great success.

Redmandarin’s main experiences of sponsorship as a lever for OD were with UBS, and Philips Electronics. UBS explicitly used their sponsorship of Ernesto Bertarelli’s entry into the 2003 America’s Cup, Team Alinghi, to cement their global brand. Their sponsorship, which ended in the victory of Team Alinghi, was notably successful in leveraging relationship-building opportunities across the various divisions – and grouping employees around a single, global objective.

We helped Philips use the FIFA World Cup to accelerate their ‘one Philips’ philosophy as an operational reality across their  (then) five business divisions, even bartering rights with Toshiba to ensure every Philips division had skin in the game (semiconductors, actually).

Tail and dog? It feels almost hubristic to suggest sponsorship could be considered as organisational change-driver… why can’t it just stay in its box?

David Aaker, when we interviewed him in 2009 for our first publication, Defining Sponsorship, correctly identified one benefit of sponsorship as ‘spanning organisational silos’ and this particular dimension of sponsorship certainly supports organisational change – but David’s point (which was not specifically addressing questions of OD) overlooks some powerful intrinsics of sponsorship.

What enables sponsorship to reach target audiences so well is its ability to sidestep emotional resistance – conscious and unconscious . It’s a psychological truth that people, we I should say, don’t like to feel unseen, unheard, or unvalued, which, I remember one of my teachers once telling me, is the single greatest cause of anger on the planet. When we’re objectified (be it as consumers, voters, readers, shoppers, subjects or employees), we resist: in fact, we’re endlessly creative in our resistance. We look for ways to subvert systems and ‘policies’. We switch off and zone out. We kick. Or play dead.

But sponsorship has the ability to sidle up to people gently, engage them in conversation, and creative an affective relationship – without provoking resistance. From that perspective, it’s the ultimate route to reach the hard-to-reach – and that can include employees.

Much of current attention on resistance to organisational change focusses on affective, that is, emotional processes, recognising that we as human beings have the tendency to populate areas of unknowing with the products of our own imagination: ignorance is fear, in other words. And what sponsorship can do is engage with and validate employees’ emotions through a clear demonstration of corporate empathy: we understand you. Instead of asking employees to adopt corporate values, it makes the clear statement: we share yours.

What Alinghi, interestingly, had in common with the Olympics was a clear sense of shared and public purpose – and adventure: for Alinghi, the sense of purpose was almost crusading – to bring the America’s Cup to Switzerland. For those who have lived it, this feels very reminiscent of start-up energy, a time of ambition, when everything is possible, regardless of the odds, with a unifying, motivational sense of organisational purpose that can be buried beneath layers of operational procedure.

David Aaker was entirely right of course to highlight  sponsorship’s ability to span silos, cross-functions and create fresh conversations.  And when these conversations are around, for example, the sort of innovation required to grapple with an out-of-corporate-body experience – such as the Olympics, it’s easy to see how this can be used to support change.

Relationships, both internal and external, become fixed, just like neural pathways – with the danger that one’s universe becomes very limited. Organisationally, businesses naturally like to operationalise – to harness extensive workforces. But the danger is that your relationships, your business model and your thinking become fixed – and your systems become as much of a limitation as a support.

Intelligently crafted, sponsorship offers an opportunity to reconfigure your system.

Red Thread

‘Make GE Olympic-centric’

The text below is an extract from an interview with Professor James Santomier of the John F. Welch College of Business, at Sacred Heart University, Connecticut. James and his colleague Tim Crader were discussing Tim’s professional experience at GE one day and he off-handedly mentioned ‘pull-through’ marketing, and implied that GE had benefited significantly from its IOC relationship, which stimulated further discussion and research.

Beth Comstock, who is the CMO, co-authored an article for the Harvard Business Review, published in late 2010, which focused on the fact that up until 10 years ago, to all intents and purposes, GE didn’t have a marketing programme – it had simply been so confident in its technologies. But one very evocative paragraph near the beginning paints a picture of growing realisation: ‘GE was learning that it could not win simply by launching increasingly sophisticated technologies… Some of its best thought-out new offerings were fast becoming commodities.’

So in 2003, GE began to evolve its marketing function, doubling the size of the function, and marketing became ‘the torchbearer’ for what was internally called ‘Commercial Innovation’ – which included ‘Imagination Breakthroughs’ across many categories. And essentially, Dan Henson and Beth Comstock were the driving forces behind the softening of GE, the femininising of GE if you will, and making it a much more user-friendly organisation. And the sponsorship played into that.

Around the same time, NBC, the media business unit of GE, was bidding for the media rights to the Games in 2010 and 2012, and GE’s top management made a strategic decision to seek a TOP position with the IOC. NBC’s winning bid represented a 33% premium on their payments for 2006 and 2008 and then, in addition, GE paid approximately US$180 million to join the TOP programme.

The drivers of the IOC relationship were most likely Dan Henson and Jeffrey Immelt. Beth was more focused on communication, and wasn’t CMO at the time. And I think, if Peter Foss hadn’t been a friend of Immelt’s, and hadn’t had experience in sponsorship, they may not have done the deal. Beth Comstock told me: ‘at the time we took the Olympics we really were trying to push from a commercial – a sales and marketing perspective – cross-selling … The Olympics allowed us to focus on this … in a very powerful way, that made it real.’

When Jeffrey Immelt convinced Peter Foss to take on the job, Peter pushed to flatten the organisation and to make GE Olympic-centric. And it’s my guess that because GE was so fresh to marketing, there was little by way of restrictions in terms of how they could integrate the sponsorship – whereas for other major companies, their marketing processes would be too institutionalised and rigid.

The GE WorkOut is a proprietary OD tool developed back in 1988, after CEO Jack Welch emerged from a meeting with mid-level managers in which many expressed concern that, amongst other things, process was slowing down important decisions. The WorkOut brings together a cross-functional group of people together to develop actionable recommendations to a business challenge that has been identified as a priority. These are tied to action plans which, if approved by leadership, are implemented within 90 days.

So when Peter Foss was hired, he developed a WorkOut related to the Olympics. His vision was a new, very flat, and non-bureaucratic organisation with a single point of contact for each of GE’s business units. That individual would be responsible for driving the revenue for his or her respective business and have a matrixed relationship with other profit /loss and internal GE cost centres. And now that’s exactly the way they’re selling all their infrastructure, and clean energy, and new grid technology.

Dan Henson, the former CMO, went on record to say that GE has ‘always been good at selling in the context of the P&L, but the Olympics forced us to be adept at responding to opportunities that span three, four or five business units … to present one GE face to the customer’.

The most interesting aspect was how the organisation embraced the sponsorship and how they were willing to adapt the organisation in response. For most organisations, sponsorship is an appendage. Beth told us in our meeting that the sponsorship became a learning experience for them.

Red Thread

The Paralympics come of age

The IOC’s signature on the landmark agreement with the IPC in Sydney 2001, linking the hosting of the Paralympic Games and the Olympics, was both hugely generous and characteristically far-sighted.

In exchange for abnegating their sponsorship rights and accepting a flat capped contribution from each Games, the IPC gained the guarantee of association with the world’s most powerful sports brand. Back in 2000, the agreement looked particularly generous. From the perspective of 2012, it looks particularly far-sighted.

In the mind of Xavier Gonzalez, CEO of the IPC, Beijing marked the coming of age of the Paralympian: ‘It was really in Beijing, to my mind, that Paralympians started to be proud to be Paralympians, and didn’t need to say ‘I’m an Olympian’’. And Sochi perhaps marks the coming of age of the IPC as a force for social change: ‘The changes in legislation to make Sochi as accessible as possible will create a template for the rest of Russia. Not that this is unique to Sochi. The Paralympic Games aren’t an end in themselves – they’re the beginning of the opportunity.’

But could London 2012 mark its coming of age commercially?  London 2012, with the obvious good graces of LOCOG, has seen a number of interesting developments.

The separation of broadcasting rights between BBC and C4 gave the Paralympics a broadcast partner who would be determined to keen to tell their story as powerfully as possible. More importantly, it created a commercial platform for the Paralympic Games which was not open to the Olympics in the UK, supporting the recruitment of Paralympic partners.

From a partnership perspective, the London Paralympic Games also offers powerful precedents for successor OCOGs. While Coke’s continued success in blocking the supermarket category cost LOCOG nearly £40 million, it opened a loophole of happiness which other OCOGs will be keen to copy. As Igor Stolyarov, himself an ex-Coker comments ‘London did brilliantly by acquiring Sainsbury’s as a Paralympic sponsor, a very smart move. The Sainsbury’s deal creates a real precedent.’

The agreement between the IOC and the IPC, extended this May until 2020 effectively incentivises the OCOG to be as commercially creative as possible around the Paralympics – as any funds raised for the Paralympics go directly to the OCOG, not the IPC. On this basis, we would expect future OCOGs to be attentive to the nimble contractual footwork of London 2012 – and use the Paralympic Games as a route to dodge Coke’s TOP firepower.

Sainsbury’s clever procurement clearly saved them roughly the same amount, enabling them to invest seriously in their Active Kids programme. Active Kids has been phenomenally successful, gives Sainsbury’s the right to claim to be the dominant brand playing in school sport – having channelled the equivalent of £115 million of sports equipment into schools since 2005. But like any 7 year old affinity programme, it needs constant reinvention to regain front of mind with consumers, and this was one of the strongest drivers for a 2012 partnership back in 2007, when Sainsbury’s was a Redmandarin client.

Sainsbury’s of course aren’t disclosing their activation budget, but with a platform which includes an ambition to introduce one million schoolchildren to Paralympic sport, David Beckham on film, a respectable C4 partnership – and a £10 million commitment to the UK School Games for the next four years, they’re not saving the change – and demonstrating a commitment to community which is both broader and deeper than any other London 2012 partner.

Weighting sponsorship investment towards activation, not rights is a sensible but still unusual position. In this case, Sainsbury’s judged – correctly in our opinion – that most people wouldn’t differentiate between association with the Olympic and Paralympic Games; and if they did, the differentiation would be positive. Sainsbury’s partnership campaign, which surely deserves any sponsorship award it’s entered for, will be a case study for the textbooks.

Curiously, Wolff Olins must also take some credit. The differences between the logos for the Olympic and Paralympic Games are minimal. The colourways obviously diverge, but no more than many Tier 1 Partners who pay for that very privilege. For anyone not versed in Olympic iconography and the ranking implications of a full colour Partner logo – Sainsbury’s is just another sponsor.

Anecdotally, the Paralympics isn’t working so well in London so far as client hospitality is concerned. Although spectators at the Beijing Games were effusive and enthusiastic, there is clearly a lingering perception that the Paralympic Games lack Olympic magic for business clients. Conversely, with respect to employee engagement, engagement with the Paralympics appears to be hugely powerful. In this instance, employee engagement is probably a more reliable indicator of consumer opinion: Sainsbury’s clearly think so.

The IPC’s active role echoes that of the IOC: to oversee the organisation of the Paralympic Games (as well as serving as the International Federation for nine sports). Its symbolic role however is arguably broader than that of the IOC – to represent the rights of athletes with disabilities, and by extension, all people with disabilities. The enormous relevance of the Paralympic metaphor lies of course in the struggle we each share to overcome our limitations. For Allianz, the power of this metaphor, and their ability to integrate it into messaging, more than compensates for having to take a back seat at the Games. In the words of Joseph Gross: ‘I am 100% convinced the IPC has a very positive future. I don’t expect it to be a fast-burner, but each Games, Beijing, London, Sochi, Rio, is going to advance the profile and the impact of the IPC. Managed well, I believe its relevance extends far beyond the disability community. It connects hugely with social values.’

In ‘Working the Olympics’, Xavier likened the IPC to the IOC’s younger brother: ‘You have one son who is already established, and you have the little one who is growing and wants to do things’. We’re led to understand that, with the encouragement of LOCOG, TOP partners will for the first time (unbelievably) maintain their presence throughout the Paralympics. Redmandarin believes the Paralympics are coming of age.

NB We’re assuming Coca-Cola will do some buddying up to the IPC and consider its relationship with the Paralympic Games going forward.

Olympic Organizers Turn to $7,280 Tickets to Boost Revenue

March 15 (Bloomberg) — The organizers of next year’s London Olympics are widening access to corporate hospitality tickets for the first time to tap into the market for companies and wealthy individuals.

About 8.8 million tickets go on sale today, with 75 percent sold to the public through a six-week lottery on the London 2012 website. The only way for individuals and non-sponsors to get guaranteed tickets is through the official hospitality programs. On-site hospitality had traditionally been limited to backers and Olympics officials. The Games start July 27.

The London organizing committee, or Locog, is counting on selling packages worth as much as 4,500 pounds ($7,280) a person to companies in London’s financial district and the wealthy at the same time the U.K. government is implementing the deepest spending cuts since World War II. The committee is breaking with Olympic tradition because the market for corporate hospitality is “enormous,” Paul Deighton, chief executive officer of the London organizing committee said in an interview.

“That’s why we decided it was better to make it an official program,” said Deighton, a former Goldman Sachs Group Inc. banker. “It’s better than corporate hospitality cropping up unofficially.”

Ticket sales are expected to generate 500 million pounds, Locog spokesman Adrian Bassett said in an interview. He declined to say how much of the proceeds would come from public sales and how much by selling luxury hospitality packages.

Empty Seats

To be sure, South Africa hosted 62 World Cup soccer matches last year, and 97 percent of tickets were sold, generating $300 million. Still, many matches were played in stadiums with empty seats. U.K. newspapers including the Daily Mail have criticized Locog for selling “the most expensive ever” tickets in sport amid faltering economic growth.

“We’ve seen criticism in the media about sponsorship since the financial crisis, and corporate hospitality is probably at the cutting edge of that criticism because it can be portrayed as a jolly,” Shaun Whatling, CEO of London-based independent sponsorship adviser Redmandarin Ltd., said in an interview.

Entertaining important contacts is “absolutely” necessary to maintain relationships with clients, said Whatling, whose clients include Bank of Scotland, Credit Suisse and Virgin Media.

Hospitality packages, which are also being sold by the U.K.’s Thomas Cook Group Plc and Far Hills, New Jersey-based Jet Set Sports, will be sold on a “first come, first served” basis, and account for less than 5 percent of the 8.8 million total.

Ballot

The majority of Olympics tickets will be sold in a ballot, giving every applicant an equal chance of attending an Olympic event. Prices range from 20 pounds a seat for preliminary rounds to 2,012 pounds for the opening and closing ceremonies. Both sets go on sale today.

A ticket will be guaranteed in the luxury on-site hospitality packages sold by Prestige Ticketing Ltd., which has been allocated less than 1 percent of the seats. Its prices range from 225 pounds for the Olympic soccer tournament at London’s Wembley Stadium to 4,500 pounds for the opening and closing ceremonies, athletics, track cycling or swimming.

Some 5,000 companies have already approached Prestige about buying the top-end packages, the company said. Wealthy individuals from the U.S. have expressed an interest in the basketball event, while affluent Chinese have made enquiries about the table tennis, Prestige said.

In order to ensure the London organizing committee that there won’t be any empty seats at less-attractive sessions, Prestige is selling its top events in combination with other sessions. That means buyers won’t be able to cherry-pick high-profile events, Prestige marketing director Tony Barnard said.

Package Deal

For example, anyone who wants to buy a table for a minimum of ten people for the opening ceremony also has to purchase two tables of ten for a cheaper category sport such as the handball, hockey or water polo that averages at around 500 pounds. So the total cost of entertaining 30 guests over three days would come 55,000 pounds, or 1,833 pounds a guest.

“We want to make sure we sell out the hospitality program, we don’t want any empty seats,” Barnard said.

Yet, that’s exactly what may happen, Joe Cohen, founder and CEO of fan-to-fan ticket exchange website Seatwave said in an interview.

Cohen said there is a “a real risk” of empty stands at some of the stadiums because holders of a ticket won’t be able to sell any unwanted tickets on a floating-price exchange. Instead, Locog allows ticket holders to sell back unwanted tickets at face value.

A fixed price isn’t an “accurate reflection of the market and therefore there will be very little liquidity and very little trading on that exchange,” Cohen said.

“So if anyone has a 100 meter final ticket to sell, they are going to sell it on the black market,” Cohen said. “They are not going to sell it for 750 pounds if it’s worth 5,000 pounds. The tickets will find a buyer who is willing to pay the market price, regardless of what Locog wishes to do.”

EBay Inc., the owner of the largest e-commerce market, is cooperating with the London organizing committee to prevent the unauthorized resale of tickets.

“The resale of Olympic tickets is illegal and we are working closely with the organizers of the games to ensure tough and effective filters are in place to identify and remove such tickets if anyone attempts to sell them,” EBay said in an e-mailed statement today.

Read more here