Wednesday, January 30, 2013

Why Super Bowl Ads Are a Good Investment

There may not be many times when you can think of spending $4 million on anything as good value, but that case can be made when it comes to the decision to buy commercial time during the Super Bowl. Advertisers for Super Bowl XLVII are paying an estimated $4 million for a 30-second spot during the big game. Bear in mind that figure only covers air time; additional spending that also reaches seven figures is not  unusual as advertisers want to make a big splash. For some brands, this investment is cost prohibitive, even if the Super Bowl audience is a good match with their target market. Some marketing executives conclude that the investment required to advertise during the Super Bowl would be better spent on other marketing tactics.

Given the cost to be a Super Bowl advertiser, what is the appeal of buying commercial time? Ad inventory usually sells out several weeks, if not months ahead of the Super Bowl... even before we know which teams will be playing. Three compelling reasons can given to justify an investment in Super Bowl advertising:
  1. Cost effective - How can a marketing spend that is so expensive be considered cost effective? When audience size is taken into account, Super Bowl advertising comes off as a rather attractive opportunity. Last year's TV audience was estimated at 111.5 million people, an all-time high. A cost-per-thousand (CPM) figure for the Super Bowl based on this year's ad rates and assuming no change in audience from last year is about $35. Reducing the cost further, the Super Bowl enables an advertiser to reach each member of the audience for around 3.5 cents. Now, $4 million sounds much more palatable when it is reduced to 3.5 cents.
  2. Compelling content - Sporting events in general and the Super Bowl in particular are ideal for live programming. The aura of the Super Bowl and drama surrounding it contribute to the big game being a "TiVo proof" event. In other words, people interested in the game are likely to watch it live. The prominence of commercials as part of the Super Bowl mean that they are likely to be seen as viewers watch the program live.
  3. Receptivity to advertising - The Super Bowl is an anomaly in terms of our willingness to view ads while watching the program. The other 364 days of the year, we work hard to avoid marketing messages while watching TV - changing channels, leaving the room, fast forwarding through recorded programs - we are pretty good at putting up barriers between ourselves and advertising. But, on Super Bowl Sunday many of us look forward to watching commercials. A recent study found that 39% of adults say that the commercials are their favorite part of the Super Bowl... even more enjoyable than the game itself! 
In addition to the three reasons cited as strengths of Super Bowl advertising, advertisers are increasingly leveraging their Super Bowl association. Releasing commercials in advance, either teaser versions or the full commercial, soliciting input on which ads to run during the game, and using social media to create conversations and interest for Super Bowl-related marketing are three examples of how advertisers have extended their 30 seconds of fame to get the most value from their Super Bowl investment. Thus, Super Bowl advertising is moving away from a one-off marketing spend to part of an integrated marketing campaign that utilizes multiple communication channels over a period of time.

On Sunday, we will watch to see if the Ravens or 49ers will be crowned champions of the NFL. At the same time, we will watch to find out which advertisers put in a championship performance and which ones come up short. Enjoy the game, and of course, enjoy the ads.

Monday, January 28, 2013

Marketing through Sports: Is It Worth It?

A useful approach for beginning study of sports marketing (or any other subject) is to answer the "what is" question. In this case, what is sports marketing? A breakdown of sports marketing  yields two dimensions: 1) marketing of sports (leagues, events, teams, venues, athletes) and 2) marketing through sports (use of sports by a company or brand as a marketing vehicle to reach a target audience). While marketing of sports is self-explanatory even to students new to the subject, marketing through sports may be less familiar territory.

To illustrate the concept of marketing through sports, I used the example of Pepsico and its sponsorship of the NFL. Pepsico renewed its NFL sponsorship through 2022 for an estimated $100 million per year to associate Pepsi, Frito-Lay, Gatorade, and Tropicana with the NFL. On top of the $100 million annual rights fees, Pepsico is expected to spend an additional $130 million per year to activate, or market its NFL relationship. These figures prompted a student to ask a very important question: "Is sponsoring the NFL worth $230 million a year?"

What a great question! It is one that every sponsor should ask of a potential or actual spend. Is the investment worth it in terms of helping achieve marketing objectives? But, before considering the return on investment of marketing through sports, it is important to understand the attraction of sports as a marketing platform. Two strengths of sports as a marketing channel are:
  1. The Affinity Advantage - Many people have strong, emotion-based relationships with their favorite sport, team, or athlete. Fans who identify with a team and have favorable attitudes (i.e., liking) are likely to have favorable attitudes toward another object associated with the sport brand that they like such as Pepsi or Gatorade. Liking of the sport transfers to liking of the brand... at least in theory.
  2. Targeted Reach - Sports are a valued marketing channel because of their ability to deliver what is known as targeted reach. Audience characteristics for a sport or event tend to be well-defined with similarities observed among a fan base (e.g., age groups, income level, and interests). Sponsors can use an association with a sports property to reach a specific audience group. For example, the U.S. Navy is an official partner of the X Games, enabling it to communicate the Navy as a career and lifestyle choice to the X Games audience that has a large proportion of young people (i.e., potential recruits).
Is any sport property worth a $230 million a year investment? The answer is complex with many variables to consider. But, the affinity advantage and targeted reach of sports are strengths that make sponsorship an attractive opportunity to break through highly competitive and cluttered marketing environments.   

Welcome to Sports Biz U

Today marks the debut of Sports Biz U, a blog for people who are studying, teaching, and mentoring in sports business. The SBU blog was conceived as a resource to supplement the textbook Sports Marketing by Mike Fetchko, Don Roy, and Ken Clow (Prentice Hall, 2013). One of the limitations of a traditional textbook is that it is cannot give readers the most up-to-date ideas and practices once it is produced. SBU is an effort to build on the concepts in the textbook by discussing in the context of current events in sports.

We hope you find SBU interesting and useful whether you are just beginning your study of sports business, teach sports business, or simply consider yourself a "fan" of the industry.

- Don Roy