From The Globe and Mail Report on Business Magazine April 2010
In December, a pair of UC Davis economists estimated that Tiger Woods’s off-course philandering managed to wipe out about $12 billion (all currency in U.S. dollars) market value for his sponsors. It wasn’t long before experts were speculating that the whole celebrity endorsement market was headed for a crash. One fallible human could not be relied on to personify a whole brand, was the suggestion from at least one consultant. And the sports attorney who writes the excellent blog Sportsbiz pragmatically pointed out that insurance costs were sure to rise for endorsement deals, driving down any hopes of profitability.
Tiger Woods is back on the Tour this month, though his bag has lost at least one logo (AT&T). But even if companies are more cautious, the endorsement market isn’t about to disappear. In fact, there are a number of innovative examples of brand partnerships we can learn from in the wake of Tigergate.
Timex + NFL: Dissimilarity breeds stability
In business as in life, partners with differing but complementary attributes often stay together longer. Consider that almost half of the $12 billion Woods destroyed belonged to just three sports-related sponsors-Nike, Gatorade and Electronic Arts, makers of Tiger Woods PGA Tour video games-names synonymous with success and integrity, just as the golfer once was. The market punished these brands disproportionately because it made little distinction between them and Woods.
On the surface, Timex and pro football could not be more different. One is affordable and reliable; the other aggressive and competitive. Yet Timex committed to invest a reported $35 million over 15 years to name the New York Giants new training facility. Why does it work? Timex’s image for precision aligns nicely with sports training. It gets the upside of brand association without much downside should the Giants experience a crisis.
Siemens + Disney: Diversity lessens risk
One of the problems with sponsoring an athlete like Tiger Woods is that you only get value when his face is physically associated with your product. Once the star’s reputation takes a hit, the entire deal is compromised. But if the sponsor spreads its public exposure across a number of platforms, the fallout can be far less damaging. Take the example of Siemens, the German technology giant that sponsors the Spaceship Earth ride at Disney’s Epcot Center. Its partnership with Disney also extends to a number of interactive exhibits at the resort, and its technology is regularly featured in episodes of Disney-ABC shows such as Grey’s Anatomy. Even if a tourist were to be injured on a Siemens ride, the risk of the company having all its sponsorship channels compromised at once is exceedingly low.
State Farm + OK Go: Be the hero
Tiger Woods and Nike didn’t need a feelgood story for a multimillion-dollar deal to add value on both sides. But if you only ever talk about a deal in terms of market value-and that’s been the story of athlete endorsement for a long time-market value is going to be the first casualty when things go south.
Contrast that with a recent deal struck between State Farm Insurance and the rock band OK Go. The Illinois insurer paid to place its name prominently in the Los Angeles-based hipsters’ recent viral video phenomenon This Too Shall Pass (look it up; it’s fantastic). In the event of an insurance scandal, or the arrest of a band member, such an arrangement might seem opportunistic and greedy.
But this deal comes with a backstory, one that grounds it in something other than money. OK Go, we learn, is originally from Illinois, and State Farm is playing the white knight here, rescuing the once-local boys from a repressive U.K. label (EMI), which has tried to prevent the band from freely distributing its videos online-in other words, preventing them from doing what brought them fame in the first place.
Those details help insulate the deal from cynicism when a little State Farm truck glides across the screen in the video’s opening frames. Somehow, the arrangement seems just right. And considering the video has been viewed more than 10 million times, everybody should feel very happy indeed.