London Olympics team sets sights on sponsorship gold

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Barely a year since Sebastian Coe and his team pulled off one of sport's great "muggings" by snatching the right for London to stage the 2012 Olympics from Paris, the race is on for multi-million pound sponsors of the world's largest sports event.

Lord Coe and his team have set the bar high - expecting the private sector to contribute at least £750m towards the operating costs of the 2012 Olympics by selling intellectual rights, VIP packages and tickets to British companies.

If all goes well, this sum, the equivalent to the current annual marketing spend for the entire sports sector in Britain, would be combined with revenues from tickets sales, merchandising and international broadcast rights to cover the £2bn operating cost of London 2012 and possibly make a profit.

Although branding seems the obvious reason to put your company's name to the Games, there are other factors such as improved government relations, boosting staff morale or simply blocking a rival.

The kernel of London's marketing plan was devised by Sir Keith Mills, vice chairman of the London Organising Committee of the Olympic Games (Locog) and the creator of loyalty schemes AirMiles and Nectar.

Among the 10 "tier one" sponsors - each paying between £50m and £100m - the first categories will come from banking, automotive, utilities and telecommunications, the latter divided into landline and mobile sponsors.

These sectors have been chosen in negotiation with the Games "franchiser", the International Olympics Committee, so as not to clash with any of the global companies such as McDonald's and Samsung, which belong to the rolling "TOP" sponsorship programme. Insiders say that the first sponsor is likely to come from the banking sector with an anticipated £100m deal. Barclays, HSBC and RBS are all in discussions with Games organisers, whose negotiations are being led by Paul Deighton, Locog's chief executive, who is also a former Goldman Sachs banker.

Locog cites the recent £100m paid to the 2010 Vancouver Winter Olympics by the telecoms firm Bell Canada as cause for optimism

About 20 to 30 tier-two companies and up 50 tier-three companies will be unveiled starting in the second half of next year.

The investment for the top 10 companies will enable them to promote themselves as the exclusive official supplier. They will also have use of the famous Olympic rings - arguably the world's most marketable symbol - as incorporated in the logo of the organising committee; and have first refusal on broadcast commercial slots and receive an allocation of tickets and hotel rooms, at market prices.

Sponsors in the lower tiers will receive fewer such hospitality opportunities and their use of the rings may be restricted to business to business rather than consumer advertising. What no company can buy is a presence in the venues as the IOC operates a strict policy of "clean" venues. All packages are devised in consultation with the IOC and there is little room for horse-trading.

"Selling local sponsorship is an integral part of the Games. It is more important than venues, transportation and security," said Terence Burns, who brokered Delta Airlines' £20m sponsorship of the Atlanta Games and subsequently sold rights for the IOC.

He reckons London has a good chance of achieving its sponsorship goals because there is a "leading-edge" sports sponsorship market in the UK. The key for the organisers is to value not just big cash offers, but companies which will aggressively market the 2012 brand, thus raising the Games' profile and boosting ticket sales and broadcast viewing figures.

"If I were selling the rights I would be less excited about the market leader who writes a cheque and is not very creative thereafter. More exciting are tier-two companies, which may give you less cash but will be very aggressive with their marketing and throw everything at it. You should look at potential sponsors as an opportunity to help promote the brand and the project."

A key selling point for the Locog team will be the robustness of anti-guerrilla marketing legislation included in the recently passed London Olympics Act. The marketing department of the IOC is still smarting at the way sportswear firm Nike ambushed the 1996 Atlanta Games by buying up poster sites and generally raining on the parade of Reebok, an official sponsor. The Olympics Act creates a legal platform for a cordon sanitaire around the Games site and potential sponsors will be further encouraged by a ban already in force on unauthorised use of combinations of such words "London" and "2012".

For some UK companies, the Olympics will be of such significance that it will hasten major changes in direction, if previous games are anything to go by. According to Mr Burns, Bell Canada has "leapfrogged" years of stagnation and has condensed two decades of infrastructure changes into a few years. Similarly Samsung's Olympic sponsorship signed in 1997 signalled the start of a 10-year plan to grow from a relatively small consumer electronics brand to a global brand and rival to Sony.

Nevertheless, opinion is divided about the prospect of sponsoring the Games. BT, one of the financial backers of the Olympic bid, will be in the frame. BT's Adam Liversage said of large sponsorship deals: "You tend to get better value for money than if you just spend it on advertising. You get three to four times the exposure, it just manifests itself in ways that might not be obvious."

BT argues there are direct business benefits to sponsorship. "You get a whole bunch of opportunities as an organisation to meet influential people. Interested parties hear about us," he added.

When BT sponsored the original Olympic bid, for example, it got plenty of chances to promote the technology that could be used for the Games themselves.

John Hockey of the Circa Group, an event management company that is one of the official agents for corporate hospitality at the World Cup in Germany, says large corporations will always be involved in the Olympics. "The [organisers] are asking for huge amounts of money, but the large companies will get involved anyway just to maintain their positions. Even if it doesn't seem to pay off straight away, they just regard it as a long-term investment."

Some within the sponsorship industry say certain large companies have already ruled themselves out of taking a sponsorship role, because they feel the benefits simply don't match the costs.

One sponsorship adviser, who asked not to be named, said: "What you are after is the TV audience. But you can't have ad logos on the track, so you never really get them. Then you have to spend a load of money advertising the fact that you are sponsoring the Olympics. If you are Nike, it makes sense, because the brand is associated with the sport anyway. If you are Barclays, it doesn't. I guarantee, if you asked 10 people who sponsored the last Olympics, eight of them would struggle."