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LMBS Student-ID 06026787

Sports Marketing 2008

Individual Report Case Study Topic: Managing the Marketing and Sponsoring of a Sports Celebrity Introduction
This case study focuses on the management of marketing and sponsoring on the example of a sports celebrity. It consists of 3 parts of which the first one introduces and describes the subject of marketing and sponsorship in form of a literature review. Part 2 focuses on a specific celebrity in the sports industry and provides further in-depth data of sponsorship management on the athlete. In part 3 the case study will finalise with questions, which in turn shall provide a discussion platform on the topic.

PART ONE: Marketing & Sponsorship Marketing Explained


Marketing is the business function that identifies customer needs, determines which target markets the organisation can serve best, and designs appropriate products, services, and programs to serve these markets (Kotler and Armstrong, 2004). In order to gain customer satisfaction valuebased relationships must be built, in conjunction with other external and internal business units (Kotler, 2003). According to Allen et al. (2002) and Kotler & Keller (2006) the marketing mix includes the following elements: product, price, promotion and place. The 4Ps provide a basic framework for a marketing concept (Smith and Taylor, 2004). The marketing mix elements are usually seen as internal variables which are controlled by the manager (Smith and Taylor, 2004). There has been a shift by many large companies from seeing sponsorship as primarily a public relations tool generating community goodwill, to regarding it as an important part of the marketing mix (Allen et al., 2002, pp.57-58). Especially the importance of sponsorship as an element of the promotional mix is rising as a result of increases in both the number of sponsoring corporations and the amounts spent for sponsorship events (Javalgi et al., 1994). The promotional mix includes all communication tools a marketer can use (Smith and Taylor, 2004) and is part of the marketing mix. According to Shank (2005) sponsorship is, besides advertising,
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Sports Marketing 2008

personal selling, sales promotion and public or community relations, part of the promotional mix. Sponsorship as a form of promotion differs from advertising in that the medium and message cannot be totally controlled by the sponsor (Javalgi et al., 1994). Mescon & Tilson (1987, quoted in Javalgi et al., 1994, p.47) state that the growth of expenditures for sponsorship highlights the need to reach specialised target groups as an integral part of the total marketing communications.

Sponsorship Explained
Sponsorship was first undertaken by managers who had a great passion about a project. Within this hobbyistic approach, this activity was one alongside the other elements of marketing communication. Since then, the integration of sponsoring in the promotional mix has increased greatly (Masterman, 2007). Sponsorship Defined Sponsorship is a business agreement between two parties where the sponsor provides money, goods, services or know-how and in exchange, the sponsored party offers rights and associations that the sponsor utilizes commercially (Lagae, 2005, p.35). Generally, sponsorship is a commercial activity (Cornwell, 1995; Meenaghan and Shipley, 1999; Sandler and Shani, 1993; Shank, 2005). According to the literature, two types of sponsorship have evolved within the last two decades; philantrophic and commercial. The philantrophic sponsorship is defined as a tool for improving corporate image and social recognition. On the other hand commercial sponsorship is used to achieve business objectives such as increased sales and awareness (Calderon-Martinez et al., 2005). As Meenaghan (1991) describes, corporate sponsorship is the investment for commercial ends and direct benefits whereas philantrophic sponsorship is a business donation with indirect benefits that are found in society and not in the organisation. The difference between both sponsorships is that the philantrophic approach does not intend to gain commercial benefits (Masterman, 2007). Nowadays organisations mainly use sponsorship to accumulate funds, resources or services (Shilbury et al., 1998), these then are used to run the organisations operations.

LMBS Student-ID 06026787

Sports Marketing 2008

Sponsorship Management Sponsorship consists of several stages (Appendix A) and is one element among a number of promotional activities which needs to be coordinated depending on their strengths and weaknesses (Beech and Chadwick, 2005, p.356). As one area of business affects another area, the single stages strongly depend on each other. Therefore elaborate research into sponsorship opportunities will allow concise and focused objectives. As Shank (2005) mentions, organisational objectives, marketing goals or promotional strategies can all be addressed through a sponsorship investment. Sponsorship focuses on the desire of return-on-investment (ROI) and reaching target groups of marketing communication as Pitts and Stotlar (2002) argue. Over the last decades, sponsorship has grown into a creative and powerful instrument of marketing communication (Lagae, 2005, p.34). As Cordiner (2002a) explains sponsors have the ability to reach consumers in a less cluttered environment than traditional advertising. As an average consumer is confronted with over 5,000 messages per day, sponsorship had the potential to deliver the messages more effectively and was therefore a growing tool for organisations (Stotlar, 2005). As the table below shows, sponsoring took place in various fields and for example in North America the allocation of sponsoring money was divided according to the fields attractiveness in 2004.
Table 1: Major Areas of Sponsorship

Sports Entertainment Festivals/Fairs Cause Marketing Arts

69% ($7.69 billion) 10% ($1.06 billion) 7% ($792 million) 9% ($991 million) 5% ($608 million)
Source: Adapted from IEG (2004)

As can be seen in Table 1, the biggest amount of money is spent on sports. Beech and Chadwick (2005) argue that sport offers an advantage in increasing brand awareness, sales generation and media exposure. On the example of the Olympic Games, it can be seen that over the last decades, investments on sponsoring have augmented continuously (Appendix B). Sponsor and sponsee must regularly evaluate whether the goals are being reached and whether any new ideas and insights can be developed to increase the effectiveness of sponsorship (Shilbury et al., 1998). More and more involved parties build a strategic alliance, which is a
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LMBS Student-ID 06026787

Sports Marketing 2008

commitment and relationship between two organisations from which both organisations hope to benefit and if both parties are able to provide the benefits needed, a win-win situation can be created (Shilbury et al., 1998, p.202). As Walliser (2003) argues the most important variables of sponsorship effectiveness for a sponsor are awareness, image and purchase intention whereas for a sponsee they are funds, goods and services. Within the awareness variable, measuring to what extent the public takes notice of sponsors, identifying factors influencing sponsor association and analysing internal processes are the most important measurements. Within the image variable, the image transfer is investigated on factors such as spectator involvement with the sponsorship process, visibility of sponsoring activities, number of perceptions of the sponsor and the spectators attitude towards the association of the sponsor. Sponsors attract wide ranges of audiences and pitch their products to the spectators which in turn create an increased intention to purchase the advertised products and can be evaluated through sales figures (Walliser, 2003). However, no conceptual framework of how sponsorship works has been established in the literature. As relationships between sponsors and sponsees vary, as well as audience perceptions, integrated marketing communications such as sponsoring can be applied to promote the desired relationship (Kahle and Kim, 2006).

PART TWO: Case Study: The Liu Xiang Nike relationship Introduction
When China's star hurdler, Liu Xiang, limped off the field on the 18th August, pulling out of the 2008 Beijing Olympics, his foot injury not only sapped the hopes and aspirations of a nation - it also dealt a blow to the marketing plans of some marquees brands, such as Nike (IHT, 2008). Nike, based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities (Nike, 2008). Liu Xiang, 25, is a Chinese super-hero since he pulled off an upset victory at the Athens Olympic Games in 2004 to win the first ever gold medal for a Chinese man in track and field, winning the 110 meter hurdles. Since then, Nike was attracted to his celebrity status, especially in the Asia Pacific region. His image could be seen on billboards in virtually every major Chinese city, and in
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Sports Marketing 2008

global marketing campaigns for Nike. A life-size replica of him hurdling, decked in Nike gear, appeared in Nike stores in the Chinese capital throughout the Beijing Olympics 2008. Liu is by far the most celebrated athlete in China. Not even Yao Ming, the 7-foot-5-inch center for the Houston Rockets, can compare in marketing appeal (IHT, 2008). No one in China has been marketed more aggressively or more successfully (Hein, 2008). Liu is widely believed to be the country's most recognisable athlete, and many Chinese fans had believed that the Bird's Nest stadium had been built specifically with him in mind: a symbol of the Beijing Games for a hero who everyone had hoped would defend his hurdling crown on home soil. Of course, Nike was willing to jump on the train to gain some benefits from their long-term sponsoring relationship to Xiang. Especially, as the Chinese market was developing to the second biggest worldwide for the company in recent years (CEI, 2007). The evaluation of sponsorship management has become of vital concern to all parties involved. However, measuring the ROI poses several challenges for sponsors as there is no exact formula for measuring the ROI. Besides, it is difficult to precisely determine how many incremental sales are directly attributable to a sponsorship programme, or even how a sponsorship has affected consumers awareness of the sponsoring organisation or its brand (Masteralexis et al., 2004). According to IEG (2003d, quoted in Masteralexis et al., 2004, p.331) the most precise measurement factors are print media and television media exposure, primary consumer research, sales/promotion bounce-back measures and dealer/trade response.

The Nike Liu Xiang Success Story


Since a few years, China is opening its markets and alluring numerous companies from Europe and the USA, promising high market shares and huge profitability for the near future (Hein, 2008). Nike therefore decided to take advantage of sponsoring one of the most emerging and best recognised athletes in the Far East. Since Xiangs winning results throughout his career (Appendix C), sponsoring companies have expressed their interest in the athlete. Nike started providing the sporting gear in 2003, increasing the support especially after Athens 2004 where Xiang surprisingly won the gold medal. Nike specifically created shoes for Xiangs 2008 Olympic run, the Zoom Aerofly LX (CCTV, 2008). As Nike argued, the Olympics are less about advertising than about supporting the athlete. By now, Liu Xiang's endorsements have made him one of China's richest athletes, bringing in $23.8 million in 2007, according to Forbes magazine (2007) of which Nike is said to pay most parts, although Nike does not reveal exact figures (Hein, 2008).

LMBS Student-ID 06026787

Sports Marketing 2008

By the time of the Beijing Olympics, Liu Xiang was the elected symbol for the entire Chinese people. He still is seen as both hero and patriot in a nation basking in patriotism. That may force marketers who are hungry to sell more in the Chinese market to stick with him, some experts say (Hein, 2008). Especially the aggressive confrontation with Xiang in the print media and on television was flamboyant (IHT, 2008).

The Tragedy
When Xiang came to the Birds Nest stadium on August 18, nearly 90 percent of the Chinese population was fascinated, following the event either on the radio or television. It was not long until the mood totally knocked over from nationwide excitement to absolute depressiveness (Hein, 2008). The spectators in the stadium watched him warming-up as he ascertained that the injury was too serious and made a start impossible. Liu Xiang limped off the track, knowing he had failed.

"Liu Xiang's dropping out aroused wide sympathy; it was quite moving," says Zheng Suhui, Brand Manager at the Communication University of China in Beijing. "I think the public will understand him and respect him. In this sense, his sponsors won't stop his advertisement campaigns. However, this assumption was not shared by all experts. China was utterly lapsed into a state of shock. "His marketing value has been seriously diminished," said Chris Renner, president for China of sports marketing agency Helios Partners and marketing experts said Liu would probably be left out of advertisements celebrating China's remarkable achievements in Beijing this summer (IHT, 2008). "If anybody takes a hit from it, it's certainly Nike, simply because they're all about performance, whereas the others are about brand image," Renner said (NYDN, 2008).

Nikes Reaction
Despite the huge disappointment, Nike promptly reacted in favour of the fallen hero. In order to make a clear statement, Nike, on August 19, signaled that it will continue to work with Liu Xiang as planned. The US-based company was immediately preparing a television spot and print

LMBS Student-ID 06026787

Sports Marketing 2008

advertisement to show its sympathy for Liu, particularly after his coach broke down in tears during a news conference after the failed qualification. The ad pictured the hurdler with a determined expression, above the slogan, "Love competition. Love to compete. Love to win it back. Love at any cost. Love honor as well as setbacks. Love sport even when it breaks your heart" (Balfour, 2008). Such clever marketing tactics have helped make Nike the icon for the new China. In fact, Nike was already opening an average of 1.5 new stores a day in China in 2004 (Forney et al., 2004) and this number remained favourable to be increased until today. Asked whether Liu's advertising value had declined, Derek Kent, a Nike spokesman, said, "He's an icon here in China. He has a very bright future" (IHT, 2008). The quick change of sponsorship management underlined the strength of the relationship and bolstered the Chinese athlete.

Nikes Interest in China


But some other reasons for the remaining attractiveness of the Asian market also might have been that Nikes sales in China still are growing at over 50 percent annually and will reach $1 billion until the end of 2008, allowing the company to remain market leader and making the mainland its second largest market globally, Nikes Chief Executive Mark Parker said. "We are about 35-40 percent bigger than the next sports brand in China," he said, "and extending our leading position". We are growing at 50 percent-plus in China," Parker told Reuters in an interview. "And we can maintain that for the foreseeable future" (CEI, 2008). Revenues jumped 22 percent in Asia Pacific, 16 percent in Europe and only 2 percent in the United States, Nike's largest market (CEI, 2007). China's efficient manufacturers helped Nike expand gross profit margins to 44.8 percent in the last quarter of 2007 from 44.1 percent in a year earlier (Hein, 2008). Nike posted a 51 percent rise in net profit to $569.7 million in the end of 2007, topping Wall Street targets and raised its fiscal 2008 revenue outlook (Hein, 2008). Furthermore, Brand Manager Denson illustrated the growing demand for Nike products in China of 30 percent, annually (Hein, 2008). Another fact is that since 2005 China tied Germany and the United Kingdom as the world's third-largest advertising economy, behind the U.S. and Japan (Fengri and Shooshtari, 2007). Furthermore the sportswear-market potential is immense. As the independent marketing and research firm Frost & Sullivan predicts Chinas market will grow to $10.4 billion by 2011 (SZN, 2008).

LMBS Student-ID 06026787

Sports Marketing 2008

The Downside
The hype and the pressure must have been beyond all bearing for such a young man. Xiang was expected to defend his gold medal at the Beijing Olympics howsoever. His face was visible across China on billboards and newspapers. It seemed no matter where you look, Liu was there (Telegraph, 2008), Xiangs coach, Sun Haiping, said. The hope of the Chinese people weighed on him. It was not Xiang who was competing but China itself. China could not be seen to be weak, impaired or flawed. Having spent seven years reworking its public image since China won the bid to host the Games, the huge country could not afford to be without the central figure around which the narrative is spun, the man who has come to embody the new China (Telegraph, 2008). "I have experienced in the past the great pressure that government officials and sponsors exert on the athletes as well as the coach, and that they demand a gold medal, otherwise it is meaningless. Liu Xiang is still a young boy and he has been put under a bit too much expectation" (Telegraph, 2008) as Mr. Gu, Xiangs former coach, denunciates. Also the Chinese people and especially sponsors like Nike tend to increase the pressure to its maximum. Post-event, malicious tongues assumed Nike could have had a major word in the play and have forced Liu Xiang not to participate in the final as the chance of losing was too risky, especially with the Cuban, Dayron Robles, who cracked Xiangs world-record two months before the Beijing Games with a time of 12.87 seconds, beating Xiangs mark by 0.01 seconds. Bearing in mind the former Nike slogan You dont win Silver, you lose Gold (Lensky, 2002), the risk of Xiang losing and Nike diminishing its image in Far East might have seemed to be too big and threatening.

LMBS Student-ID 06026787

Sports Marketing 2008

PART THREE: Case Study Questions

QUESTION 1:
How can a sport sponsor manage sponsorship deals more effectively in order to allow the achievement of both partys objectives and gain the best possible outcome?

QUESTION 2:
After reading the case, to what extent, do you believe, shall a sponsor be able to influence sports athletes performances?

LMBS Student-ID 06026787

Sports Marketing 2008

References ALLEN, J., OTOOLE, W., MCDONNELL, I. and HARRIS, R. (2002). Festival and Special Event Management. 2nd ed. Milton: John Wiley & Sons Australia. BALFOUR, F. (2008). Nike tweaks Olympic Ad with Liu Xiang. Available from: <http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2008/08/nike_tweaks_ad.ht ml> Accessed on 19 December 2008. CALDERON-MARTINEZ, A., MAS-RUIS, F.J. and NICOLAU-GONZALBEZ, International Journal of Market Research, Vol. 47, 75-99. J.L. (2005).

CCTV (2008). Chinese Track & Field Team Equipment for Olympic Tournament. Available from: <http://2008.cctv.com/20080809/106923.shtml> Accessed on 30 December 2008. CHINA ECONOMY (2007). Nike Expects $1 Billion China Sales in Year. Available from: <http://www1.cei.gov.cn/ce/doc/cen3/200710220865.htm> Accessed on 23 December 2008. CORDINER, R. (2002a). Boxing and Sponsorship: A Mismatch of Knockout Combination. International Journal of Sports Marketing and Sponsorship, 175-181. CORNWELL, T.B. (1995). Sponsorship-linked Marketing Development, Sport Marketing Quarterly, Vol. 4, No. 4, 13-23. FENGRI, L. and SHOOSHTARI, N.H. (2007). Multinational Corporations' Controversial Ad Campaigns in China: Lessons from Nike and Toyota. Advertising & Society Review, Vol. 8, No. 1, 17-19. FORNEY, M., BEAVERTON, N., GOUGH, G. and FONDA, D. (2004). How Nike Figured Out China. Available from: <http://www.time.com/time/magazine/article/0,9171,995462,00.html> Accessed on 26 December 2008. HEIN, C. (2008). The Pain of the Sponsors (in German). Frankfurter Allgemeine Zeitung. Available from: <http://www.faz.net/s/Rub5FA217707F6047DCAA31F8FCCC0B1C7D/Doc~E4120F3BDA28F4 B6188C081FF9E97B3C5~ATpl~Ecommon~Scontent.html> Accessed on 29 November 2008. INTERNATIONAL EVENTS GROUP (2004). Sponsorship Spending to Increase 8.7% in 2004. IEG Sponsorship Report 22, Vol. 24, No. 1, 4-5. INTERNATIONAL HERALD TRIBUNE (2008). Sponsors feel Liu Xiangs Pain. Available from: <http://www.iht.com/articles/2008/08/19/sports/19liu.php> Accessed on 23 December 2008. JAVALGI, R.G., TRAYLOR, M.B., GROSS, A.C. and LAMPMANN, E. (1994). Awareness of Sponsorship and Corporate Image: An Empirical Investigation. Journal of Advertising, Vol. 13, No. 4, pp.47-58. KAHLE, L. and KIM, C.H. (2006). Creating Images and the Psychology of Marketing Communications. London: Routledge.
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KOTLER, P. (2003). Marketing Management. 11th ed. Upper Saddle River, N.J.: Prentice Hall. KOTLER, P. and ARMSTRONG, G. (2004). Principles of Marketing. 10th ed. London: Pearson/Prentice Hall. KOTLER, P. and KELLER, K. (2006). Marketing Management. 12th ed. Upper Saddle River, N.J.: Prentice Hall. LAGAE, W. (2005). Sports Sponsorship and Marketing Communications: A European Perspective. New York: Financial Times/Prentice Hall. LENSKY, H. (2002). The Best Ever Olympics: Social Impacts of Sydney 2000. Albany, NY: Suny Press. LIU XIANG WEBSITE (2008). Liu Xiangs Career Highlights. Available <http://liuxiang.sports.cn/english/news/index_5.html> Accessed on 27 December 2008. XIANG WEBSITE (2008). 2008: End of Year Review. <http://liuxiang.sports.cn/english/> Accessed on 29 December 2008. Available from:

LIU

from:

MASTERALEXIS, L.P., BARR, C.A. and HUMS, M.A. (2004). Principles and Practice of Sport Management. Gaithersburg, MD: Aspen Publishers. MASTERMAN, G. (2007). Sponsorship: For a Return on Investment. Oxford: ButterworthHeinemann. MEENAGHAN, T. (1991). The Role of Sponsorship in the Marketing Mix, International Journal of Advertising, Vol. 10, 35-47. MEENAGHAN, T. and SHIPLEY, D. (1999). Media Effect in Commercial Sponsorship. European Journal of Marketing, Vol. 33, No. 3, 328-348. NEW YORK DAILY NEWS (2008). Liu Xiang Pullout a Blow to Olympic Advertisers. Available from: <http://www.nydailynews.com/money/2008/08/18/2008-08-18_liu_xiang_pullout_a_blow_ to_olympics_adv.html> Accessed on 26 December 2008. NIKE (2008). Nike Chinas Call to Action: Campaign Launch. Available from: <http://www.nikebiz.com/company_overview/features/JDI.html> Accessed on 29 December 2008. PITTS, B. and STOTLAR, D. (2002). Fundamentals of Sport Marketing. 2nd ed. Morgantown, WV: Fitness Information Technology. SANDLER, D. and SHANI, D. (1993). Sponsorship and the Olympic Games: The Consumer Perspective, Sport Marketing Quarterly, Vol. 2, No. 3, 38-43. SHANK, M.D. (2005). Sports Marketing: A Strategic Perspective. 3rd ed. London: Prentice Hall.

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Sports Marketing 2008

SHENZHEN DAILY NEWS (2008). Advertisers Back Liu Xiang Despite Injury. Available from: <http://paper.sznews.com/szdaily/20080820/ca2901255.htm> Accessed on 26 December 2008. SHILBURY. D., QUICK, S. and WESTERBEEK, H. (1998). Strategic Sport Marketing. St. Leonards, New South Wales: Allen & Unwin. SKY NEWS (2008). Sore Hurdle Hero says Im Sorry. Available from: <http://news.sky.com/skynews/Home/World-News/Chinas-Hurdle-Hero-Liu-Xiang-Says-SorryFor-Olympic-No-Show-Over-Foot-Injury/Article/200808315082606> Accessed on 20 December 2008. SMITH, P.R. and TAYLOR, J. (2004). Marketing Communications: An Integrated Approach. 4th ed. London: Kogan Page. STOTLAR, P. (2005). Developing Successful Sport Sponsorship Plans. 2nd ed. Morgantown, WV: Fitness Information Technology. TELEGRAPH (2008). Liu Xiang sent to Olympic Death by Chinas 1 Billion Image-Building Exercise. Available from: <http://www.telegraph.co.uk/sport/othersports/olympics/2589848/LiuXiang-sent-to-Olympic-death-by-Chinas-1-billion-image-building-exercise.html> Accessed on 22 December 2008. WALLISER, B. (2003). An International Review of Sponsorship Research: Extension and Update. International Journal of Advertising, Vol. 22, No. 1, 37-42.

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LMBS Student-ID 06026787

Sports Marketing 2008

Appendices Appendix A: The Main Stages of Sponsorship Management

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Review of corporate marketing plan and objectives Identification and prioritisation of specific sponsorship objectives (corporate and product/brand related Identification of evaluation criteria and assignment of relative weighting based on the prioritisation from step 2 Screening and selection of sponsorship proposals Implementation of selected sponsorship proposals Evaluation of sponsorships effectiveness in achieving prescribed objectives
(Source: Adapted from Beech & Chadwick, 2005, p.356)

Appendix B: Evolution of Sponsoring Sums of Olympic Programs

Location
Calgary, Seoul Barcelona, Albertville Lillehammer, Atlanta Nagano, Sydney Salt Lake City, Athens

Period
1985-88 1989-92 1993-96 1997-2000 2001-04

Sum ($ million)
95 175 350 500 600

Partners
9 12 11 10 11

(Source: Adapted from Lagae, 2005, p.41)

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Sports Marketing 2008

Appendix C: Career Highlights of Liu Xiang

YEAR 2000 2001

EVENT Men's 110m hurdles at World Junior Championships Mens 110m hurdles at

RANK 4th 1st


2002 2002 2003 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008

East Asian Games in Osaka World University Games in Beijing Broke the world youth and Asian record with a 1st 1st 3rd 1st 2nd 1st 2nd 1st 1st 1st 1st 1st 1st

time at IAAF Grand Prix in Lausanne Mens 110m hurdles at Asian Championships Mens 110m hurdles at Asian Games Mens 60m hurdles at IAAF World Indoor Champs (first medal for China in 18 years) Mens 110m hurdles at National Grand Prix Mens 110m hurdles at IAAF Grand Prix in Zagreb Mens 110m hurdles at Olympic Games in Athens Mens 110m hurdles at IAAF Grand Prix in Osaka Mens 110m hurdles at the IAAF World Championships in Athletics in Helsinki Mens 110m hurdles at East Asian Games in Macau Mens 110m hurdles at IAAF Grand Prix in Lausanne Mens 110m hurdles at IAAF Grand Prix in Stuttgart Mens 110m hurdles World Championships in Osaka Mens 110m hurdles at IAAF Grand Prix in New York Mens 110m hurdles at IAAF World Indoor Championships in Valencia

(Source: Adapted from Liu Xiang Official Website, 2008)

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