Marketing and Promotion of the Olympic Games

Abstract

Nowadays, Olympic Games have become one of the most large-scale and profitable global media events. Today, sport, especially events associated with the Olympics, has not only become great entertainment, occupation and lifestyle, but solid business as well. In the world of sports, marketing, promotion and advertisement are fundamental tools for generating great profits. The current article will explore the issue of marketing-mediated sport events on the example of Olympic games and will touch upon the issues of promotion of properly the Games, advertising athletes and participants, sources of profit for conducting the Games, technologies used in Olympic marketing, new trends in marketing of Olympics and emerging threats to sports marketing. The issue will be discussed both in theoretical and practical network and is aimed at tracing the compliance of theoretical findings on advertisement, promotion and sponsorship strategies, with the practical implementation thereof on the example of one of the most profitable events in the sense of advertising, the Olympic Games. Thus, the work will focus on the issue of current developments of Olympic marketing and steps to be done in both theoretical and practical way to ensure further effectiveness and attractiveness of Olympic marketing programs.

Introduction

Sport plays one of the most significant roles in everyday life of people around the world, whether those who actively participate in it or just spectators and supporters. In most western countries, this part of social life is widely reported on and reflected by the mass media.

Today, sport has not only become great entertainment, occupation and lifestyle, but solid business as well. In the world of sports, marketing, promotion and advertisement are fundamental tools for generating great profits. Each year, entrepreneurs and executives involved in the sport industry face serious issues, whether ones of defining ways to persuade advertisers to buy commercial time during the sport event or alluring customers to purchase some particular equipment for sports.

Particularly huge profits are associated with marketing and advertising of Olympic Games. Nowadays, Olympic Games have become one of the most large-scale and profitable global media events. Though, the situation was not always like that. Starting as ancient Greek religious festival, where athletes competed in honor of Zeus and being revived in late nineteenth century as completely athletic games, Olympics ended up with becoming one of the most celebrated and profitable media events in the world.

The current article will explore the issue of marketing-mediated sport events on the example of Olympic games and will touch upon the issues of promotion of properly the Games, advertising athletes and participants, sources of profit for conducting the Games, technologies used in Olympic marketing, new trends in marketing of Olympics and emerging threats to sports marketing. The issue will be discussed both in theoretical and practical network and is aimed at tracing the compliance of theoretical findings on advertisement, promotion and sponsorship strategies, with the practical implementation thereof on the example of one of the most profitable events in the sense of advertising, the Olympic Games. Thus, the work will focus on the issue of current developments of Olympic marketing and steps to be done in both theoretical and practical way to ensure further effectiveness and attractiveness of Olympic marketing programs.

Distinctive features of Olympics Marketing

The Olympic games is the global arena for the best athletes in the world and a venue for unity and cooperation of people around the globe. Together with that, since the beginning of the last century, the games have acquired powerful advertising function. In 20s and 30s, this function was primary political and aimed at ideological propaganda of certain regime, most often dictatorship, like communism or nazism, while by late twentieth century it acquired purely economic dimension, becoming one of the most suitable places for advertising, marketing and generating considerable sums of money.

Today’s Olympics is one of the most popular and most watched events in the world. For that reason, each 4-year period states compete for the right to host the games and show their country and attractions to thousands of Olympic enthusiasts who are going to come at the venue to watch the Games and millions of others watching them on TV. Broadcasting companies, in their turn, pay considerable sums of money to buy the rights for transmission of the Games. For instance, NBC, an national American broadcasting company, paid the sum of $3,5 billion to receive the right to transmit five Olympic games for the period of 2000-2008.

Nevertheless, this deal is considered a very successful one, since NBC has already return those $3.5 billion and received even more by selling advertising during the broadcast of the Games. The officials of the Company prefer not to disclosure the actual price of their advertising spots, but some sources of the industry assert that prime-time spots 30 seconds long may cost about $600,000. Of course, this sum doesn’t go in line with $2million cost of commercials 30 seconds long during Super Bowl of 2002. Notwithstanding the price, the demand for advertising spots is very high. Already in November 2001, NBC has sold 90% of its advertising spots to be broadcast during Olympic Games.

The advertisement strategy in Olympics significantly differs from other events. In Olympic Games, there are limited ways of attaining revenues from advertisement – either athletic endorsement in Olympics, or purchasing broadcasting rights and in such way promotion the TV Company, or sponsorship. Thus, in Olympics, there are no merely advertisers, there are sponsors. Sponsorship involves not only financial support of the revenue, but providing products and services, technologies, expertise and personnel to help in the organization of the Games. Revenue on sponsorship makes up about 32% of the total Olympic marketing revenues. The Olympic Games provide incomparable returns for the sponsors. They benefit from the marketing platform based on the ideals and values and increased opportunities from the company’s showcasing, sales, community outreach programs and internal rewards.

“Without the support of the business community, without its technology, expertise, people, services, products, telecommunications, its financing – the Olympic Games could not and cannot happen. Without this support, the athletes cannot compete and achieve their very best in the world’s best sporting event.”, stated Dr Jacques Rogge, the President of International Olympic Committee (International Olympic Committee Official Website )

The example of great benefits derived from the sponsorship can be the Coca-Cola Company, which used Olympic Games to advertise and sell its products for quite long period of time. In Athens, it has purchased the right to be the “official soft drink” of the Games and paid solid sums for numerous advertising spots. At 1984 Olympic Games in Los Angeles, Coca Cola was the second leading advertiser having spent $29,875,000 on promotion of its drinks. At 1996 Olympics in Atlanta, Coca Cola spent $73,645,900 on promotion (Eastman, 2000), becoming the leading advertiser of the Games and making Olympics its biggest and most important event in promotional company.

Promotion of Sportsmen

In summer 2001, the Olympic Committee of the United States announced a new promotional campaign aimed at developing interrelation of United States Olympic Team and public. This was to be attained with three commercials picturing in humorous way three sportsmen trying to get into the Olympic Team. Each commercial ended with a slogan “The U.S. Olympic team. They’re not just out there every four years, they’re out there every day.”( Dedyukhina, 2004). Chairman of NBC Sports and Olympics Dick Ebersol said that his company conducts the policy of raising awareness of U.S. Olympic team with the aim of making athletes more familiar to viewers, particularly the young ones for them to follow the sportsmen of the team throughout Olympics.

Athletic Endorsement in Olympics

During the Olympic Games, virtually all the athletes carry a huge number of advertisements on their clothes. Numerous outfit companies such as Nike, Adidas or Oakley provide sportsmen with new equipment and clothes designed to facilitate movement and improve performance and at the same time advertise their new products to millions of viewers. Athletes can have various kinds of deals, while some are paid for appearance in a definite outfit, others just get them at no cost. Generally, skis, snowboards, skates and other equipment needed for Olympic games is considerably expensive, and the only opportunity for many athletes is to get sponsored by a sports-outfit company to cover the cost of their equipment. The companies greatly benefit from such deals since by this way their equipment is advertised by the world’s most famous sportsmen. Often the companies modify the models of their outfit used by sportsmen to decrease their price and adapt them to the condition of consumers.

Olympic Licensing and Merchandise

Olympic licensing programs are targeted to market officially licensed products and merchandise from the Organizing Committee, National Committees and IOC. Olympic souvenirs and other merchandise bring a huge amount of money to the organizers. Consumers at the venue of the Games are certain to purchase some little things which would remind them of Olympics, such as official golden or silver coins of Olympic Games, wallets with Olympic symbols and a number of other souvenirs with Olympic logos.

Thus, today Olympics have become a mixture of ancient ideals of sportive perfection and today’s reality associated first of all with commerce. Marketing and advertising are essential things in the organization of the Games since they are targeted to cover great expenses of such global event. Though, despite overwhelming dominance of commercial element, the Games still try to preserve the level and ideals of the Ancient Greece. Thus, there are strict tools aimed at maintaining the purity of the competition and the athletes who win the games become people of national pride.

Use of Technology in Olympic Marketing Strategies

From the perspective of mass-media, the Olympics become undoubtedly a testing field for the new technologies. As the essential pert of the Olympic ideal of the universalism, (Verdier, 1996, p59) the International Olympic Committee tries to make every possible effort to ensure everyone around the globe the access to Olympic information irrespective of location. Although the goal started as idealistic, today the infrastructure and technological developments are able to achieve this task. The information age offers the developments in the communication technologies which reorients the mode the consumers experience the Olympics in a broad range of traditional, developing and yet untested mass-media. This in particular concerns the vast potential of the Internet. Though, in Olympics, this medium is has somewhat limited action range due to the actions of the IOC Press Commission and Radio and Television Commission (Verdier, 1996, p62) as a reply to request of other forms of media rights holders. Technologies available for use in the Internet, such as streaming video footage of Olympics on the web, were prohibited. Thus, the limits were placed on the possibility of reorientation of media usage for watching the Games. As to the finding out about the Games, internet, as a assessable and far-reaching information tool has large potential for reorientation of the media forms for the informative exposure of the Games.

Historically, radio was the second media or one supplement to television in exposure of the Games. Recent developments in the availability of mobile connection and satellite communication channels have afforded radio networks with relevant infrastructure to provide improved live coverage of the Games. (Verdier, 1996, p61).

Of course, the main coverage media of the Olympics is television. Television broadcasting rights traditionally constitute 50% of the Olympic marketing revenue. The estimated number of Olympics viewers is 3.7 billion people in 220 countries and territories (Information from International Olympic Committee Official website). Thus, television is the engine that has pushed the growth of the entire Olympic movement. Over the past two decades, increases in the broadcast revenues have provided the Games with unusually large financial base. Though, this revenue is drawn for the broadcasting rights solely, not on the money derived from the viewers. Olympic committee adheres to the principles of free TV coverage and declines offers for broadcast on a pay-per-view platform since such practice contradicts the Olympic Broadcast Policy, targeted at making the Games viewed by as much number of people as possible. The fundamental Olympic principle, set forth in the Olympic Charter, provides the maximum presentation of the event by broadcasters all around the globe for everybody having access to the television. Therefore, broadcasting rights are sold only to those companies, who guarantee the broadcasting of the Games on their territory free of charge.

Methods of signal transmission of radio, television or Internet, have greatly developed by the advancements in transmission technologies, including Satellites, microwave or fiber optic technology. Therefore it should be noticed that developments in communication technologies, both complimentary and peripheral to the Internet advancements, reorient the mode of informing the audience of the Olympic Games and exposing the main events. This is mainly based not only on huge increase in the number of media tools and facilities, but the capability and quality of new technologies.

Theoretical findings on sports marketing

There are very few studies that focus on particular issue of sports promotion, but instead there is a considerable number of mediated sports research which touch upon different aspects of the marketing connected to sports. Moreover, the issue of promotion is generally included in the broader sphere of marketing, which enhances not only the audiences of the program, but economic and social issues of sponsorship, globalization, political manipulation and commercialization. Therefore, sport marketing covers a broad range of issues such as selling sports events to television distributors and advertisers, and a few studies have covered the question of ongoing and increasing commercialization of sport events (Wenner, 1998).

Despite prevailing usage of televised marketing practices of professional sports that occupied the networks and mass media around the world to the great extent by the early 1990s, a very limited number of researches has been made in regards of the effects of televised sports marketing.

Farrell ( 1989) called marketing of the sports transmitted by television the creation of modern spectacles, McAllister ( 1997, 1998) perceived televised sports as a tool for the sponsorship of the products, but there are very few studies which explored the link between sport marketing and televised program promotion. Since the prices for acquiring right to broadcast sport events of paramount importance keep growing at enormous rate (Goldstein, 1996), considerable number of research on marketing has naturally focused on the issue of how the networks pay for these excessively expensive broadcasts.

For example, NBC paid more than $3.5 billion for the right to transmit Olympic games from 2000 to 2008. Moreover, cities hosting the Games pay more than a billion dollars each to attract the games and host the visitors. (Fortune, 1996). Marketing is the only tool with which NBC and Olympic host cities can turn their debts into profits. For example, in 1976 in Montreal, due to sponsorship, a billion dollar loss was converted into $215 million profit for the city. According to the estimations of the Fortune magazine in 1996, the Atlanta city spent more than 2 billion dollars to host the games in 1996 but due to sponsorship they were returned with surplus. Although the television companies have a number of other income sources, none of them is larger and more profitable than sponsorship. To the contrast with spot advertising, sponsorship is defined by McAllister (1998) as “the funding of an entire event, group, broadcast, or place by one commercial interest in exchange for large amounts and special types of promotion connected with the sponsored activity” (p. 357). This resulted in such deviations as the Sunkist Orange Bowl, Winston Cup racing series, the Virginia Slims tennis tournaments, and presenting Visa as the main official credit card of the 1998 Winter Olympic Games. One of the very appropriate definition of sponsorship is the one defining it as a paid effort of the advertiser to tie its name to event or venue which strengthens its brand in a positive, yet in not obviously commercial way. Therefore, sponsorship, particularly one of Olympic Games, is different from merely advertising, since it involves not only financial support of the event, but provision of technology, equipment, services and products, expertise and relevant staff to assist the organization of the venue.

It is understood that marketing of sports is a big business and it requires elevated attention of researches. Work by O’Neal, Finch, Hamilton, and Hammonds (1987) on the topic of features of sports that make it particularly attractive to the corporate sponsors, pay special attention to the finding that the sport rises excitement of viewers and thus lowers their anti-commercial self-protection mechanisms, making them more sensitive to advertising. According to the studies of Eastman (2000), if this phenomenon works between the content of program and commercials, it should also work between the sport program and promotions of other programs. This study confirms that advertisement of other programs during major sport events, in particularly Olympics, has great impact on the popularity of the promoted programs. But the excitement effect works in two directions: as the sports environment makes the promotion of other programs more effective, exciting commercials of other programs render sport events even more exciting. These conclusions are made on the basis of two theories, theory of expectance and theory of excitation transfer. Expectancy theory states that expectations about programs, sport programs in particular, might either enhance or diminish the effect of promos for other programs. Excitation-transfer theory stands for the fact that promotions that are able to excite viewers may transfer these emotions to the sport programs. In that way, promotions of televised sport event help create excitement about upcoming sport events and potentially increase their ratings, while promos for other programs, such as movies or prime-time series generally gain elevated effectiveness just by the fact of being placed within sport environment. Studies of Izod (1996) concluded that broadcasters have the real levels of power to present the myths to the audience as a real-life fact and shape the view of audience on the Olympic Games. Developing this issue, Puijk ( 1997) explored the effect of the 1992 Lillehammer Olympics on creating the image of the host country, and Stevenson (1997), on the basis of the analysis of 2000 Olympics staging, presumed that mythology connected with the games will have dramatic impact on world vision of Sydney as a city and a culture. These studies have provided comprehensive arguments that mega sporting events gave the ability and power to create and shape identities, cultures, attitudes, adding to the research of the marketing mediated sports particular social and economic significance.

New Trends in Olympics Marketing

It was shortly mentioned above that there is a growing trend towards changing the format of Olympic Games advertising which provides the ground to assert that millions of dollars spent by the corporate sponsors for advertising in the framework of Olympic Games do not guarantee a considerable profit from their investments. To succeed in the actual environment, more elaborate strategies are needed.

Today, a growing number of big companies which traditionally spent substantial amounts to associate their brands with the image and idea of Olympic Games ask the question if the Games are worth it. The most recent example is provided by Xerox Company which decided to cease its 40-year Olympic games sponsoring history. Olympics 2004 in Athens, which took 42 million euros of the Company’s investments are the last games funded by Xerox (Dedyukhina, 2004). Instead, the company plans to direct its resources into other initiatives aimed at drawing customers’ attention and loyalty.

Numerous data provided on Olympic sponsorship indicate that large-scale funding of Olympics is becoming less efficient for promotion of the companies that it had been earlier. The results of the poll carried out by American Dynamic Logic Company (Dedyukhina, 2004) show that only 25% of American viewers and only 12% of Europeans pay considerable attention to the commercials connected to the Olympic Games. Specialists insist with increasing faith that major companies have to review their traditional strategies of sponsorship. To make the financial assistance to the Games bring a solid commercial return, these companies need to elaborate more targeted marketing steps that take into consideration not only geographic differences between Europeans and Americans, for instance, but also the differences in interests of various consumer groups.

Over the last few decades, many major global companies have made huge investments targeted on associating their brand with the Olympic Games. For instance, Coca-Cola spent $145 million on advertising and sponsorship programs in 2004 Olympics in Athens (International Olympic Committee Official Website). Other official sponsors of the Games, such as McDonalds, Kodak, Samsung, Panasonic, Adidas and Visa in total spent $1.3 billion during the same games. The games enjoy such popularity with big corporations because these corporations encounter growing difficulties in introducing themselves to the mass audience and get feedback on their advertisement. Some estimates show that average Americans are subject to about 3000 commercials per day. This information overload causes growing resistance to perceiving marketing and advertising information. Therefore, Olympic Games are viewed as a perfect tool for delivering advertisement to millions of viewers worldwide. This argument is supported by enormous audience and great number of replays of the Games over the limited timeline. However, with increased commercial exploitation of the Olympic Games, it becomes evident hat not each sponsor is successful in benefiting from its Olympics-related promotion. For example, Samsung’s promotional campaign in Sydney turned out to be surprisingly ineffective. Their $40 million of advertising investments returned in only 1 billion dollars of income. Very often other firms are even less lucky. For example, during the winter 1994 Olympics in Lillehammer, 43% of interviewed people failed in correctly name the Olympic sponsors. They mixed up Pepsi with Coke and American Express with Visa.

There emerges another aspect of the problem. It becomes evident that being official Olympic sponsor is not necessary to gain benefits from the Games’ image. An entire parasite movement, or ambush marketing, has emerged, when major companies put their advertisement in major places near the venue of the Games or during the Games without paying sponsorship fees. As it was mentioned, this phenomenon is called parasite, or ambush, marketing. As sponsorship of the Games becomes increasingly lucrative, increasing number of companies create association with their company’s products and the Games. The term of Ambush marketing is used in marketing industry to denote the strategy of a company, which is not an official sponsor of the event, but, because of the fact that its promotional company is focused on the Games or any other event, creates an illusion of being one of the official sponsors. For instance, in 1996 Olympics in Atlanta, Nike Company located its slogans outside but very close to sporting arenas of the Games, which hampered the efficiency of Adidas, an official sponsor’s, promotional campaign.

The scale of such abuses has so greatly grown up that the organizers of the Games had to take to extraordinary measures. For instance, during Olympics in Sydney, Pepsi cans were taken from the viewers by the organizers, since Coca-Cola was an official sponsor of the event. Athens organizers took unprecedented steps and protected rights of their sponsors by removing 10,000 billboards from the city, averting in such way potential ambush marketers and leaving space only for their official sponsors. This action cost Olympics organizers 750,000 euros.

Conclusions

One of the main reasons of inefficiency of Olympic Games is that companies have not decided definitely on their expectations from sponsoring Olympics. Sponsorship can prove effective only in case when the company hits its potential targeted audience that relates itself to the Olympics and associates itself with them. Sponsors’ attempts to attract consumers around the world are useless as long as their image and activity is conceived differently in various parts of the world. For instance, there is no point in trying to influence American and European people in the same way with Olympic advertisement. According to the same Dynamic Logic poll data (Dedyukhina, 2004), only 58% of Americans and 39% of Europeans understand that it is predominantly due to sponsors that Olympic games take place and can be broadcasted on TV. Another example is the result of the same poll where 66% of American people and only 51% of Europeans attach particular importance to advertisement with the Olympic logos.

This fact can be accounted to cultural and lifestyle differences between Europe and America. First of all, in general terms Americans tend to be more susceptible to promotion and advertising techniques. Secondly, Americans practice a healthy lifestyle cult, which results in elevated interest in sporting events and more involvement in them. The third factor contributing to the popularity of the Olympic games in USA is strong belief in victory of American team. The games are of bigger interest to Americans because their team is more likely to win more medals. Thus, they are more positive toward Olympics and everything connected with them, commercials in particular.

Moreover, it is calculated that private investments in Olympics always turn out to be more effective than the public ones. For instance, Olympic Games in Los Angeles, the most successful games in terms of commerce, gained $335 million mostly due to private investments. Other examples are 1996 Atlanta, 1992 Barcelona and 2000 Sydney Games that were most efficient in the financial return and funded primarily by private capital. To the contrast, in 2004 Athens games, where ratio of public and private capital was 3:1, were not paid off and Greece still has the problems with its foreign debt. Future 2008 Games in Beijing will cost about $28-30 million, which will be absolute record in cost for all Olympic history. It is very unlikely that the organizers of the Games will manage to cover such expenses with revenues from the Olympics.

Therefore it is evident that the myth of high effectiveness of Olympic Games doesn’t correspond to today’s realities. To benefit from Olympic advertisement, development of more sophisticated strategies is necessary. Mere putting advertisement on billboards and transmitting commercials with Olympic symbols on TV is not longer enough. It is indicative that some companies like Samsung gave launched a special Wireless Olympic Works program. Within this program, more than 14,000 mobile phones are distributed at no cost to the members of Olympic committee, mass media and politicians for them to be able to receive the information on the Games online. In this way the company acquires loyalty of different consumer groups.

These improved strategies are likely to strengthen the factor of sponsorship in the business field. Sponsorship and merchandising will become the major factor of growth on American sports market along with a global one. It is calculated that sponsorship spending is to increase by 8% a year, while broadcasting right will enter the period of recession due to already high inflation on TV broadcast rights.

The conclusion drawn from the information above is ambiguous one. From the one hand, the economic impact of the Olympic Games is enormous and can transcend the very event itself. Thus, according to Lawrence Davidson, professor of business economics and public policy in IU’s Kelley School of Business, having done several studies on economic impacts of other important sporting events, such as The Brickyard 400, Pan American Games, the Indianapolis 500 and the Final Four of the NCAA Basketball Tournament, came to conclusion that most people are aware of huge economic influence of the Olympic Games due to global audience, but also, there are serious long-term impacts which are often overlooked until the Games are finished. “The Olympics make people aware of your country and what’s there. It’s a way to make a statement to the world that your community is a destination,” he said (Stevenson, 1997).

From the other hand, new trends, discussed above, illustrate some inefficiency of traditional advertising methods in the Olympic Games are obvious. Therefore, there is a need to fill the gap in theoretical studies on the issue of Olympic promotion strategies with the finding of a new promotion, advertising and sponsorship methods and approaches. Taking into account urgent need for a brand-new vision of marketing, due to advancement of new technologies and complication of marketing instruments, such necessity is more than obvious.

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