An examination of the rationale and motives for corporate purchase of stadia and arena naming rights.

Dr. Larry M. McCarthy (Seton Hall University) & Dr. Richard Irwin (University of Memphis)

Previous research by Irwin & Assimakopoulos (1992) and Irwin & Sutton (1995) indicates that corporate sport sponsors have used facility sponsorship to achieve marketing objectives as well as provide service to the community. These conclusions were drawn from analyses conducted among corporations involved in a multiplicity of sport-related sponsorships, not just focusing on those corporations actively engaged naming rights procurement. The absence of research focusing on the rationale applied to naming rights purchase served as the catalyst for the current investigation. This study explores the motives of corporations seeking facility sponsorship, the intended implementation of such arrangements, the entitlements sought by naming rights purchasers, and assessment procedures utilized in determining sponsorship effectiveness.

Naming rights relationships, arguably, provide the most cost effective marketing communication in the market place today (Friedman, 1998). The typical price which sponsors in the United States are currently paying per annum is in the region of $2 million. When the cost is analyzed in the framework of supplemental business opportunities, such as pouring rights, or measured in terms of exposure in both local and national media, it appears that sponsors are getting a very good return on their investment. Bernstein (1998) suggests that while few marketers consider mere sponsorship impressions to be of equal value to television advertising, they compare the two using a ratio of 1:4 or 1:5 indicating that impressions generated through a sponsorship are considered to be a 20% to 25% percent as valuable as spot-television advertising of equal duration. It was further indicated that in 1997 naming rights owners in 12 selected markets in the U.S. paid less than one-tenth of what they would have had to pay to generate the same number of total impressions through TV advertising (Bernstien, 1998). Considering that the cost of advertising is going to continue to rise, the long term agreements (typically longer than 10 years) which are common place appear indeed to be very good buys by corporate marketing executives.

Recent Developments

The first naming rights agreement where the name of an arena was altered to that of a corporate sponsor occurred in nineteen eighty-seven. As a result of the Great Western Bank purchasing the naming rights to The Los Angeles Forum, it became the Great Western Forum. This alteration was a precursor to a multiplicity of name changes that have taken place through out the nineteen nineties. A total of sixty-six arenas have either, altered their names to reflect a relationship between a corporate entity and the arena, or in the case of newly constructed arenas, been given corporate monikers. Prior to nineteen ninety a total of only four arenas or stadia housing major league sport in North America had corporate names. By nineteen ninety-nine that number had grown to 70.

Reflecting the allure that sport continues to have as a means of marketing communication, between nineteen ninety-seven and nineteen ninety-nine alone, the number of corporately named arenas grew from fifty-one to seventy, a growth rate of thirty seven percent. The addition of nineteen corporate named arenas is a function of the construction of new arenas, and the re-naming of old arenas. The naming rights have been sold to a variety of corporations, but they have typically been sold to corporations in the airline, telecommunications/computer, automobile, consumer products, financial services, and beverage industries (Friedman, 1997).

While Friedman (1997) has elaborated on a variety of objectives that have been pursued by corporations engaging in sport facility naming rights arrangements, Schlossberg (1996) contends that its basis is direct marketing and community goodwill. This has been supported by research which has found that the primary motives for facility title sponsorship are to provide a public service as well as enhance the sponsoring company's market position (Irwin & Sutton, 1995). This may be best illustrated by PepsiCo's sponsorship of the arena in Denver, Colorado. Pepsi's funding of the arena aided the community's effort to secure a National Hockey League (NHL) franchise, the 1996 Stanley Cup Champion Colorado Avalanche, while also retaining the Denver Nuggets, a franchise in the National Basketball Association. It has been argued that professional sport adds to the community cultural spirit (Sandomir, 1997), and by endowing the locality with a state of the art venue, PepsiCo will very likely be viewed as a valued corporate citizen which has significantly contributed to the community's quality of life.

Perhaps more important, as a part of the naming rights arrangement Pepsico secured the exclusive soft drink pouring rights for all events in the arena. Additionally, PepsiCo's subsidiary food products division, which includes fast food giants Taco Bell, Pizza Hut, and Kentucky Fried Chicken, as well as snack food supplier Frito Lay, were provided first option for in-arena vending rights and concession trade.

Schaaf (1995) reports that facility entitlement has become a popular means of leveraging event access and maximizing the marketing opportunities for companies that lack a direct link such as product usage within an arena. Welch & Calabro (1997) contend that Pro Player, an apparel company, successfully used its' naming rights arrangement with Miami's Joe Robbie Stadium to catapult from virtual obscurity to name brand recognition within the marketplace. This is, in all likelihood, due to facility name inclusion in all media coverage of the venue's calendar of events, which includes the Florida Marlins of Major League Baseball, the Miami Dolphins of the NFL. Representatives of Corel Corporation estimate that securing the facility title sponsorship on the Corel Center, home of the Ottawa Senators of the NHL, has generated in excess of 400 million annual media impressions of the company name (Kaydo & Trusdell, 1997). Sponsors will typically endeavor to sponsor, or partner with, a facility that regularly hosts nationally televised events which will generate significant media attention of venue and sponsor (Friedman, 1997).

In addition recognition within the local as well as national media, companies claiming facility title rights contract for inclusion of venue executive suites for client entertainment, event tickets for employees and promotional giveaways, and special access for event-related promotional tie-ins suggest Kaydo & Trusdell (1997).

Bernstein contends that there has not been "any shining star when it comes to leveraging naming rights naming rights", suggesting that purchasers have to use their agreements as anchors for entire marketing platforms (Bernstein, 1999, p.21). However, a number of corporations would appear to leveraging their relationships to develop incremental business. Canadian Airlines, as a result of its' deal with the Calgary Saddledome has the exclusive team travel contract for the primary tenant, the NHL's Calgary Flames, as well as its' minor league affiliate (Friedman, 1997). Enron Corp, negotiated an exclusive service and power contract with the Houston Astros new ballpark which will guarantee more than $200 million going back to Enron (Bernstein, 1999). These examples highlight the means by which a naming rights deal provides the sponsor optimum opportunity for sponsorship integration as well as incremental business development.

Methodology

This study explores the motives behind corporate purchase of naming rights as indicated by individuals who make such decisions. For sampling purposes, corporations actively engaged in sport facility naming rights deals were consolidated into four categories, reflective of the current sport facility naming rights marketplace: transportation, communication/ electronics, food and beverage, and financial services. Respondents selected for interviews, in the case study methodology, represented 2 airlines, 2 communications companies, 2 breweries, a utilities company, and a financial services firm. Sponsorship managers, marketing directors or corporate communication directors at each corporation were forwarded an introductory letter from the researchers describing the intent of the analysis as well as a sample survey form adapted from Irwin, Assimokopoulos, & Sutton (1994). Subsequent phone calls were placed to letter recipients to insure study participation and to arrange an interview session of 20-30 minutes. All identified representatives expressed willingness to anonymously participate. Over a period of two weeks all interviews were scheduled and completed.

Results

The most popular motives for corporations engaging in sport facility naming rights agreements were found to be the pursuit of community citizenship and an increase in sales/market share. Of greatest interest to the researchers was the importance placed upon corporate citizenship, the most important overall motive and one which many indicated was the driving force behind their company's naming rights agreement. As one communications company representative indicated "Our naming rights deal for the new ballpark enabled us to play a significant role in saving the community's major league baseball team from moving out of town."

Added another communications firm representative "Our agreement was a very reactive response to a potential community crisis." This last quote may best explain the low number of respondents (only 4 of the eight polled) indicating that specific objectives were identified prior to sponsorship engagement.

Respondents in this study indicated that their companies are actively exploiting the opportunities availed via the agreement. Most popular among all respondents was the "extended sales opportunities" available to sponsoring corporations. Contractual entitlements for corporate hospitality, ticket packages, and luxury suites were viewed as key elements in generating business from such an agreement. One corporate representative stated "Our facility sponsorship avails us, as well as our key customers, access to exclusive events which then strengthens our business relationship." Added another, "We can take a client to a game, special event, or otherwise, and get to know one another as well as do a little business. You can't get that with a mass media buy." Another suggested that "the deal provides tremendous local marketing opportunities and hospitality options."

Each of the breweries included in the analysis exploited the exclusive pouring rights benefit and viewed this as a means of generating brand awareness and product usage. The financial services company included in the sample has obtained the exclusive credit card rights within their sponsored venue, viewing this as a favorable customer service opportunity as few other venues accept a credit card for many in-arena purchases. Several of the respondents indicated that venue sponsorship affords their corporation large volume product display opportunities. As stated by one communications company representative, "We have the opportunity to display new products and services on an on-going basis to a captive audience."

As might be expected, based on the absence of predetermined objective identification, few of the respondents provided insights on any formal evaluations that may be conducted to assess the effectiveness of the naming rights agreement. Several expressed uncertainty as to how the arrangement could be objectively/quantifiably evaluated particularly in light of their recent contract origination. However, respondents expressed that they, as well as their corporation, were satisfied with the naming rights arrangement thus far. As stated by one marketing representative, "We feel we have already received our money's worth and the contract is only one and a half months old." The naming rights holder for the Super Bowl venue offered, "We received $12.8 million in media exposure around the Super Bowl alone. With a total cost of $18 million ours is a great deal."

While it was termed a "secondary investment component in their overall marketing strategy" the naming rights sponsorship of what may be a city's better known landmark was seen to be important in identifying one corporation as the dominant entity in that particular market. While the media benefits of being associated with a landmark entity in a city were recognized and appreciated a number of executives intimated that it was only one element of a larger brand building effort and should be seen in that context.

Conclusions

It appears that the views offered by the respondent's echo those provided by market experts reported in the trade literature. These identify naming rights deals as, not only one the fastest growing marketing tactic, but also perhaps, the most cost-effective. These sentiments may also account for the willingness among corporations to invest in such arrangements without the preparation commonly found in marketing communication-related decisions. While the purchasers of such agreements are cautioned, not to become immune to the ills of such improper marketing management, the naming rights retailers are likewise cautioned. They must limit their exposure to the subjective nature of such preparatory and evaluation processes which may lead to spontaneous, irrational decisions including non-renewal.

The levels of satisfaction expressed by corporate marketing executives would seem to suggest that the use of naming rights will continue to be a communication format which will be used well into the next millennium. When one considers the number of new arenas that are planned in each of the major sports in the U.S. there is potential for extensive growth, particularly in Major League Baseball and the NFL.

Increasing competition in industries such as energy, health care, financial services and communications will see corporations continue to use naming rights a basis of marketing strategy. The purchase of the naming rights by Safeco to the Seattle ballpark, the purchase by Comerica Bank of the rights to the Detroit Tigers ballpark and the proposed sponsorship by PNC Bank of the new stadium in Pittsburgh, suggests that this trend is already underway in the financial services area.

Regional corporations will purchase the rights to second and third tier venues, while there will also be an expansion into the non sport area. Corporations will seek to align themselves with state fair grounds, convention centers, amphitheaters, and concert halls. Coca-Cola attached it's name to a local amphitheater in Atlanta in the summer of 1998 while the MidWest Express Center in Milwaukee was the first non-sports affiliated convention center in the US to sell its' naming rights. Outside of the realm of entertainment it is suggested that one will see the development of naming rights associated with shopping center developments.

The development of trans-national sporting competition such as the Super 12 in Southern Hemisphere rugby or the proposed super league in European soccer create opportunities for organizations wishing to maximize their exposure and name recognition on a global scale.

For naming rights to retain their allure as forms of corporate communication both purchasers and benefactors must continuously ensure that the relationships are mutually beneficial. While name recognition may be a rationale for obscure companies to initially purchase naming rights, the spiraling costs of agreements suggest that full service partnerships will become the norm. Such agreements must be structured and managed so that they sustain value over the course of the agreement for both purchaser and seller. Sport entities must not develop cavalier attitudes which lead to a failure to generate the full benefits offered by the sport sponsorship medium (Thwaites & Carruthers, 1998). The rights holder must realize that mere purchase of the name to an arena is only the initial thrust of a marketing communication format, which has tremendous potential, but, which must be worked assiduously to reap those benefits.

A critical aspect of any marketing strategy is the impact that it has on the end user. Consumers' view of the stadia and arena sponsorship would appear to be a critical research question. While Performance Research (2000) has completed preliminary work on the reaction of consumers to name changes, both in the USA and in the UK, further investigation would appear appropriate to discern the critical impact on consumer purchasing habits.

References

Bernstein, A. (1998). Venue naming rights deals are making a loud bang for the buck. Street & Smith's Sports Business Journal, 1(9), 5.

Bernstein, A. (1999). Stakes get higher as fees rise. Street & Smith's Sports Business Journal, 2(8), 21,30.

Friedman, A. (1998). Naming rights may be a bargain for companies going national. Street & Smith's Sports Business Journal, 1(3), 8.

Friedman, A. (1997). Naming rights deals. Chicago: Team Marketing Report.Irwin, R. L. & Assimokopoulos, M.K. (1992). An approach to the evaluation and selection of sport sponsorships proposals. Sport Marketing Quarterly, 1(2), 43-51.

Irwin, R. L. & Sutton, W. A. (1995). Creating the ideal sport sponsorship arrangement: An exploratory analysis of relationships existing between sport sponsorship inventory criteria and sponsorship objectives. Proceedings of the Seventh Bi-Annual World Marketing

Congress, 5, 113-127, Melbourne, Australia.

Irwin, R. L., Assimokopoulos, M. K. & Sutton, W. A. (1994). A model for screening sport sponsorship opportunities. Journal of Promotion Management, 2(3).

Kaydo, C. & Trusdell, B. (1997). Stadiums 'r us: visibility is the reason that companies are clamoring to sponsor stadiums. Sales and Marketing Management, 149(1), 74.

Performance Research (2000). Naming Rights, Naming Wrongs [online]. Available: http://www.performanceresearch.com/framesets/f_naming_rights.htm

Sandomir, R. (1997, June 8). The name of the game is new stadiums. The Commercial Appeal. B3-4.

Schaaf, P. (1995). Sports Marketing. Amherst, NY: Prometheus Books.

Schlossberg, H. (1996). Sports Marketing. Malden, MA: Blackwell Business.

Thwaites, D. & Carruthers. A (1998). Practical applications of sponsorship theory: empirical evidence from English club rugby. Journal of Sport Management, 12(3), 203-219.

Welch, R. & Calabro, L. (1997). The name of the game: why it makes financial sense to name a stadium. CFO, 13(6), 25-28.

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