Time is running out fast to cash in on 2012 Olympics

Matthew Beard, Olympics Editor
9 Apr 2010

The second in a series on how business hopes to benefit from the Olympics

For a blue-chip company boss there can few more glamorous duties than a photo-call with double Olympic champion Sebastian Coe to seal a multi-million sponsorship of the 2012 Games.

So far Lord Coe's organising committee, Locog, has raised £600 million from 26 backers — a testament through the recession of the once-in-a-lifetime appeal of the Olympics.

But with the London Games just two and half years away there are warnings that some companies may be leaving it too late to make the most of the promotional rights they have purchased.

Swingeing staff cuts have left a handful of 2012 sponsors with insufficient in-house expertise in marketing to exploit their rights.

“Some companies have been reticent about being visible with Olympic marketing because on the one hand they have been making redundancies and on the other hand they would have been celebrating something that costs millions of pounds,” said Andy Sutherden, managing director of sports marketing and sponsorship at PR agency Hill & Knowlton.

“Many boardrooms worry about the contradictions and the perception of extravagance.

“The effect of the recession is that every one of the sponsors will have hard-nosed commercial objectives to meet and these will be scrutinised more scientifically then ever before.”

Promotional spend so far has been for one-off rather than sustained campaigns — for example, Visa spent £1 million on a street party in the Mall to mark the handover to London and official Games sponsor BT marked the 1,000-days-to-go milestone by lighting up its eponymous tower in the colours for 2012.

Sutherden believes that after this summer's World Cup in South Africa sponsors will shift their focus to London.

Pippa Collett, managing director of Sponsorship Consulting, agreed the sponsors are keeping a low-profile.

“Overt flag-waving by the sponsors would not be appropriate - it's not in the mood of the nation” she said.

Sponsorship experts say that marketing departments need to find a creative way around the tough constraints which prohibit branding at Games sites under the International Olympic Committee's “clean venues” policy.

It is quite unlike the Fifa World Cup where sponsors can rely on pitchside advertising to send their message around the world on TV.

Sean Whatling, chief executive of redmandarin sponsorship, said: “Leveraging the value of an Olympic relationship requires the same level of organisational commitment that would be given to major new product development, a medium-sized acquisition or a corporate repositioning.

He added: “I would single out Lloyds TSB, BT, BP and EDF as the brands with most to prove.

“All four have made reasonably explicit their intention to use London 2012 to become more customer-friendly.

“This is a perfect use of the partnership but it sets the bar high in terms of how well these companies need to demonstrate consumer insight: do we, as a business, understand the public well enough to be able to identify and work with what, for the public, is magical about the Games?”

Michael Payne, former marketing director of the International Olympic Committee, added: “Now is the time to really roll up your sleeves and understand the full potential and power of what you have purchased.

“The CEO driving the programme across divisions will get the results.

“It's not just about sticking the marques on your product or throwing tickets around, but whether the masterplan has been locked down.”

Sponsoring the Games

So far 26 blue-chip companies have paid £600 million to use the Olympic rights in the UK market.

The seven “tier-one” sponsors, paying at least £40 million, are Lloyds TSB, EDF Energy, BT, BP, adidas, British Airways and BMW. Sponsors buy the rights to the Olympic brand and can pay extra for Games tickets and right to sponsor the torch relay and volunteer programme.

Another 20 companies have provided cash, free products or services to the Games. In addition to these “domestic” partners, Locog receives a share of revenue from the IOC's sponsors with global rights. Known as the “TOPs”, these include Coca Cola, Visa, GE, Panasonic, Omega and Samsung.

Here we profile two sponsors:

EDF Energy
French-owned firm became “utility services” provider in July 2007 in a deal worth an estimated £40 million. EDF has won three multi-million pound contracts in the Olympic Park — the undergrounding of power cables, a power substation and the electricity network. It also hopes to win supply contracts with other Olympic partners GE and BT. Through its Olympic campaign and green-energy efforts, EDF aims to differentiate itself from rival firms and overhaul the image of the typical utility company.

Lloyds TSB
Became the first 2012 sponsor in March 2007 in an £80 million deal making it the official banking and insurance partner. Already working with teenage athletes and will sponsor the dozens of open-air festivals to woo new customers. There are three objectives of Olympics deal — brand differentiation, to inspire staff though incentive schemes; and boost value to both business and retail banking. Lloyds has offered £1 billion of loans to Games suppliers and a special 2012 mortgage pays a contribution to the British Olympic Foundation.

Matthew Beard's London 2012 blog