What happens when the CEO loves F1?

‘Grübel was planning to get in with Sauber¹’ was how impeccable veteran F1 journalist Roger Benoit broke the news that UBS Group CEO Oswald Grübel had been planning once again to sponsor Sauber F1 in Swiss magazine Blick. Following a few days after the announcement of UBS sponsorship of Formula 1, the timing couldn’t have been much worse.

The return of UBS to the international stage of sponsorship was meant to signal a turning of the corner from the black days of the sub-prime crisis. It followed closely on the heels of the new advertising campaign, We will not rest, which positions UBS modestly as a part of the support team that even the highest achievers need.

The impact of its losses on the UBS psyche are difficult to imagine. Having played the more dominant role globally, it found itself playing number two to Credit Suisse on the home front. UBS sponsorship had always carried the same hallmark as the brand: refined and intelligent. A sponsorship department of around 80, an enormous team, was whittled down to a team of one.

Grübel’s fondness for F1 is no secret. Whilst at Credit Suisse, he led the powerful Private Banking division, and had stepped in, in winter 2000, to save the Sauber team, in a deal which made Credit Suisse both team sponsor and 60% shareholder, with an annual commitment, as reported by Blick, of CHF25m. After Grübel’s 2007 move to UBS, Credit Suisse exited the deal, although Grübel himself, a personal friend of Peter Sauber, had remained on the Board at Sauber.

The Blick story is bad news for everyone.

For all Grübel’s assertions that the sponsorship will strengthen the UBS brand globally and provide attractive opportunities for customer hospitality, Blick’s disclosure talks squarely to CEO whim. Whatever rationalisation is offered – and F1 absolutely ticks the two boxes of media and hospitality – it’s obvious that Grübel sponsored F1 because Grübel likes F1.

Corporate governance?

You can imagine the sort of questions appearing on the Blick website - hauntingly familiar to a UK audience in particular: but for a sponsorship professional, there’s a whole other set.

Despite the familiar dual Board structure standard to corporate governance models, the Blick article makes it very clear that Grübel was only narrowly foiled in his attempt to sponsor Sauber.

It can easily be argued that the CHF50m investment Blick references is a small amount for a company which posted a pre-tax profit of CHF 2,614m in the second quarter of 2010. The UBS Optimus Foundation, on the other hand, has taken 11 years to disburse CHF 79m, against which the F1 investment seems considerably more sizeable. Either way, if the Group CEO can operate with such little input from either Board on this matter, where does that leave UBS corporate governance at a time when the governance of the financial services sector is under regulatory scrutiny?

The 2009 UBS Annual Report openly acknowledges the link between reputational damage and client attrition – and the subsequent negative impact on financial performance. ‘Restoring our reputation is essential to maintaining our relationships with clients, investors, regulators and the general public, as well as with our employees. It is critical to the success of our strategic plans.’

The OECD’s Corporate Governance Principles do not explicitly mention reputation or brand, let alone sponsorship: they talk only of risk. The interface between sponsorship and organisational risk is not large, but it has been shown to exist, and most visibly at the level of the Chairman’s whim. Although there are far weightier issues for the agenda, Boards remove themselves from major sponsorships at their own risk – and the business case process is a fundamental supervisory tool.

The business case?

On its website, UBS claims to have evaluated the association comprehensively, and points to the business value of hospitality and brand awareness in the Middle East, LatAm and Asia. Let’s consider these points.

UBS Wealth Management defines itself as serving audiences with investable assets ranging from CHF250K to CHF50m, an audience which the Merrill Lynch 2009 World Wealth Report shows is still predominantly US based - and not certainly not mass². For the majority of potential Wealth Management clients, a free ticket and hospitality at F1 are not that compelling. And although Finance Asia claims that AsiaPac is likely to overtake North America with respect to HNWI assets by 2013, even basic modeling will show that the total numbers fail to add up. The highly personal dynamics of private banking generally means that hospitality, as good as it gets with the Paddock Club, simply can’t be packaged in that way, for that audience. The audience of Asset Management, on the other hand, is primarily institutional, where lavish hospitality has little role to play – where it’s not prohibited under compliance rules.

It’s also hard to see a way the sponsorship of Formula 1 can be integrated with the new UBS advertising campaign. UBS has no heritage in F1, it has had no role to play in the growth of the sport, and it has no drivers to embody ambitious restlessness.

Chairman’s whim is a great phrase because it scapegoats the Chairman. The reality is, whims are not the Chairman’s prerogative. Although Board scrutiny is often the kiss of death for innovation and creativity – especially in companies where innovation and creativity are not valued – sponsorship, and especially major sponsorship of this scale, needs to be better understood by the Board.

Given the importance of restoring its reputation, one would expect the UBS Board to have required clear answers to some simple questions: how do we know our clients watch or like Formula 1? Where is the evidence that sponsorship of Formula 1 will support and not hinder the restoration of our reputation? How will F1 sponsorship enhance our advertising? What are the risks and how do we mitigate them? And most critically, where is a balanced and strategic assessment of alternative ways to achieve the same objectives?

From a management consultancy perspective, much of Governance is ultimately about diligent decision-making – but strategic decision-making is impossible without a set of alternatives. For the UBS Board to make its decision based on a single option - and Sauber and Formula 1 count here as a single option – indicates less than perfect Governance.

Ironically, Grübel’s proposal might well have fared better in a properly structured business case process. A relationship with Sauber would have played the national card for a Swiss retail audience; it could have become a proof-point for ‘We will not rest’, complete with actual content; with access to the Team and drivers, it would have offered far more exclusive levels of race day client experience for clients in AsiaPac and around the world.

We don’t know who to cheer for.

Cunning linguist

Naming rights are the perfect IP. They cost nothing to create, they need minimal servicing and there's no benchmark for pricing. No wonder rightsholders love 'em - they're like a real pot of gold at the end of the rainbow. And the rainbow ends in your backyard. Or stadium.

Arsenal is the inspiration for the Premier League, with Chelsea, Liverpool and Spurs openly linked to aspirations to follow their lead. It's hard to argue with the potential when sellers can point to the O2. Not only did the easy and universal adoption of the name provide a brilliant example of brand integration, the assets secured gave O2 a clear leg up in the race towards customer reward, which is one logical way forward for that industry. And, as with all the best examples, it feels so effortless and natural that failure was never an option.

But for every Emirates and every O2, there’s a Friends Provident St Mary’s Stadium, or Sportsdirect.com@StJames’Park and probably two Ricoh or Manchester Evening News Arenas: the question is, what makes the difference?

We've just concluded due diligence for a major naming rights proposal on behalf of a multi-national client and our study helps explain exactly why the O2 was such a success - and exactly what to look out for.

Of all the challenges facing a naming rights deal, user acceptance is the most critical: even the notion of some naming rights deals has been met with rejection. The story of Candlestick Park, in the US, where money often talks more persuasively than common-sense, is salutory.

Tellingly, many of the most successful deals have stuck with new builds, where the opportunity existed to create a new identity, rather than overprint an old one. In the case of the O2, although an existing venue, there was no existing user franchise, no emotional ownership, and hence no integral resistance.

The other advantage of a new build, beyond allowing fans’ memories to rest in peace, rests upon a familiar principle of sponsorship: the brand’s contribution, in this case generally financial, is obvious and appreciated. Again, the O2 was exemplary: when it opened, the new venue had been entirely transformed for the better; the vast space of the Millennium Dome had been tamed. And O2, somehow, took the credit.

All of this is analogous to traditional sponsorship, of course: how does any new sponsor overprint its presence? But with naming rights, it’s that much more critical, as name usage is an integral and obvious measure of success. Surprising then, that absurd constructions like Sportsdirect.com@StJames’Park are ever conceived. Our linguistics expert was fairly categoric: if you want to get into the vernacular, you have to think vernacular. You, me and the groundsman all know that Sportsdirect.com@StJames’Park will remain St James’ Park. Syntactically, because it actually embeds the separation between sponsor name and venue, is about as bad as it can get. But even constructions such as Friends Provident St Mary’s Stadium fly against our natural tendency to abbreviate. So, once again, the O2 was spot on: shorter, cooler and more memorable than Millennium Dome. And easier to spell.

There is still value in the ubiquity that naming rights can give a brand: for Mike Ashley, the media exposure for Sportsdirect.com was probably fairly compelling – and he won't have paid much for it. But I can’t help believing that putting your brand in a position where consumers’ entirely predictable linguistic behaviour will resist the association, is not a good place to start.

Some thoughts on platform

The change of name from Sponsorship News to Platform was inspired.

One of the discussions we manage, in trying to help brands understand exactly how much freedom they have to interpret the concept of sponsorship, is around platform, precisely because sponsorship is just one of many.

For some brands, such as Apple, product is platform: from a marketing perspective, this is absolutely the sweet spot, because you’re already a part of their lives. In Apple’s case, and a number of typically artisan products, where development and production remain labours of love, the integrity of the product commands its own fascination and respect: Ferrari also sits here.

Jack Daniel’ s is a wonderfully clever example, because its storytelling has created a brand platform out of its own distillery, engaging consumers in its values and its personality. While the Halifax has axed Howard Brown, Randy ‘Goose’ Baxter is still doin’ his thin’ for Jack Daniel’s.

Some brands maintain product as their platform beyond what’s healthy: many manufacturers, most obviously automobile and handsets, have left themselves with nothing very much to say beyond the story of the latest model. This is, of course, a dead end from which they will have to retreat as endless product variation ultimately ceases to be a differentiator in many sectors.

Other brands have used the environment - to greater or lesser effect – as a platform. M&S turned its environmental policies, its Plan A, into a major brand platform: integrated within the business and all communications, demonstrating responsibility, intelligence, leadership and innovation. And of course The Body Shop proved beyond doubt that campaigns, about the environment, social issues, fair trade or even sex slavery, can provide a brand platform as powerful as any. EDF, on the other hand, can’t seem to choose between Olympic hero or green energy champion: both lack conviction as a consequence.

And other brands rely on their advertising. Rainey Kelly’s cartoon world for Lloyds TSB differentiated the brand from its competition and created a gentle fictional world which is easy to insulate from the hard knocks of reality. Guinness repeatedly creates visual epics with style, grace, humour and edge. Lynx never fails to disappoint with its preposterously adolescent magical reality. The weakness with advertising of course is the size of the gap it can create between image and reality.

So for me Platform plays to all of these routes – and brand platform is simply the dominant communications and engagement framework.

Sponsorship, of course, is premised on engaging with consumers. And for businesses without unique product credentials, without a strong sense of their own heritage and story and its potential relevance to consumers, without a strong or distinctive creative culture, sponsorship offers a ready-made solution, in principle. The challenge is: can the platform be as coherent as Jack Daniel’s, as visually compelling as Guinness and as relevant as The Body Shop.

And, and this is where the discussion goes, sponsorship is no more immune than any of the other platforms to failure. The thing is, you need to be very clear why you want one, and what you’re going to do with it when you’ve got it, because, if you’re not, a platform can be a very scary place.

A double or quits?

The new Lib-Con government is talking a big game on the topic of binge drinking. How this impulse manifests itself remains to be seen, but we are right to be twitchy about the recommendations contained in the Health Committee First Report on Alcohol (HC151) and the prospect of alcohol sponsors being told – you’re barred. But as we wait for news on drink, gambling is grabbing the headlines.

John Higgins’ taped conversation with Russian mobsters, has plundered snooker into a black hole of doubt and recrimination; and the longer term effect on the commercial value of the sport is now very much under question.

Meanwhile, Bodog, an American onling gaming brand, made an ‘Indecent Proposal’ to Tiger Woods, in the shape of $100million over five years, with a no moral judgement clause. This might be a stunt or a genuine offer, but either way it raises broader questions.

On the one hand, you have to applaud any brand with the confidence to make such a gesture. It feels at least more honest than the sanctimonious departure of Tiger’s sponsors who should have known better. On the other hand, this feels like the real face of online gambling – gloves off.

For a primer on the issue of sport and gambling, I point you toward Declan Hill’s book, The Fix. Hill estimates of the total global market for gambling, the legitimate gambling brands (bookies, lotteries, exchanges etc) account for just 40%. The rest is unregulated and underground. This means any government seeking to ban gambling sponsorship are merely tackling the ‘visible’ minority. But even within this group, the problem is evident. On a personal level, I half believed the story offered to me by one representative of the UK online gambling industry: that the big profits came from whales, the name given to gamblers who can afford to lose ridiculous amounts of money. But it never really stacked up – ask the World Lotteries Association for clarification: the real money is made from hundreds of thousands of people losing a little too much, too often.

Although the figure was disputed by the previous Government, the UK Gambling Commission estimates that 7.4% of people go on to develop an addiction to betting, and the number of women with gambling addiction is soaring, according to charities such as Gamcare. Commonsense says it can only increase – it’s invisible, exciting, and convenient: a pretty powerful combination.

The connection with alcohol is ubiquity. Ubiquity isn’t really talked about in marketing but it was ubiquity that was driving the concerns of the Health Committee: both in terms of blanket, untargeted exposure and the subconscious messages of legitimacy and social acceptance that ubiquity suggests. The online gambling brands are ubiquitous in a way that alcohol never was.

“But it doesn’t make me want to buy one” is a common response to marketing among the general public. But this misunderstands the issue, which for me could be an X Factor in the debate. The result of ubiquity is awareness but it also brings a legitimacy and an unconscious imprint of acceptability. When a brand, or a sector's advertising, is everywhere, it starts to become the norm - and reduces emotional resistance or the perceived barrier to entry. Having a flutter, like having a quick one down the pub, can be perceived as the cultural norm. The Health Committee didn't articulate their issue with sponsorship in this way, but I’m convinced it lies at the heart of their concerns. Despite its multi faceted appeal to business, to the vast majority of sports fans, and legislators, sponsorship is all about the logo, and ubiquity.

We all have to learn to deal with the pressures of living – both the daily grind and the deeper existential stuff: and addiction is just one response. But if the anti-alcohol lobby gains momentum – and the medical profession has the history, the infrastructure and the voice to argue the case for sponsorship prohibition – it opens the door even wider for online gambling.

I would hope that Tiger’s got enough FO money, if not dignity, to decline. I wonder what the IOC would say?

Own goal?

I think historians will look back and pinpoint Sydney 2000 as the event which truly marked the beginning of sport as a dominant global belief system. I’m not talking about global appeal or commercial value, I’m talking about sport as a predominant metaphor for living.

Not disregarding the scepticism that preceded the Games, what was so remarkable was how they aligned so closely with how most people would characterise the Australian way of life: open, non-hierarchical, competitive, and good-natured. Australia’s ability to embrace the Games marked a sea change for the Olympic movement.

But although Olympian values have been around for 9,000 years, it’s only been the decade since Sydney that has embraced sport’s ability to provide a meeting place for people which transcends divides, or even embraces them.

Although countless small initiatives have been running at grassroots level for decades, virtually ignored, it’s only Laureus, in terms of large scale initiatives, which pre-dates Sydney. The Homeless World Cup began in 2003, Barclays Spaces for Sport in 2004. Although FIFA has long run CSR initiatives, they didn’t jump off the perimeter board until after 2006, with Barcelona’s 2006 sponsorship of UNICEF, and Honda’s Earthcar (2007) all clearly pushed boundaries, each in their own way.

This is all good news for the sponsorship industry. The vertical integration of brands across a sport gives them a more rounded proposition and allows them to maximise the feel-good value of high level endorsement. Grassroots programmes benefit from greater funding. Agencies get more business. So what’s wrong with that? Nothing. It’s just that it could be better.

In many cases, CSR is being used as a bolt on by the sports industry in exactly the same way as it is for business. And yet for most sports organisations, community is precisely where they should be looking.

There are two development models aspired to by most sports organisations: win, if you’re a team; media exposure, if you’re a federation. Both of them, currently, focus on taking sport ‘up’ the investment ladder – bringing together the best players or teams. And yet for most sports these models are delusional. Football, which provides examples of both, is in a league of its own. There is no magic bullet to transform tennis, badminton, gymnastics, table tennis, sailing, triathlon etc etc.

Yet community activity, and CSR programmes offer rights-holders an opportunity to extend their relevance to the public, increase participation, grow membership and drive viewing figures. They offer the opportunity to add depth to many two dimensional sports brands. In organisations which generally struggle to innovate, it offers safe space for creativity. And, importantly, they offer a model which is sustainable, achievable and which can be engineered to deliver clear results - unlike the others.

We carried out client research two years ago, looking at the community programmes of Premiership Clubs, and the results (with the exception of Fulham) were dismal enough to kill the concept under consideration by the client: no real commitment from the team or players, little investment, little imagination, little obvious pride.

And that’s the open goal.

Media. Value. Cabbage.

I recently received (anonymously) a ‘sponsorship valuation’ commissioned from a specialist agency by a brand: the sender was a little incredulous at what he'd been persuaded to pay for. Arguably sponsorship 'valuation' has a role to play in instilling rights-holders with a greater sense of confidence in the commercial value of their sponsorship offering - but these reports, when commissioned by brands, assume a far greater significance, as the organisation is left to assume the sponsorship industry actually defines its own value in this way. Although tone of voice and language both suggest rigour, objectivity, expertise and science, the truth is far from the case.

The valuation, for anyone who hasn’t seen one, is based on two measures - ‘tangible’ and ‘intangible’ - and two corresponding fictions. The tangible component is calculated by assigning a value to every conceivable touch-point with the brand. Calculating the ‘tangible value’ is based on the fiction that an accurate commercial value can be assigned to the consumer touch-points offered by the sponsorship.

The methodology begins with a detailed list of every conceivable consumer touch-point, from verbal mentions by an event announcer to the bumper branding on the TV show, from PR mentions to the credit at the back of the programme.

Secondly, a commercial value is assigned to each brand exposure. This is supposedly based on the cost of buying the equivalent space for advertising. Now, despite the in-house expertise credited in the report, we’re already veering dangerously into the realm of fantasy, as there simply are no meaningful comparables for some of the touch-points. It is relatively easy to find a comparable for radio mentions – but sponsor credits by an announcer, or branding on balloons is a different matter.

The methodology then consists of making assumptions about the reach of those brand exposures. So, for example, a report will assume that 40% of spectators are ‘impacted’ by the announcer credit and 65% ‘impacted’ by the balloons. The word ‘impact’ flatters, of course, expressing the brand’s fullest aspirations for its communications, and is applied equally, and liberally, to flags, advertising, website sponsor credits, giant flags and branded inflatable sumo wrestlers.

So that’s part one: now for the intangibles, which refers variously to brand and audience fit, event stature, impact, sponsor clutter, promotional opportunities etc which vary by agency.

According to this particular report, the ‘accepted breakdown’ values the intangibles – including brand and audience fit - at a maximum 25% of the tangibles. The implications of this phrase are worth teasing out. Firstly, it implies an industry-wide concensus which doesn’t exist; secondly, it implies that the impact of brand and audience fit and all the other intangible elements of a sponsorship can only be positive; and, finally, that the value of event status, for example, carries a weighting of at best one third of the value of the media exposure the sponsorship offers. Which places a slightly lower value on the Olympic brand than the IOC would have you believe. In this case, the agency claims to apply ‘a little more science’, setting the upper bar for intangible value at 40%.

The process now attributes scores out of ten to this range of intangibles, along with a one line commentary, such as ‘such a high profile event was entirely appropriate for the sponsor’ or ‘the wide cross-section of audiences allowed the sponsor to target a wide range of consumers’. Bingo. These scores are converted into a percentage, which is then applied to the maximum allowable 40%, resulting in the ‘intangible value component’.

So the second fiction is more insidious: the methodology implies that brand and audience fit, and all of the other intangibles, can only ever play second fiddle to media. The IOC will want to address their clean venue policy, I’m imagining.

Now this isn’t intended as an attack on the agency which produced this report. There is definitely a place for media assessment as one of a number of value indicators when it comes to large media-driven properties such as Champions’ League, But to suggest it is relevant to the vast majority of sponsorships is bunkum. These reports don’t help our industry because, although they claim to be valuing sponsorship, the methodological perspective views any sponsorship as no more than the sum of its media.

The absurdity of post event valuation as a service is ultimately that the methodology is at best intended to measure potential. By the time a sponsorship has past, it's too late to look at its potential - the only thing that should be of interest is the results.

Rights-holders should not be deceived into thinking these reports provide much guidance into building sponsorship value. And anyone professionally responsible for sponsorship who commissions one of these reports, or uses one as part of an evaluation, budget request or report, is potentially putting their head on a block.

They seemed smart enough...

Everyone loves a fall from grace. It's human nature. A mixture of relief - for those of you who never have; reassurance - that we're all human, regardless of endorsement value; and fascination - at how far our emotions can betray our rational selves.

The non endemic media, indoctrinated in the lore of brand value transfer, always jump to the conclusion that sponsors will suffer immediate irreperable brand damage. But of course, that's not the case.

Consumers builds relationships with brands over years, like friends - although soap characters is a better analogy. Unless we are ourselves quite strange, we don't drop friends quite so abruptly: even when Fred West's neighbours found out it wasn't party games he was playing in the cellar, the quotes were, more or less: i'm really shocked, he always seemed nice enough.

So the impact on Accenture - from the perspective of brand image - will be minimal. Clients, prospective clients and staff won't walk away in shock. They won't even be quoted: it always seemed like a nice place to work.

The impact, and there will be an impact, looks different.

In terms of corporate self-image, and confidence, they've been weakened. Their positioning around Tiger was leading performance. But, despite running the best (non sports industry) athlete sponsorship for the last six years, their performance has been shown to be flawed. The association has turned out to be ... slightly ridiculous.

Tiger's adventures in the rough were known on the circuit: what does Accenture's apparent ignorance say about its market intelligence?

Their management integrity has to be questioned: if they did know, why didn't they act?

Given their reliance on Woods, where can we see evidence of the risk mitigation and management that would be appropriate in these circumstances? How can Accenture of all companies, be caught with it's metaphorical pants down?

What this points to is internal management failings at Accenture that are not uncommon with much business handling of sponsorship. The essence of the potential damage to Accenture's seven year campaign is that their management of Woods has not lived up to their messaging

From a brand and management perspective, the fact that this is 'just sponsorship' is not a defence. An organisation whose entire proposition is about excellence simply can't have blind spots. A mismanaged sponsorship begs the question: what else?

That said, Accenture won't be paying the price in lost customers, but lost voice.

When you've run an exemplary comms campaign, as Accenture has, what do you say next? Tiger came to represent Accenture's entire positioning. Their association with Tiger, in many ways, has stood for the immense power that sponsorship has to build a brand in the mind of consumers.

To replace Tiger is the challenge. Not the person, because no person can replace Tiger. There are plenty of people who could stand for performance as well as Tiger - albeit without quite the same level of celebrity. But that's not a place Accenture can easily return to. The same strapline, the same corporate positioning, is not an option.

So the challenge is an entire corporate positioning. Which takes money, and energy, and management time. So in the interval, Accenture will find it hard to deliver anything but tactical messaging. Its outdoor and ambient media presence will be placeholders. And when their new campaign, aggressively promised for 2010, emerges - will it stand comparison? So what Accenture have lost - and this plays to the heart of brand communications - is a voice, and a momentum. And like Tiger, their next appearance in public will be closely watched.

If Accenture manage to produce a campaign which begins to rival the punch, the relevance and the simple accessibility of Tiger - a sponsorship, let's not forget - both they and their agency will richly deserve the epithet of leading performance. As a huge fan of what Accenture has done for the past six years, I'll be surprised.