This is a slightly-modified version of an article that first appeared in issue 8 of 2r magazine. Subscribe to 2r for free HERE.
In my twenty years in cycling, I have experience as a team sponsor working with teams, as a team owner working with bike-industry and outside sponsors, and as an advisor to companies considering a cycling sponsorship. Since not many people have seen the sponsor-bike team relationship from so many different angles, I thought it was time to write about it.
When it comes to sponsors entering cycling, there are some faint indications the worst is over. It’s hard to make definitive statements since the sample size is so small and so many factors are in play, but Blanco turning in to Belkin, Argos turning into ???, the rumored deal between Slipstream and Qatar, Alonso entering cycling and several other pending arrangements seem to point in that direction.
As a former team owner who lived through the post-Lehman drought, these are heartening developments. Yet they are also surprising for a few reasons.
Before I delve into those though, let me start by saying handling sponsorships is hard even at the best of times. When the economy is bad and the sport is in the news for all the wrong reasons, it’s near-impossible. It’s easy to judge it from the sidelines, and in fact that distance can help to see some perspective. In that sense, this article is as much my “Lessons Learned” as it is a view of how teams handle sponsorships today.
Firstly, sponsor acquisition strategies for most teams haven’t really changed that much, and are still relics from the Maurice Garin age.
Some teams work with agencies to find sponsors, but many still do it on their own. This can work – especially when you’re lucky and let me tell you, some teams are extremely lucky – but in general this is a tough route. As a cycling team, you need sponsors so infrequently (assuming they stick around for a while) that it is hard to keep sponsor acquisition skills and contacts current.
As a team, you also don’t have the chance to cross-sell. While an agency may be called in to a company to pitch a golf property, only to find out during the meeting that the company may be better served by cycling, a cycling team would never have gotten into that meeting to begin with.
The second weak spot is how cycling sponsorships are pitched by most teams (though thankfully there are exceptions).
I was invited last year to speak to a large multinational looking to enter the sport. I quickly found out that the teams that had pitched completely failed to address the needs of this company. Their main concern was doping (no surprise), but most teams were either underprepared to address the topic or simply lied about it. One team even presented their internal test program even though it had been cancelled the year before!
Another area of disappointment was the inward focus of the teams. I presented the company with a concept of how to drive the company’s Key Performance Indicators through the sponsorship, but their discussions with teams on this topic went nowhere.
None of the teams (all WorldTour teams) had bothered to address the company’s needs or in fact any form of accountability at all; their strategy consisted mostly of presenting a list of wins and inflated media exposure figures. In the end the sponsor did not enter the sport, although disappointment with the proposal quality was not the only factor.
In case it isn’t obvious, here’s why this approach is a dying breed. A list of wins is like past stock market performances – in no way a guarantee of what the future will bring. Banking on winning instead of providing value independent of racing success is a risky strategy.
The way media exposure figures are used is possibly even worse. You definitely need some figures to show how much the brand will show up, but the pompous conclusions teams often present are off-putting to most sponsor staff with any form of common sense.
Let’s take a step back: media exposure figures are basically calculated by measuring how often the logo is visible and calculating the costs of buying an ad for the same duration or in the same media. Then a discount factor is applied, since having a logo visible is not quite the same as having your fully-controlled message appear.
Instead of this approach, some agencies calculate how many thousands of people are reached across all media and then attach a cost-per-thousand (cpm) to it. Both methods can work, it all depends on how conscientiously you follow through.
At Cervélo TestTeam, we once contacted one of the companies specializing in calculating media exposure. When they started the process, one of the first questions they asked was if we wanted them to calculate with a cpm of $10 or $1. I assumed it was their expertise to figure out what was the right number. Of course, if you ask me as a team, use $10 so my exposure may appear $200 million instead of $20 million.
A similar situation occurs with the other method where a discount is applied to regular ad costs. How big should the discount be, how do you calculate the effectiveness of a logo on a sweaty rider versus your full brand message in a commercial shot with a well-coifed George Clooney?
Note that some factors can make the sweaty rider MORE appealing than Clooney. Although you definitely won’t get the same product message across, the excitement that cycling brings can’t really be replicated in a commercial. As well, a cycling sponsorship may be able to reach people you can’t reach through commercials, because people are trained to tune those out.
You see time and again that name recognition sky-rockets when sponsors enter cycling; within a few years everybody knew CSC, Fassa Bortolo, ONCE, Astana, Katusha, Europcar and soon Belkin. Yet what these companies exactly do is tougher to get across on a shirt, and requires supporting actions. A team can really help with that (and this was the concept I proposed to the large multinational last year). Unfortunately, most teams don’t see that as their concern, they’d rather focus on winning a bike race.
Back to the exposure numbers, it should be clear they can be anything you want them to be, and while it is logical they end up on the high side if a team commissions them, not even a sponsor can get an accurate number if they wanted to.
But it gets worse. Let’s take the Repucom report about the state of global cycling. The main number looks great: WorldTour teams create an average of $88.4 million in exposure. As we saw before, there is a discount factor already applied, and although Repucom won’t share the full methodology freely, they will when you are a client and from what I have seen, it’s a reasonable approach.
That said, there is no point in paying the full $88.4 million for that exposure, companies would want a very significant discount on that amount.
But let’s dig a bit deeper. The Repucom report also states that Team Sky generated $556 million in exposure. Not a surprise given their dominant 2012 season. But if the average of all 18 teams is $88.4 million and Team Sky generated $556 million, then the other 17 teams only averaged $60.9 million. That’s 30% less than the average quoted with Team Sky included.
$60.9 million is a much more realistic number to work with. While sponsors would no doubt like to experience a “Sky year” during their sponsorship, they certainly won’t count on it and won’t be willing to pay for it in advance.
Next up is geography. Given the importance of the Tour de France in the total annual exposure, you won’t be shocked to learn that almost 30% of TV exposure is in France. That’s great if France is an important market for you, but if it is not, that means those 30% of your exposure are a write-off.
This obviously applies to other countries as well, meaning the overall exposure is not that relevant to sponsors. Only exposure in countries they are active in or plan to be matters.
Given that most title sponsors are global brands, this effect may be small, but even if you are active in France, you may not have “use” for $20 million in advertising there.
Finally there are the demographics. If all cycling spectators are 40 years or younger and you sell hearing aids, maybe none of that $60 million in exposure is useful to you. Likewise, when Lotto had a co-sponsor that sold pregnancy tests, not every TV viewer was a potential customer. Just like with any other advertising, demographics matter.
As in the case of the geography, the desired demographics depend on the sponsor, not the team. Therefore the “team exposure” numbers are not very relevant; it’s about the cross-section between the team’s exposure and the sponsor’s potential customer base. The bottom line is that to successfully attract and keep sponsors, teams should focus on what sponsors need rather than on what their standard offerings are.
Sponsorship 101 – for teams
- Teams should consider working with an agency or multiple agencies if you don’t want to be beholden to luck. Yes, they charge a fee, but 90% of a large sum is better than 100% of nothing.
- Teams should find out what sponsors need. A pitch is as much about asking that as it is about presenting yourself.
- Presenting “best case” media exposure figures may work with unsophisticated sponsors, but for most it will be a turn-off. Be realistic.
- “Winning” may work for the egos of some CEOs or for sugar-daddy sponsors. But for most sponsors it will be a means to an end. And betting on winning to deliver value is a dangerous proposition; there may be lower-risk methods.
- Brand exposure is a given, and cycling is a great tool to generate name recognition. Don’t dwell on it; instead focus on what else you can do for the sponsor.
- Beware the “law of the shitty click-throughs”. This says that a new approach attracts a lot of attention and therefore is very effective at the start, but the numbers worsen over time. So you have to keep re-inventing what a team offers sponsors.
- Don’t overcharge. Of course it’s great to get a more money for a sponsorship than it’s worth, but eventually the sponsor will figure it out (either because they hear from other teams or because their metrics will show poor value) and then you’ll lose them. Give them fair value for a fair price and they may stick around.
- Be honest. The amount of empty promises and anti-doping nonsense teams spout in sponsor presentations is nuts. Remember that some of these sponsors may have advisors who are quite well positioned in the sport and who can shoot holes in your statements. You lose your credibility, you lose your sponsor.
- Treat your sponsors – all of them – properly. Most teams don’t have a professional department for this, but they should. Somebody with a small budget to keep everybody happy. Although it is nice to hear, it also makes me cringe when ex-sponsors from the Cervélo TestTeam tell me that was still their favorite team. In my opinion, the way we treated sponsors should have been the standard, not the exception.
Sponsorship 101 – for sponsors
- If you’re spending millions of dollars on a sponsorship, get proper advice. I see too many sponsors with a lack of understanding of the sport negotiating with the wrong team or severely overpaying for what they get. You don’t need to pay 5 million Euro or anywhere near it for a second title sponsorship, no matter how much logo exposure you get. Get advice, you will save that money tenfold when you sign the final deal.
- I also see companies relying on one advisor who they happened to know but who knows little about pro cycling. It is really astounding to me how big companies often rely on questionable advice. This sport loses a lot of sponsors to middle-man hacks. Check some references.
- It’s all in the details. Again at the Cervélo TestTeam, the jersey was clean yet it provided exposure to the sponsors way beyond the average. It was also the best-selling jersey in the peloton, providing additional exposure every time somebody put it on. Even now that Cervélo has stopped the team and is merely a product sponsor, this focus continues to pay dividends. It’s not a coincidence that according to the Repucom report, Cervélo received more exposure from sponsoring Team Garmin-Sharp than either of those two title sponsors.
Finally, some advice to teams and sponsors alike: Find an innovative concept. If you sponsor a team the same way as everybody else, you’ll get the same exposure. To super-charge that exposure, try something new. When we started the Cervélo TestTeam, we were the first bike company-run team in a long time. We also focused on Fan access and product development instead of on winning. Even in the four months before the team started riding, the exposure the team received was way beyond even the biggest-budget teams. And this makes total sense; people are attracted to new stories, not to the same old stuff. Now more and more bike companies follow this route, but as the law of shitty click-throughs predicts, the returns will lessen.
Of course it’s not that easy to create a new concept, but it isn’t rocket science either. Over the years I’ve developed several concepts, some focused on B2C companies and others for B2B (an area for which cycling sponsorship is often neglected but potentially very lucrative). Most of them have never been released but that’s the way teams should work too: create a library of concepts, waiting for the right sponsor to appear.