SBJ/January 24 - 30, 2005/SBJ In Depth

Retailers take aim

The sports marketing strategies of retail companies used to be driven by their vendors — manufacturers. The manufacturers — whether a Gillette or a ConAgra or a Black & Decker — would buy a sponsorship and involve the retailer in a promotion via pass-through rights.

About 10 years ago, more retailers began to take the manufacturers’ role, turning the tables on manufacturers by buying their own sponsorships and involving manufacturers in ways — and on schedules — that better suited the retailer.

Today, retail companies are more involved than ever as sports sponsors, not just co-op partners, and they’re calling the shots with vendors to an unprecedented degree. Even when they’re not the lead dog in the promotional relationship, they may still demand a fuller range of assets from the vendor, not merely the same promotion the vendor did with another chain the week before.

In some cases, the retailer is even playing the vendor role, such as the Wisconsin-based department store chain that had its own brand of sportswear built around Green Bay Packers players.

In all, retailers have taken stock of their established brands, geographical reach and key position in the product pipeline to solidify their position in the sponsorship world.

Gaining leverage

In some cases — Wal-Mart being the most prominent — the most desirable retailers are selling co-op positions and turning the sponsorship itself into a revenue source.

Retail company league sponsorships

NBA
RadioShack

NASCAR
AutoZone
Sears, Roebuck and Co. (Craftsman brand)
Home Depot

ATP
Tennis Warehouse

WTA
Tennis Warehouse

LPGA
DSW Inc. (shoe store chain)
Women’s Golf Unlimited (Square Two Golf)

NHL*
Home Depot
Best Buy

* 2003-04 season
Sources: The leagues

“Retailers are saying, ‘My margins are getting squeezed, we’re only making a 1 or 2 percent margin, and I’ve got to find revenue elsewhere. If I go buy my own sponsorship, I can turn around and sell positions in these sponsorships. It’s a complete opposite model,’” said Reid Stewart, a vice president at Momentum Worldwide, whose clients include Gillette, ConAgra and Home Depot.

The practice was already part of the grocery industry 10 years ago, but the past few years have seen mass merchants and home-improvement retailers get involved.

Why the shift?

“They’ve seen the value of those relationships increase as they’ve been exposed to them, but also, I think they are looking for control of consistency at retail with one promotion going on in the shelves as opposed to having two or three or five different ones,” said Greg Busch, director of sports marketing at GMR Marketing, who was formerly a marketer at power tool manufacturer Porter-Cable.

Retailers also are leveraging their unique position in the data-compilation equation. “Obviously they have a lot of capabilities to track traffic and transactions, and in a lot of cases can build systems to [measure the results of promotions],” Busch said. “And in the case of packaged goods, you’re a little more at the discretion of the retailer and scanning data and whether you can actually build the infrastructure to tie sales directly to a sponsorship.”

At Wal-Mart, the sponsorship power of the retailer is in full force. Company marketers did not return requests for comment, but other marketers describe with awe Wal-Mart’s leverage

Wal-Mart commands hefty fees from vendors that participate in its FLW pro fishing tour.
in commanding low-six-figure participation fees in its NASCAR and FLW bass-fishing programs. Wal-Mart is famous for being rugged with vendors; sponsorship is just one facet of this.

Even where retailers aren’t demanding money for co-op positions, they’re demanding programs catered to their needs. Especially in the grocery category, chains aren’t settling for the same promotion done at their competitor the week before.

“At most you used to give them a different week of media,” said Stewart. “One week Albertsons, one Kroger. Now it’s either ‘Give me my own customized promotion’ or even ‘Customize my own sponsorship.’”

Stewart said a recent Gillette program with Stop & Shop involved an honorary team captain program and game ticket giveaways that were exclusive to Stop & Shop.

The home-improvement and home-electronics segments have been slower than the groceries and mass merchants to assert this strength, marketers say. There are at least two reasons. One is a greater aversion to promotional clutter, the other is that the marketing and the “retail environment” departments are distinct at many retailers and have different aims.

“The retail guy has done a lot of research to see that the consumer only looks in five places, and so he wants to avoid clutter, but the sponsorship guy wants to activate in as many places as he can,” Stewart said. “We’re doing NASCAR-themed planning at Circuit City, and it’s very limited as to how we can promote in-store.”

Wal-Mart has focused some of its muscle on its “retailtainment” strategy, which includes “Fan Days,” such as the NASCAR-themed days going on simultaneously around the country and involving interactive events and displays that go well beyond cardboard point-of-purchase displays. The company leverages these to liquidate its sponsorship fees, and makes it clear to vendors that these are the way to get superior results.

“Wal-Mart winked at Gillette and said, ‘You’ll get better performance if you do our special days,’” Stewart said.

Stewart is surprised more chains haven’t got into the “retailtainment” idea.

“Wal-Mart is saying, we don’t just want a one-way communication with the customer, we want an in-store experience that’s a little more dynamic,” he said.

Brand building

Not every retail chain has the market strength or management skill to draw co-op payments from vendors. But retailers now find sponsorship more valuable for a less tangible reason: branding. As they’ve seen manufacturers benefit from long associations with sports properties, they’ve begun to follow suit.

“Establishing what the brand represents is a bigger part of the overall message that already includes price competition,” said David Paro, president of Deep Alliance Marketing, a former McDonald’s sports marketer who also serviced retailers at agencies SFX and Frankel.

Chains such as Wal-Mart, Target and Kmart are working extremely hard to develop distinct marketplace images, “so matching up with sports and event properties is more of a natural thing,” Paro said.

This search for “personality” is driving another trend, some say: Retailers are increasingly involved in cause-related marketing. It’s one reason why Gallery Furniture shifted some of its marketing dollars last season to the Houston Texans, with whom it is doing several cause-related programs. And on Jan. 31, Gallery Furniture is sponsoring a tennis exhibition at the Toyota Center with John McEnroe, Jim Courier, Anna Kournikova and other luminaries to aid victims of the Southeast Asian tsunami.

“The Rockets let us have the Toyota Center for next to nothing, and I like to market with teams that are proactive like that. It’s a broad change in attitude, from Me Generation to We Generation,” said Gallery Furniture President Jim McIngvale. “Any property that’s involved in the community and wants sponsors involved, too, is something I can latch on to. It helps the community and it helps the cash register ring.”

Sears, Roebuck and Co. feels similarly. It instituted a $100 million American Dream program a little over two years ago to help promote home ownership and maintenance in needier communities, and it now has a program to support families of enlisted people involved in the Iraq war who are also Sears employees. “We’ve returned our attention to cause marketing,” said Touré Claiborne, director of brand and partnership marketing for Sears.

The billboard shows some of the ways Carson Pirie Scott markets its store brands through its sponsorship with the Packers.
Examples of retailers asserting the strength of their positioning in the marketplace are everywhere. Three of Carson Pirie Scott’s store brands — Boston Store, Herberger’s and Younkers — created their own line of activewear around two Green Bay Packers players this past season, right alongside the Reebok duds they carried in 24 stores. The Packers are the company’s only major sponsorship.

The stores also developed proprietary activewear brands and logos for Javon Walker (J-Walk) and Nick Barnett (Defiant 56), and marketed them along with an in-school program involving a raffle that students entered in store. Barnett and Walker will make 24 visits this year to winning schools around the state.

Although the clothing line didn’t do as well as the store’s Reebok offerings, which did “enormously well,” according to Christine Knippel, vice president of special promotions and publicity, they did well enough for another run next season, especially after wide receiver Walker’s break-out year.

If there’s one area where retailers haven’t followed manufacturers, it’s in venue naming rights. Currently only four of the roughly 70 major league sports venues with title sponsors have retailers as those sponsors — Target, Office Depot, Staples and Petco — probably because while retailers are focusing more on brand-building, they usually don’t need the high-cost blitz of a naming deal. They have more immediate dollars-and-cents concerns.

But if this area starts to follow other areas of sports marketing, we’ll see naming-rights deals for retailers during this decade. Chances are it will depend on whether the deal involves enough latitude to market vendor partners and to do it the sponsor’s way. Because retailers are starting to expect the upper hand.

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