SBJ/February 4-10, 2013/In Depth

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  • Is Sochi a tough sell for sponsors?

    When sponsorship executives from the International Olympic Committee’s nine worldwide sponsors landed in Sochi last month for a sponsor summit, the first things they noticed were the cranes.

    Hundreds of them dotted the skyline in various sizes and colors. They worked day and night building hotels, finishing venues and transforming a small town on the Black Sea into a host city for the world’s biggest winter sporting event.

    That transformation, which is costing the Russian government and Sochi Olympic organizers $18 billion, is nearly complete. Most venues are finished, the mountain resort is ready, and a train is opening soon that can ferry spectators from arenas on the Black Sea to alpine events in the mountains.

    Construction continues on Olympic Stadium while the completed Iceberg Skating Palace sits in the foreground.
    Photo by: Getty Images
    A year from now, the Olympic cauldron will be lit and the Olympics will return to Russia for the first time in more than two decades. But much has changed since the IOC awarded Sochi the Olympics in 2007.

    Over the past six years, Brazil has been awarded not one, but two, major global sports events. A recession hit the global economy and is still straining marketing budgets. Trips to Sochi, which doesn’t have an international airport, have proven difficult. And working in Russian cities has required more local expertise than many marketers anticipated.

    Those challenges have curbed marketers’ enthusiasm and dampened optimism that the 2014 Sochi Games will unlock the Russian market the same way the 2008 Beijing Games unlocked China. It’s been enough to make some observers wonder just how significant the 2014 Olympics will be.

    “Sometimes the Winter Games can suffer a little bit because it’s bookended by the Summer Games,” said Gary Pluchino, IMG senior vice president and head of global Olympic consulting. “In the case of Vancouver, you had two iconic host cities, Beijing and London, but Vancouver did well in holding its own and people showed good interest from a marketing and activation perspective because it was North America. I’m not sure whether Sochi will do the same and garner that marketing interest while being bookended by London and Rio.”

    Making a choice

    The Winter Games offer a much smaller marketing platform worldwide than the Summer Games. Just as there are fewer sports — seven in the winter, compared to 28 in the summer— there also are fewer countries interested in winter sports.

    The regions that follow the Winter Games are limited to Japan, China, Korea, Russia, Europe and the U.S. As a result, members of the IOC’s The Olympic Partner (TOP) program such as Visa, which activated in 70 countries during the London Games, will activate in half that many during the Sochi Games. Coca-Cola, which developed a global marketing program around London, plans to concentrate its marketing in Europe, the U.S. and Japan.

    “The way we approach the Winter Games is a bit different,” said Thierry Borra, Coca-Cola’s director of Olympic Games management. “We usually activate in the winter markets.”

    The Winter Games also falls in the same calendar year as the World Cup. As a result, IOC sponsors who also have FIFA rights — Coke, McDonald’s and Visa — have to divide their marketing budget between the 2014 Sochi Games and 2014 World Cup in Brazil. In many cases, Brazil is winning out.

    “There’s a lot of focus on Brazil,” said Jan Katzoff, head of global sports and entertainment of the new GMR Marketing,
    which works with Visa and P&G. “People have to make tough decisions. There’s only so much money to go around.”

    That decision is even tougher for Visa, which also has an NFL sponsorship and plans to activate heavily around the Super Bowl in New York next year. Ricardo Fort, Visa head of global sponsorship marketing, said the company would concentrate on the Super Bowl in the U.S., Sochi in Europe and the World Cup in Latin America, Africa, Asia and Europe.

    “There is a lot going on, but when you look at the global interest of our clients and consumers, there is a nice distribution across all three events,” Fort said.

    While Visa won’t be activating in as many markets as it did during the London Games, it will roll out campaigns in more markets than the previous Winter Games in Vancouver. The same can be said for fellow Olympic sponsor Samsung.

    The Russian market forces sponsors to make tough decisions about how they spend their marketing dollars. Sochi is closer to Istanbul than Moscow, which is 1,000 miles away, and its population is just under 345,000 — half the population in Vancouver and a third of the population in Turin, Italy.

    That’s meant several sponsors are dividing their budgets between activities in Sochi and marketing in Moscow and St. Petersburg. For example, Omega plans to do something with its store in Moscow and a temporary store in Sochi, and Coke is employing experiential marketing programs in Moscow and St. Petersburg.

    “(Sochi is) not a big city,” said Stephen Urquhart, president of Omega, a TOP sponsor. “It’s not Moscow. Not London. Not Beijing. Not even Vancouver. … It will be challenging, but it will be an interesting challenge. ”

    Slow recovery

    The recent recession and the slow recovery also complicate sponsors’ plans. TOP sponsor Dow, which announced plans to lay off 5 percent of its workforce last year, considered doing a public showcase pavilion in Sochi but opted to do a private one for clients instead. Panasonic, another TOP sponsor, is limiting almost all of its Olympic marketing to Russia because the company is in a difficult financial situation.

    Coca-Cola, which trails Pepsi in the Russian market, is using a mobile display touting its Olympic ties and sponsorship of the torch run. The attraction is shown here in Moscow, and the brand planned a similar effort in St. Petersburg.
    Photo by: Coca-Cola
    “A lot of the TOP sponsors are not spending as much money there,” said Davis Butler, a former IOC executive and the founder of Encompass, a strategic marketing agency. “They’re going to spend but not nearly as much as in the past. It’s not a huge international destination.”

    Despite ongoing financial challenges, most TOP sponsors plan to run hospitality programs. Those programs are expected to be smaller than what sponsors ran in Vancouver but comparable to what they did in Turin.

    Hospitality agencies working with sponsors said they’re being more strategic with invitations than they have been in the past. To reach Sochi, travelers have to fly through Moscow or Istanbul. From the West Coast, it takes 20 hours, and from the East Coast, it takes 15.

    Executives at Jet Set Sports and GMR Marketing, which run hospitality programs for official sponsors during the Olympics, said that demand was strong but corporate guests were coming predominantly from Russia or Scandinavian countries.

    But demand from non-corporate sponsors is lower than it has been for past Games, said Adam Dailey, managing director of Ludus Tours, which offers tour packages to the Olympics. He added, “What we’re seeing is that if you’re a corporate group, and you don’t have Olympic business, flying 20 hours to the dead of winter is a harder sell.”

    For some sponsors, working in Russia has proved as challenging as traveling to Sochi. The country’s rule of law is weak, so business is more reliant on relationships and trust than contracts and agreements.

    To help deal with that and other cultural differences, Visa created its first project team in a country for an Olympic Games. It has a team of Russians in Moscow that is setting up payment systems for the Sochi Games, and it brought employees from its Russian division to its headquarters in California to help the sports marketing group prepare for the Olympics.

    “One of the things that’s important there is the network that you have, knowing the people that do the work, understanding what’s important for them, how they value different things,” Visa’s Fort said. “We have to understand the culture.”

    Room for growth

    Those challenges may have tempered marketers’ enthusiasm for the Sochi Games, but they haven’t extinguished optimism about what can be accomplished in Russia during the Olympics.

    Sponsors believe the Games offer an excellent opportunity to expand their businesses. Russia’s Gross Domestic Product remains the third strongest among BRIC (Brazil, Russia, India and China) countries, and it’s one of the most important
    The local connections needed to successfully conduct business in Russia encouraged Visa to create its first project team in a country for an Olympic Games.
    and fastest-growing markets for several TOP sponsors.

    Interest in the Games is high there, and sponsors hope to cash in on that. When Coca-Cola, which trails Pepsi in the Russian market, launched a website last month to collect nominations for Olympic torchbearers, the submissions were so overwhelming that the site crashed. Coca-Cola expects to have more than 100,000 entries.

    “Having that amount of excitement one year out is spectacular,” said Coca-Cola’s Borra. “That means it might not be a Sochi Games but a Russia Games. For us, it’s a great opportunity to develop and potentially take over a bit of (market share from) our competitors.”

    The country also offers opportunities for business-to-business growth. TOP sponsor GE already has sold two gas turbines that will help power the Games, and Dow has had its products included in everything from insulation at venues to seating materials.

    “We’ve made tremendous headway,” said Amy Millslagle, Dow’s vice president of Olympic marketing. “We’ve placed product in Sochi venues and hotels but we’ve also placed product with partners. It’s turning out to be a great Games for us.”

    Marketers believe Sochi has the potential to be a turning point for their brand. Dow believes it can help the company win business during the 2018 World Cup in Russia. Visa believes it can help it increase card usage. Panasonic believes it can boost business-to-business sales. And no one wants to waste the opportunity Sochi provides in reaching those goals.

    “For all of our traditional clients, when it comes to the Olympics, I don’t think you’re going to see steps backwards,” said GMR’s Katzoff, whose agency works with four of the nine TOP sponsors and three Sochi sponsors. “Everyone’s going to continue to be aggressive. Russia is a huge market.”




































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  • Sponsor activities planned around Sochi

    Atos
    Providing the technology infrastructure that delivers instantaneous scoring and communication to organizers, officials, media, television viewers and Internet users.

    Coca-Cola
    Marketing in Russia with a torchbearer nomination campaign and an exhibition in Moscow of past Olympic torches and memorabilia from the 1980 Moscow Games.
    Focusing on the torch relay.
    Signed Alexander Ovechkin (hockey), who is being featured in commercials in Russia, Yelena Isinbayeva (pole vaulter), Maria Kiseleva (synchronized swimmer), Ilya Lagutenko (rock musician), Ekaterina Gamova (volleyball), Alexei Nemov (gymnast), Tatyana Lazareva (TV personality) and Kamil Gadzhiev (jujutsu champion).
    Hospitality program.
    Showcase pavilion in Sochi; considering experiential marketing in Moscow and St. Petersburg.
    Dow
    Business-to-consumer showcase pavilion that illustrates Dow products used in facilities and local infrastructure.
    Bulk of spending will be outside the U.S.
    Hospitality program.

    GE
    Provided two gas turbines to help power the Games.
    Hospitality program.

    McDonald’s
    Olympic branding in restaurants nationwide with special emphasis on Sochi, Moscow and St. Petersburg locations.

    Omega

    Omega wasted little time rolling out its Sochi countdown clocks, using this display at last summer’s London Games.
    Photo by: Getty Images

    Countdown clocks in Moscow, Sochi and other Russian cities.
    Marketing program in Russia, China and Europe.
    Hospitality program will focus on building a temporary store in Sochi.

    Panasonic
    Panasonic Russia will launch and promote Olympic-branded products including a camcorder, Lumix digital camera, audio headset and other items.
    Installing audio-visual equipment in competition venues.
    Panasonic Russia will advertise on TV and online in the local market.
    Online promotion on its Olympic Facebook page.
    Hospitality program.

    P&G
    In discussions about having another “Family Home” for athletes’ families.

    Samsung
    Pavilion showcasing wireless communications technology.
    Digital campaigns emphasizing the company’s smartphone technology.
    Featuring top winter athletes as members of Team Samsung. In addition, tennis player Maria Sharapova will take part in promoting Samsung’s Sochi 2014 campaign.
    Extending the Samsung Global Blogger initiative, which will feature local bloggers using Samsung technology to capture and share their Sochi 2014 experience online.

    Visa
    Advertising in the Sochi airport.
    Global campaign developed by BBDO.
    Anticipates activating in 35-plus markets, which will be more than Vancouver.
    Hospitality program.
    Acceptance program with Sochi merchants, including point-of-sale branding.
    Advertising, digital and social media campaign to promote Sochi ticketing.
    Advertising program with Sberbank, the retail banking partner of Sochi.

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  • Questions for Sochi

    When the International Olympic Committee’s coordination committee visited Sochi last fall, they were impressed. Venues were largely completed and a high-speed train to the mountains was on schedule. Organizers seemed prepared to host a successful Winter Games. But the construction success on the ground doesn’t mean there aren’t questions that Sochi, the IOC, NBC and others will need to address between now and the opening ceremony next year. Here are a few:

    Will the NHL show up?

    Alexander Ovechkin
    Photo by: Getty Images

    Hockey is to the Winter Games what track is to the Summer Games. It’s the anchor sport and marquee attraction during the second week of the Olympics. In Sochi, hockey has the potential to be as popular as it was in Vancouver. Hospitality and Olympic travel company executives say hockey tickets are in high demand. Alexander Ovechkin is already being featured in Coca-Cola advertising. And hockey-mad Scandinavians are expected to travel en mass to Sochi.

    But the NHL and the International Ice Hockey Federation could kill it all. The league and players didn’t reach an agreement regarding the Olympics in their collective-bargaining agreement. It will be up to the NHL and IIHF to make sure that happens.



    Will Olympic ratings slump?
    A mix of favorable time zones and high-profile host cities delivered ratings gold for NBC in Beijing, Vancouver and London, but Sochi will test that streak.

    The city presents a host of challenges for NBC. It’s unknown. It’s closer to Istanbul than Moscow. It’s in a country, Russia, that still carries Cold War connotations for many Americans. And its time zone is nine hours away from the East Coast.

    The last time NBC carried a Winter Games that far away was Turin, Italy, and ratings were awful. The network averaged a 12.2 Nielsen rating in prime time, down 36 percent from the 2002 Salt Lake City Games and 25 percent from the 1998 Nagano Games. To avoid a repeat of that, NBC will need to find the right mix of athlete stories and travel tales to engage U.S. viewers.



    Will security be too tight?
    Photo by: Getty Images

    The Caucasus region surrounding Sochi is rife with conflict. There are Muslim militants, separatist groups and Chechen rebels, making this Winter Games more susceptible to a terrorist attack than any in recent history.

    The Russian government says the Games will be safe, but Olympic marketers are concerned that the security presence could be so heightened that it dampens the festivities. They envision heavily armed military and long security lines. It will be up to the government to balance keeping spectators safe with making sure they still have a good experience.



    Will the venues be used again?
    Every venue in Sochi — from the ice hockey arena to the mountain resort — is being built from scratch. The construction costs total more than $6.5 billion. It’s a huge investment designed to turn a longtime summer destination into a winter resort.

    But will people return? Will the permanent venues be used? Or will they become padlocked and largely abandoned like the Bird’s Nest in China?

    Russian leaders already are expressing concerns. The head of the audit chamber estimated the cost of maintaining the facilities at $2 billion annually and said it was “too expensive.”



    What stars will emerge?
    Lindsey Vonn
    Photo by: Getty Images

    Attracting U.S. viewers for the last few Olympics has come easy for NBC because many of the biggest stars have returned and new talent has stepped up to win. Most recently, swimmer Michael Phelps and the U.S. gymnastics team delivered during the 2012 Summer Games.

    The 2014 Sochi Games have the potential to offer the same mix. Lindsey Vonn and her gold-medal-winning teammate Julia Mancuso return to the slopes, and 17-year-old Mikaela Shiffrin, who picked up her first World Cup win last month, will look to join them on the podium. Shaun White will return in the halfpipe, freeskiers like Simon Dumont and Tom Wallisch will step onto the Olympic stage for the first time, and figure skater Ashley Wagner will look to reclaim a women’s gold medal for the U.S.



    Will hotels, restaurants and shops be prepared to welcome the world?
    Sochi’s Radisson Lazurnaya hotel
    Photo by: Getty Images

    Like every venue in Sochi, most of the hotels in the area are being built to host the Games. Hospitality experts said that means they will be far better than the hotels in Turin in 2006, and in many cases better than the hotels in Vancouver in 2010. But it isn’t the hotels that concern them. It’s the service.

    Sochi’s food and hospitality industry is unaccustomed to hosting international guests. Few are multilingual, and many are unaccustomed to the expectations of American and European travelers.

    To overcome that, several of the new hotels are partnering with international chains such as Radisson and Swissotel in hopes that they can tap into the larger chains’ training programs and expertise. But sports hospitality providers are concerned that may not be enough.

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