Business: Are sports venue naming rights a good deal? Some say no.
Couple’s analysis showed deals didn’t boost profits
In exchange for the millions it likely will spend to hang its brand on the Milwaukee Brewers’ ballpark, American Family Insurance will attract widespread attention and will further cement its name in the minds of potential customers, communications professionals say.
Clearly, the executives running the banks, airlines, telecommunications firms and other companies that spend heavily on sports-venue naming rights believe the investments pay off. More than three-quarters of the stadiums and arenas in Major League Baseball, the National Football League and the National Basketball Association now bear corporate names.
Collectively, they spend hundreds of millions of dollars a year for what marketing experts view as significant benefits.
But a study by two economists — sparked by a radio discussion of naming rights for an arena in Philadelphia — found that the branding strategy does nothing to boost profits.
First, though, the case for making such deals.
Having “top of mind awareness” with consumers is important in insurance and many other product categories, said Jim Pokrywczynski, associate professor of strategic communications at Marquette University.
“I am sure that American Family has assessed what the value proposition is with the Brewers stadium, and has other considerations that include everything from media exposure to businessto-business opportunities, providing hospitality for important clients, premium seating, access to athletes, that sort of thing,” he said.
“Attorneys do the same thing. It’s why we see David Gruber’s name all over the place,” Pokrywczynski said, speaking of the personal-injury lawyer who advertises heavily in the Milwaukee market.
Greg Nickerson, chairman of Milwaukee marketing firm Bader Rutter, agreed. A naming-rights deal builds
awareness, he said, and for American Family, it will forge a connection with “a winning brand” — the much-beloved Brewers.
With the huge array of news and sports outlets covering baseball, American Family’s connection to the Brewers “really gives them a huge multiplier effect on that brand name,” Nickerson said.
That effect can be measured in terms of what it would cost to buy an equivalent number of impressions through paid advertising.
In 2011, for example, a research firm said the mentions of Miller Park on television, in newspapers and on the internet were worth $2.74 million to MillerCoors — a good deal, since the company was paying an estimated $2.06 million for the naming rights.
But Michael Leeds and Eva Marikova Leeds beg to differ.
In the early 2000s, the couple — he’s an economist at Temple University in Philadelphia, she at Moravian College in Bethlehem, Pennsylvania, were listening to a marketing expert talk at length on the radio about how valuable naming rights were for branding.
“And my wife and I looked at each other across the table,” Leeds recalled, “and said, not once has he mentioned profit.”
So the husband-and-wife economics team decided to investigate.
They analyzed 54 naming-rights deals, looking to see whether the original announcements provided a jolt to the company’s share price. Stock prices serve as a proxy for investors’ expectations of future profitability, Leeds said, and have been used in “events studies” to see what happens to, say, an airline after a major crash.
In such instances, investors collectively function sort of like Las Vegas bookmakers setting the point spread for a big game and weighing the multitude of
factors — from an injury to a defensive back to the chance for a December blizzard at Lambeau — that could affect the outcome.
And what the Leedses found with naming rights announcements was that investors essentially shrugged and said “meh.”
“We basically found that it does nothing. … In terms of the profitability of the company it has no impact,” Leeds said.
“It may be very useful for name recognition,” he said, “but it doesn’t seem to move the needle in terms of profitability of the company, and that should be the bottom line.”
So why do companies do it?
Leeds has a theory. It’s not something that can be tested empirically, but it does speak to another sort of value.
“Basically,” Leeds said, “it’s a guy thing.”
Take the NFL. With 32 teams, the owners make up a pretty exclusive club.
“And if you can’t be an owner in the NFL,” Leeds said, “well, one of the things you can do is put your name on the place where an NFL team plays. Maybe not your personal name on it but you can put the company where you’re CEO … and you suddenly become kind of an insider in this very, very closed group.”
University of Wisconsin-Madison marketing professor Kevin Chung sees good reason for insurers to keep their names before the public. In a hyper-competitive insurance market in which consumers shop only infrequently, it’s very important for companies to be on consumers’ minds, Chung said by email.
That’s one reason why insurance advertisements — think of Geico — tend to be memorable and interesting, he said.
“With this being said,” Chung added, “there is no study in marketing that I know of that has convincingly shown that sponsorship via stadium naming rights led to increased awareness and ultimately to more sales in insurance products.”