What to do when sponsorship becomes brand risk

When Australian cricketers were caught out cheating in a match against South Africa it was undoubtedly a reputational crisis for the team, the game and its administrators. But it was also an important decision moment for the commercial organisations who sponsor the game.

Sponsors quickly and very publicly dumped the three players directly involved, with Asics declaring their actions were “not something that Asics tolerates and are contrary to the values the company stands for,” and LG saying it would only work with “ambassadors that share our core brand values.”

A more challenging issue management conundrum faced two of cricket’s highest profile commercial partners. Qantas, whose logo is prominent on the Australian team’s shirts, urged the cricket authorities to take appropriate action. But CEO Alan Joyce said the airline was “nowhere near” withdrawing sponsorship and had not threatened to do so.

By contrast, funds manager Magellan tore up its three year contract as naming rights sponsor – said to be worth $20 million – after only eight months, declaring that the ball-tampering incident was “so inconsistent with our values that we are left with no option but to terminate our ongoing partnership with Cricket Australia.”

The question is, which was the right response?

Although we’ll never know what discussion took place in the executive suite, is it wise to cloak a business decision in a message about morality?  And with the current Royal Commission into Misconduct in the Banking and Finance Industry exposing damaging revelations in the sector day after day, do the public really have an appetite for a finance company preaching about ethical behaviour?

Indeed, unnamed sources inside the Commonwealth Bank were reported saying the CBA decision to dump sponsorship of team captain Steve Smith deliberately avoided taking a “high moralistic tone” for that very reason.

Most importantly, do sponsorship decisions – to continue or to withdraw – have any long term impact?  Consider the case of Tiger Woods, caught cheating not on the game, but on his wife.  Many sponsors rushed to drop the fallen star, but Nike and EA maintained their support, despite criticism, particularly from female consumers.

A few months later, Advertising Age reported a study showing that, while Woods did major damage to his own brand, most of the brands he endorsed escaped relatively untarnished.

Furthermore, two Professors from Carnegie Mellon University later used a complex analysis related to golf ball sales to conclude that Nike was right to stand by Woods, because “even in the midst of the scandal, the overall profit was greater by $1.6 million for Nike with Tiger Woods than without him.” It was a reminder that these decisions are, to a large extent, most likely more about business than morals.

So, what to do when a sponsorship generates unwanted attention?

  • Never forget that it’s a business decision.
  • Avoid using it to make a statement about morals or values.
  • Recognise that most of your stakeholders probably don’t much care either way.
  • Do some real analysis, not just knee-jerk response.
  • Understand that you are NOT likely to be substantially punished whatever you decide.
  • Remember that media attention will quickly move on.
  • Don’t complain and don’t explain. Make a decision, then follow Nike and “Just Do It.”



About managingoutcomes

Issue and crisis management expert
This entry was posted in Issue Management, Reputation risk and tagged , , , . Bookmark the permalink.

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