Business, Marketing

Marketing Agreement Series: The ups and downs of marketing deals

Marketing agreements fail and succeed for various reasons, but quite often I’ve found the attention to the initial formation of the alliances between companies can predict the fate of these deals.

Some may end even before they have the chance to begin.

Remember when Shaquille O’Neal was with the Los Angeles Lakers? The basketball star’s selection as the team’s new center disrupted an arrangement and inflamed a battle between two soda giants squaring off over sports and entertainment marketing deals.

In 1996 an Atlanta-based bottling company considered renewing a five-year marketing agreement with California Sports Inc./Great Western Forum. This included sponsorship of the Lakers and the Los Angeles Kings hockey team. When O’Neal was added, the contract that would have made the Coca-Cola company the exclusive beverage of the Forum, and given the company media, team marketing and stadium display rights with the Kings and Lakers came to halt. Coca-Cola withdrew.

The company made this move even though it had sponsored the Dallas Cowboys, through its sponsorship of the NFL, when Deion Sanders, who was the Pepsi pitchman, played on the team.

This time it was different, Coca-Cola claimed. Shaquille O’Neal, who starred in numerous Pepsi television ads and promotions, identified too closely with the Pepsi brand. He could start drinking the beverage in front of cameras at any time, and there was no way to stop him. Plus, he was a huge NBA star. Coca-Cola believed the team would build its franchise around Shaq who would charm the media. It concluded “the Lakers would become a de facto marketing vehicle for Pepsi.”1 Coca-Cola was also discouraged by the California Sports Inc. decision to raise its soft-drink sponsorship fee upon Shaq’s arrival.

This isn’t the only example. Other agreements have received devastating blows that broke up the deal. AT&T terminated its deal with Dish Network Corp. after the number of new satellite-TV subscriptions declined. Meanwhile, Dish’s rival DirecTV defied its skeptics. It took advantage of the market share, it claimed, and rapidly added customers.2 The pay TV operator struck a deal with its competitor’s former partner, AT&T Inc. just as the economic recovery began bundling its services with the Dallas telecommunications company.

However, a deal can sometimes survive a tumultuous relationship. In 2007 former Maine senator George Mitchell’s long-awaited performance-enhancing drug report revealed a link between 80 major league baseball players and steroids. The players included stars such as Roger Clemens and Barry Bonds. Marketers weren’t deterred from making deals with Major League Baseball despite the news. In fact, General Motors sponsored the MLB during the two years it took Senator Mitchell to investigate and write about the players’ drug use.3

Political pressure revolving around lenders’ controversial use of government funds from the Troubled Asset Relief Program almost led Citigroup Inc. to back out of a $400 million dollar, 20-year marketing agreement with the New York Mets.4 The legally binding agreement signed in 2006 included naming the Mets’ new ballpark after the bank. Citigroup was one of several banks shoring up sports marketing deals and receiving government assistance. However, the large amount of money Citigroup doled out for its deal made it the “poster-child.” The company reassured the public and the government that it wouldn’t use the $45 billion it received in government bailout money to fund this agreement.

Learn about the factors that can impact marketing agreements in “Marketing Agreements: Establishing and Sustaining a Mutual Relationshipavailable on Scribd.

I’m leading an ExecSense webinar on May 11th at 4:30 EST on What to Know Before Signing or Negotiating a B2B Marketing Agreement in 2011, more info – http://bit.ly/kOk7MI

Notes:

Photo Credit: jscreationzs / FreeDigitalPhotos.net

1. Frank, Robert. “Advertising:Signing O’Neal Costs the Lakers Coca-Cola deal. Frank, Robert.” Wall Street Journal.  4 Sep.1996, Eastern Edition: p.B1. ProQuest. Web. 6 May 2011

2.  Cheng, Roger. “DirecTV Bucks Recession.” Wall Street Journal. 8 Apr. 2009, Eastern Edition. p. B5B. ProQuest. Web. 6 May 2011.

3.   Enrich, David, Matthew,Futterman,  Damian Paletta. “Citi Explores Breaking Mets Deal—Bank That Got Bailout Cash Revisits $400 Million Pact to Put Name on Stadium.” Wall Street Journal. 3 Feb  2009, Eastern Edition:. p. A.1. ProQuest. Web. 6 May 2011.

4.   Cheng, Roger and Andrew LaVallee. “AT&T Net Rises 30% Despite Weakness: Growth in Wireless Offsets Steep Decline in Landline Business.” Wall Street Journal. 24 Jul 2008, Eastern Edition: p. B.8. ProQuest. Web. 6 May 2011.

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