Public Flogging for Bailed-Out Marketers

Pols, Media Dismiss Ads From Automakers, Citi, BofA as Waste of Money

By Published on . 8

A correction has been made in this story. See below for details.

BATAVIA, Ohio (AdAge.com) -- In the marketing and media industries, it's widely believed that advertising, done right, is an investment in future business results. But the question today is whether the rest of the country can be persuaded to see it that way.

In the past week, advertising, in all its forms, has become a whipping boy for recipients of Troubled Asset Relief Program funds. The more than $300 billion in bailout bucks poured into automakers and financial institutions to keep them afloat has subjected their marketing efforts to unprecedented public scrutiny and criticism.

In the first six days of February alone, Citigroup was reported to be reconsidering its $400 million sponsorship deal for the New York Mets' new stadium under criticism from members of Congress, and Bank of America was battling criticism for sponsoring what ABC News called "a carnival-like event" at the Super Bowl.

U.S. automakers were conspicuously absent from advertising on the big game for the first time in at least 15 years -- not surprising considering that General Motors CEO Rick Wagoner last November, with hat in hand on Capitol Hill, pledged under skeptical questioning that none of his brands would pony up $3 million for Super Bowl spots.

The conundrum: To drive much-needed sales, Tarp recipients must spend on marketing. But that's tough to do when some lawmakers, the media, and perhaps a section of the general public seem to denounce marketing or advertising as an unnecessary expense.

Payback time
"The investment that the U.S. taxpayer has made in Bank of America represents an obligation to pay back to the taxpayers with a premium," said BofA spokesman Joe Goode. "And the only way that we're going to be able to pay back all our shareholders is pursuing business activities, like our relationship with the sport industry, that allow us to generate earnings."

Since last fall's financial turmoil, polls show a heightened public outrage against anything that smacks of corporate waste or indulgence, including marketing expenditures that seem frivolous or overpriced, said Richard Luker, chief strategy officer of event-marketing firm TBA Global. Naming rights deals that in better times symbolized strength have now come to represent high-profile reminders of the sponsors' current weakness.

While marketers for years have had to justify their spending to senior managers and investors, now that their investors include taxpayers, they may need to redouble efforts to make their ads seem effective to the very people they're marketing to.

How to prove marketing's value? Gene Grabowski, senior VP of crisis PR firm Levick Strategic Communications, believes marketers should consider publishing outside audits of their marketing return on investment and devoting at least some of their budgets to showing their marketing funds are well spent. Corporate transparency, particularly around spending, "is the new environmental movement," Mr. Grabowski said.

"Certainly if a company is receiving government assistance, but even if they're not, there will be greater scrutiny on their expenditures," he said. He believes marketers in the next decade will roll out efforts to prove they're not wasting money much like those that burnished their green credentials in the past decade.

Open secret
Clearly, government money and the accompanying public scrutiny already are changing how marketers spend and portray that spending. GM's Cadillac brand remains the Official Car of the NFL, but unlike past years, the brand didn't advertise during the Super Bowl or engage in the same levels of promotion on the ground.

In past years, those activities had included a fleet of as many as 400 Escalades offering free shuttles to players, celebrities and other VIPs, a go-cart race with celebrities for charity and official presentation of the keys to a new Cadillac to the Super Bowl MVP during the post-game broadcast. "We've taken out a lot of promotions, including the grassroots Super Bowl events," said Mark LaNeve, VP-marketing sales and service at GM North America. "No matter how you look at it, we need to be very transparent and subject ourselves to whatever conditions that apply and execute immaculately," he said. "We don't have any margin for error."

Though Cadillac upheld its contractual agreements with the NFL, it provided fewer vehicles for free VIP shuttles, a spokesman at the brand said, declining to reveal exact numbers.

Bank of America learned the risk of doing anything approaching business as usual at the Super Bowl when ABC News reported Feb. 2 that "despite a near collapse that required $45 billion in federal-taxpayer bailout funds [BofA] sponsored a five-day carnival-like affair just outside the Super Bowl stadium. "The prominent sponsorship of the Super Bowl says to the American people we'll take your money and then we're going to go waste it," said Tom Schatz, president of Citizens Against Government Waste in the report.

But BofA's Mr. Goode said the ABC report created the wrong impression. It cited, per an "insider," that Bank of America spends $10 million annually on its NFL partnership and a minimum cost of $800,000 for operating a tent at the Super Bowl on top of that. But Mr. Goode said the NFL Experience promotion was paid for last summer prior to establishment of Tarp and was nowhere near $10 million or even $800,000 but "probably in the low six figures."

That helped generate 14,000 applications for new accounts, he said. Bank of America does have a $7.5 million a year deal for naming rights and a broad-based partnership with the Carolina Panthers, but Mr. Goode said the bank generates $10 in revenue and $3 in net income for every dollar spent on its sports-related partnerships through sales of sports-related consumer accounts, commercial lending to leagues and teams and other cash management and investment banking services.

Bank statements

Citi Field: New home of New York Mets.
Photo: Ray Stubblebine
TARP RECIPIENT NAMING DEAL
Citigroup New York Mets stadium
Bank of America Carolina Panthers stadium
J.P. Morgan Chase & Co. Arizona Diamondbacks stadium
Wells Fargo Arenas in Des Moines, Iowa, and Tempe, Ariz.
PNC Financial Services Pittsburgh Pirates stadium
U.S. Banccorp U.S. Bank Arena, Cincinnati
Capital One Capital One Bowl
Regions Financial Corp. Minor league park, Birmingham, Ala.
SunTrust Banks Section of Turner Field, Atlanta
Fifth Third BancCorp. Arena at University of Cincinnati, minor league ballparks in Dayton, Toledo
BB&T Wake Forest football stadium
KeyCorp KeyArena in Seattle
Comerica Detroit Tigers baseball stadium

What's in a stadium name?

Tarp may be the most apt acronym ever, as the federal bailout is covering a whole lot of companies with stadiums named after them. Of the 20 biggest recipients of funds from the Troubled Asset Relief Program, 14 have naming-rights deals for stadiums, arenas or, in the case of Capital One, a college bowl game.

Though all the deals were reached before the companies got Tarp money, having so many companies that bought naming rights now requiring federal help is casting such deals in a rather harsh light. Citigroup's controversial 20-year, $400 million deal for the New York Mets' new stadium is but the highest-profile example.

At the very least, and with no evidence of cause and effect, there's a high correlation between naming rights and business failure. The list of Tarp-funded stadium namesakes doesn't even include Houston's Enron Field (since renamed Minute Maid Park) and Ohio State University's Value City Arena, named after a retailer that went bankrupt.

Or consider the peculiar fate of the stadium where the NFL's Baltimore Ravens play -- first named PSINet after an internet service provider that went belly up in 2001, and later renamed after M&T Bank, a Tarp recipient.

When a company buys naming rights, "it's a sign you should short the stock," said an executive who once eliminated all such deals or ownership of private boxes by his own company. He likened such deals to new corporate headquarters, which he believes are similarly ego-driven endeavors that distract executives from running their businesses.

Nothing could be further from the truth, at least in the case of Gillette stadium, said consultant Peter Klein, who was senior VP-strategy, business development and global marketing resources when the company acquired naming rights for the New England Patriots' stadium in 2002.

An extensive analysis of all factors, including exposure in newscasts and associated marketing partnerships, showed the deal to be one of the best marketing investments Gillette ever made, he said, even after discounting estimates of returns by 40% to 50%.

For Citigroup, the $20 million a year amounts to less than 2% of the company's media outlays, said Mr. Klein. Federal interference in Citigroup's marketing strategy, he said, will make things worse, not better.

But teams, leagues and marketers need to communicate better why such deals make business sense, said Richard Luker, chief strategy officer of event and sports-marketing firm TBA Global. "These are more complex deals than people often realize, and there's a lot that the teams and leagues could do to communicate the value," he said.



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CORRECTION: The chart in an earlier version of this story incorrectly listed Chrysler as having naming rights for an arena at the University of Michigan. It does not, and the correct spelling is Crisler Arena.
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