The losers? The losers are mostly state-run companies new to marketing such as fixed-line telecommunications provider China Netcom Group, energy giant Sinopec Corp. and Air China.
"We now have a clearer picture than ever of the likely winners and losers in the sponsorship war," said Greg Paull, principal of the Beijing-based marketing consultancy R3. "Those that have chosen athletes wisely and maintained consistency have performed ten times better than companies who haven't."
R3 and its partner CSM Media Research released the results of their latest wave of research into China's consumers and their Olympic preferences late last month. The companies interviewed over 1,500 consumers in China's ten most important cities.
Terrorism concerns rising
More than 93% of those surveyed have a strong interest in the Olympics -- the highest of any previous wave.
"There's a fever pitch in China towards this event like no other in its history," said Mr. Paull who added that there are also some new concerns. "Terrorism and inflation have been mentioned before, but they are now by far the two most dominant negative issues. Chinese are worried how these games may affect their hip pocket and their country's security."
Measured advertising expenditure by the top sponsors for the last three months was RMB 9.1 billion ($1.32 million), a 49% increase from the previous three months, as all the large companies try to leverage their sponsorship investment.
"Not only are sponsors dominating the mass media, we're seeing them extend this activity to activation events, both around the torch relay and standalone activities," said Matt Brosenne, international client service director at CSM Media Research in Beijing. While such events "are harder to independently track, there's never been more on-ground activity in China's main cities that right now."
Unprecedented TV investment
In addition, CSM and R3 have observed an unprecedented investment in TV sponsorship in the last three months. There was a 65% increase in the sponsored broadcast hours in the latest wave of research compared to the last one, which was conducted last winter, led by live torch relay programs associated with Coca-Cola, Samsung and Lenovo.
Non-sponsors also pushed for more content. The Chinese dairy company, Mengniu Group, sponsored over 50 hours of national TV through this period, four times more than any other company. Mengniu's China Music Chart Awards was dominant in viewership through this period, confusing consumes since the official dairy sponsor of the games is Yili.
"Despite the fragmentation of media, prime time TV viewership is still strong this year in China, and marketers continue to invest to get returns," said Mr Brosenne.
On the question of return on investment, R3 and CSM have linked sponsorship cost and total media investment to both consumer perception results and published business data for mainland sales, through a proprietary method called the Olympic Performance Index, or OP, which weights awareness, purchase intent, value and recall.
The results vary widely. China Mobile has invested close to RMB 5 billion ($730 million) in measured media over the last two years, but their cost per OP point is RMB 31,000 ($4,525), while China Netcom has a cost per point of RMB 50,000 ($7,300). By comparison, Coca-Cola's cost per point is RMB 4,000 ($585), so purely from a consumer impact point of view, some companies are outperforming others by ten times.
"In terms of sales , for some such as Coke with $30 billion in sales globally, a $100 million investment in Olympic sponsorship, along with supporting activities might still be less than 0.1% of their sales, less than 10% of their annual marketing budget, so the returns are there," said Mr. Brosenne. Yili, for instance, grew 21% in the first quarter of 2008, and sales are on track now to top RMB 20 billion ($2.9 billion) by year-end, "something that without an Olympics association would have been difficult to achieve," he added.
Coca-Cola and Yili both showed the greatest improvement this wave in awareness, purchase intent, values and promotional recall.
"Coke's secret is just the right combination of experience, athlete management and focus that a lot of other sponsors have lacked," said Mr. Paull. Coke also has an 86-year head-start over most companies in this area, with the longest sponsor history and great shared learning across the Olympics and World Cup. For the first time, close to 50% of all respondents spontaneously mentioned Coke as a sponsor -- and more than 86% recognized the brand on a prompted basis.
Yili has made some smart choices on stars such as track-and-field star Liu Xiang, champion diver Guo JingJing and basketball player Li Jianlian. The dairy giant "used them in a relevant and creative way. Using Liu Xiang with his parents [in ads] is a strong method to build differentiation and drive impact," said Mr. Paull.
Among stiff competition from more than 60 active Olympic sponsors, on the national and international level, there are some that have failed to leverage their Olympic investment. A lot of state-owned enterprises are relatively new to consumer marketing, and don't have the experience of Coke or talent pool of local companies like Yili.
Sinopec, Air China, China Netcom and others have all done tactical work to support their investments, said Mr. Paull, "but the payback has been poor. This has been a great learning curve for them though, to see how other world class Chinese companies such as Lenovo Group and Yili have generated a positive return."
Life after Olympics?
The Olympics will dramatically change the marketing landscape in China for the better, according to R3 and CSM. China's marketing industry is just twenty years old, while other Asian countries like India have a 60-year head-start in terms of development.
But in a short period of time, standards towards sports and the use of athletes in marketing, on-ground activation and increasing consumer sophistication "have generated much more professional and more targeted thinking," said Mr. Paull.
China has also experienced massive changes in consumer behavior in the last two years. Internet daily usage has moved from 1.4 hours to 2.0 hours a day, alongside huge increases in the total online population. Forty percent of respondents in the R3 and CSM research expect to use IPTV and mobile TV as media for Olympic updates.