IBM and the Masters: A Technology Sponsorship Unlike Most Others

An "inside the ropes" look at IBM's sports partnership strategy, and the risk vs. reward game that the technology vendor takes on as Tiger Woods returns to golf and viewer interest hits an all-time-high in the storied tournament at Augusta National.

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IBM's Risk-Reward Question

While IBM's deals are different than the norm, they also can be tricky. Singer points out that the dual dependency inherent in IBM's partnerships with the sports organizations adds an interesting wrinkle to the business relationship: both parties are buyers and sellers.

So what's the hard-dollar return for IBM and its sponsorship and partnership activities?

In short, there isn't one (or at least one IBM will publicly disclose). That, though, has more to do with the inexact science of marketing campaigns rather than IBM's efforts, says Jennifer Belissent, Forrester Research's senior analyst on technology vendor strategy. Directly linking efforts such as IBM's to exact revenue or sales metrics is "one of the hardest things to justify," she says. However, it's easy to see why companies want to be associated with premier sporting events such as the Masters or the Olympics. "It's associating that company or product with excellence," she says.

Singer won't get into specific financials but offers this ROI assessment:

We look at what we spend, we look at what we think we've generated—based on a number of sources—in incremental revenue, whether it's clients who attend or clients who reach out to us in other ways.... At the end of every year we look to see how we are doing on these properties: We spend X: What kind of a return are we getting? We're not looking for a return in terms of bringing in revenue. You really want to get a multiple return, and we're strict on that. It tells us that: Every year, every property pays out at that multiple. Some years may be a little more challenging than others. But we don't look at the payout of what the property would spend with us; we look at where the opportunities are outside of that, because that's where the huge opportunity is. And our management keeps letting us renew them, so I guess we're doing OK.

Because IBM provides a service to events that are being watched around the world, the reward is clearly there: massive exposure and brand awareness. But there's also risk.

At the 1996 Olympics in Atlanta, for instance, the Games' website was slower than a heavyweight wrestler competing in the 50-meter dash. In addition, one of the seven main systems providing competition results to 12 news organizations flamed out. The company managing it all? IBM. (Financial and sponsorship disagreements between IBM and the International Olympic Committee ended their 40-year partnership with the 2000 Games in Sydney.)

Forrester's Belissent, who has done research on Olympics sponsorships, says that tech vendors have to hedge for the huge amount of risk they face. "There's a fine line between innovation and risk abatement. And they'll take no risks," she says. "So they'll innovate, but there's a stopping point at which they'll start testing and testing. They absolutely recognize that there's no room for error."

Singer says the IBM team is aware of the weight of the world watching the Masters this year—barraging the IBM systems and data centers. Tiger Woods' return to Augusta has made that intensity undeniable. "It's certainly a great challenge, and we are preparing ourselves for a tremendous amount of [website] traffic," Singer says. "As far as the TV audience goes, we know a lot of people will be seeing IBM ads."

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Copyright © 2010 IDG Communications, Inc.

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