I was watching ‘The Big Short’ recently, an American comedy-drama that revels in the absurdity of the events that led to the Global Financial Crisis of 2008.
There is a great scene in the film that outlined how the industry built new products, ‘Synthetics’ as Wall Street labelled them, products that bore no real connection to what was really happening in the American mortgage market.
As I reflected on the farcical situation that the Banking Industry got itself into, I realised that the industry I operate within is not much better. Over the years, the business of sport & entertainment has developed and propagated its own set of metrics that bear little or no logical connection to the real world; metrics that drive ridiculous behaviour. These are metrics that many in the industry know to be flawed, but we just can’t or won’t jump off the merry go round.
It’s called logo spotting, and it’s created a Global Logo Crisis
My first exposure to a logo spotting report was back in 1999 when I was working for adidas. We had just completed the first year of a sponsorship contract with a large football club and the club’s commercial manager was proudly telling me that my brand had received millions of dollars in exposure which far outweighed our annual investment. I was confused by the logic at the time and thought that I must have misunderstood these new “breakthrough metrics”.
After further investigation, I realised that I did in fact understand the metrics and politely explained to the club that the dollar value attributed had no relevance to our business. I explained that despite the apparent ‘millions of dollars of exposure’, our unprompted awareness was languishing at a measly 0.9%, our margins on licensed product were awful because the club changed sponsors during the season and my retailers were furious because of obsolete product cluttering their stores. I explained that these were the sponsorship metrics I was concerned with.
Back then, I predicted that logo spotting would be a marketing fad, a ‘metric-de-jour’ that would soon be replaced by something more evolved. Clearly, I got that prediction wrong.
Seventeen years on and there is a proliferation of metrics claiming to attribute the ‘dollar value’ of sponsorships. The logo spotting industry has picked up pace with a number of companies now claiming massive amounts of ‘value’ from broadcast, digital and social media exposure. Like the fictitious data flying around before the financial crisis, the amount of ‘exposure value’ allegedly being created in the world of sport and entertainment doesn’t have any connection to real world economics.
I still sit in meetings week after week where smart marketers and planners are heard to say ‘We know these numbers aren’t right, but …’ The logos keep being counted and the dollar values assigned nonetheless. For those who have seen The Big Short, think about the meeting with Rating Agencies! Self serving chaos.
So what is the problem with logo exposure metrics and why is it important that as industry we move on?
No connection to cost
Logo spotting reports have no fundamental correlation to the actual cost of a sponsorship contract. To mask this disconnection, the logo spotters often apply ‘discount ratios’ (a major concession straight away) in an attempt to ground the metric in some version of reality. It’s not accurate. To make matters worse, there are often massive discrepancies in the “discount ratio”, even from the same vendor.
After almost 20 years, we can comfortably say that the current logo exposure metric does not help anyone understand the appropriate price to pay for a sport or entertainment asset.
No connection to value
Defenders of the logo spot argue that these reports reflect ‘value created by a sponsorship.’ Okay, let’s first agree ‘what is value?’ Some basic economic structures help us break this argument down. In any economic transaction, we have input metrics, productivity metrics and output metrics.
For a sponsorship, the input metrics are things like TV ratings, crowds and the image of the asset. Measuring the amount of logo exposure at this point can be useful in understanding the share of voice of different brands. However, all we need for this is a measurement of the amount of exposure, not an artificial calculation that converts exposure to currency. Accurate exposure metrics should then be benchmarked against the cost of the asset.
Productivity metrics assess how well we are using the asset. Relevant measures would include campaign effectiveness metrics, client attendance at hospitality, staff engagement etc.
Finally we have output metrics, which is in fact the ‘value’ of the sponsorship. These metrics would include brand image improvements, sales results, and increases in staff engagement scores.
The above provides a comprehensive assessment of the performance of a sponsorship asset, without a ‘logo valuation’ to be seen.
It is driving some seriously silly behaviour
Why are we seeing football players and managers interviewed whilst being immersed in a sea of logos? Is this a good look for the game? It’s logo soup… on digital media backdrops with rotating logos, iPad screens in front of the microphone, product placement on every surface, logos crammed on the hats and collars of officials? Why? Because someone thinks that this is creating more ‘value’.
Another basic economic principle is the law of diminishing returns. Just because there are more logos doesn’t mean that more value is created. Arguably, as we shove more logos in front of consumers, we’re diluting the impact of sport and entertainment as a marketing channel. There’s only so much the brain can take in.
But as we know, you manage what your measure. If we continue to measure logo exposures as value, we will continue to shove more logos down the throats of consumers.
Time to move on?
Those who know me or have stumbled across my LinkedIn or Twitter feeds, would have noticed my passion for calling out the nonsense of logo spotting. I often get asked why I keep banging on about the subject.
The answer is simple. I am passionate about the power of sport & entertainment as a marketing channel and business driver and this sort of measurement does not do the industry or its key stakeholders any justice. It is not good for brands. It is not good for rights holders. It is not good for the agencies and consultancies that support these businesses.
Our channel impacts the emotions of people like no other channel. In a world where consumers are constantly bombarded with messages, the sport & entertainment channel has the ability to truly engage on a deeply emotive level.
Our channel can impact a number of outcomes. It can help reinvigorate staff morale. It can help build relationships with key trade partners. It can help open up new markets. It can help drive sales.
But in an age where digital channels are driving higher levels of transparency and accountability, the logo spotting metrics undermine the credibility of our channel. As outlined above, we simply don’t need it to have a robust measurement approach and furthermore the C-Suite are increasingly dismissive of the metrics.
We have to move on. Let’s end the global logo crisis and agree to retire the logo spot metric.
Secondly, let’s agree that investments in sport & entertainment need a more robust, holistic set of measurements. There does not have to be one number, no silver bullet approach. No other marketing channel has one ‘killer metric’ to determine it’s worth.
Finally, as an industry, let’s innovate. If we are serious about legitimising investments in sport & entertainment, we need to be constantly pushing for new ways of measurement and evaluation.
It took a financial crisis of monumental proportions for the banking industry to realise that it needed to reassess its connection to the real world economy. Hopefully the sport & entertainment industry won’t be forced to change through such crisis, but its credibility will erode over time if we don’t have the courage to change. In the meantime, take a seat for your daily feed of logo soup.