Why Banks Sponsor Sport – Still.

The conditions for banks around the world have been well reported as tough. This is bad news for sport because banks are big sponsors. It’s strange that the mainstream press – who rely so heavily on advertising revenue would be so critical of bank sponsorship of sport – but luckily, the banks know that sponsorship is a great way to build brands, communities and drive revenue.In an article published last week in the Economist, several banks showed that sponsorship of sport is still a useful part of the marketing mix. Unfortunately from our point of view, sailing is not getting it’s share.

Sponsorship of sport (by all companies, not just banks) will grow by just 1.8% in North America this year, according to IEG, down from 14.8% in 2008 and 11.2% in 2007. Banks and their customers are watching every penny. With many financial institutions propped up by taxpayers’ money, so are politicians and the press.

Some deals have ended: RBS is quitting Formula One at the end of next season. Some have not gone ahead. Bank of America (BofA) has put off a juicy long-term deal with the New York Yankees and extended its existing contract for a year. Others have been quietly shelved or derided as monuments to corporate excess.

More surprising, given all the fuss, is that plenty of banks are still sponsoring sport. This month Investec, a bank already keen on rugby and cricket, agreed to support the (English) Derby until 2013. It looks likely that Santander will switch to Formula One’s most famous name, Ferrari, in 2010. In Britain the £80m ($124m) of support agreed on in 2007 by Lloyds TSB (now Lloyds Banking Group) for the 2012 Olympic games has raised barely a squeak, despite the copious state support Lloyds has received.

Why do shareholders-and taxpayers-play along? For a start, sponsorship gets you noticed, especially in a new market.

Among big banks, B of A has made it a speciality, becoming the “official bank” of several sports and forming partnerships with several teams. A deal with a team, for example, brings in retail custom, through affiliated debit and credit cards and the automated teller machines dotted around a stadium. It opens the door to managing the wealth of a team’s owners and players, or to arranging the finance for a new stadium. On top of that come tickets, space to entertain and impress clients, and the marketing value of having the bank’s name emblazoned around a stadium.

The bank claims to make $3 of profit for every $1 it spends on sports marketing, a rate of return that may look too good to be true.

The success of Lewis Hamilton, Formula One’s champion driver, has helped make Santander better known in Britain. On May 27th it said it would rebrand its well-known British operations, Abbey, Alliance & Leicester and Bradford & Bingley, under the Spanish name. It reckons the task has been made easier by its high visibility as McLaren’s sponsor.

Sponsorship is also important inside as well as outside the sponsoring company. Stephen Greyser, a professor of marketing at Harvard Business School, notes that UBS, a Swiss bank, used its sponsorship of Alinghi, the sailing team that won the America’s Cup in 2007, to enthuse its employees. Sally Hancock, director of group sponsorship at Lloyds, says that backing the Olympics “changes the way we think and act as a business”. The bank can bring in British Olympians to meet and help motivate staff. “What people don’t see is how we’re using the Olympic access for our training and development,” she says. That is timely. If ever Lloyds needed Olympians, it is now.

The full article can be found at : http://www.economist.com/finance/displaystory.cfm?story_id=13751644