What’s Tiger Woods Worth To Sponsors Now?

9th Apr '10 by Andrew Butter

12 comments 4599 reads

So far Nike has spent $60 million on Tiger Woods.

If you invest in companies that spend that sort of money on hype, the skill of management in distilling out bang for buck is an important consideration. That of course is the problem with advertising, only half of it works (if you’re lucky) and you never know which half, and more to the point, working out the value of the brand is just as hard.

There were three reactions by the sponsors to the “difficulties that Tiger and his family are facing”. One was to run away from the spotlight (Accenture and AT&T ran a mile), one was to wait and see (Gillette and Tag Heuer). Nike ran straight towards the fire. On the day-before Woods teed up at the Masters, they put out a controversial “Tiger” Advertisement that some people called “creepy” and others called “disgusting”. But they all watched it.

So was that a “Setback…or a Test”?

In January Professors Victor Stango and Christopher Knittel of UCDavis made an estimate of what Tiger Woods’ little play-in-the-hay cost his sponsors:

“We estimate in the (13) days following the Tiger Wood’s car accident shareholders of the companies Mr. Woods endorses lost $5 to $12 billion in wealth”. http://www.econ.ucdavis.edu/faculty/knittel/papers/Tiger_latest.pdf

That’s a nice round number… average $8.725 billion plus or minus 40%. The logic is that over those 13 days there was an aggregate 2.3% drop in “weighted” market cap over that period, multiplied by $360 billion gets you to $8.725 billion plus or minus presumably 40%. The analysis has a few…”gray areas”, for example; they say they compared against comparable benchmarks but they don’t say what those were (except the S&P 500). More important, they don’t explain how a 13 day change in stock-prices constitutes a loss of wealth. The value of a sponsorship deal is not measured in days and a snapshot of a 13 day window is at best a measurement of noise.
That may be what passes for cutting-edge “economics” these days… but it’s not a valuation any more than valuation is about (a) “inflation targeting” (with movable the targets), (b) not noticing a credit crunch looming until it runs you over, or (c) working out for Hank Paulson in July 2008 that “The US Banking…

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emptyend

9th Apr '10

Started out quite interesting.........but vastly too long and I nodded off.

I'm temtped to suggest that there is "no such thing as bad publicity" - providing that sponsors and their shareholders DON'T crystallise their losses at the bottom of a market panic!

salty64

With a nickname like "Tiger" perhaps he had something to prove. Next is a promotional video, "Do it like Tiger" complete with a Caddy in a white suit :o)

SW10Chap

11th Apr '10

I think Nike have deliberately stayed with Tiger to give themselves a whole new set of taglines to use. "Sticking by your team-mates", "solidarity in adversity", "through thick and thin" will all be appealing when translated into sporting language and spun by Nike's copywriters.

In terms of your "top-of-mind" argument, I disagree with the all-publicity-is-good mantra and I nominate Gerald Ratner as my expert witness when you take your valuation to court!

SW10

Andrew Butter

12th Apr '10

Never heard of him...but thanks, I'll look him up

In terms of your "top-of-mind" argument, I disagree with the all-publicity-is-good mantra and I nominate Gerald Ratner as my expert witness when you take your valuation to court!

Yes the Ratner case is an interesting one - but not a good analogy. As you know, Ratner wasn't a brand that received "collateral damage" in the way that sports and enetertainments people damage their own brands with tangential transgressions........ Ratner himself appeared to attack the core values of his own brand in a speech at the IoD:

We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, "How can you sell this for such a low price?", I say, "because it's total crap"

Now this was extremely widely reported - and very damaging to Ratners because it suddenly came to the attention of their customer base that there were.....err....quality issues over Ratners' products (something that more discerning jewellry shoppers had long ago noted!).

What is less well known though is that Ratner had made similar comments on a number of previous occasions at other private functions and, for some reason, the IoD event got widely reported whereas previous occasions had passed almost without notice (though I had certainly saw the "crap" word in print well before the furore over the IoD event).

You're probably right about Nike's motivation for sticking with Woods though.....there are plenty of ways they can adapt their advertising, depending on how things go.

I think that a much better analogy is the case of David Beckham.....who damaged his brand at a relatively early stage by getting sent off against Argentina - and then endured months of being boo'ed at every appearance........ but proved to be extraordinarily successful at turning round public opinion by "letting his boots do the talking". Woods has the same opportunity - and the Masters has been a good start for him.......

.....keep winning tournaments and focusing on "the business", and his private life will once again become private - and his sponsors will profit as a result......

...which I guess is the point being made.

Ah that "Ratner".... I remember!!!

Tiger Woods never actually said that Nike or any of the products he endorsed were "crap".

In any case, my article was mainly about valuation, and the main point was it's absurd to say the "transgressions" cost sponsors $12 billion

On the issue of "branding" in my opinion the best book ever written on that was Concepting by Jan Rijkenberg (with a name like that you can understand how he never went mainstream).

The point he makes is that brands need to be clear about their core values and that promotion of the brand must be consistent with those values - Wood works for Nike because he is a brilliant golfer, and Nike is about sport, that's their core value.

The relevance to the other brands is more tenuous and more about "attention-seeking" than reinforcing core values.

The point he makes is that brands need to be clear about their core values and that promotion of the brand must be consistent with those values - Wood works for Nike because he is a brilliant golfer, and Nike is about sport, that's their core value.

The relevance to the other brands is more tenuous and more about "attention-seeking" than reinforcing core values.

Yes - that is the nub of it. It is difficult/impossible to make (for example) a Consultancy brand worth anything...which is perhaps why Accenture got hit harder than some as they had chosen to bind themslves to someone who by his own admission told a string of lies for years.....

....rather too near-the-bone for the consultants to put up with, I'd have thought ;-)

...ps....apparently Woods has announced that he will be taking "another break" from golf - I imagine that would hit Nike rather harder!

13th Apr '10

Ah that "Ratner".... I remember!!!

:-( And I thought you were joking when you said you'd never heard of him...

Tiger Woods never actually said that Nike or any of the products he endorsed were "crap".

No he didn't - I was just trying to counter your point:

who is the best person Gillette could find to sponsor? Well here is a suggestion…Charles Manson, or Osama bin Laden.... you don’t “tell” anyone that you paid them $20 million….but that would work.

by saying that there is such a thing as bad publicity. The wrong 'sleb' could turn the punters away - Johnny Vegas for McDonalds would maybe have been a better example?

it's absurd to say the "transgressions" cost sponsors $12 billion

I agree. And I enjoyed your analysis. It would be interesting to see what happens when these companies pull any ad campaign. And more so perhaps to compare the effect of pulling a campaign with continuing one that features a recently-tainted celebrity!

I think as long as the associated companies act quickly the damage-by-association is failrly limited. We've all managed to have a bit of a laugh at Accenture's expense in particular, because their campaign and taglines lent themselves to being read in a new light. Having said that, I think we all accept that they had no inkling of what went on in Woods' private life and that we don't really belive it represents much more than an embarrassing moment for them without any real reflection on their business or capability.

Of course, having found out, and given their business, I think that Accenture had little option but to drop him. Nike however, I think will be able to spin it successfully as I suggested above.

SW10

thebuffoon

I'm pretty sure that Tiger Woods is worth a bit less to sponsors; how much less is anybody's guess.

He was always going to play in the Masters; an opinion I backed with my own money. He will also, short of a significant injury, play in all of the remaining majors for the forseeable future. I sense he is going the route of Jack Nicklaus, who cut back on his playing schedule to focus on winning majors. That will surely impact on his sponsors view of his value to them. His poularity is tangibly diminished. So many people have said to me that they no longer want him to break Jack's major winning record.

Regardless, he still remains, and will likely do so for some time, the most marketable golfer in the world.

Buffy

Sure - a tough call, you are spending millions of dollars for hot air.

I think that Accenture's adds with Tiger Woods were some of the best pieces of advertising selling that product, ever, they were brilliant...you noticed them, you read the copy, and you bought into the story-line that this is a company that thinks smart, and different.

Personally I think they made a big mistake to drop him, sure people would have (and did) crack jokes, but there is always something to be said for loyalty, sure they paid him a bunch of money, but they get more back (if they didn't well their advertising was badly spent).

That doesn't change the fact that when your friend falls over, you got a choice, walk away or engage. You get a split second to make that decision, it's what "character" is about.

They could have "stood-by" him without in any way condoning what he did (in any case he wasn't actually the first person in history to cheat on his wife, and their tag-lines were all about playing golf, not family values), wait for it to blow over, and then do something real smart.

And in between - they would get a lot of free publicity, and attention, and people cracking jokes when they went into meetings, so what? You laugh it off, that's if you are really as smart as Accenture say they are.

Right now sure - but I think the operative word is "bit" and I don't think he cost them in terms of the money they had spent.

But time is a great healer...and once that's happened, Tiger woods will still be top of mind.

He will also, short of a significant injury, play in all of the remaining majors for the forseeable future.

...err.....no (as I indicated earlier):

http://news.bbc.co.uk/sport1/hi/golf/8614701.stm

What’s Tiger Woods Worth To Sponsors Now?

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Andrew Butter

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