See the article at the Times of India here.
Recent quarterly results from Indian IT companies suggest that they have turned the corner for another phase of strong performance. So how best to capitalise on this growth and to compete with the world’s leading brands in the sector?
This growth is in spite of many Indian IT companiess’ relatively poor brand awareness and international stature. As the CEO of Tata Communications, Vinod Kumar, recently highlighted, despite $2.8billion sales in 2012 the consistent challenge faced by his company, particularly amongst large target MNCs outside India, is “Who is Tata Communications?”
Encouragingly Kumar has been proactive in addressing this through a high profile sports sponsorship, becoming a Formula 1 Global Partner. This is the type of activity the established global technology brands have already been involved with for decades and represents a great opportunity for India’s ambitious companies too.
IT businesses including HP, IBM, Intel, Oracle, SAP, Autonomy, Accenture, Samsung and LG have used sports sponsorships for many years now as an integral component of their sales and marketing strategy investing as much as $80m-$100m per annum. Why? A recent analysis, conducted by Prof. Jensen of Columbia College, of 50 major US corporations’ KPIs over a five-year period (stock price appreciation, total revenue, net income and earnings per share) found sponsors clearly outperformed other S&P companies across net income growth, growth in earnings per share and stock price appreciation. Prof. Jensen concluded, “A long term commitment to sponsorship as a powerful tool in a brand’s marketing arsenal is indicative that a brand will surpass competitors over the long term.”
So a high profile, well-executed sponsorship will accelerate enterprise value growth. Its time that Indian technology companies entered the big league of sports sponsorship. What’s more, sponsorship today may be even more effective for IT brands.
Sports sponsorship is now far more than a ‘media buy’ to raise brand awareness and drive association. In 2013 the best sports sponsorships are true partnerships in which the sponsors’ actually participate – an IT firm may provide products or services that enhance performance, facilitate successful delivery of an event, and or enhance the audience’s enjoyment and experience.
As Kumar of Tata Communications explained in a recent Wall Street Journal interview “We provide connectivity for the 20 race locations around the world, and that enables both F1 and some of the race teams to optimize and fully leverage the data that’s being collected from the track and the races to improve the performance of cars on the circuit [the business showcase].
Coupled with this, we host the F1.com website, where users are pulling all kinds of videos and information and stats on the drivers and the teams and weather conditions and all of that [enhancing the audience’s experience].” Participating rather than just associating with the sport enables all sponsors to truly tap into the passion and excitement of sports fans. Sponsors consistently find this approach drives brand awareness, trust, preference and loyalty far more effectively than any traditional marketing campaign could hope for.
These benefits are certainly not limited to consumer brands. In 2009, the Institute of Practitioners in Advertising analyzed 880 international case studies and concluded that even for B2B companies emotional campaigns are twice as likely to generate large profit gains than rational ones. Similar research has found sports sponsorship themed advertising is on average 25% more effective than brand led campaigns. So sponsors may benefit from more efficient advertising that generates longer-term sales benefits.
For the IT sector, Formula 1 has to be the sport of choice. The world’s favourite sport on TV has attracted an average annual audience of 561 million since 2005 and indexes highly amongst corporate IT decision makers. Comperio Research found that across key global markets 66% of Information and Communications Technology decision makers expressed an interest in Formula 1.
Even in India’s domestic market 16% stated they had a “passionate” or “strong” interest in Formula 1. The sports’ relentless and explicit technology race provides an ideal platform for IT brands to showcase their latest innovations and services in a mission critical high performance environment that never fails to impress. The good news even for India’s most successful IT brands is that IT sector sponsorships need not be expensive. Sports now use technology to manage the delivery of successful events and to enhance their audience’s experience whilst teams and athletes increasingly rely on technology and cutting-edge analytics to gain an advantage over their competition.
In a sport where a single tenth of a second separates winners from losers, Formula 1 Teams collectively spend multi-million dollar IT budgets on high-speed data analysis, data networking, efficient storage, process improvement, automation, testing, CAD, CAM and bespoke software development.
So smart IT brands may offset the costs of their sponsorship, in some cases even entirely, through the provision of “value in kind” for sponsorship rights or the subsequent exclusive provision of product or services to the team’s requirements at market rate. For example TCS has enjoyed a successful supplier based relationship with the Ferrari F1 Team for the past few years, as has Mahindra Satyam with FIFA.