Will Rakuten Extend the Partnership With the FC Barcelona?
Discussing the Halo Effect in sponsorship
Here is a quick overview about the different sections of the article:
- The Holy Grail of Sponsorship Evaluation
- FC Barcelona — A Crumbling Giant
- Can Barca Replace Messi?
- Are Barca’s Sponsors Suffering From the Bankruptcy Scandal?
When comparing a football team to sport sponsorship, one finds a surprising number of similarities. Just like a team victory, sponsorship success also depends on multiple variables. Yet, there is one crucial difference. While it is quite easy to measure the success of a team, measuring sponsorship success is much harder to quantify.
The Holy Grail of Sponsorship Evaluation
Historically, sponsorship evaluation has been heavily dependent on media equivalents such as direct sales or aided and unaided awareness levels. Though, recently scholars have voiced their doubts about these evaluation techniques. They argue that sponsorship managers are missing out on indirect sponsorship effects which can be quite powerful. One of these intangible variables is the Halo effect.
The Halo Effect originated in psychology and is nothing more than a mental shortcut a human brain uses to simplify life. It describes the phenomenon that occurs if you conclude unknown characteristics of a person. (Nufer, 2019). For example, when you see a well-dressed and attractive person, you are more likely to think that she/he is smart and knowledgeable.
Though, it is important to know that the Halo Effect works both ways, positive and negative. On one hand, positive characteristics produce positive perceptions, while negative information tends to result in rather negative judgment of attributes (Graf & Unkelbach, 2016).
Back to sponsorship — Fahy et al. (2002) describe the Halo effect for sponsorship as follows: “Sponsorship generates a halo effect through consumer awareness of, and goodwill for, the sponsor’s support for an activity favored by those consumers.” Dissecting the last statement, the literature assumes that it’s ‘awareness’ x ‘goodwill of a sponsor. Yet, to this date, there is no clear formula on how to measure it.
FC Barcelona — A Struggling Giant
Let’s look at a real-life example of how the Halo Effect affected FC Barcelona. The Spanish club and their long-term sponsor Rakuten have recently extended their contract for one more year. After many years of continuous success, the one-year extension can be explained by the fact that Barca will (likely) lose the best player in the world. Besides, their on-pitch success has lacked its typical luster recently. Furthermore, off field factors can play a role in Rakutens decision. Barca is apparently on the verge of bankruptcy, in midst of regional political instability, and struggling to to pay thier player in full (El Mundo).
The question that arises is simple: Will Rakuten extend or terminate the upcoming contract? To answer questions like this sponsors need to base their sponsorship decisions on ‘transparent, evidence-based selection procedures’. Unfortunately, this is seldom the case. Instead, Rakuten is hesitating to sign a long-term deal because they don’t know what a deal without Lionel Messi is worth. Rumors are suggesting that Barca has offered their sponsors two types of deals, one in case Messi stays, and one in case Messi leaves.
Can Barca Replace Messi?
A big part of the solution to the pressing question to renew or terminate Rakuten’s sponsorship can be answered if we take the Halo Effect into account. Messi’s GOAT (greatest of all time) aura will lead fans to perceive Rakuten as a great company. The power dynamics, in this case, are shifted towards the clubs. Since there is no consensus on measuring the positive Halo Effect, teams can drive the value of sponsorship deals to infinity.
The case of FC Barcelona is intriguing because a player such as Messi impacts the on-pitch performance dramatically. What happens if Messi decides to leave? Most likely, FC Barcelona’s on-pitch performance continues to down spiral. Now, the negotiation power shifts towards the sponsor. It is now up to the club to prove that the negative Halo Effect is not as significant as the brand might think.
It can be reasoned that sponsors should be careful when working with teams who rely heavily on one star player. Throughout history, many star players have left their team (e.g., Cristiano Ronaldo and Real Madrid, LeBron James and Cleveland) and with their departure, the on-court performance and consequently, the positive impact of the sponsorship decreased.
Yet, no matter what happens this summer, there will come a time when Barcelona will lose Messi. The club must plan for different scenarios. Rumors suggest that Barca has offered their sponsors two types of deals. One in case Messi stays, and one in case Messi leaves. However, Barca needs to go one step further. The club needs to know what the alternatives are.
While no player can replace Messi 1:1, younger superstars might replace a certain percentage of his value. But scenario planning is only possible for Barca if they track and evaluate the worth of their players. The more data Barcelona collects about the impact of Messi, the better are they able to negotiate future contracts without him.
Are Barca’s Sponsors Suffering From the Bankruptcy Scandal?
One of the biggest contemporary sports scandals has been the Tiger Woods case. Kittel and Stango (2012) estimated that due to the Tiger Woods scandal the full portfolio of sponsors lost more than 2% of market value, with losses concentrated among the core three sponsors: Electronic Arts, Nike, and PepsiCo (Gatorade). Will Barca’s bankruptcy scandal have a similar effect?
Hughes and Shank (2005) conceptualize sport scandals as actions that are “either illegal or unethical, involve multiple parties over a sustained period, and whose impact affects the integrity of the sport with which they are associated” (p. 214). Thus, scandals involve clear breaches of codes of conduct or law.
We would argue, that ‘Barca Gate’ is a breach of codes. While it may be common in today’s commercial Football world, it is unethical and affects the integrity of Football. Yet, fans are often hesitant to abandon their team following scandals because it is part of their social identity.
What does this mean for sponsorship managers? Well, the response to a sport scandal differs based on whether people identify with the team involved. For scandal perpetrators, it appears fans are not particularly forgiving. Yet, the findings reveal interesting behavior. Fans will keep supporting their clubs as long as the individual perpetrator is punished.
In short, our research indicates that the risk of a scandal for sponsors can be reduced if the sponsored property punishes the responsible individuals. Thus, for a team sponsoring the risk of a negative connection between fans and the sponsor brand is relatively low, comparing to the endorsement deal of an individual. A team can always blame one or more individuals while in the case of an individual, there is only one person who takes the blame. This also explains why the Tiger Woods scandal had such devastating effects on the sponsors.
For Barcelona, this is good news. As long as they hold individuals(s) accountable for their financial problems, their fans will continue to support them and their sponsors should not fear any negative Halo Effect.
However, as all things Halo-related, things are not black and white. Even though Rakuten is extending their contract with Barcelona, at the same time they also renegotiated the price tag. Since Barcelona currently needs every cent they can get, fans could have the impression that Rakuten is contributing to the club’s financial struggles. Whether this is true or not does not matter here. What matters is how fans perceive this negotiation. If their fans have the impression that Rakuten wants to exploit the position of Barcelona, this could result in negative perceptions for Rakuten.
The pandemic provides a good reason for Rakuten to cut the deal. But if Rakuten decides to cut the costs again because they think that the value of Barcelona went down, fans might not be as understanding in the future. Therefore, it is vital for Rakuten and other sponsors to communicate their position clearly. The sponsor should explain to Barca fans why the price tag went down (ideally not blaming Barca’s wrongdoing, but perhaps own financial insecurities). The long-lasting relationship between Barca and Rakuten might be an advantage.
The ultimate aim of sport sponsorship is to connect to the internal core of a fan and play an active role in their relationship to the sponsoring brand. Only if sponsors can make indirect influences like the Halo Effect tangible, are they be able to pinpoint the true value of their sponsorships.
Our advice to Barca would be to review their rights offers from the previous decade. That might help them to estimate the impact of Messi. Besides, it allows them to understand what other player is the best alternative in case Messi leaves. In the long term, measuring the impact of their players enables Barcelona to consider different scenarios when negotiating future deals.
One solution to sponsorship evaluations is to assess scenarios and alternatives from an objective (data-driven) perspective. Setting up a data governance framework helps you to base your decisions on evidence rather than your gut feeling. Ultimately, the right use of data empowers brands to make better decisions.
At A.S.I we help marketers to make faster and smarter sponsorship decisions. Each sponsorship is analyzed from five different lenses. The evaluation of the strategic fit guides the focus of the other four lenses:
- Quantifying the business impact of sponsorship in financial revenue generation (ROI).
- The Brand Impact each sponsorship delivers against its specific objectives (ROO).
- Quantifying the contribution a sponsorship has on your workforce.
- Considering the risk factors associated with the sponsorship property.
At A.S.I we help marketers to make faster and smarter sponsorship decisions. We utilize up to 250,000 data points in addition to expert input to measure the effectiveness of a sponsorship. For more expert insights into sponsorship data & analytics visit us on Advanced Sponsorship Insights.