A unique platform that delivers
The success of a sponsorship depends on a number of key ingredients that unfortunately don’t always make it into the mix. The best sponsorship programs are the ones that manage to achieve clear, pre-set objectives, are capable of measuring results and have a strategic vision that stays in focus over time.
O2’s sponsorship program, though not new, remains one of my all-time favourite examples of how to get it right. As well as being incredibly well designed, the winning program developed by this Telefonica-owned mobile company became a core driver of the firm’s corporate marketing strategy. In this case study, we take a look at the context, the program, the strategy and the performance metrics behind O2’s outside-the-box approach to sponsorship.
Setting the stage
First introduced in England, O2 today operates in a number of European markets. When it was launched in the early 2000s, the brand—represented by the chemical symbol for oxygen, an element essential to life—bore little likeness to the “tech heavy” image typically associated with telecom companies (we need only think here of Clearnet and Fido in Canada).
At the time, the industry, which was just coming off a period of substantial growth, had reached maturity and was beginning to stagnate as mobile penetration hit the saturation mark in many European markets. This left telecom companies jockeying to increase their market share by enticing customers away from the competition, with consumers being rewarded—not for their loyalty—but for switching to a rival network.
In this fiercely competitive, undifferentiated and mature market, O2 had to find new ways of pursuing its growth. The options came down to customer poaching, customer retention and/or increasing the average revenue per user.
It became clear that brand differentiation, which was virtually non-existent on the technical level, would have to be played out on the marketing battlefield.
O2 decided to concentrate on brand loyalty and consumer retention, putting the customer first instead of focusing on the product. With brand as the main basis for differentiation, the company sought at the same time to enhance its performance on all of the other factors influencing consumer choice, such as customer care, quality of the network and, of course, price.
The objectives of its sponsorship program were to grow the brand while attracting and retaining customers. This meant finding ways to balance the often irreconcilable goals of driving short-term sales while building long-term brand equity.
To achieve this, O2 found itself having to rethink its existing piecemeal portfolio of sports, television show and music festival sponsorships.
Rather than simply cutting prices to hold on to customers, the company made sponsorship the key to breathing new life into the brand.
The pillars of successful sponsorship
For the sake of clarity and coherence, O2 put together a sponsorship policy based on five main criteria:
1. You’ve got to be in for the long haul
Recognizing the power of sponsorship as a communications tool, O2’s management devoted the bulk of the company’s marketing budget to it. But it was also understood that this is a long-term investment that pays off over time. That awareness set the stage for an approach that allowed efforts to be focused on longer-range goals rather than on quick returns—an approach made all the more necessary by the duration of many of the partnership agreements, which extended to as long as 15 years in the case of venue title sponsorships.
2. If you’re in it for winning, it’s going to be a short relationship
In the case of sports sponsorships, success must not be measured by the team’s performance; on-field success has to be viewed as an “added bonus.” Indeed, management recognized that team performance is beyond the brand’s control and that support for the teams it sponsors must be unconditional.
3. It’s not about SOV; it’s about “engaged” SOV
Although O2 does measure share of voice (SOV) and awareness of the brand’s relationship with the sponsored property, a far more important indicator for the company would be the number of consumers who participate in an event. For instance, an initiative that gave O2 customers in Ireland the chance to have their name put on an Irish Rugby Team player’s jersey drew the participation of over 100,000 people!
4. You have to link who you are with what you do
It’s not about trying to dominate the space, which can be extremely crowded—especially in a sports environment—but about each brand playing its role and finding its place within that sponsorship space. For example, if Powerade relates to the performance aspect of the sport and Guinness to its social aspect, O2’s role is to bring the fans closer to the team, consistent with its “Together is better” brand DNA.
5. Set objectives upfront and measure from day one
Beyond the conventional quantitative measures (awareness, recall, etc.), O2 focused on numerous indicators for measuring participation and client recommendation as well as qualitative aspects like consumer sentiment on social networks. With the assistance of a research firm, management set up a rigorous monitoring process to help answer the question: “Are we moving in the right direction?” All in all, an essential tool.
The brand’s new consumer-centric approach translated into the development of a sponsorship program offering rewards of a symbolic value through the convergence of technology, interactive participation and customer interest. To earn these rewards, customers had to sign up on a site or digital application and choose the benefits or take part in various activations.
This new participation philosophy moved away from traditional sponsorship visibility towards a program that encouraged brand engagement, always in line with the company’s “Together is better” theme. In short, participation became the brand ideal for customer engagement.
In searching for a new retention plan for the UK market, O2 first looked to music as a key sponsorship opportunity but knew it would face strong competition from Virgin mobile, which already enjoyed a solid foothold in the category. With a smaller budget than its rivals, O2 had to find a program that would help clearly set it apart from the competition.
The company managed to do just that by acquiring the naming rights to the Millennium Dome in London. This entertainment venue, the largest domed structure in the world, features a massive arena for hosting major concerts and was the perfect environment for consumer experience and engagement with the brand. The company rounded out its new portfolio by also sponsoring with the Arsenal Football Club.
O2 customers were able to benefit from this partnership with access to advance tickets, priority admission to events, an onsite lounge reserved for O2 customers and other bonuses.
The launch was carried out over conventional mass media channels, with consumers invited to register on the digital platform. Once enough people had done so, communications were able to shift over to the less costly digital options.
An ingenious balance
O2’s decision to give sponsorship predominant weighting in its marketing mix was a key strategic choice, and one that impacted traditional media spend as the company sought to standardize its messages for greater clarity.
O2 also bucked the industry trend by investing 65% of its budgets in rights fees and only 35% in activation. While allocating such a small percentage to activation is normally seen as risky, the company was banking on its direct access to consumers via mobile devices and its strong digital focus. The brand’s popularity was also enhanced by its wide social media community and high Web traffic.
A thoughtful approach to measurement
As successful as this sponsorship program turned out to be, without an adequate range of performance metrics to measure that success, O2 management could have just as easily decided to pull the plug and try out a new direction.
In 2009, on the Irish market (the program was launched around 2005), O2 ranked as the most recognized sponsor, all sectors combined, and the leader among all telecom companies. Out of its customer base of 1.7 million, 400,000 people had signed up for the platform.
A significantly higher rate of satisfaction was also noted among O2 customers who were able to correctly identify one of the brand’s sponsorships versus those who were not similarly exposed. These sponsorships were also found to have a positive influence on the perceived value of the brand.
The result of this was a significant drop in the churn rate (the number of customers leaving the customer base). Depending on the sponsorship and activation to which they were exposed, customers were 10% to 19% less likely to leave the brand and tended to stay longer and spend more than did those not been exposed to the sponsorship.
O2’s sponsorship program is nothing short of exceptional. It succeeded in tackling market challenges and highly-complex communications objectives head on, while running completely counter to everything its rivals—and the industry in general—were doing in sponsorship. It reflected the vision of a corporate management that was shooting for long-term results and was prepared to take the necessary means to get there. And lastly, it took the time to put a rigorous performance measurement system in place to ensure the success of its initiatives.
With a growth strategy focused on developing customer rewards, building brand affinity and lowering its churn rate, O2 was propelled into market leadership and redefined the status quo in the industry.
Sponsorship at O2—“The Belief that Repaid,” Jonnie Cahill, Tony Meenaghan, Psychology and Marketing, Vol. 30(5): 431–443 (May 2013)