Brands can quickly be affected by the actions of their endorsers, or by the people, teams, groups, or staff who become embroiled in controversy. Take Donald Sterling’s ownership of the LA Clippers as an example. Sponsors are immediately opting out of their contracts before the scope of the problems Mr. Sterling is exposed to are known. The reason is obvious, they don’t want to take the risk of becoming associated with the scandal. Sponsors need to be watchful. We have seen this before with Lance Armstrong, Tiger Woods, Pete Rose, and now the Clippers and their owner Donald Sterling.
Sponsorships walk a delicate line as they seek the status and prestige of the entity, but they risk the downside if the entity becomes embroiled in negative behavior.
NEW YORK (AP) — Advertisers are backing away from the Los Angeles Clippers after racist comments attributed to the NBA team’s owner.
Mercedes-Benz USA said Monday its dealerships are ending their sponsorship of the Clippers in the wake of comments allegedly made by the team’s owner, Donald Sterling. Used car dealership chain CarMax, airline Virgin America, and the Chumash Casino Resort are doing the same.
Three other sponsors, Kia Motors America, energy drink maker Red Bull and hardwood flooring retailer Lumber Liquidators, said they are suspending their advertising and sponsorship activities with the team. Another sponsor, insurer State Farm, said it “will be taking a pause in our relationship with the organization.”
The Clippers declined to comment.
The incident highlights the risks that companies face when they make sponsorship deals. The deals can bring goodwill when things are going well, but brands face a tough spot when they link themselves with teams or athletes that become mired in controversy. Advertising experts say that once the bad news it out there, a negative association could have already been made in the eyes of consumers.
Allen Adamson, managing director of research firm Landor Associates, said there’s little benefit for brands to stick with their sponsorship deals in this instance.
“There’s some benefit in moving quickly,” he said. “You can always renew your sponsorship later, but the longer you’re linking your brand to a brand in trouble, the higher the risk.”
Paul Swangard, managing director at Warsaw Sports Marketing Center at the University of Oregon, said sponsorships like Carmax and Virgin America can be worth hundreds of thousands of dollars to millions, depending on terms of the agreement. He said many brands might be waiting to see what happens at the NBA’s press conference on Tuesday.
“The early indication is that this could be incredibly damaging to the franchise if things aren’t dealt with quickly,” he said
This isn’t the first time companies have had to consider whether to keep a sponsorship deal after a controversy erupts. Nike and other sponsors dropped disgraced cyclist Lance Armstrong after his doping scandal. But many sponsors stood by golfer Tiger Woods after he acknowledged infidelities and went to rehab for sex addiction.
Sterling has come under fire for comments he is alleged to have made in a recorded conversation with a woman. Portions of that conversation were released over the weekend by TMZ and Deadspin, leading to a national outcry. The NBA is planning a news conference Tuesday on its investigation into Sterling.
“CarMax finds the statements attributed to the Clippers’ owner completely unacceptable,” Richmond, Va.-based CarMax Inc. said Monday in an emailed statement. “While we have been a proud Clippers sponsor for 9 years and support the team, fans and community, these statements necessitate that CarMax end its sponsorship.”
Bloomington, Ill.-based State Farm also described the remarks as offensive and said it will monitor the situation as the facts are sorted out. It will continue to run its Born to Assist ad campaign, which began in December 2012 and features Clippers point guard Chris Paul as himself and a fictional, mustachioed insurance-selling twin, Cliff Paul. State Farm said that campaign is part of its overall sponsorship of the NBA.