Who gets more out of their advertising dollar?

[AAmech]

----------------
On 6/27/2003 801 AM KCFlyer wrote:

But here''s the kicker - AA (and others) paid mega millions to name an arena or a stadium so that the media uses the name. Most in the local media will use the name, but in the national media, the name might be used when returning from a commercial break. Then Southwest spends several million dollars less money to strike a deal with the sports league, so that in the middle of all the action is a huge sign (going out nationally) with SOUTHWEST AIRLINES written on it - regardless of the name on the outside of the arena - and advertisements during games (again nationally) for Southwest. So for the ''hometown team'' it would appear that AA (and others) have drastically overpaid for the "exposure" that they get in return.​

----------------​

It really cuts both ways. Its got to Gall some execs who pay to sponser some sports only to have other airlines logos on TV all night. Advertising is an evil science!! BTW, AA''s Miami arena deal is a relative bargin. They purchased those rights early in the game. The Dallas Arena rights on the other hand were purchased at the hight of the naming frenzy. But AA got a whole lot more as they knew the game better. Last I heard the arena deals cost AA about 10% of their annual AD budget.

 

[KCFlyer]

----------------
On 6/27/2003 3:27:06 PM buzzkill wrote:


Did you read the articles?

----------------​

Yep..sure did. And it brought to mind something else. Here in KC, we have a beautiful stadium that is currently called "Arrowhead Stadium". The Kansas City Chiefs play there, and they are one of the financially strongest NFL teams in the league. Season ticket holders have seen annual price increases in tickets and parking every year for the past 15 years. Now, one of the biggest employers in the area is Sprint Corporation (a financially troubled telecom). If Sprint popped down $50 million in naming rights for that stadium, the employees (current and laid off) would have a fit, and the season ticket holders of the Chiefs would have a revolt if the following year yet another ticket price increase was implemented.

Now, AA isn''t in the greatest financial shape these days, and the goodwill created by the arena name for the public creates one of the absolute WORST feelings from the employees who are being asked to give up wages and benefits. Is AA getting their money''s worth out of the advertising? My guess is, all things considered, no, they aren''t.

 

[buzzkill]

----------------
On 6/27/2003 3:38:38 PM KCFlyer wrote:

----------------
On 6/27/2003 3:27:06 PM buzzkill wrote:


Did you read the articles?

----------------​

Yep..sure did.  And it brought to mind something else.  Here in KC, we have a beautiful stadium that is currently called "Arrowhead Stadium".  The Kansas City Chiefs play there, and they are one of the financially strongest NFL teams in the league.  Season ticket holders have seen annual price increases in tickets and parking every year for the past 15 years.  Now, one of the biggest employers in the area is Sprint Corporation (a financially troubled telecom).  If Sprint popped down $50 million in naming rights for that stadium, the employees (current and laid off) would have a fit, and the season ticket holders of the Chiefs would have a revolt if the following year yet another ticket price increase was implemented. 

Now, AA isn''t in the greatest financial shape these days, and the goodwill created by the arena name for the public creates one of the absolute WORST feelings from the employees who are being asked to give up wages and benefits.  Is AA getting their money''s worth out of the advertising?  My guess is, all things considered, no, they aren''t.

----------------​

Apples and oranges. AA didn''t purchase the naming rights after it was in financial trouble, so I don''t see how the Sprint comparison is valid. And why would corporate sponsorship cause ticket prices to rise? It seems more logical that a corporate sponsorship would do the opposite. (Actually, it seems more logical that the team would charge whatever price maximizes profits, but that is another topic).

Did you notice the quote from one of the articles that said, "In a survey of more than 700 people last year, more than one-third said such deals had a positive effect on their opinion of a company while only about 10 percent said they generated negative connotations."? How about this quote: "The value of a deal--as measured against the cost of the same amount of media exposure if it came from paid advertising--shoots up when a game is televised nationally, said Jason McCullough, spokesman for Sponsorship Information Services, a New York-based market research firm."

Also, the AdAge report graded the 50+ major venues with naming rights. It give its highest grade of "A" to only 4, and the AA Center was one of the four "A''s".

Personally, I don''t really care what your opinion is on this subject, but I think this board could be more useful if people posted opinions with some research or facts behind them.

 

[FWAAA]

In 2002, WN spent $156.4 million on advertising.

AA spent $161 million on advertising that year.

AA's revenues were more than THREE times as much as WN's revenues.

Which company got more bang for its buck from its ad budget? A cogent argument could be made that AA did, since it only spent a third as much on ads per dollar of revenue as did WN.

AA's ad budget amounted to about $1.50 per passenger emplanement. That's just about what each pax consumes in soda, ice, cups and their share of the lav expenses. Insignificant for a company with $17.3 billion in revenue. And remember, on a per-pax or per-dollar of revenue basis, WN spent 3 times as much as AA. WN is wasting money on ads, since their ad spending doesn't appear to bring in the revenue that AA's ads do. By all measurements, WN's ad budget should only be a third its size.

After all, does anybody really think pax give a damn about the size of an airline's ad budget? Pax aren't punishing WN for their wasteful advertising - so why should AA's pax punish AA for its relatively frugal ad budget?

 

[buzzkill]

----------------
On 6/27/2003 4:07:02 PM KCFlyer wrote:

----------------
On 6/27/2003 3:56:32 PM buzzkill wrote:


Apples and oranges.  AA didn''t purchase the naming rights after it was in financial trouble, so I don''t see how the Sprint comparison is valid. 

If one of the benefits of naming rights is that they can sell them, perhaps now that AA is in financial straits, it would be a good time to exercise that right.

And why would corporate sponsorship cause ticket prices to rise?  It seems more logical that a corporate sponsorship would do the opposite.  (Actually, it seems more logical that the team would charge whatever price maximizes profits, but that is another topic).

I believe I implied "if" prices were to rise.  I believe there is a greater chance of that happening than of pricing remaining flat or a reduction in prices. 

Did you notice the quote from one of the articles that said, "In a survey of more than 700 people last year, more than one-third said such deals had a positive effect on their opinion of a company while only about 10 percent said they generated negative connotations."?  How about this quote:  "The value of a deal--as measured against the cost of the same amount of media exposure if it came from paid advertising--shoots up when a game is televised nationally, said Jason McCullough, spokesman for Sponsorship Information Services, a New York-based market research firm."

Are there only 700 people watching a nationally televised sporting event?  That''s a problem of "representative samples" - who exactly is being sampled?  Yes, people may not know what  3Com or Cisco does, but they know who they are...their shareholders know what they do...and aren''t too happy these days.  Were any of those folks included in the 700 people sampled?

Also, the AdAge report graded the 50+ major venues with naming rights.  It give its highest grade of "A" to only 4, and the AA Center was one of the four "A''s".

That''s great - but here''s an impression that a lot of people get (bear in mind that there are a lot of people on the internet who believe that the good person in Nigeria wants to make them a millionaire just for helping the transfer some money) - American airlines OWNS the building...not the naming rights.  And those people most likely weren''t included in the 700 respondents.

Personally, I don''t really care what your opinion is on this subject, but I think this board could be more useful if people posted opinions with some research or facts behind them.

And that''s fine.  Consider me the 701st respondent and I''d be included in your "facts".

----------------​

----------------​

1) I never said that AA could sell the naming rights. I have no idea what the contract stipulates in this area. If AA didn''t have to pay its $6.5M annual payment for the AA Center, all the employees could split it up and get about $65 per year. Hardly seems like enough money to get upset about.

2) You implied that any rise in ticket prices would be a result of Sprint''s purchase of the naming rights to Arrowhead.

3) A representative sample is just that, representative. If the proper methodology is used to conduct the survey, then 700 people is more than enough to draw conclusions on the results.

4) AA does not own the AA Center. It seems highly unlikely that people think that AA owns the AA Center.

Why would almost every venue in the country have corporate sponsorship if they didn''t have evidence that it was worth the money? You can go with the Bob Owens theory that it''s all about executive perks or that hundreds of companies all have complete idiots at the helm - or you can believe that companies do this because they believe it generates profits.

 

[KCFlyer]

----------------
On 6/27/2003 4:35:38 PM buzzkill wrote:


1) I never said that AA could sell the naming rights. I have no idea what the contract stipulates in this area. If AA didn''t have to pay its $6.5M annual payment for the AA Center, all the employees could split it up and get about $65 per year. Hardly seems like enough money to get upset about.

Selling the naming rights was mentioned earlier in this thread, albeit not by you. And I don''t disagree about the savings. But sometimes there are things that go beyond money. To a lot of employees the gesture of giving up the naming rights on the arena shows efforts to cut costs somewhere besides in their paychecks.

2) You implied that any rise in ticket prices would be a result of Sprint''s purchase of the naming rights to Arrowhead.

Sorry if you took it that way. What I was saying was that given the past history of the team, price increases were a way of life. To increase prices after a company paid several million dollars to the team (to name a stadium owned by the city - go figure) would result in a revolt. Of course, all bets are off if the Chiefs win the super bowl.

3) A representative sample is just that, representative. If the proper methodology is used to conduct the survey, then 700 people is more than enough to draw conclusions on the results.

But yopu can never be too sure who was "represented" in this sample.

4) AA does not own the AA Center. It seems highly unlikely that people think that AA owns the AA Center.

It would also seem highly unlikely that people would fall for the Nigerian e-mail scam (hence my reference), yet many do...even some holding college degrees.

Why would almost every venue in the country have corporate sponsorship if they didn''t have evidence that it was worth the money? You can go with the Bob Owens theory that it''s all about executive perks or that hundreds of companies all have complete idiots at the helm - or you can believe that companies do this because they believe it generates profits.

Because they are a bunch of sheep I guess. You take several cheap shots at me for my supposed lack of knowledge. That''s your perogative. I''m not saying that the naming rights are the reason for AA''s financial problems. But you have to deal with a workforce that is looking for ways to cut costs - I think most of them recognize that a company has to advertise. But I think that this much money for the "advertisement" of AA on an arena can and does strike many as wasteful. Sell the naming rights and the employees just MIGHT view that as the company doing something more than coming to the workforce to cut costs. Also, I''d venture to guess that the average AA worker can''t afford tickets to a Mavericks game - those that can are unfortunately in upper management. Not that any execs do go to Mavericks games, it''s just that it can be viewed as the "good old boys club" and they spend the money on things that only upper management can enjoy. And you are the first to lump me in with Bob Owens...I disagree with him on FAR more points than I agree with him. But I''ll give him this...there really ARE a lot of companies with complete idiots at the helm. Well educated idiots mind you, but idiots nonetheless.

----------------​

 

[Bob Owens]

----------------
On 6/27/2003 3:32:53 PM FWAAA wrote:

In 2002, WN spent $156.4 million on advertising.

AA spent $161 million on advertising that year.

AA''s revenues were more than THREE times as much as WN''s revenues.

Which company got more bang for its buck from its ad budget? A cogent argument could be made that AA did, since it only spent a third as much on ads per dollar of revenue as did WN.

AA''s ad budget amounted to about $1.50 per passenger emplanement. That''s just about what each pax consumes in soda, ice, cups and their share of the lav expenses. Insignificant for a company with $17.3 billion in revenue. And remember, on a per-pax or per-dollar of revenue basis, WN spent 3 times as much as AA. WN is wasting money on ads, since their ad spending doesn''t appear to bring in the revenue that AA''s ads do. By all measurements, WN''s ad budget should only be a third its size.

After all, does anybody really think pax give a damn about the size of an airline''s ad budget? Pax aren''t punishing WN for their wasteful advertising - so why should AA''s pax punish AA for its relatively frugal ad budget?

----------------
​

Yea but how much profit did AA make?

They spent more on advertising and their average pay per mechanic is higher but they make money and AA does not. Who has the better business plan?

 

[buzzkill]

----------------
On 6/27/2003 5:03:34 PM KCFlyer wrote:

----------------
On 6/27/2003 4:35:38 PM buzzkill wrote:


1)  I never said that AA could sell the naming rights.  I have no idea what the contract stipulates in this area.  If AA didn''t have to pay its $6.5M annual payment for the AA Center, all the employees could split it up and get about $65 per year.  Hardly seems like enough money to get upset about.

Selling the naming rights was mentioned earlier in this thread, albeit not by you.  And I don''t disagree about the savings.  But sometimes there are things that go beyond money.  To a lot of employees the gesture of giving up the naming rights on the arena shows efforts to cut costs somewhere besides in their paychecks.

2) You implied that any rise in ticket prices would be a result of Sprint''s purchase of the naming rights to Arrowhead.

Sorry if you took it that way.  What I was saying was that given the past history of the team, price increases were a way of life.  To increase prices after a company paid several million dollars to the team (to name a stadium owned by the city  - go figure) would result in a revolt.  Of course, all bets are off if the Chiefs win the super bowl.

3)  A representative sample is just that, representative.  If the proper methodology is used to conduct the survey, then 700 people is more than enough to draw conclusions on the results.

But yopu can never be too sure who was "represented" in this sample.

4)  AA does not own the AA Center.  It seems highly unlikely that people think that AA owns the AA Center.

It would also seem highly unlikely that people would fall for the Nigerian e-mail scam (hence my reference), yet many do...even some holding college degrees. 

Why would almost every venue in the country have corporate sponsorship if they didn''t have evidence that it was worth the money?  You can go with the Bob Owens theory that it''s all about executive perks or that hundreds of companies all have complete idiots at the helm - or you can believe that companies do this because they believe it generates profits.

Because they are a bunch of sheep I guess.  You take several cheap shots at me for my supposed lack of knowledge.  That''s your perogative.  I''m not saying that the naming rights are the reason for AA''s financial problems.  But you have to deal with a workforce that is looking for ways to cut costs - I think most of them recognize that a company has to advertise.  But I think that this much money for the "advertisement" of AA on an arena can and does strike many as wasteful.   Sell the naming rights and the employees just MIGHT view that as the company doing something more than coming to the workforce to cut costs.   Also, I''d venture to guess that the average AA worker can''t afford tickets to a Mavericks game - those that can are unfortunately in upper management.   Not that any execs do go to Mavericks games, it''s just that it can be viewed as the "good old boys club" and they spend the money on things that only upper management can enjoy.  And you are the first to lump me in with Bob Owens...I disagree with him on FAR more points than I agree with him.    But I''ll give him this...there really ARE a lot of companies with complete idiots at the helm.  Well educated idiots mind you, but idiots nonetheless.

----------------​

----------------​

I never intended any cheap shots. I just think you came to some strong conclusions pretty quickly. I still don''t follow you on the representative sample. No survey is perfect, but the stats people are very good at picking a representative sample. According to the articles I have read, over $2B has been spent on naming rights for venues. Nobody, not even sheep, spends this kind of money without a lot of analysis that shows that it is worth it.

AA spends $6.5M per year on the AA Center (before getting concessions from the AA Center). I wonder if it wouldn''t do more harm than good in the publicity area to go and tear down all the AA signs in the AA Center. Imagine what a message that would send to AA customers. I know that somebody will respond and argue that it would send a positive message. I can''t help but think that it would look like a company going completely under. Also, I can''t think that it is just that simple to sell the naming rights. The whole place was built as the AA Center. If you have ever been there, you know that it is almost like an airport inside the building. AA logos are actually carved into stone all over the place.

Finally, this thread started by debating whether AA gets more advertising bang than WN through its sponsorship of the AA Center and AA Arena. It has turned into another debate on how AA spends money. If AA upper management has done their analysis and truly believes that this is money well spent, then they should stick to their guns. That is what leadership is about - doing the right thing. Management''s job is not to cowtow to employee opinion.

And for Bob Owens, I doubt you will find too many people who will argue with you that WN has the better business plan. Their profits have clearly demonstrated that. If you can figure out how to get from where AA is today to looking like WN, you could make a lot of money.