IPL sponsorship: Vivo's Rs 2,199 cr investment is 'outrageous'; will work only if it has offerings beyond smartphones
Logically, no one would give away this kind of money for a title sponsorship. The IPL sponsorship can only be a short-term strategy
The Indian Premier League (IPL) sponsorship bagged for Rs 2,199 crore by Vivo, Chinese handset maker, has set a record in the history of sports sponsorships. According to the Board of Control of Cricket in India (BCCI), the amount is a whopping 554 percent rise over the previous contract. It had held the title rights for the 2016 and 2017 seasons. That deal was pegged at an estimated Rs 100 crore per year.
The nearest bidder to Vivo was Oppo, another Chinese mobile phone maker, and that was by a yawning chasm at Rs 1,430 crore. The Rs 2,199 crore five-year contract translates to Rs 440 crore yearly. Is this kind of huge money invested on IPL worth it? Most brand specialists think it is an outrageous amount to have paid while a few including sector analysts think that the money invested is well spent and could bring dividends for Vivo. The IPL though could swing the fortunes of the company to another stratosphere, some believe.
Many would recall Vivo from the selfie feature being promoted by its brand ambassador, actor Ranvir Singh.
Incidentally, Vivo, Oppo and OnePlus are from the same company, BBK Electronics and each phone is targeted at different price points without eating into the other’s share of the market.
The uppermost concern with regard to the sponsorship in sector specialists' mind is, what if Vivo does not have a strategy to back this sponsorship. Then the money invested in the IPL could threaten the company's existence in the market. What would make a company bid at such a high price when its nearest competitor's bid is a far cry from it?
N Chandramouli, CEO of TRA Research, a brands insights company, formerly Trust Research Advisory, says the reasons for this ‘overpriced’ sponsorship could be many. “Primarily, it could be fear followed by misinformation,” he says.
Vivo would not want to be in the ‘nondescript’ arena in the country in the category of smartphones and that could be the fear which may have propelled it to go in for this huge sponsorship. The other reason could be that the company may have been misled by rumours of the bid amount by Oppo which would have catapulted it to go in for this outrageous bid, says Chandramouli.
To have the Board of Control for Cricket in India (BCCI) also admit that it is a huge amount that they have got as sponsorship says that it is not a good negotiation, feels Chandramouli. “A negotiation is good if both the buyer and seller are slightly unhappy. The seller should feel he should have sold it for a slightly higher price, while the buyer should have the feeling he paid slightly more. However, here the seller – BCCI, is very happy. I only hope Vivo does not regret its decision for the Rs 440 crore yearly investment could have been spent on the phone by bringing in additional features or by investing in an array of products besides the mobile phone,” he said.
Chandramouli is of the view that 'logically', no one would give away this kind of money for a title sponsorship.
The money paid by Vivo has understandably raised eyebrows and led to comparisons being drawn to previous sponsors. PepsiCo, the previous title sponsor of the IPL in 2013, bid at the then considered ‘whopping’ amount of Rs 396.8 crore and prior to PepsiCo, DLF had paid Rs 200 crores from 2008 till 2012 as the title sponsor, a PTI report said.
For Vivo to make good the money invested on sponsorship, the company would have to have a strategy in place beyond the IPL sponsorship. If that strategy is not well planned, it is in danger of losing the sheen it receives during the duration of the games on TV and through advertisements.
Sponsorship cannot be the only plank that Vivo can use to create sales and demand for its phones. “The IPL sponsorship can be a bump that will help Vivo get eyeballs but that alone would not sustain the longevity of the bump,” says Alpana Parida, managing director, DY Works, a Mumbai-based brand strategy and brand design firm. She points out to the sponsorship of Micromax for a few matches of the BCCI in the past and also as title sponsor of Asia T20 Asia Cup 2016. “That has not translated into a wide brand recall for the company. The IPL is a short-term strategy and that alone will not help any brand,” she believes.
Admittedly no company would plan investments as huge as Vivo's. Prahlad Kakkar, advertising guru, says that in his view every organisation that makes an investment is out to extract ‘even blood from a stone’ with regard to its money.
Not every IPL match will be watched closely by all. But the television will be switched on when the matches are on and by that yardstick any viewer watching it on the go or watching it sporadically will be exposed to the brand. From that point of view, Vivo stands to earn a lot by its sponsorship, says Kakkar.
Concurring with Parida, Kakkar says that Vivo will have to look at a broader offering besides just phones. “You can’t sustain interest in a mobile for five years!”
Some sector specialists believe that Vivo's decision to invest heavily in IPL is the right decision. They aver that the IPL sponsorship is the right event for any company to target its brand so as to get mass appeal. Harish Bijoor, Chief Executive Officer of brand and business strategy firm Harish Bijoor Consults Inc, says the awe and the 'outrageous' reactions to the money Vivo has paid for the IPL title sponsorship mirrors the reaction a few years ago when PepsiCo had won the bid for the IPL. Incidentally, Vivo also hold a five-year sponsorship deal with Pro-Kabaddi League beginning July 2017 which is around Rs 275-300 crore.
Earlier, Cola companies were the right fit for sponsorships as it was felt every bladder thirsts for a cola! Cola sponsors benefitted from their investment with sports, says Bijoor. With cola falling out of favour for health reasons, the most exciting sector now is telecom with mobiles being a must-have product in every person’s hands.
Agreeing that there is ‘apparent irrationality’ in the bids by Vivo and Oppo, he says sponsorships have nothing ‘rational’ about them. “Customer eyeballs are irrational opportunities and grabbing it for those opportunities is what sponsorship is all about. I believe Vivo will do much better than a cola brand and if it were not for Vivo, then any other player in the telecom sector would do well too simply because mobiles are a necessity today,” Bijoor says.
With the kind of money invested in the IPL, Vivo will work hard to see it succeeds and pull out all stops to catapult to the top of the smartphone category it is positioned at. “Else it will never be able to live down the embarrassment of paying such a huge amount as sponsorship,” says Bijoor.
Vivo is not an unheard of name in the telecom sector though. Its smartphones are among the top players among Chinese players, including Xaomi, Lenovo and Oppo, accounting for 51 percent of the smartphone market in India.
The company has a good strategy offline and 90 percent of its sales come from this channel, says Navkendar Singh, Head of Mobile Devices and Research, India and South Asia at IDC India.
Consumers of smartphones are not bothered whether the handset they are buying is a Chinese or a non-Chinese brand in the price brand that Vivo or Oppo sells which is around Rs 9,000 to Rs 35,000 category. All they want is a phone at a price point that offers features that an expensive phone does without having to pay for it. Vivo fulfills that promise with its smartphones, say analysts.
The company has established itself with the selfie camera as its most sought-after feature and is now forcing bigger brands to look at lower price points and focus on this feature, says Singh. “It makes complete sense for Oppo and Vivo to have associated themselves with cricket – an important game for Indians and have players wear their jerseys,” he said.
The Rs 2,199 crore investment will pan out well for Vivo only when the brand recall will be easy and natural for consumers.
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Using an onsite 5G mmWave base station, Vivo transmitted a video of 8K UHD to a Vivo smartphone from a server, which was then wirelessly projected on an 8K TV