Richard Sandomir wrote a slightly polemical piece on Citi’s $20 million purchase of naming rights to the Mets’ new ballpark, arguing largely that it’s unfair to the Citi employees who’ve been laid off during the bank’s recent financial troubles. It’s the type of side-by-side comparison that offends our sensibilities: Big, bad, insensitive Corporation and its Greedy Executives light cigars with $100 bills, cackling as they sign pink slips for the proletariat.
The problem is that Sandomir doesn’t address the one question that underlies the comparison: Does Citi get a higher return from spending the $20 million on naming rights and cutting the employees, or would they get a higher return from foregoing the naming rights and keeping the employees?
I don’t know the answer. Neither does Sandomir, but he’s arguing that Citi’s executives have made a mistake without knowing whether or not they did. If the return on the naming rights option is higher than the return on the employee-retention option, then Citi’s executives made the right call for their stockholders, for the remaining employees, and for their own pockets as well. If the return on keeping the employees is higher, then the executives just screwed up. All Sandomir offers, however, is this:
Even in the flush times during which it was signed, the deal seemed questionable. With high name recognition and a place among the world’s banking leaders, Citigroup hardly needed the Citi name plastered on a ballpark to enhance itself. Will fans move their C.D.’s to a Citibank branch because of the Mets relationship, any more than air travelers will consider flying American Airlines because its name is on two professional arenas?
Will the corporate suite-holders at the Mets’ new home want to do more or new business with Citigroup because they share deluxe accommodations at Chez Wilpon?
I don’t know the answers to those questions, Richard. Do you? And if you don’t, why are you asking these questions as if the answers are all going to support your underlying argument that the naming-rights deal is a dud? The closest we get to this is a generic quote from an academic who raises the same questions I do without providing answers, although he misses one of the fundamental (presumed) benefits of stadium naming rights – the frequent repetition of the stadium name during game broadcasts, on news and highlight shows, and in print coverage of games.
Sandomir calls the deal “an investment that seems to thumb its nose at laid-off workers.” In reality, Citi is responsible to more than just the workers they laid off; they’re responsible to their stockholders, remaining employees, and maybe even their customers. If the naming-rights deal is a bad one, then the executives are putting more than their noses at risk.
Related: BBTF discussion of the article.
I guess the real question is: has anyone ever been able to demonstrate what the ROI for naming rights actually is?
I don’t know the answer to that. My suspicion is that the ROI is not very good, but I don’t have any data to base that on. I do agree with your position that if the ROI on the naming rights is better than it is on the laid-off workers, then Citi made the right call.
If pinned to an answer, I’d choose the same, Chris. I’ve never been a big fan of nebulous brand marketing without any clear call to action. The ROI probably isn’t high, and measuring it is difficult.
Well, Keith, I think the point stands that Citigroup is not looking so good at the moment and that the park opening when it is smacks just a little of Enron Field c. 2000. It’s not the best time–and I’ll limit this proclamation to p.r., of which I know something rather than economics, of which I know next nothing–to be the biggest bank in the world.
People feel exploited by the banking industry, and it certainly fits with the narrative of rampant excess for the company to have such a high-profile naming-rights deal.
It’s a lot easier to blame a big corporation when it lays off 2600 workers than it is to blame the 2600 other workers who used their job at Citibank to pad their resume for a better job.
Why is it always the company that’s supposed to be loyal to the worker when workers leave businesses all the time to improve their financial standing?
Well, that’s because individual workers are typically characterized as being good and having feelings and all that, and companies are characterized as heartless, soulless unfeeling globs of greed.
There were also times when loyalty was expected on both ends. People used to talk about IBM and having a job for life: if you worked hard, you could stay until you retired.
But that’s a bad way to do things. I don’t expect my employer to keep me out of loyalty. I expect my employer to keep me because I work hard and am worth my salary. If that changes — either because I’m not doing the job or because the value of what I do changes — I don’t expect them to hang on to me.
As an employee of the company, I’m starting to wonder how many more bonehead decisions will be made before businesses are sold and consolidated. Employee morale is low, and all of the negative publicity gets tiring to listen to everyday.
I remain confident that everything will workout as Vikram Pandit has made some good decisions thus far, but this seems more like a marathon than a sprint to improve the reputation and overall business efficiency and productivity.
These stadium deals are so ridiculous regardless, but a company who’s stock was once $40 higher not so long ago really is tough to stomach. They bust our balls with travel restrictions, hiring freezes & reduced department budgets, but they can afford to pay a CEO who ran the company into the ground a nice package, and of course spend more money that they don’t have on stadium rights. We’ll see what happens, but I would think the Arabian princes in the Middle East will tire of bailing us out.
On a side note, kinda interested to see this new good looking girl Aida on FN.
I think the view many people have of the corporate world is something like this: Executives are paid millions for their perceived ability to lead an organization. Executives make one poor decision after another, the company takes a nose dive, and to keep the company from failing all together…it cuts back the work force, expenses, etc.
The executive then leaves said company, with an absurd compensation package, taking millions with him even though he’s done nothing advantageous for said company. It’s as if they suffer no consequences for their actions.
That is the perception of the modern executive, and I’ve seen the reality matching this perception on numerous occasions.
However, I’ve worked with executives that I feel are incredibly competent, visionary, and creative too.
The growth in name recognition alone may very well be worth it…
Random thought, but doesn’t Citi Group’s somewhat generic not lend itself well to naming rights for a stadium. I mean, Citi Field can easily by thought of as “City Field.”
Just how does one measure the results of such a move? An uptick in business could be a coincidence, and the economy certainly must factor in. I would think it would be very challenging for anyone to draw a direct correlation between naming rights and business results, other than the obvious, straight financials that follow. Which, as I say, oould be influenced by any number of factors.
I imagine it’s sort of a false choice, anyway, since if those 20 million marketing dollars weren’t spent on ballpark naming rights, they’d have been spent on another form of promotion. When your company is worth over 100 Billion dollars, you’re going to build a high-level budget and then let the various divisions of the company figure out the right way to spend their chunk.
You can ask if Citigroup should spend more on salaries and less on marketing, but as far as the naming rights decision, nobody was ever in a position to choose between CitiField and paying employees.
I think selling the naming rights to a stadium that enjoyed considerable public assistance with financing is an insult to the fans of the Mets and citizens of NYC more then anything else.
The only major blight’s on Bloomberg’s legacy will be Citifield and Yankee stadium. Those two billion dollar companies should not have gotten the kind of help they did.
Phill — I like Bloomberg a lot as well, but you can add the failed West Side Stadium/Olympics 2012 bid to his negative column. I will give him credit, though, for immediately canceling Rudy’s two sweetheart deals for both teams, which would have cost the taxpayers a considerable amount more.
As someone in the advertising industry, I would think that the ROI is quite high on naming rights.
The amount of impressions you receive each year is in the ballpark (punny!) of 1MM to 3MM depending on the team–that’s just through people who walk through the gates. Then, factor in the millions of people who follow baseball, and I can guarantee that $20MM is a much better investment than most think.
The demographic for a Citigroup would be males and adults, the core of baseball fans. Not to mention, the added impressions you receive from naming a team in NYC, and a team that should be good and in the news.
Mike G:
What you say is logical, but does nothing whatsoever to address an actual ROI. You speak of “impressions,” and perhaps this is my naivete, but how do you translate those impressions into revenue?
I have trouble believing, for example, that AT&T needs any more name recognition than it has, and I struggle to understand how “AT&T Park” helps their bottom line.
Chris,
ROI is usually calculated by the actual client (Citigroup) using their own research and metrics, and not by a third party. How they translate the huge amount of impressions into a number relies on a bunch of their proprietary information, so I can’t say I know what Citigroup is looking for, though like I said it makes sense for their target: adult males probably with a household income of $75k+.
AT&T is the second largest advertiser to P&G. Like Proctor, it’s not that the brands aren’t popular (Tide, Gillette, and many others) it’s the idea that your phone service is a daily use item, so it’s an item that needs to be top of mind. To be top of mind, you try to be everywhere you can be with your ads. You look for new places to go. Thus, you get stadium naming rights.
It’s all part of the competition within the markets, too, as Verizon is the 4th biggest advertiser in America, I believe.
Mike G:
I hear what your saying, and I understand your logic, but at the end of the day I still don’t think anyone can demonstrate that it translates into actual revenue. In fact, I don’t even see how you could determine whether or not it does.
It’s the “clutch hitting” of marketing: lots of people think it exists (as an effective means of marketing), but in all probability it either does not exist at all, or if it does, it’s marginal.