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IEG In The News

Home Depot Weighs Its Olympic Role

The Atlanta Journal-Constitution, May 11, 2008

By Rachel Tobin Ramos

There are weight lifters, wrestlers, runners and rowers. Cyclists, pole vaulters, fencers and boxers. Archers, kayakers, sprinters and water polo players. And don't forget the tae kwon do and judo fighters.

In all, some 137 athletes work at the Home Depot part time and train the rest of the time as Olympic hopefuls. But as these athletes attempt to make the U.S. Olympic team that will compete this summer in the 2008 Olympic Games in Beijing, Home Depot is pondering whether to keep the program.

The Olympics job program is a flame the home improvement retailer has kept alive since it first sponsored the 1996 Games in Atlanta, the company's headquarters. The jobs —- in which the athletes work 20 hours a week at Home Depot but get paid for 40 —- are just one piece of Home Depot's Olympics sponsorship. Another is a large advertising buy during the Games' broadcast on NBC in August, plus the right to use the Olympic rings.

But at a time when many retailers are suffering from the economic downturn (Home Depot recently announced it would be closing 15 stores), companies such as Home Depot are looking harder at where they spend their sports sponsorship and advertising dollars.

Home Depot's U.S. Olympic Committee sponsorship expires after the Beijing Games, and the company is in talks with Olympic officials about sponsoring future games.

"We are in negotiations with them," confirmed John Ross, Home Depot's vice president of advertising. "I can't discuss a negotiation in progress, as that gives us no benefit and could hurt our negotiation leverage long term, so I'm not going to do that."

A decision could come before the 2008 Summer Games, which will begin Aug. 8 in Beijing.

So far, as a U.S. team sponsor, Home Depot has avoided the public relations flap that has plagued global Olympic sponsors such as Atlanta-based Coca-Cola. Human rights protesters are upset that China was allowed to host the Olympic Games. Home Depot said it has received no letters of protest.

Ross emphasized that Home Depot is ramping up its investment in other sports.

"We added soccer and NFL," Ross said. The company already sponsors Major League Baseball as well as popular NASCAR driver Tony Stewart, who drives the No. 20 Home Depot car.

Ross wouldn't say how much the company spends on sports sponsorships, but its total advertising and marketing budget in 2007 was $1.2 billion, according to Home Depot's 2007 annual report.

Several firms track the numbers. One, IEG Sponsorship Report, says Home Depot spent $60 million to $65 million on sports sponsorships in 2007, said William Chipps, a senior editor with the publication.

The Nielsen Co. reports that Home Depot purchased $25.3 million and $30.1 million in ads during the 2004 Summer and 2006 Winter games, respectively. Nielsen also reports Home Depot spent nearly $12 million on NASCAR ads in 2007, while rival Lowe's spent $7.7 million.

"Companies sponsor pro sports teams and other properties to reach target audiences and tap into the emotion and the passion those people have for their favorite sports teams," Chipps said. "NASCAR does a really good job of letting fans know that without the sponsors' support of their favorite drivers, they couldn't race on Sunday."

Still, he said, companies "wrestle with measuring return on investment."

But one thing is certain: With a virtually year-round season and five-hour races, NASCAR sponsors get a lot of rev for their marketing buck.

All NASCAR sponsors combined get $6.5 billion in value for getting their logos on screen and names announced on air during races, according to sports marketing research firm Joyce Julius & Associates in Ann Arbor, Mich.

"There are 90 total telecasts to the NASCAR cup series, including replays," said Eric Wright, vice president of research and development at Joyce Julius. "The total exposure time was 734 hours, 17 minutes and 17 seconds. Brands were mentioned 13,285 times."

Home Depot and rival Lowe's (which owns a team and a racetrack) both came in the top 10 of brands mentioned during the telecasts.

It's difficult, of course, to compare NASCAR —- a nearly year-round racing franchise and one of the fastest-growing sports in America —- with the Olympics, a three-week competition that comes every two years.

However, the Olympics gives sponsors something almost intangible, Chipps said.

"It's an affiliation with a top-notch property," he said. "The Olympic rings represent achievement, credibility and going for the gold. All those corny things, but that is why a company spends millions of dollars for the right to use those rings in marketing materials."

Home Depot's Ross said the Olympic sponsorship is "a longer-term brand-affinity play." One of the major audiences for the deal is Home Depot employees, he said, who can feel pride in the company's Olympic athletes.

More than 300 Home Depot athletes have made Olympic and Paralympic teams since 1996. "We've won just shy of 200 medals," Ross said. "Eighty-nine of those were gold." And so far this year, 17 Home Depot athletes have qualified for the U.S. Olympic team.