Issue: Adidas' Challenge: Sprinting Ahead in China

The German maker of sports goods works to become known as the Games' official sponsor, while rival Nike employs nonofficial tactics

Chinese hurdler Liu Xiang leaps ahead of the rest of his heat. Kids watch him on screen and mimic his moves. At the end of this 60-second TV ad, the hurdler wins, and he celebrates as the Nike (NKE) slogan, "Just Do It," appears.

While Adidas (ADS) invested tens of millions of dollars becoming an official sponsor of the 2008 Olympic Games in Beijing, its rival Nike secured sponsorships of some of the most visible athletes, such as Xiang—one of several ways Nike has employed for the event what is commonly referred to as "ambush marketing." Nike spokesperson Derek Kent says the company decided to focus on athletes rather than the event itself is because it is "looking to connect people to the brand via the athletes they admire." He describes the athlete-centric focus as working "exceedingly well."

The concept of ambush advertising isn't new. Chen Feng, a spokesperson for the Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG), defined it in a June press conference as "attempts by firms that are not official Olympic sponsors to associate their products with the event so they can capitalize on the connection without paying for the right to do so."In fact, as far back as the 1984 Games in Los Angeles—when Kodak (EK) snuck around the ad dominance of Fuji (FUJI), the Games' official sponsor, by sponsoring the Games' TV broadcasts—nonofficial sponsors of the Olympics and other large sporting events have been finding ways to grab some of the action.

Policing Difficulties

Adidas is relying partly on Beijing to combat this problem. BOCOG, the city's Olympic governing committee, began cracking down on rogue advertisements in late 2007, removing outdoor ads that gave the impression that nonsponsors were official sponsors of the Games.

Chinese officials have increased their quashing of ambush ads in the weeks leading up to the Games, but China's broadly dispersed population makes it difficult to patrol for ambush ads outside specific locations. So it's also up to Adidas to keep watch and report violations to BOCOG.

At the same time, with its sponsorship coming at such a high premium, Adidas needs to make the Chinese people aware of its official status. "The Olympics are in our DNA," says Erica Kerner, director of Adidas' 2008 Olympic Program. Because the Games are such an integral part of the Adidas brand, she adds, it's worth the cost to keep Adidas connected to the Games.

Online Strategy

To keep its brand in people's minds, Adidas is relying heavily on an online campaign to spread its "Impossible Is Nothing" slogan in the digital world. The strategy includes user-generated videos and online trading cards featuring athletes and other Olympics-oriented images. Those features won't go away once the Games end. Instead, videos and cards will be used in future Adidas-sponsored events, according to the company.

Sponsors are also looking to expand their physical presence—and not just in the host city. In July, Adidas opened a massive brand center in Beijing, the biggest Adidas store in the world. By the end of this year, the company intends to open another 5,000 stores around China.

Marketing research shows that big Olympic sponsors like Adidas and Coca-Cola are unlikely to get a decent return on their investment

Shaun Rein, founder of Shanghai-based China Market Research Group (CMR), has some bad news for official Olympic sponsors like Adidas (ADSG.F). He says shelling out tens of millions of dollars, the reported cost of a sponsorship (Adidas won't specify what it has spent), won't boost sales enough in China to justify the expense or even help gain an edge in brand awareness on competitors.

In a recent study, CMR found that almost 80% of Chinese consumers don't care who the actual Olympic sponsors are. What's worse, many consumers don't even know: Some 40% of those surveyed thought Nike (NKE) was the Games' official sportswear partner (half of the respondents correctly named Adidas). That means the ambush marketing has been effective.

Ambush Ads

While the Beijing Olympic organizing committee has ratcheted up its assault on ambush ads in Beijing, Scott Kronick, president of Ogilvy International Public Relations, says a major challenge for official sponsors like Adidas lies in spreading its message beyond the city limits. Adidas, it seems, would agree. It plans to launch some 5,000 stores in both urban centers and more remote areas of China this year. Opening stores in fringe cities, Kronick says, is a good way to capitalize on the growing Chinese market and remind consumers of Adidas' Olympic ties.

Part of Nike's brand-awareness success in China has come from being associated with official sponsors in completely different categories. Chinese hurdler Liu Xiang, one of the athletes Nike is sponsoring, is also being backed by Coca-Cola (KO), which is an official Olympic sponsor. This sponsorship blend is a recipe for confusion, according to Rein's research.

Rein says the key to untangling sponsorship lines and distinguishing brands could lie in the digital world. China has at least 253 million Internet users (according to the China Internet Network Information Center), and a large percentage of Chinese under 32 spend the majority of their leisure time online. Rein says Olympic sponsorship isn't worth a company's money if its online presence is less than that of its competitors.

Pepsi vs. Coke

He cites Pepsi (PEP), which has teamed up with several Chinese portals to launch a digital marketing campaign that is giving rival Coca-Cola heartburn, as a good example. One of Pepsi's partner sites is Suho, an Olympic sponsor. It's easy, then, for Chinese consumers to associate Pepsi with the Games despite no mention of official sponsorship or use of trademarked Olympic symbols on Pepsi's part. Rein says Pepsi is able to win the battle for Chinese Internet users because Coke's digital campaign is less interactive and more focused on the under-18 crowd. To turn this tide, he adds, Coke needs to increase its site's interactivity.

But even if Adidas and Coke can secure their images as official sponsors, what then? Chinese consumers who prefer Pepsi or Nike aren't likely to switch allegiance over sponsorship status. Unless companies like Coke and Adidas can convince the Chinese that their brand and respective products are superior, Rein says, those eight-digit sponsorship fees aren't worth it.

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