5 Ways to Recover From a Sponsorship Scandal

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Should I stay or should I go?

When a scandal breaks, keeping quiet can seem like the most appropriate course of action for a sponsor. But there are, in fact, many different tacks a sponsor can take when the time comes to distance itself from an important property.

Turn the scandal into a business move: the Festina Affair

Long before Lance Armstrong, the Tour de France already had a number of scandals under its belt (hence the nickname: the Tour of Doping). The most significant scandal was the Festina Affair in 1998. For the first time in the history of cycling, an entire team was excluded from the Tour de France after their soigneur was arrested at the border with large quantities of doping products in his car. It was tough for Festina—the luxury watch brand sponsoring the team—to distance itself from the scandal when its name was peppered all over the media. The Festina team put an end to its activities in 2001, and the brand redirected its involvement in the event: it remained the official sponsor of timekeeping for the Tour de France and set up a foundation to prevent doping.

The 1998 IOC scandal: how to bully your way to reform

No doubt the most important scandal to rock the Olympics erupted in 1998 when members of the International Olympic Committee (IOC) were accused of taking bribes from the Salt Lake City Organizing Committee during the bidding process for the 2002 Winter Olympic Games. Afterwards, David D’Alessandro, CEO of the insurance company John Hancock, was the only sponsor to react—and he reacted strongly. He publicly criticized the committee, demanded an investigation and called on the president of the committee to resign. He removed the Olympics logo from all his communication materials and cancelled his television advertising for the Atlanta Summer Olympic Games. But he didn’t stop there: he pushed for reform and transparency within the IOC and in the process became a polarized figure that some considered an attention-seeking bully.

A new concept: suspension of sponsorship activities after the Sterling scandal

In 2014, a scandal broke when an audio recording was released in which Donald Sterling, owner of the LA Clippers basketball team, made racist comments to his girlfriend about a photo she had taken with basketball legend Magic Johnson. Reactions were swift, with Barack Obama weighing in and several people offering to buy the team, including Magic Johnson, Oprah Winfrey and finally former Microsoft CEO, Steve Ballmer. Some partners reacted quickly by pulling their sponsorships (Carmax, Virgin America, Mercedes-Benz and Chumash Casino Resort) while several others like Corona, Kia, Red Bull and Samsung opted to suspend their partnership. Because suspending their sponsorship likely wasn’t an option in their contract, technically they remain sponsors of the team, but at a safe distance that’s far removed from the controversy. This new option will no doubt become commonplace in sponsorship jargon as it offers the best of both worlds.

A hierarchy of reactions: one scandal after another for the NFL

In 2014, the multiple cases of domestic abuse involving players of the NFL deeply tarnished the image of the league, from Ray Rice (conjugal violence) to Adrian Peterson (child abuse). Though sponsors criticized the league for not taking swift action in punishing the players, they didn’t terminate their partnership. Even Cover Girl stayed on board, despite activists altering one of their ads to draw attention to the brand’s inaction. Brands certainly don’t want to be associated with a controversy of this magnitude, but they aren’t ready to walk away from the NFL altogether. So what did Nike do? They stopped sponsoring players who were involved in the scandals, thereby distancing themselves from the violence while still remaining associated with the league and its attributes of excellence in sport.

The FIFA scandal: giving into fan pressure

May 27, 2015 wasn’t a good day to be a FIFA sponsor, when US investigators uncovered years of corporate corruption dating back to 1991. One such scandal involved the Qatar bid to host the 2022 World Cup, which also came with damning reports of the country’s treatment of migrant workers, raising deeper ethical and humans rights issues. FIFA’s major sponsors—Coca-Cola, McDonald’s, Budweiser and Adidas—have all expressed their concerns but none have gone any further than that, with the exception of Visa, which has threatened to end its sponsorship if the federation doesn’t institute meaningful change. Social media reaction created an unprecedented crisis for sponsors, in that consumers now see the power of sponsors and demand that they pull out and end their partnership when a property is corrupt.

In weighing the consequences of a tarnished image against the benefits of a platform that offers access to millions of fans, brands also have to consider the fact that consumers are increasingly choosing brands not only for their products but for the values they support. In short, there’s no easy answer when it comes to dealing with a scandal. Brands must weigh all their options—and, in the process, never lose sight of consumers or the market.

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