Li Ning, one of China’s most recognizable brands, is not an official sponsor of the 2008 Olympics, but the company’s surgical approach to brand building could see it leverage the games for maximum visibility at minimum cost.
It has avoided expensive shotgun sponsorships, instead targeting teams that are medal hopefuls and sponsoring newscasts that will be watched across the country and even overseas. The ultimate goal is to use the games to give the brand an initial burst of global recognition.
“I don’t think that Li Ning will spend large sums of money on the Olympic Games,” said Charles Li, an analyst with First Shanghai Securities.
Hey, big spenders
This is not to say the company didn’t seek a larger role – Li Ning and Nike lost out in the official Olympic sponsorship bidding to Adidas, which reportedly paid US$70 million for the privilege.
The sponsorship could be a boon for Adidas, which is engaged in a fierce battle with Nike, currently the leader in the top -tier cities and in China as a whole, said Greg Paull, principal at marketing consultancy R3, which is tracking Olympic marketing efforts.
Li Ning also trails Nike in these top cities but it has a huge advantage in tier three- and tier-four cities where its network of 4,300 outlets comes into full play. Brands are not made from sponsorship alone and it is this retail network that anchors Li Ning’s Olympic strategy.
“You must open enough outlets so the consumer can buy your product after they see your advertisement,” said Tan Wee Seng, CFO and executive director at Li Ning. “People [may] see an advertisement but after three months they forget about it if they don’t use the product.”
And, while the company has one eye firmly fixed on the international market, the focus remains domestic.
“Although we have a very strong foundation, we have to make sure that we are somebody here before going international because it will be much easier,” Tan said. “For the next two years we are still going to be very much focused in China.”
Therefore, the objective is to raise Li Ning’s stature among Chinese consumers while planting the seeds of international expansion. To this end, the firm is sponsoring teams that could give it maximum international visibility at minimum costs.
It has signed up China’s shooting, gymnastics, diving and table tennis teams, which were collectively responsible for 40% of China’s gold medals in Athens 2004. Top Ethiopian marathon runner Ambesse Tolossa, Tanzania’s track and field team and the Swedish Olympic delegation also have contracts with Li Ning.
In addition, the company has a two-year deal with domestic sports channel CCTV-5 and is hoping some of the programs will be carried by foreign networks, providing a wave of free coverage.
The one gamble with the largest potential payoff is the company’s sponsorship of the Spanish and Argentinean men’s basketball teams – two of world’s top four.
“If these two teams make it to the finals we will open bottles of champagne to celebrate,” Tan said.
He believes a gold medal basketball match between Argentina and Spain would represent a return of 10 to one on the company’s sponsorship investments.
Li Ning spends 16-18% of annual revenue on marketing. With turnover coming in at just over US$420 million in 2006, this means the company’s annual marketing expenditure is about equal to what Adidas paid for its official Olympic sponsorship package alone.
However, Li Ning is not putting all its eggs in the Olympic sponsorship basket. Two weeks of sporting action is not long enough to transform a brand from domestic to international.
“The management is fully aware that building an international brand is an evolving process,” said Wei Xiaopo, an analyst with CLSA. “The Beijing Olympics will pave the way for Li Ning to go international… but in the long term.”
The next step
The question is how Li Ning will leverage its Olympic exposure into a post-Olympic expansion will be addressed in the company’s 2009-2013 strategic plan, said Tan.
But being a big fish in a relatively modest domestic pond is different from being a small fish in the global ocean.
“I don’t think Li Ning has made adequate preparations for global development,” said Li. “In China, many international firms come from manufacturing industries… Few people believe China will have strong consumer brands.”
The company is not sitting still, though. The Olympics may go a long w stars Damon Jones and Chuck Hayes and has a co-branding deal with Shaquille O’Neal. ay towards raising its international profile but Li Ning also has deals with other athletes. It sponsors NBA Ultimately, the company wants to morph itself into a global power that is associated with quality products first and China second.
“We don’t want to be known as the Nike of China,” Tan said. We want to be known as the Li Ning of the world.”