BY MICHAEL BELLER – MEDILL NEWS SERVICE
The Olympic torch arrives in Vancouver Friday, where thousands of athletes from around the world want to strike gold. Companies looking to do the same should be right there alongside the athletes, as a new study found the Olympics could be the perfect venue to spend advertising dollars.
Doctors Chuck Tomkovick and Rama Yelkur of the University of Wisconsin at Eau Claire examined stock prices for companies that advertised during the last five Olympic Games, beginning with the Sydney Games in 2000. They found that in the four months after the games concluded, those companies outperformed the S&P 500 by an aggregate of 4 percent.
“The performance [of the stocks] is statistically significant way beyond the .01 level,” Dr. Tomkovick said. That means the odds of the Olympic stocks doing that well by chance are far less than one time out of 100. To control the study, they examined stock prices for 20 trading days three months before the Olympics. The same advertisers that beat the S&P 500 after the games underperformed the index by 1 percent in the control period.
Dr. Tomkovick explained that the nature of the Olympics contributes to a favorable view of companies associated with the event.
“Investors don’t have perfect information, so sometimes they look for a signal of strength,” he said. “There’s a lot of optimism and good feelings around the Olympics, and that sends a signal something positive is happening.”
According to Tomkovick, that positivity blends with strategy to help companies experience the jump in stock price.
“We believe very strongly in something we call the activation theory,” he said. “Activation puts the company’s marketing group and sales force on notice and tells them to bring their ‘A’ game on distribution, promotion and sales. There’s Olympic merchandise at point of purchase, and that connects advertisers to the Olympics.”
Let’s take three of the major advertisers from the 2008 Summer Olympics in Beijing as an example. The study began analyzing stock prices the Monday before the specific games began, which was Aug. 4 for the Beijing Olympics. On that day, the S&P 500 stood at 1249.01. By the last day of the year, it had fallen 27.7 percent to 903.25
McDonald’s Corp. began the study at $60.55. It climbed to $62.19 on Dec. 31, an increase of 2.7 percent. Proctor & Gamble Co. dipped 6.1 percent to $61.82 from $65.82 in the period, while The Home Depot Inc. saw a slip to $23.02 from $23.89, or 3.6 percent.
While the study was confined to just the first four months after the games ended, Tomkovick and Yelkur followed the stock prices for an additional six months. They found that the luster of the Olympics hadn’t worn off for almost a full year.
“The portfolio of stocks was still outperforming the S&P 10 or 11 months later,” Yelkur said. “The pattern wasn’t quite as strong, but they still came in above the market.”
Companies may not be getting the message, or may not completely buy into the study. NBC is projecting advertising sales to remain flat, close to or narrowly exceeding the $650 million the network garnered for the 2006 Winter Olympics in Turin, Italy. That, along with increased costs, has NBC projecting its first loss from the Olympics in at least 30 years.
One thing advertisers can count on is that the Olympics draws in a “high involvement audience,” as put by Tomkovick.
“Advertisers become well-known to the public and it creates a halo effect where there’s a lot of top-of-the-mind awareness of the companies.”