VIVO investing Rs 440 cr per year in IPL Title Sponsorship: Mistake or masterstroke?

Guest Column: V Sudarshan, VP of Hansa Research Group analyzes the figures and the rationale behind VIVO's large spend

V Sudarshan

I am sure, a lot of people who have heard this news for the first time would have been surprised at this large size of spending on a single sporting event which will last only for 3 months.

A lot was spoken about this deal - some said that this was a gamble, some said that they will not invest unless they have a plan to earn at least 10 times what they have invested, some called it a ghatbandhan between China and BCCI. However, no specific analysis was ever done to see if this was a mistake by VIVO or a masterstroke.

This simple analysis will shed light on the figures and the rationale behind the large spend.

First, let’s see the IPLomania© data to know how has this spends helped VIVO

Here are some mind measures of VIVO and their association with IPL. IPLomania a study done by Hansa Research for the last 9 seasons of IPL, tracks all the brands associated with this mammoth event called IPL. Subscribed by ~40+ brands, this study helps brands to understand how did their spends work on IPL, both on recall and other brand/mind measures.

In the last 9 seasons we have seen 3 major sponsors; DLF which was the sponsor for the 1st 5 years of IPL, handed over the baton to Pepsi who committed for 5 years but withdrew their association after the 2nd year. One of the reasons for the same could be the fact that statistically, Pepsi’s revenue growth for the 2 years was just over 1-2% while their arch-rivals Coca Cola’s revenue growth for the same 2 years was upwards of 10%.

In IPLomania we track various associations of different brands and different properties available for these brands. Through these associations, we come up with an ROI measure called rROI© - recall Return On Investment.

Analysis of this data comes to a conclusion that VIVO has achieved what probably Pepsi and DLF couldn’t do, in their initial 2-year association with the game. DLF took 5 years to reach an 80% overall association with IPL (it was 60% in the first two years). Pepsi in the 2 years could only reach a 60% overall association in the two years. VIVO has already reached 80% in the first 2 years.

Now we can debate that, the game has evolved and so on, one would show the BARC and TAM data, which shows that reach of IPL is increasing Y-o-Y, but in the same breath we also should see that the stickiness with IPL is coming down significantly. This is also evident from the IPLomania data. While in 2010-11 the average number of matches watched in a week was 5, this has come down to barely 3 in 2019.

Though new viewers are getting into the IPL bandwagon, the average time spent has come down significantly. While in 2010 the average time spent on a weekday on an IPL match was ~3 hours, this has come down significantly to 1 hour in 2019.

Even with all these issues, BCCI and Star Sports has ensured that the brand gets its due for the money spent. VIVO branding is everywhere. The only or the first brand that comes to mind when anyone sees IPL now is VIVO.

Let’s look at the annual mobile industry report:

According to the annual report in the four quarters of 2018, a total of 13.7 crore mobile handsets were shipped in India. This was a 10% growth over the last year (2017).

Chinese brand Xiaomi is the market leader with a whopping 28% market share, followed by Korean brand Samsung which has a 24% market share. The third brand which has made its presence felt in just 2 years is VIVO with an average 11% market share, followed by its sister brand OPPO with 8% market share.

The progressive growth seen for the brand is self-explanation that in such a short time, VIVO has reached an 11% market share. Now let’s put some numbers to these:

VIVO has approximately 29 mobile handsets variants in India, with average pricing of INR. 13852/- (average of all the variants). Considering total off-take of 1.34 crore of VIVO handsets in 2018, the revenue generated (without taking into account overheads) would be ~ INR 20,874Crores for the calendar year 2018. In light of this revenue earned, this advertising budget of 440 crores dwarfs in comparison.

Now, let us look at the typical marketing budget spends of a few big brands across the globe. There are two things that one needs to consider when we speak about this topic – is the brand new to the market, or is it a market leader? VIVO is relatively new to the market, and if we look at the competition, it’s a distant No-3.

Big brands spend close to 10% of their revenue on marketing budgets. For eg., Google spends 12%, Apple 6%, Intel 12%, Microsoft 16% and Oracle 22% of its revenue on marketing. If we look at the IPL spends to the total revenue of VIVO, it comes to an abysmally low 2.1% (440 on 20874). They can still spend ~1520 crores on other marketing activities (ATL and BTL) throughout the year.

To summarise

VIVO’s entry into Indian markets - via IPL -is evidently an extraordinary tale of success, packed with numerous lessons in marketing foresight and long-term business strategy –MAKING VIVO THE MOST SUCCESSFUL IPL FRANCHISE OF ALL TIME! This was clearly money well spent, and worth it.

 

 

(The author V Sudarshan is Vice President of Hansa Research Group, a full-service market research agency)

 

Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com

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