Wall Street Journal: Capitalizing on That Big Event in Vancouver

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By DIANA RANSOM

When Ted Guggenheim decided to make and sell an Olympic-themed cowbell app for the iPhone, he knew it would be tough to get the word out.

Intellectual property law prevents Guggenheim, the president and chief executive of Rage Digital, a custom iPhone app maker in Boulder, Colo., from including the word “Olympics” anywhere on the app. And he can’t use the term as a keyword for customers searching Apple’s iTunes Store. “We didn’t want to get in anybody’s way,” Guggenheim says.

Anxious to cash in on Olympic fever—but unwilling to pay official sponsorship fees that can cost millions, even for smaller categories—many marketers are trying to play it both ways, with ads that imply an Olympics connection but stop safely short of mentioning the Games. This is always something of a tactic when the Olympics roll around. But some business and marketing experts say it’s reaching new levels this year as U.S. companies try to capitalize off the physical proximity of the Games and officials step up efforts to hunt down unauthorized ads that go too far in hinting at an Olympic link.

For the donut chain Tim Hortons, that meant ads including Olympian Sidney Crosby had to be pulled down. When Vancouver-based yoga-apparel retailer Lululemon Athletica launched a line of sweatshirts and T-shirts called “Cool Sporting Event That Takes Place in British Columbia Between 2009 and 2011 Edition,” the company was publicly scolded by the Vancouver Olympic Organizing Committee.

The International Olympic Committee and U.S. Olympic Committee did not immediately return calls or emails seeking comment.

Other businesses are toeing the line carefully. Fiona and Scott Rintoul, the co-owners of Vancouver’s outpost of Flip Flop Shops, an Atlanta-based flip-flop franchise, have plastered the windows with giant maple leaves and flags to hint at the games. And David Foot, the executive chef of Jean-Georges’ restaurant Market in Vancouver is offering four Olympic-themed cocktails and a special tasting menu in honor of the event—but he isn’t using the “O” word.

So why are businesses getting creative to advertise with tacit references to the Games? An association with the Olympics—even a weak one—can be a sales boon for U.S. businesses, says Scott Minto, the director of the Sports Business Management MBA program at San Diego State University. (Just days into the Olympics, Rage Digital has already sold more than 20,500 apps for 99 cents each.) The event alone creates hype during a typically slow sales month, and the fact that this year’s Games are being held in North America offers U.S. companies a big advantage, he says. Domestic viewership is helped because Americans can watch events as they happen, rather than view pre-recorded snippets, he says. “You don’t really want to go to a bar and watch an Olympic hockey match when everyone already tweeted and posted the results on their Facebook pages,” Minto says.

American businesses are attempting to cash in on a customer base so close to the hype. However, unless the firm is a paid Olympic sponsors, the International Olympic Committee and the U.S. Olympic Committee strictly prohibit the use of the event’s trademarks—the iconic set of five multicolored, linked rings and the word “Olympics”—in advertisements or business materials.

Of course, the Olympics has been selling the rights to its trademarks since the 1970s—and policing them since then, as well. However, this year, the IOC and the USOC have gotten tougher on trademark abuse. In fact, two weeks before the Games began in Vancouver, the USOC and the IOC issued a joint press release decrying the practice of so-called ambush marketing, in which companies attempt to profiteer from an illicit association with the Olympics. According to the release, the USOC intends to “actively” respond to such illicit activities.

The push is having a palpable effect on how some companies advertise their products. Tim Hortons recently pulled hockey star and Canadian Olympian Sidney Crosby from the Hamilton, Ontario, coffee chain’s ads to avoid treading on the International Olympic Committee’s Rule 41, which prohibits Olympic athletes from appearing in advertisements for non-Olympic sponsors during the two-week event. (The IOC makes an exception for Olympic sponsors.)

To be sure, the USOC has long held a strict view toward policing the Olympic brand. However, some sponsors—in particular, U.S. financial-services firms that received financial help from the government—have dropped out. In addition, a number of sponsors have begun questioning the benefits of partnering with the Olympics. At the European Sponsorship Association’s annual conference in November, 79% of the 200 leading figures in the sponsorship industry in attendance said that domestic Olympic packages were not a good value relative to their cost. The event’s ability to channel media exposure and added brand recognition has waned since the downturn, according to one conference attendee. Today, those sponsors are calling on the IOC to deliver measurable returns on sponsorship investments.

Given that mandate, it’s little wonder that various Olympics committees are pulling out all of the stops, says Minto. But in this environment, businesses cannot rest on pure sponsorship —or even branded products. “If you’re going to sponsor the Olympics, or any other event, the key is successful activation,” he says. “You have to be creative to try to get the return on investment that you were hoping for.”

At least one small business, WIN Products, a sports detergent maker in New York, has capitalized. During the summer Olympics in Beijing in 2008, WIN became the official detergent of the USOC, but the company picked up some valuable publicity, too. After being featured in an article in The Wall Street Journal in August of that year, grocery giants Publix Super Markets and Kroger began stocking the detergent in their stores, says Mark Konjevod, WIN’s co-founder and CEO. “We avoided paying slotting fees and we got distribution in over 4,000 stores,” he says. “Does an Olympic sponsorship help? You bet it did.”

Write to Diana Ransom at dransom@smartmoney.com