The 2010 World Cup

The 22 men on the field in each game will be aiming for two goals. But host nation South Africa has bigger objectives for the 2010 FIFA World Cup, the most prominent sporting event ever to be held on African soil.

Multiple stakeholders have already made large investments in the World Cup, based on their expected return on investment (ROI). However, what’s the best way to measure the ROI of the World Cup itself? Traditional measurement models, such as net present value or nation brand audits, fail to integrate quantifiable and intangible returns.

This paper is a synopsis of research conducted as part of Kellogg’s Global Initiatives in Management program into a new ROI model that includes calculable and non-calculable factors in projecting returns of the 2010 World Cup for various stakeholders. The model can be applied to other sporting events of this scale for a range of host countries at different development stages.


Who are the Stakeholders?

Several stakeholders have significant involvement—and investment—in the 2010 World Cup.

South Africa and Southern Africa

South Africa’s presence on the world stage has been complicated by its history of apartheid and high incidence of HIV/AIDS. A successful World Cup would give the country a rebranding opportunity. South Africa faces two key questions: (1) Can its infrastructure support an event of this scale? (2) Should the country be investing its resources in social initiatives over sports?

South Africa is confident about saying yes to the first question: it has prepared ten stadiums—including five new ones—for the World Cup. Meanwhile it is building a bus-and-train network to enhance intra- and intercity travel.

On the social front, South Africa has had to overcome a number of incidents that hurt the country’s image abroad, including the indictment, eventually dropped, of President Jacob Zuma on corruption charges. Another incident directly related to the World Cup was the 2009 murder of FIFA Local Organising Committee (LOC) member Jimmy Mohlala after he opened an investigation into corruption in the building of the Mbombela Stadium. Against this backdrop, South Africa has promoted a rebranding campaign featuring the tagline “It’s Possible” and messaging regarding the country’s “can-do” attitude. The rebranding effort is crucial: the World Cup attracts hundreds of millions of viewers worldwide and nearly 20,000 press representatives.

Of course the country’s economy is expected to benefit from the World Cup, notwithstanding the large investment in infrastructure—estimated at about 10% of the government’s total infrastructure spending. The games are expected to attract 400,000 visitors spending just over $1 billion. FIFA and the government are working to create games-related growth opportunities for entrepreneurs.

How will the World Cup affect South Africa’s population at large? Beginning in 2010, FIFA has focused on improving social impact, including introducing a cheaper ticket class ($20/ticket) that will be affordable to a wider portion of the population. The LOC has joined forces with local community groups to create an adopt-a-school program whereby representatives from competing nations will visit schools to discuss their cultures. Yet, despite such efforts, some believe the games will fail to benefit South Africa’s poorest. For example, a firefighter in Nelspruit, where a new stadium is being built, says, “The contractors closed the school to turn it into a [stadium-worker] dormitory . . . We who live here still have nothing, only thousands of unemployed.”

South Africa’s neighbors, including Botswana and Zambia, are also expected to benefit from the games. The former plans to host teams knocked out of the competition early. Even strife-ridden Zimbabwe plans to seize tourism opportunities.

FIFA Sponsors

Among FIFA’s three tiers of sponsors—Partners (e.g., Coca-Cola, Visa), World Cup Sponsors (McDonald’s, Mobile Telephone Networks), and National Supporters (Telkom)—no Partners and only one World Cup Sponsor is South African (Mobile Telephone Networks). Coca-Cola is using sponsorship to strengthen its position in South Africa, one of its top ten markets, by targeting males ages 12 to 29 and designating “recycling ambassadors” at local schools. Visa plans to use its sponsorship to build relations with local merchants, banks, and consumers through merchant incentive programs and to offer products like prepaid cards (featuring World Cup mascot Zakumi) to bottom-of-the-pyramid segments.


Traditional ROI Models

So how do these stakeholders assess the value of their participation in the 2010 World Cup? In this context, ROI is a crucial measure, and there are several traditional measurement models.

The net present value (NPV) model reduces investment inputs and expected returns to a simple positive or negative value. To gauge the World Cup’s value to South Africa, the NPV would include required capital expenditures, along with returns expected from tourism and foreign investment. A shortcoming of this model, however, is that not all potential returns can be quantified (e.g., future tourism inspired or social impact).

Another method of measuring ROI is a brand audit, which assesses the investment’s impact on brand equity through focus groups, brand perception surveys, and other means. While useful, a brand audit does not provide a financial measure of return, may be subject to sample bias, and is too limited to capture perceptions of a nation.

For understanding perceptions of countries, the Anholt-GfK Roper Nations Brand Index (NBI) measures the public’s image of a given nation on dimensions including exports, governance, culture/heritage, people, tourism, and investment/immigration. But like brand audits, the NBI excludes financial metrics.


Expanded ROI Model

South Africa’s World Cub would best be evaluated with an enhanced ROI model, to capture tangible and intangible factors. The model here was constructed around four core dimensions: financial implications, long-term brand implications, “halo” brand implications, and strategic implications.

Financial implications focus on revenue generation (including breakeven points), costs (including infrastructure-related expenditure and costs of goods sold), and broader macroeconomic impacts (such as local jobs created). Long-term brand implications comprise brand strength (potentially measured by the NBI for nations), market share for sponsoring companies, and brand awareness (whether the public recalls a country’s or brand’s participation in an event). “Halo” brand implications include the effects of promotional/paid placement (like signage), coverage by traditional and non-traditional media (like reporters and bloggers), and “creative X-factor” (the buzz around a brand, region, or event, particularly stemming from new media). Finally, strategic implications include the cup’s social impact, growth infrastructure (as in a way of supporting future growth), and strategy sustainability (the permanence of improvements on any of these dimensions).

Naturally this expanded model has strengths and weaknesses. Strengths include the addition of qualitative factors for a more holistic view of returns, the ability to recalculate ROI over time, and the ability to benchmark more thoroughly against past events (e.g., comparisons among of the magnitude of the Olympics and World Cup). Weaknesses include more room for potential miscalculation, inflation, and faulty comparison, especially in qualitative categories such as brand strength.


Measuring ROI for Each Stakeholder

Using the expanded model, ROI can be considered for each 2010 World Cup stakeholder.

South Africa and Southern Africa

South Africa will see significant influx of revenues with the World Cup, largely from tourism. Longer-term, the new stadiums will be used for other events, driving more revenue. Of course there will be considerable costs behind these returns: South Africa’s government has committed over $1.7 billion to cup-related infrastructure projects and over $100 million to tourism-related investments, along with $60 million toward security. These figures are compounded by the recent weakening of the rand, South Africa’s currency. Nonetheless, by some estimates, the World Cup will generate close to $1.3 billion in direct spending and 160,000 new jobs.

There’s also ample opportunity for the country to strengthen its brand, from the cultural/heritage dimension to the hospitality of its people. It will be important to shift recent memories of oppression into new perceptions of opportunity. In this context, the cup’s social impact initiatives are especially important—the World Cup is an opportunity to inspire (or re-inspire) citizens worldwide to believe that social equality is possible in South Africa. South Africa must also work to make the improvements sustainable—from the ability of the new stadiums to attract revenue to the benefits of improved transportation networks.

South Africa’s neighbors are making smaller investments in World Cup-related improvements, so assessing their ROI may require a less robust model.

FIFA Sponsors

Sponsors such as Coca-Cola can use the 2010 World Cup to further their brands on the world stage. Coca-Cola should see a slight increase in unit sales of its mass products, but must balance this with the costs of sponsorship, including labor and promotional giveaways. Thus, long-term brand implications are fundamental to Coca-Cola’s ROI. Pre- and post-event market share will be one indicator of success, as will positive mentions across media channels and the effects of recycling initiatives.

Like Coca-Cola, Visa can expect some revenue generation from the World Cup (e.g., increased usage by visitors), but offset by sponsorship costs, including contractual fees and marketing expenses. Visa can also gain in terms of brand strength (especially as a first mover in the region) and through its social impact by providing more financial options for the bottom of the pyramid and the growing middle class.

Overall, South Africa and FIFA sponsors seem well-poised to capture short- and longer-term benefits from the 2010 World Cup. Importantly, gains in one ROI dimension (e.g., creative X-factor) can boost others (e.g., brand strength). Even economic and social elements can be linked: the new stadiums can be used for youth programs. Thus South Africa and other stakeholders, including future World Cup hosts like Brazil, should take into account all tangible and intangible dimensions in planning for such events to maximize an expansive definition of ROI.