Samsung Electronics' willingness to start severe austerity management has been shown in the likely termination of sponsorship for an overseas professional soccer team, which requires a cash injection of hundreds of thousands of won per year.
The tech giant said that the reason for the termination is the limits of advertising effects, but many in the industry interpret Samsung's move as part of measures to tighten its belt due to deteriorating performance. It means that the company has started to cut costs in sports marketing abroad, following sales management and business in general such as airfares, travel expenses, and advertising and sales promotion costs.
According to Samsung associates on Oct. 5, Samsung is likely to terminate its uniform sponsorship contract with the Chelsea Football Club this year, which has continued for 9 years. In that case, the company's overseas sports sponsorship as a marketing strategy will virtually end.
A Samsung official said, “We are reviewing whether or not to renew our uniform sponsorship contract with Chelsea Football Club. But there are increasing concerns that advertising effects are relatively minimal. So, I think that we are not going to renew the contract.”
The firm is not officially revealing the amount of sponsorship per year, but it is said to be around 30 billion won (US$28 million), since LG Electronics has reportedly been investing a similar amount in supporting Bayer Leverkusen, a German football club playing in the Bundesliga, the top tier of the German football league, since Aug. 2013.
Industry analysts are saying that Samsung's move has been somewhat anticipated. The company drastically cut the advertising and sales promotion costs at home and abroad in the first quarter of this year, and also reduced travel expenses in the second quarter. As for advertising costs, 327 billion won (US$306 million) were spent in the first quarter, merely one-sixth compared to the same period last year.