United deal makes business sense

Jan 20 2010 by Andrew Heden, The Journal

THE response to Northern Rock's surprise decision to renew its shirt sponsorship of Newcastle United was predictable in one respect and surprising in another.

While the Daily Mail and Daily Telegraph rounded on the move as an appalling waste of taxpayers’ money (shock), their effort to line up critics to condemn the decision was notably pathetic.

In fact, the sum total of their combined endeavours to stoke the anger of Middle England resulted in two hardly unexpected critics – Robin Ashby of the Northern Rock Small Shareholders Group and the campaign director of the Taxpayers’ Alliance. Rock chief executive Gary Hoffman won’t need to cross either of them off his Christmas card list.

So how do we explain this widespread acceptance of what, on the face of it, is certainly a controversial decision? Well perhaps, on reflection, because the deal makes sound business sense.

One thing Northern Rock could not be criticised for during its heady pre-crash days was any lack of effort – or success – on the marketing front. In fact, its high-profile branding ultimately made its downfall a bigger story than its actual size perhaps justified.

Now the Rock is once again attempting to rebuild its customer base – a course that is widely accepted as being the best thing for the taxpayer – it only makes sense that it again raises awareness of its brand. And this means spending money on marketing, advertising and sponsorship. How else can we expect the bank to be rebuilt into something that has a realistic market value that can ultimately be realised to the taxpayers’ benefit?

The final decision on what makes sound business sense has to be left to the bank’s management – and Mr Hoffman is no mug when it comes to these matters. He was in charge of Barclaycard when it took over as sponsor of the Premier League. And it will not have been lost on him that the renegotiated deal with Newcastle United is a generous one for the bank, being unusually closely related to the club’s on-the-pitch fortunes. The Rock could pay as little as £1.5m for this four-year deal, which is a bargain in anyone’s eyes given the size of the club (regardless of what division it is in). This deal is a brave move by Mr Hoffman - but the right one.

None of which really fits the national newspapers’ agenda of condemning anything associated with this “failed” northern bank and – by association – this unpopular government.

Presumably these newspapers don’t think that Northern Rock paying for huge adverts in their titles is a similar waste of their reader’s hard-earned cash? If so, they should refuse to carry them.

Andrew Heden, The Voice of nebusiness