BMW had to apologize for bad weather. It all began when their advertising agency decided to buy naming rights to a high-pressure area. Like hurricanes are named alphabetically in the U.S., high- and low-pressure weather areas that approach Central Europe have human names. Here, though, rather than a meteorologist, you can decide what the weather will be called. You just have to buy a letter from a German weather institute.
It cost BMW $394 to get “C.” Hoping to remind people of their Mini Cooper, they selected Cooper. However, instead of cool, crisp wintry weather, the “Cooper front” was disastrous. With hazardous conditions, extreme cold, and temperatures sinking way below zero, more than 100 people died. BMW even had to issue a statement explaining, “It was not intentional, and you cannot tell in advance what a weather system will do.”
Responsible for naming weather areas since 1954, the Berlin Institute for Meteorology created its “Adopt a Vortex” program in 2002 when it needed funding for a student weather observation program. You can look here to see the letters that are still available for 2012. High-pressure systems cost more than lows because they last longer.
Similarly, U.S. municipalities are using naming opportunities to fund their depleted coffers. In Philadelphia you can board the subway at an AT&T stop and in Brooklyn, NY, Nestle named the Juicy Juice Park.
The Economic Lesson
An economic lens takes us to the opportunity cost for a municipality when evaluating naming rights. The opportunity cost of a decision is the next best alternative. It is the alternative that is sacrificed.
On an opportunity cost chart, the alternative choices for a train stop could be “The Broad Street Stop” or the “Pizza Hut Stop.” The benefit of Broad Street is locational information. The benefit of the Pizza Hut name is municipal revenue. Which are you willing to sacrifice?
An Economic Question: As a municipal official, what naming rights might generate the most revenue?Read More