Farmers Group, Inc.’s announcement of a 30-year, estimated $600-million naming rights deal with a proposed NFL stadium in downtown Los Angeles has generated a great deal of attention.

For L.A. area residents, sports fans and the general media, interest has focused on the insurer’s role in coaxing a pro football team back to the City of Angels, plus building a new convention center, creating jobs and promoting economic development in downtown Los Angeles.

The ultimate goal for Farmers and venue developer AEG is for Farmers Field to open for the start of the 2015 NFL season with a league franchise in hand. The stadium also is expected to host the X Games, international soccer matches and other events.

Within the sponsorship industry, the deal has gained notoriety simply by its nature: A company publicly agreeing to the largest U.S. naming rights fee in history for a development project that has not received approval from city or state governments, or a commitment from an NFL franchise.

While the parties to the deal agree the partnership carries some risk, they all remain adamant the venue will be completed and will ultimately host an NFL team.

"We did our due diligence with the NFL and other parties, and we came away with confidence," said Kevin Kelso, Farmers’ CMO and executive vice president. "There would be some disappointment if the project did not go forward, but that’s highly unlikely."

AEG’s track record of building sports and entertainment facilities around the world helped mitigate concerns over the venue not being built, Kelso said, noting that Farmers has sponsored a number of AEG-controlled assets, including the NHL Los Angeles Kings and a soccer game between the MLS Los Angeles Galaxy and FC Barcelona at the Rose Bowl.

But with so many moving pieces, many of which are outside the control of AEG and Farmers, what happens if the development runs into complications? What if the venue is not completed or even started? Will any of the worst-case scenarios tarnish the Farmers brand?

Kelso thinks not. "If the venue isn’t built, it would be a result of politics at the city or state level. People understand we are providing a revenue stream through the naming rights deal, and we are not out there actually building the facility."

Farmers’ contract with AEG includes contingency clauses if the stadium is not completed, he added.

How The Deal Supports Farmers’ Sponsorship Strategy

Farmers, which sells auto, homeowner and other insurance products through roughly 15,000 agents in 29 states, has increased its use of sponsorship over the past three years.

Similar to its latest and biggest deal, the company focuses on naming rights with high profile sports properties in and near L.A., location of its corporate headquarters.

For example, Farmers last year replaced General Motors Co.’s Buick brand with a one-year naming rights deal for the January PGA Tour stop in La Jolla, Calif. Farmers, which renamed the event the Farmers Insurance Open, has since extended the tie through 2014.

Also in 2010, the company took three-year title of the Farmers Classic presented by Mercedes-Benz ATP World Tour 250 series tournament in Los Angeles. Farmers first partnered with the tournament in 2009 as presenting sponsor.

In 2009, Farmers teamed with the WNBA Los Angeles Sparks in a tie that affords exposure on team jerseys.

Farmers has increased its use of sponsorship in part to carve out a place separate and apart from Allstate Insurance Co., GEICO, State Farm Insurance Cos. and other large insurers who spend significantly more on marketing and advertising.

Despite launching a national TV ad campaign five months ago, "we are the third largest personal insurer in the country, but the 11th largest spender on marketing," Kelso said. "We are not blasting the airwaves as much as our competitors and we need to find ways to stand out."

Sponsorship also represents an economical use of marketing dollars, he added, noting that Farmers’ nine-figure fee for Farmers Field is spread out over three decades.

"One of our competitors spends more on advertising in one year than we will spend over 30 years. We think the sponsorship will be an extremely efficient marketing platform."

The Zurich Financial Services subsidiary wants to accomplish two goals with its sponsorships: Gain national media exposure and support local communities.

Farmers is partial to naming rights deals to gain dominant positioning, embed the company in the fabric of the event and make the sponsorship DVR-proof. "We look for opportunities where we are front and center," Kelso said. "We don’t want to be lost in a crowd of other brands."

"Helping local communities is very high on our list of priorities," Kelso said, noting the Farmers Insurance Open has raised more than $1.5 million for local charities while the Farmers Classic is a major source of funding for youth tennis programs in Southern California.

Community involvement also was a major driver behind Farmers Field.

"There are other ways a company could help bring football back to Los Angeles," he noted. "But the sponsorship attracted us largely because of the opportunity to bring jobs downtown and help renovate the convention center, which will have a strong impact on the city."

That sentiment was echoed by Greg Luckman, CEO, North America, for GroupM Entertainment & Sports Partnerships, the agency retained by Farmers to assist with the deal.

"This is not simply a win-win, it’s a game changer. It’s a powerful partnership between two first-class Los Angeles-based companies that are committed to bringing the most dominant U.S. sport to the country’s second-largest market, combined with the positive economic impact on the local community."

(IEG SR publisher IEG, LLC and GroupM ESP are both GroupM businesses, part of the media investment management operation of WPP Group plc.)

Farmers activates sponsorship with its local agents, said Kelso, noting that each agent participates in training programs offered by the University of Farmers, which provides the theme of the company’s TV ad campaign.

Sponsorship and other sports marketing activities help support the company’s best-in-class training, he said. "An association with tournaments, leagues and championship sports events resonates with our agents, each of whom is striving to be the best in what they do."

The agents attend sponsored events to interact with crowds and discuss insurance options, he said.

The company will measure the success of Farmers Field by tracking shifts in awareness and attitudes toward its corporate brand. "You can spend an awful lot of money trying to determine the impact of a sponsorship, but at some point you have to make a judgment," Kelso said. "We are committed to this for 30 years, and at some point we will know if it is a success or not."

Farmers also sponsors 17 state high school organizations to build exposure in local communities and gain one-on-one touch points for agents. The company’s corporate headquarters helps fund local sponsorships in conjunction with agents.

Farmers was the ninth largest property/casualty insurer in 2009 in terms of net premiums written, according to A.M. Best Co.