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Automotive Holdings to sponsor Melbourne Football Club

Australia’s largest automotive retailer Automotive Holdings Group (ASX: AHE) has announced a three-season major sponsorship deal effective immediately with the Melbourne Football Club (Melbourne Demons) in the AFL. The sponsorship agreement will see the logo ahg.com.au branded across the front and back of the Melbourne Demons’ playing jumpers and will also include “outstanding exposure within the MCG during Melbourne’s home games.”

In commenting on the decision, Managing Director Mr Bronte Howson stated that, “This is a great branding opportunity for AHG and especially for our online presence.” Given AHG is focusing the sponsorship agreement on its online portal it is likely to have attracted the attention of Carsales.com (ASX: CRZ). It is a move that suggests AHG is prepared to use its marketing spend to attempt to generate increased business internally rather than letting the profits flow to Carsales.com. Likewise fellow listed automotive retailer and shareholder AP Eagers (ASX: APE) will no doubt be watching the move by AHG with interest.

Marketing and advertising is a significant and important investment for most businesses. With the dispersion of advertising channels due to the increased time being spent on the internet rather than in front of the television, listening to the radio or reading a newspaper or magazine, companies have to rethink the most effective ways of communicating with their customers. Sport remains one of the prized channels for communication and at least partially explains QBE Insurance’s (ASX: QBE) ongoing association with the Sydney Swans and Santos’ (ASX: STO) sponsorship of the South Australian biking event The Tour Down Under.

Foolish takeaway

Automotive Holdings achieved a record result in the financial year ending June 2013, with sales reaching $4.3 billion and net profit after tax up from $64.1 million in the prior year to $72.7 million. Clever marketing such as this sponsorship deal could see sales and profits go even higher if the firm can successfully advertise its “online store” to a wider audience.

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