Take the sponsorship plunge

2005 - Instead of spending big bucks on advertising,savvy firms are investing in high-impact sponsorship. Kristina Greene reports

At first mention, the cocktail world cup does not sound like the biggest sporting event on the planet.

But with broadcast coverage in New Zealand, Australia, and the United States, 42below, the Kiwi vodka company sponsoring the event, got its money's worth. Advertisements of that sort can cost hundreds of thousands of dollars.

42below chief executive Geoff Ross says there is no dearth of events to sponsor. "The question is 'What do we want?' Those that are unique will get notoriety because of the publicity involved.

"You have got to do things that are high-impact to get any residual impact. I guess we don't run from what is provocative or contentious."

Waikato University's associate marketing professor, Ron Garland, is reluctant to ascribe any miraculous effects to sponsorship, but he concedes that the more noticeable the event the stronger its effect on minds – and this does not necessarily mean companies need to disburse significant sums.

"You try to connect your firm with the unexpected. The chances are this will cut through the usual clutter of ads."

Professor Garland says the importance of sponsorship appears to be growing in New Zealand as companies' marketing strategy matures.

Sponsorship is used in connection with sales and promotions, and firms attempt to measure the effect, he says. Management is increasingly professional with event organisers courting possible sponsors.

"Gone are the days when all you needed to do was put your hat out. Getting sponsored is now a competitive business and requires a plan.

"We have caught up with overseas practice and are on an equal footing as regards the money spent and the types of event."

Though large-scale corporates have been active in professional sponsorship activities since the late 1980s, smaller businesses have gained ground, Professor Garland says.

Kaweka Food Company managing director David McLellan has just begun to appreciate the potential returns of branding through sponsorship engagements. His meat-based products reached the market last December and Mr McLellan was keen to make the company name known and associated with positive values. In February, he gave $5000 to the Kaweka Challenge, a mountain race with little prominence despite its 16-year history, and is looking at shouldering costs for the entire event next year.

Mr McLellan's aim is to more than double the number of participants. "It's one of the highest ranges and reportedly one of the toughest races, but it doesn't register on the radar. It has this low-key, volunteer, friendly atmosphere. "We would like to make it more visible and a more valuable tool for us as a sponsor. We'd like to raise the bar on the level of professionalism, put up prizes, get coverage and get the athletes that generate the coverage."

Mr McLellan says the idea was to find a logical link between his packaged meals and outdoor activity, but in the end the company and staff of eight gained more than publicity out of the event.

"It was just great for team spirit. Everyone loved being part of it," he says. Professor Garland says smaller enterprises are likely to become more professional and spend larger sums on sponsorship but total communications budgets are not likely to increase.

"I imagine a shifting around in budgets between advertising and sponsoring could take place as television channels become increasingly fragmented." Mr Ross from 42below says he spends more on sponsorship than advertisements. There is more risk involved, but returns can be a great deal higher.

"You have to avoid anything obvious. If an idea is not exciting you and making you nervous, it's probably a bit too pedestrian."

No information is available about sponsorship spending in New Zealand, but Wellington consulting firm Foresee Communications believes only 70 to 80 corporates employ a dedicated sponsorship manager or have a full sponsorship strategy.

According to a report commissioned by British strategic consultancy Redmandarin on European sponsorship, 12 per cent of sponsors do not set objectives or know if any objectives have been set before they commit to sponsoring.

"In many respects, the days of the chairman's whims are still very much with us," Mark Knight of Redmandarin says.

Though smaller, owner-operated businesses have a more rigorous approach to sponsorship and are a lot more demanding of sponsorship contracts, the research highlights a discrepancy between ideal and actual sponsorship practice.

"Good planning" and "development of a sponsorship strategy" are rated as the most important factors to ensure a successful sponsorship campaign, but less than a quarter of respondents believe their organisation is "very effective" at measuring sponsorship return on investment.

Little more than half of participating companies report using an external consumer market research agency to track the efficiency of sponsorship on their brand.

Foresee reports there is a lack of clarity and understanding among small businesses about when to use sponsorship and its specific strengths as a marketing communications tool.

This lack of understanding is limiting the most effective and efficient use of sponsorship, chief executive Heather Newell says.

In deciding whether to keep sponsorships in the portfolio, decisions are being based on people and relationships rather than on hard data. An encouraging number of organisations are conducting primary research into their target audience before making a sponsorship commitment.

"However, it is not clear whether this type of research is conducted to inform future thinking or whether it is more frequently used to post-rationalise a decision to sponsor," Ms Newell says.

The effects on brand awareness are accordingly feeble. Research reveals most people are not able to name a company when asked to name organisations that provide financial support to the arts in the form of sponsorship. However, when conducted productively, sponsoring activities can do a business as much good as it does the brand.

MacPac marketing manager Simon Gerathy says the outdoors gear company has had strategic relationships with athletes from its start 30 years ago. "We sponsor people at the edge of performance and that makes us push the technology (engineering their gear). We then go from that and develop derivatives for the mass market," Mr Gerathy says.

The Christchurch company signs up adventurers, climbers and multi-sports people, providing gear and funding in return for maximum public exposure during and after events.

His company seeks out highly publicised occasions, such as the adventure racing world championship, to be held on the West Coast in November, and thus initially receives big news coverage, he says. However, the goal is to obtain lasting effects. Sponsored athletes can prolong publicity by touring the country for slide show lectures, speaking engagements or writing books.

"The Adventure Philosophers Antarctic kayaking expedition was in 2001 – and just yesterday I received another photo request from the book. Ideally, longevity can be five years plus," Mr Garethy says.

The key is developing a sponsor relationship and remaining committed to it, as this allows a company to gradually build up credibility and gain public awareness, which does not grow overnight.

"You have to recognise there is an investment period before you get any payback."

But firms willing to engage in a lasting sponsoring partnership should be aware that costs are greater than the initial, event-related outlay.

"You are looking at a three-to-one ratio. For every dollar spent at the event, you will need three more to obtain leverage."

What counts is being present in people's minds and obtaining a leverage effect. "People may never go out and climb a mountain, but they could start cycling on weekends."

He says sponsorship is particularly important to assert the company's presence when entering a new market.

When MacPac made its entry in the North American market last February, sponsorship was again the vehicle.

However, though it is now in the focus of marketing managers, it is no cure for all, he says.

When asked, "Do you go out of your way to buy the products or services of organisations that offer such sponsorships?" by Marketing Magazine in 2004, 75 per cent of respondents answered no.