A View From The Inside

Sponsorship continues to grow at a faster pace than all other marketing channels, read to find out our views as to why?

Sponsorship continues to grow at a faster pace than all other marketing channels, with a global increase of 12% forecast for 2001 (source: IEG). Why? As media fragments ever further, and consumers secure the option to avoid ads altogether (welcome the brave new world of TiVo, arriving imminently to a television near you), communicating brand or product promise is no longer enough. Consumers need to experience and encounter brands, and sports sponsorship provides the means to hit the pulse through an activity they have a passion for. Good news for sponsorship seekers and agencies, but a true reflection of increased interest?

First, a word of caution. Let us not forget that the sponsorship industry is notoriously secretive over expenditure. Some sponsors report total budgets, others a rounded indication of the spend on rights fees alone, others say nothing at all. Rights fees for major events have increased exponentially, and whilst the economics of supply and demand play a role here it is also true that some sponsors invest in properties without fully grasping the costs and benefits of doing so. Whilst the rights holder might breathe a private sigh of relief whilst swiftly banking the cheque it is probable that as more sponsors wise up, rights fees will consolidate to reflect more accurately the true value of the rights on offer.

The sponsorship industry is finally shaking off its perception as a poor relation to advertising. Accountability for sponsorship within corporations for sponsorship is moving up the corporate food chain, as awareness increases of the role sponsorship can play in adding to shareholder value. Whilst a Chief Executive may have little or no involvement in the decision making on a press advertising campaign, you can be sure that the latest sports sponsorship programme will be discussed around the board table. And yet still decisions to sponsor, or not, are ludicrously taken at a senior level based on personal interest rather than strategic logic.

The agency sector continues to grow, the monolith agencies get bigger, specialist agencies fill the gaps and provide the strategic direction which cannot be objectively provided by those agencies who sell rights too. And witness the rush by the big ad agency groups to establish a position in sponsorship, driven by the demand of clients and the recognition that the advertising sector is not what it used to be.

But while sponsorship continues to explode, it is also changing, very rapidly indeed. The very definition of the word has become less rigid, and indeed not used at all by some sectors, in the belief it smacks of exploitation and interference. Savvy rights holders continually remind their public that without their corporate “partners” or “associates” the event would not be taking place, all the while recognising that while the cash in the bank might be nice, the marketing value that sponsors can provide in attracting new fans and interest in the sport can far exceed any rights fees paid.

There will be plenty of rights holders who may be ruing the day they first heard of the supposed dot.com gold rush. Helping to hugely inflate advertising spot costs and rights fees one moment, many dot.com sponsors disappeared the next, leaving bills unpaid and a large dose of ill-feeling all round for good measure. Due diligence has become a must-do, and specialist sports and sponsorship lawyers continue to thrive.

Good sponsors are spending more on doing less. Gone are the days when a successful sponsorship programme was measured on the number of perimeter boards bought across the widest range of sports in the greatest number of markets. Good sponsors are taking a long, hard look at the number of properties they sponsor and cutting back, significantly. Brand awareness alone is no longer enough. Good sponsors are going deeper, leveraging their association with a sport or event from top to bottom. Exclusivity is not the be-all and end-all it once was. Categories are now sliced so thinly by rights holders they are rendered meaningless. Good sponsors are turning to those events that recognise the value of appropriate bed partners, that encourage meaningful cross promotions, for the greater good of the sponsors and the sport. And where those events are priced too high, sponsors are creating and owning their own, in order to secure a greater control over its destiny and format.

Sponsorship is not without risk. The warm fuzzy glow achieved by marrying the right event with the right brand can disappear very quickly when the boat sinks, the player breaks a leg, brown envelopes change hands or fans fight. Any rights holders who sell to corporates who don’t have a clear strategic rationale, and who believe that buying the rights to a logo or perimeter boards is sufficient, may find their contracts very short lived.

Some rights holders rush into selling, and some sponsors are quickly wooed into buying. But rights holders need sponsors, and sport can be a hugely effective way of cutting through the media clutter for brands and corporates. Both sides of the negotiating table need to recognise the critical need for careful, structured planning and return on investment analysis if long term effective partnerships are to be achieved.

Sally Hancock
Chief Executive
Redmandarin