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Sponsorship Chapter 15
Chapter Summary • With industry leaders projecting a future growth rate in sports sponsorship of 7 percent per year, it is apparent that sport sponsorships will continue into the next century. It is essential for the sport manager to fully comprehend this marketing element. • The relationship between a sport organization and event owners involved with sponsorship must include advantages to both parties. A well-developed sponsorship can provide market value and increased profits for corporations, scarce operating revenues for sport organizations and events, and a full spectrum of sports events for participants and spectators. • Through a properly structured sponsorship agreement, one can ensure that benefits for both the sport organization and the sponsor(s) are achieved. • With models derived from existing sponsorship proposals and agreements, one can develop the skills necessary to succeed in the exciting world of sport sponsorships.
Philosophical basis for sponsorship • Definition of sport sponsorship • Exchange theory: If you give me something, I’ll give you something • A situation wherein a sport organization grants the right of association to another company or organization • Irwin (1993) “in years past, corporations provided financial assistance to sporting events and athletic programs for philanthropic purposes, but today’s corporate interests are strictly promotionally motivated.”
Philosophical basis for sponsorship • Key to making a sponsorship proposal is to provide a comparison of the requested amount to competitive advertising costs and values • Measurement of return on investment (ROI) • Is there an equivalent increase in sales attributable to the sponsorship? • If a promotion is not effective in increasing sales within a six-month period, it will never produce sales
Philosophical basis for sponsorship • Sponsorship may send a more convincing message than traditional advertising • Virtual signage • Allows a broadcaster to electronically insert an image onto any one-color surface, including a playing field or boundary • Two of the most prominent are finance and media exposure
Researching sponsorship prospects • Obtain a thorough understanding of the corporate sponsorship environment • Gain access to corporate literature • Annual report gives details profits and losses and gives a forecast for the coming year • May be accessed at www.sec.gov or through a stock broker • Public Register’s Annual Report Service, www.prars.com • Research the corporation’s prior sponsorship experiences
Examining Sponsorship Objectives • Target markets • Careful match between the demographics of the sponsor’s consumers and the audience/participants of the sports event • Organization can collect its own data • It can use secondary data collected by a commercial firm • Geographical reach of the sponsorship is also important
Examining Sponsorship Objectives • Product sampling opportunities • Single best way to convert people • Compare the cost of the sampling to the anticipated return • Can convert about 10 percent of product users to the company’s product
Other considerations • Client entertainment • Business-to-business (B2B) • Skybox ownership • VIP parking and seating • Hospitality suites • Specially designed event apparel • Management of an event • Image of the products and services offered must result in a good match
Other considerations • Sponsorship options • Individual athletes • Facilities • Events
Other considerations • Sponsorship models • Corporations often would rather deal with large projects than be burdened by a multitude of small ones • High-cost deals are more profitable and less work than numerous small ventures • Important to offer several options in the sponsorship agreement, ranging from exclusive ownership of all events to smaller and less expensive options
Other considerations • Sponsorship agreement • Terms like title sponsor and official supplier have no standard meaning in the industry • Need to preserve the value of the sponsor’s exclusivity • Each partner should strive to protect each other’s trademarks and logos • Both parties need to be protected from liability through insurance • Agreement must include details on the use of the sponsors and event logos, including facilities and uniforms • Protection against unfulfilled promises should be addressed in the contract • Types of event signage, the number, location, and responsibility for making and hanging them are important • An organization’s mailing lists and the use of individual athletes are often key factors • If a participation contract exists with an athlete, this stipulation should be part of the contract • Sponsorship activities must be directly tied to the company’s marketing plan
Pricing sponsorships • Cost-plus method • Involves calculating the actual expenses incurred in providing the sponsorship package with an inclusion for profit for the organization
Pricing sponsorships • Competitive-market strategy • Early in the development of sport management, leverage was on the side of the event holder • As more sport organizations and events entered the field, leverage shifted to the companies which could choose options
Pricing sponsorships • Relative-value method • Based on the market value of each sponsorship component • Valuation • Most critical aspect of pricing • “What is the real value of anything?”
Implementation • Execution of each detail in the sponsorship agreement is the implementation goal • Harvard project review • Critical-path method (CPM) • Project evaluation and review technique (PERT)
Implementation • Sponsor must clearly understand that purchasing a sponsorship is only part of its commitment • Must leverage its association across all of its marketing elements • Generally accepted ration suggests that a sponsor must spend at least as much money promoting its association with the event at it paid for the rights
Controversies • Major tobacco companies signed an agreement in 1998 that restricted all tobacco sponsorship of sporting events • Ambush marketing • A promotional strategy whereby a non-sponsor attempts to capitalize on the popularity/prestige of property by giving the false impression that it is a sponsor
Controversies • High schools in the sponsorship ‘frenzy’ • Score boards provided by drink sponsors • School-wide sponsorship to drink companies • Venus sponsorship and naming rights
Trends • Extreme sports – target the youth market • Advancement of “grassroots” sponsorships • Increasing corporate exposure and consumer awareness were highly rated corporate objectives • Increased potential for product sampling and prototype testing
