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Sponsorships and Events (part A)
by
Charles Lamson
The Growth of Sponsorship
Advertising and public relations people get involved in sponsoring many kinds of special events. In fact, sponsorship may be the fastest-growing form of marketing today. It actually embraces two disciplines: sales promotion and public relations. Some sponsorships are designed to create publicity, others to improve public relations through personal contact and affiliation with a worthy cause, and others to immediately improve the bottom line.
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A sponsorship is a cash or in-kind (Payment-in-kind (PIK) is the use of a good or service as payment instead of cash. Payment in kind also refers to a financial instrument that pays interest or dividends to investors of bonds, notes or preferred stock with additional securities or equity instead of cash.) fee paid to a property (which may be a sports, entertainment, or nonprofit event or organization) in return for access to the exploitable commercial potential associated with that property. In other words, just as advertisers pay a fee to sponsor a program on radio or TV, they may also sign on to sponsor a bike race, an art show or chamber music festival, a fair or exposition, or the Olympics. The sponsorship fee may be paid in cash or in kind (that is, through a donation of goods and services). For instance, if a local TV station signs on as a sponsor of a 10K run, it will typically pay for some part of its sponsorship with advertising time for the event.
While the sponsored event or organization may be nonprofit, sponsorship is not the same as philanthropy. Philanthropy is support of a cause without any commercial incentive. Sponsorship (and a related strategy, cause marketing) is used to achieve commercial objectives.
The reasons for the phenomenal growth of sponsorships relate to the economics of marketing, the escalating costs of traditional advertising media, the fragmentation of media audiences, the growing diversity in leisure activities, and the ability to reach targeted groups of people economically. Initial growth probably came from the tobacco and alcohol companies, which many governments banned from broadcast advertising. Recent legislation in the United Kingdom, Canada, and the United States threatens to end tobacco sponsorships altogether, but their success at sponsoring sports and events has shown the way for mainstream advertisers, who are rapidly picking up the slack.
Today there is greater media coverage of sponsored events---everything from beach volleyball to grand prix horse shows to Xtreme games to cultural events. This provides a highly desirable venue for advertisers seeking young, upwardly mobile, educated customers. Likewise, for transnational markets there is growing interest in global events such as World Cup soccer, the Olympics, and the America's Cup yacht race. Even traditional business-to-business marketers, such as Sweden's Ericsson Corp., are making a play for greater brand awareness in the United States by sponsoring the World Championships of Beach Volleyball, which is staged and marketed by Nike.
Benefits of Sponsorship
In the past, for marketers with limited media alternatives (such as tobacco and alcohol companies), sponsorship offered a means of communication with customers and prospects. Today, the many benefits of sponsorship are well-documented and more far-reaching.
More than almost any other marketing tool, sponsorships and events have the ability to involve customers, prospects, and other stakeholders. Naturally, events vary in degree of participation. A person attending a seminar or workshop will have greater involvement with the sponsor than someone attending a sponsored stock-car race. However, events are also highly selective of their target audience. Someone who actually attends a stock-car race will most likely have a higher degree of interest than the average person. So marketers that define their audiences tightly can select just those sponsorships that offer the closest fit. Of course, marketers that sponsor an event simply because it has a large audience are misusing this tool.
Unlike advertising, sponsorship and events can provide face-to-face access to current and potential customers. Depending on the venue, this access can be relatively clean and uncluttered by competition. Sponsoring a seminar, for instance, creates an opportunity for both customer education and brand involvement. In some cases, it even enables product demonstrations and the opportunity to give a personal sales pitch to multiple prospects at a time when they are open to new information. This is especially good for business-to-business marketers.
A significant benefit is the opportunity to enhance the company's public image or merchandise its positioning through affiliation with an appropriate event.
Also important, but often overlooked, is the effect sponsorship can have on employees. Affiliating with a dynamic event can really boost the morale and pride of the troops in the trenches. And many companies offer attendance at the event (Super Bowl, Olympics, etc.) as an incentive to their sales staff.
Some marketers have discovered that sponsorships can rapidly convert fan loyalty into sales. One fan told Greg Penske, president/CEO of Penske Motorsports, how upset he was that NASCAR driver Rusty Wallace had switched from Pontiac to Ford: "I'm only one year into my Pontiac lease and it's costing me $3,000 to get out of it and into a Ford"
Finally, sponsorships can be very cost-efficient. Volvo International believes the media exposure it gets from its $3 million sponsorship of local tennis tournaments is equivalent to $25 million worth of advertising time and space (2005).
Drawbacks of Sponsorship
Like all marketing communications tools, sponsorship has some drawbacks. First, it can be very costly, especially when the event is solely sponsored. For this reason, most companies participate in cosponsored events, which spread the cost among several participants.
The problem with cosponsored events is clutter. Some events have so many sponsors that getting one marketer's message through is extremely difficult. Look again at stock-car racing. How many logos do those cars sport?
Finally, evaluating the effectiveness of a particular sponsorship can be tricky at best---especially since it rarely happens in a vacuum. The problem is in separating the effects of a sponsorship from the effects of other concurrent marketing activities.
*SOURCE: CONTEMPORARY ADVERTISING 11TH ED., 2008, WILLIAM F. ARENS, MICHAEL F. WEIGOLD, CHRISTIAN ARENS, PGS. 350-352*
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