Sponsorship Fundamentals

Introduction

To be a marketable athlete, individuals and their support teams need to know about the main elements of sponsorship as a marketing tool and how commercial relationships work. This article provides an outline of sponsorship fundamentals, understanding marketing audiences, the concept of leverage and how sponsorship works from the sponsor's point of view.

1. What is sponsorship?

  • Sponsorship is a cash and/or in-kind fee paid to a property (typically in sports, arts, entertainment or causes) in return for access to the exploitable commercial potential associated with that property.
  • Sponsorship plays a different role to advertising - it is a unique way of engaging and interacting with an audience where they are most passionate. In Australia's competitive market effective sponsorships are linked to marketing and brand objectives; sponsorship is far more sophisticated than signage or logo placement on athlete clothing.

"If advertising waves at the audience, sponsorship has the ability to get close enough to shake it by the hand"

Sponsorship and Marketing Terms

  • Rights Holder the entity selling the sponsorship .i.e. sporting federation, broadcast network, athlete, or event.
  • Rights fees the agreed dollar amount a sponsor gives to a rights holder.
  • Contra goods and services provided instead of cash.
  • Exclusivity providing exclusive access to sponsor, usually in a designated category i.e. telecommunications.
  • Leverage further marketing activity undertaken to activate and promote the sponsorship.
  • Leverage ratio the leveraging dollars spent in comparison to the sponsorship cost.
  • Sponsorship assets specific rights and benefits determined in the agreement.
  • Above the line -  free to air or cable TV advertising.
  • Below the line -  print, direct mail, public relations, point of sale activity.
  • Digital website, social media including twitter, Instagram, Facebook, LinkedIn. There are many other smaller platforms the sponsor could include.
  • Image and Likeness the visual use of the athlete in marketing usually in the form of photography, illustration, name, text.
  • Crossover appeal popularity of the athlete/property across broad demographics and generations.
  • ROI - Return on investment

Different type of sponsorship

In Australia sport dominates the sponsorship spend due to its popularity and role it plays in Australian culture. Sponsorship categories include:

  • Sports (Events, teams, athletes)
  • Broadcast
  • Arts/culture
  • Venue (stadia)
  • Digital
  • Cause/charity

Main sponsorship categories in Australia

  • Sports apparel
  • Automotive
  • Alcohol
  • Government
  • Financial Services
  • Soft/Energy drinks
  • Telecommunications
  • FMCG (Fast Moving Consumer Goods)

Thought starter- What sectors and companies are currently sponsoring your sport? Which companies would be likely sponsorship targets for you long term?

2. Commercial Aspects of Sponsorship

Sponsorship is a two-way commercial transaction that involves commitment and effort from both parties to make it successful. It is essential that clear legal agreements are in place which include the following:

  • Term of the contract
  • Deliverables required by both parties
  • Territories international, domestic, specific countries
  • Payment installment timeframes
  • How the athletes' image and likeness will be used(still photography, video, illustration)
  • Athlete approval procedures
  • Termination clauses for both parties
  • Bonus structures
  • Renewal procedures including first right of renewal
  • Exclusivity

In most cases the sponsor will provide the legal contract and it is essential that athletes have it checked by an experienced sports lawyer.

Common athlete sponsorship elements

  • Logo placement on apparel (where, when)
  • Wearing of sponsor apparel (i.e. sporting events, media conferences, post-race interviews)
  • Use of sponsor product (i.e. sports drinks, energy bars)
  • Use of sponsor equipment
  • Custom advertising campaigns/photo shoots number and time frame, days required, location
  • Media that marketing can be used in above and below the line
  • Personal appearances/public speaking engagements, days required, location
  • Provision of blogs, timeframes
  • Development of personal clothing lines i.e. Hurley, John Florence boardshorts
  • Royalties from product development

3. What role does sponsorship play in the marketing mix?

  • The marketing mix, also known as the 4 P's of Marketing, is the combination of product, price, place (distribution), and promotion. Getting the mix right is crucial for marketing managers when determining a product or brand's offer. Sponsorship is just one of the communications tools on offer to marketers for branding and communication purposes.
  • Sponsorship can be used in both B2C (marketing to consumers, Coke for example) and B2B (businesses selling to other businesses, Deloitte for example) marketing.
  • Sponsorship delivers valuable and engaging content (in many cases exclusive) that can be used across multiple media channels including Public Relations, social media, employee engagement, advertising, point of sale and online.

4. Importance of mutual fit

  •  It is essential that both parties are 100% comfortable with the synergies in the partnership. The best athlete sponsorships have a great 'fit', they look and feel right. Many of the largest global deals are paid by sport product suppliers such as Nike and Adidas. Other popular categories include watches (Tag Heuer, Omega), electronics (Samsung, Panasonic, LG), sports drinks (Gatorade), soft drinks (Coke & Pepsi), Financial Services (Barclays, Chase, Commonwealth Bank).
  • Athletes need to have absolute confidence in lending their name and reputation to the product and company, as in some cases athlete endorsement statements, product reviews or signatures on advertising are used. Insincere endorsements are not successful as consumers are quick to sense any disconnect. Athletes (and their management) should research prospective sponsors before signing, researching for example the product's manufacturing methods and employee welfare practices.
  • Occasionally endorsements with no link to the athlete's sport or performance are created, but these need clever strategy and enough crossover appeal from the athlete to make them work. Example Pat Rafter's long-term association with Bonds.

5. Sponsorship Leverage

  • For many companies securing a sponsorship is only the starting point of the agreement. Successful sponsors spend additional funds to leverage and promote their sponsorship by undertaking further marketing activity using sponsorship imagery and content. The common ratio of spend is 1:1, for every dollar spent on the sponsorship fee, a dollar is spent on leveraging. Experienced sponsors will have explored leveraging options prior to signing the athlete.
  • Leveraging may include promoting the sponsorship announcement, custom ad campaigns using the athlete, purchasing television commercials in event broadcasts, and special promotions using events/athlete appearances.
  • Inexperienced companies will do little, possibly issue a media release, run a few small ads and add the sponsorship details to their website. As a result unleveraged sponsorships have poor ROI.

6. What's special about sponsorship?

  • One of the most unique attributes of sponsorship is the two-way transfer of values between sponsor and athlete, also known as 'borrowed equity'. This is especially valuable for start-up companies or new brands with no brand awareness. Sponsorship has quick audience cut-through and is able to bring a brand or product to life or reposition it in new markets quickly.

Other attributes include:

  • Use of appealing imagery that may be a lot more interesting than their product. (i.e. office equipment, computers)
  • Sponsorship can be used across all marketing activity, particularly social media
  • Creates excitement around a product or company
  • As content for newsletters, websites
  • Value - Can be integrated across all divisions of large corporates

Sponsorship can also be used for:

  • B2B Corporate entertainment/networking
  • Employee engagement/reward
  • Promotions campaigns - use of event tickets, 'money can't buy' opportunities for promotions, trips to events

7. Understanding sponsorship audiences

The most marketable athletes appeal to all generations such as Andre Agassi, Roger Federer, Maria Sharapova, Pat Rafter, Cathy Freeman. There are many market segments; here are few broad classifications to note:

Age

  • Baby Boomers - 1946 to 1964 (aged 51-69 in 2015) 
  • Generation X- 1965 -1979 (aged 36-50 in 2015)
  • Generation Y 1980 - 1994 (aged 21-35 in 2015)
  • Generation Z 1995 2009 (aged 6-20 in 2015) 

Socio-economic
Marketers use Occupational Group classifications that have replaced the AB, C1, C2, D and E labels. These were developed by OzTam5 who monitor TV ratings in Australia and are used to record demographics of TV viewers.

Classifications include:

  • Occupation Group 1 (OG1) (formerly ABs)
    Managers, Administrators and Professionals
  • Occupation Group 2 (OG2)
    Para-Professionals, Clerks, Teachers, Salespeople and Professional Service Workers
  • Occupation Group 3 (OG3)
    Tradespersons
  • Occupation Group 4 (OG4)
    Plant and Machine Operators, Drivers and Police
  • Occupation Group 5 (OG5)
    Labourers and Related Workers


Thought starter - What marketing audiences do you and your sport represent, and could help sponsors reach?

8. Who makes sponsorship decisions?

  • In companies Marketing Directors and Managers are responsible for developing marketing strategy and selecting sponsorships. They manage budgets ranging from hundreds of thousands of dollars to, in some cases $1m+ dollars. In larger companies they report to the CEO and the board, and in publicly listed companies are subject to shareholder scrutiny. They manage large teams of staff nationally.
  • Managing large teams of staff nationally, they are under pressure to deliver sales revenue from their marketing activities and are looking for innovation, value and productive working relationships.
  • In smaller companies athletes deal directly with the CEO or Marketing Manager, in larger companies a Sponsorship Manager handles all athlete negotiation/communication.
  • What do marketing managers expect from athletes? They look for consistent performance, impeccable behaviour, loyalty, responsiveness, punctuality, fulfillment of contractual obligations, and no dramas!

9. How is sponsorship performance measured?

Effective sponsorships are linked to marketing and brand objectives and must deliver consistent ROI. Common evaluation methods are:

  • Market research: surveys to track brand metrics and awareness
  • Web analytics or digital research: increases in site visits, average stays, click-through rates, etc.
  • Public Relations evaluation: market research to record the reach, target audience and sentiment
  • Social media analytics: the effect on buzz, interactions and positive sentiment
  • Broadcast exposure analysis: on-screen exposure via logos, signage and mentions
  • Business metrics, including sales, leads, or new accounts.
  • Customer feedback qualitative feedback
  • Employee feedback qualitative feedback

Sources

  1. IEG Source: US-based sponsorship research firm, IEG) www.ieg.com
  2. Octagon "Sponsorship as a communication tool presentation"
  3. Australian Bureau of Statistics)
  4. McCrindle Research The ABC of XYZ
  5. Source OzTam Australia

Disclaimer: Best endeavours have been taken to ensure the accuracy of information using reputable sources and industry experience when researching this article, however the author cannot guarantee the accuracy of information as a result of industry changes or inaccuracy of information supplied by third party sources.

 

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