How sponsorship works?
Sponsorship is currently one of the fastest growing marketing segment not only in the USA but worldwide. The industry of sponsorships boasts a long history, which does not prevent the industry from being used across a variety of spheres and generate innovative solutions. Sponsorships is a financial or in-kind support of some activity. Sponsorship can take various shapes, starting from logos and promotional products, and finishing with setting up marathons and other sports events.
Sponsorship is a unique in its kind type of marketing activity, equally positively perceived by both companies-sponsors and sponsees. Indeed, the act of sponsorship entitles sponsor’s brand to be viewed by target audience in a new, unusual way. Sometimes it allows sponsors to participate in an event, which is uncommon inside their business sphere. This can attract additional attention from press and consumers, creating new vectors for discussions.
North American region remains to be a major source of sponsorship spending all across the world, with USA and Canada responsible for 39% of the market size. North America is followed by Europe and Asia-Pacific region. It’s worth mentioning, that sponsorship activity is gaining popularity not everywhere. For example, Central and Southern Americas showed only a 3% growth last year instead of projected 5% annually. Taking into account the fact that such large sports events as FIFA World Cup and Olympic Games were held in 2014 and 2016 respectively, this missed expectation seems quite weird.
Sponsorships offer a great way to generate revenue and acquire new customers. Instead of traditional marketing channels, like display advertising, which bombard people with multiple intrusive marketing messages on a daily basis, sponsorship creates a quality dialogue between a brand and its potential customers.
Effectiveness of traditional push-advertising is strongly declining. It’s becoming more and more difficult for businesses to get noticed in today’s background noise. That’s why sponsorships are now attracting 18% of total marketing investment, up 4% in the past 2 years.
However, doing business in sponsorship industry is becoming harder. With the advent of new technologies and media channels, properties and sponsors must be especially open to new ideas and strategies. The business of sponsorships has evolved significantly over the past few years driven by a number of different factors many of which are positive for the industry, but can still lead to challenges in the future.
The proliferation of social media and influencers, including athletes acting as influencers, has created new engaging and efficient marketing mediums, which have led to increasing pressure to justify the return on investments from large-scale sponsorships.
Show me the sponsors
There is a variety of different types of sponsors out in the market. All of them have different goals and strategies.
For large-scale and high profile events that require plenty of publicity, media sponsors will certainly be advantageous. They are, by definition, companies that are able to provide financial aid in securing media coverage for an event. For example, a media sponsor might pay for an advertisement in a local paper or cover the cost of filming and airing a TV commercial.
Cash / Financial sponsors
As the name suggests, cash or financial sponsors, are sponsors who literally give money to an event organizer in exchange for the benefits outlined in a sponsorship agreement. This may include logo placement on signage or promotional materials, pre-event content creation, promotions and keynote speeches.
Unlike cash or financial sponsors, in-kind sponsors donate products or services instead of offering cash. For example, a hotel may offer free use of its facilities as a form of sponsorship. In this regard, the hotel is not making a cash contribution, but rather serving as a location sponsor.
What can be sponsored?
Despite the whole sponsorships market being heavily biased towards sports industry in terms of money spent, there is still a plenty of options to sponsor. It’s worth noting, that money is not the most universal and trusted measure of scale and effectiveness in sponsorships industry — end-consumers’ satisfaction is.
Sponsoring an event
Event sponsorship is one of the most popular forms of sponsorship. Event sponsorship can be defined as financial support of an event used to achieve certain business goals such as receiving recognition or increasing brand awareness.
Unlike other forms of advertising, which are frequently intrusive and unwanted, event sponsorship allows consumers and businesses to connect through meaningful real-time interaction.
A growing number of marketers think that corporate sponsorship is better than other methods as it provides opportunities to gauge customer response to products immediately. In comparison, marketing research methods such as focus groups are usually costly and may not focus on the right kind of people, while market surveys or questionnaires usually do not allow prospective customers the opportunity to try out products.
While managing an event’s sponsorship, it’s very important to constantly bear in mind the end-consumer’s opinion. Sponsors must not forget, that all these sponsorships have one and the only essential intention: to bring new customers and squeeze more money from them.
According to a recent study, 72% of consumers positively view brands that provide quality event experiences and 74% of respondents admit that engaging with brands that create memorable moments makes them much more likely to buy their product.
The numbers point us to the fact that being the right kind of sponsor means much more to your target audience than being just an advertiser. This is a great way to demonstrate your authority as an industry expert and consequently get heard.
One can gain credibility and respect by only providing best-in-class quality and listening to consumers.
Regretfully, today most sponsorship campaigns are conducted without participation of customers. Moreover, small players on sponsorship market, such as not so big brands or local events, simply do not have access to the level of expertise required to exercise prominent sponsorships.
Sponsoring a facility/building
Many sponsors affiliate themselves with a venue. The most prominent way to sponsor a facility or building is through title identification. Title identification involves directly linking the sponsor’s name with the sponsored property. Other ways of sponsoring a facility include placing advertisements on stadium boards, banners, and signage. Title sponsors benefit from the use of the full sponsored title in all publicity related to the sponsorship.
One of the drawbacks of this type of sponsorship is its financial cost. Title identification of prominent buildings can cost millions of dollars.
Sponsoring an athlete
Athlete sponsorships and endorsements have grown rapidly in the past decade. Today, professional athletes competing in non-salaried sports usually rely on sponsorship to cover their training expenses. Sponsorship and endorsement deals are similar arrangements. In both arrangements, athletes receive money and a company pays for publicity. Under sponsorship arrangements, companies help to cover training expenses while under endorsement deals, companies use athletes as spokespeople. Companies can benefit greatly from the publicity that athlete sponsorship and endorsement deals offer. Athletes such as Tiger Woods and Michael Jordan have secured numerous sponsorship and endorsement deals worth millions of dollars each. Floyd Mayweather — a stellar American boxer — is paid a lot to wear underwear with a specific brand title.