Chapter 15

1. Sponsorship Chapter 15

2. 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.

3. 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.”

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. Other considerations • Sponsorship options • Individual athletes • Facilities • Events

11. 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

12. 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

13. Pricing sponsorships • Cost-plus method • Involves calculating the actual expenses incurred in providing the sponsorship package with an inclusion for profit for the organization

14. 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

15. 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?”

16. 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)

17. 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

18. 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

19. Controversies • High schools in the sponsorship ‘frenzy’ • Score boards provided by drink sponsors • School-wide sponsorship to drink companies • Venus sponsorship and naming rights

20. 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