Sponsor (commercial)

Corporate logos showing NASCAR team sponsors.

Sponsorship of an automotive company in equestrian sports.

To sponsor something is to support an event, activity, person, or organization financially or through the provision of products or services. A sponsor is the individual or group that provides the support, similar to a benefactor.

Definition

Sponsorship^[1] 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, according to IEG.

While the sponsoree (property being sponsored) may be nonprofit, unlike philanthropy, sponsorship is done with the expectation of a commercial return.

While sponsorship can deliver increased awareness, brand building and propensity to purchase, it is different from advertising. Unlike advertising, sponsorship can not communicate specific product attributes. Nor can it stand alone, as sponsorship requires support elements.

Theories of sponsorship

A range of psychological and communications theories have been used to explain how commercial sponsorship works to impact consumer audiences. Most use the notion that a brand (sponsor) and event (sponsoree) become linked in memory through the sponsorship and as a result, thinking of the brand can trigger event-linked associations, while thinking of the event can come to trigger brand-linked associations. Cornwell, Weeks and Roy (2005)^[2] have published an extensive review of the theories so far used to explain commercial sponsorship effects.

One of the most pervasive findings in sponsorship is that the best effects are achieved where there is a logical match between the sponsor and sponsoree, such as a sports brand sponsoring a sports event. Work by Cornwell and colleagues^[3] however, has shown that brands that don't have a logical match can still benefit, at least in terms of memory effects, if the sponsor articulates some rationale for the sponsorship to the audience.

Global sponsorship market

IEG projects spending on sponsorship globally to grow 5.2 percent in 2011 to $46.3 billion. Subtracting expenditures by North American companies, the rest of the world’s sponsors spent $29.1 billion on partnerships in 2010 and IEG projects that sum to increase 4.8 percent to $30.5 billion in 2011.

Europe will remain the largest source of sponsorship spending apart from North America, followed by the Asia Pacific region. Growth in Central and South America during 2010 did not materialize to the extent projected—3.8 percent versus a forecast of 5.7 percent—despite the FIFA World Cup and Olympic Games in Brazil in 2014 and 2016, respectively. With the 2010 World Cup concluded, sponsorship activity should begin to heat up, thus the region is projected to be the fastest-growing source of sponsorship dollars outside of North America, with a forecast growth rate of 5.6 percent for 2011.

Sponsorship in the United Kingdom

Relaxed television industry legislation surrounding product placement has led to a small but increasing rise in sponsorship in the UK.

Sponsorship in North America

IEG Sponsorship Report, which has conducted primary research on sponsorship spending annually since 1984, projects $18.2 billion will be spent by companies in North America on rights fees in 2011, up 5.2 percent over 2010. Sponsorship expenditures by North American companies grew 3.9 percent in 2010 to $17.2 billion.

As it has in most years over the past two-plus decades, sponsorship’s growth rate will be ahead of the pace experienced by advertising and sales promotion, according to IEG. North American media spending, which rose two percent in 2010, is projected to increase 3.9% in 2011, according to the worldwide media and marketing forecast produced by GroupM, the global media investment management operation of WPP Group plc. (GroupM is the parent company of IEG SR publisher IEG, LLC.)

Consumer and business-to-business promotional spending did not increase in 2010, declining for the second year in a row—although the drop of 3.3 percent was an improvement from the decrease of 7.1 percent in 2009, according to the Communications Industry Forecast 2010-2014 published by private equity firm Veronis Suhler Stevenson. VSS projects that promotion spending will be flat in 2011 compared to 2010

North American corporate spending on cause sponsorships grew at the highest rate of the six major property sectors in 2010—6.7 percent—as marketers sought to earn goodwill from consumers and other stakeholders still recovering from the recessionary economy, according to IEG research.

The largest segment—sports—grew 3.4 percent in 2010, as a 7.6 percent jump in spending on the four major U.S. pro sports leagues and their teams was dragged down by little or no growth among other types of sports, including auto racing. For 2011, continued interest in major sports properties should drive category spending enough to make it the fastest-growing segment, as cause spending cools down to a still respectable growth rate of five percent.

The category that grew the least in 2010, the arts at just 2.7 percent—should improve in 2011 to a 5.1 percent increase, as its two largest sponsor categories—automotive and financial services—continue to see improved overall fortunes and turn the sponsorship spigot back on.

Selling sponsorship

The sales cycle for selling sponsors is often a lengthy process that consists of researching prospects, creating tailored proposals based on a company's business objectives, finding the right contacts at a company, getting buy-in from multiple constituencies and finally negotiating benefits/price. Some sales can take up to a year and sellers report spending anywhere between 1–5 hours researching each company that is viewed as a potential prospect for sponsorship.^[4]

Leveraging sponsorships and activation

These are the terms used by many sponsorship professionals, which refer to how a sponsor uses the benefits they are allocated under the terms of a sponsorship agreement. Leveraging has been defined by Weeks, Cornwell and Drennan (2008) as "the act of using collateral marketing communications to exploit the commercial potential of the association between a sponsor and sponsee" while activation has been defined as those "communications that promote the engagement, involvement, or participation of the sponsorship audience with the sponsor."^[5]

Money spent on activation is over and above the rights fee paid to the sponsored property and is often far greater than the cost of the rights fee."^[5]

Principles Governing Sponsorship

All sponsorship should be based on contractual obligations between the sponsor and the sponsored party. Sponsors and sponsored parties should set out clear terms and conditions with all other partners involved, to define their expectations regarding all aspects of the sponsorship deal. Sponsorship should be recognisable as such. The terms and conduct of sponsorship should be based upon the principle of good faith between all parties to the sponsorship. There should be clarity regarding the specific rights being sold and confirmation that these are available for sponsorship from the rights holder. Sponsored parties should have the absolute right to decide on the value of the sponsorship rights that they are offering and the appropriateness of the sponsor with whom they contract.^[6]