Sponsor (commercial)


Sponsor (commercial)
Corporate logos showing NASCAR team sponsors.

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.

Contents

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

And, while sponsorship can deliver increased awareness, brand building and propensity to purchase, it is different than advertising. Unlike advertising, sponsorship can not communicate specific product attributes. Nor can it stand alone. Sponsorship requires support elements. And, while advertising messages are controlled by the advertiser, sponsors do not control the message that is communicated. Consumers decide what a sponsorship means.

Size and Growth of the Sponsorship Market 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.

A fast-growing segment of the industry relies on social media and its virtual ability to extend sponsorships in a viral manner. The largest community of sponsorship professionals is lead by Dan Beeman with nearly 8,000 members worldwide in Sponsorship Insights Group on LinkedIn.

The 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 Germany

Recently, the sponsorship industry has been under scrutiny for compliance issues, among others the alleged channeling of funds ("kickbacks"),[2] invitations to lobbyists/politicians and taxation of benefits such as free admission tickets and hospitality.

The German initiative S20[3] has been established in 2007 in order to define a stable framework for the sponsorship industry in Germany.

Sponsorship professionals come together through a peer group on LinkedIn founded by sponsorship professionals for sponsorship professionals. This is the largest worldwide group of peers dedicated solely for the objective sharing of best-practices and insights. More than 100 members come from Germany.

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]

Activation

The term used by many sponsorship professionals referring to how a sponsor uses the benefits they are allocated under the terms of a sponsorship agreement. Activation is defined by IEG as the marketing activities a company conducts to promote its sponsorship. Money spent on activation is over and above the rights fee paid to the sponsored property. Also known as leverage.[5]

See also

References


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