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Sponsorship industry puts on a brave face despite slowdown in growth

According to the latest figures by The World Sponsorship Monitor (TWSM) Annual Review for 2008, produced by Sports Marketing Surveys, sponsorship deal volume of new deals recorded a 17% increase on 2007 deal flows, from 1,196 to 1,446.

These results reflect reported sponsorship deals with a minimum value of $75,000 (£52,000) and don’t take account of any expenditure incurred in activating those sponsorship rights.

The figures also show a rapid decline in new sponsorship deals in Q4 as the credit crunch started to bite into marketing budgets on a global basis.

In the US, researchers IEG estimated that spending on sponsorship rights fees globally was around $43 billion but this figure included pre-existing sponsorship deals rather than just new deals so looks inflated.

And in June last year, PWC provided an upbeat global outlook for 2008-12 that placed the value of the global sponsorship market at $60 billion by the end of that period.

However, PWC is sensibly in the process of revising its predictions for 2008-12 given that these were based on research and analysis that would have started in October/November 2006, running up to the publication date last year before the global economy went into meltdown.

Given that GDP and corporate profits are core underlying assumptions in any advertising or sponsorship forecast, then its likely PWC’s new predictions in June this year will give the sponsorship industry less to cheer about.

But this hasn’t stopped the sponsorship industry putting a positive spin on the market.

“Sponsorship can perform many marketing functions and is also a very effective way of tackling today’s important issues such as Corporate Responsibility, social education and sustainability” trumpeted Karen Earl who was recently listed as one of the most influential voices in the world on sponsorship.

But with respect to Karen, she’s not quite right on two points.

First, sponsorship is a basket of intellectual property (IP) rights – not marketing functions.

Sponsorship is a platform for marketing and requires a level of activation – using above and below the line activities – in order to achieve a return on objectives and a return on investment for the brand owner/sponsor. Fundamentally, sponsorship is a subset of marketing, not a substitute for it.

Second, Corporate Responsibility is often the by-product of a sponsorship programme rather than the focus for it.

Given that the sponsorship market is dominated by sports – around 84% of all new reported deals – and most of these are to do with football team sponsorship which is largely about brand marketing/awareness – then there’s still a long way to go.

One area which is growing (albeit modestly) is education sponsorship, with the value of new sponsorship deals at around $7.8m, up $1m from 2007.

The marketing support and sponsorship of educational material and education ‘product’ provides brand owners with a highly targeted and cost effective route to a well defined but notoriously difficult to reach customer segment of children, families and young people.

The other advantages are reputational as having access to these customer segments through the school gates helps brands build trust with these groups well into the future.

But perhaps the biggest wake up call for the sponsorship industry is found in the length of sponsorship deals that brand owners are prepared to commit to in the current economic climate.

In terms of all new deals analysed last year, TWSM reported that 53% (766) of these deals were for 12 months, with 11% for two years and 15% for three years.

This may reflect the growing trend amongst marketing directors to think of sponsorship as a short-term tactical fix rather like the marketing tie-in with a Hollywood film that can help shift product over a six month period.

The problem is that in many cases the benefits of sponsorship may come in year two or year three rather than immediately in year one.

And there’s also the question of dialogue that the brand owner has built with fans, spectators, supporters and the public at large – and the trust it has created as a result of its sponsorship activity. All of this can evaporate if the brand owner isn’t seen to be in it for the long term.

This is a key challenge that the sponsorship industry needs to address if it’s to sustain the kind of levels of growth it has enjoyed over the previous decade.

By demonstrating how it can achieve a return on objectives and a return on investment, I believe the sponsorship industry will weather the current storm and ironically emerge stronger for it.

Ardi Kolah is the author of Sponsorship Works: A Brand Marketer’s Casebook, available from www.sportbusiness.com He is CEO of Guru in a Bottle, a new sales & marketing training and mentoring company www.guruinabottle.com

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