Sport Sponsorship and Retaining Commercial Partners

This article is a guide to provide a framework for sports organisations in securing, developing and retaining valuable commercial partnerships. The framework is not intended to be a ‘one size fits all’ approach and sports organisations should adapt the process to suit their needs and experience.

Four key ideas to take from this guide:

• Sponsorship is a business relationship between a provider of funds, resources or services and an individual, event or organisation that offers rights and association that may be used for commercial advantage in return for the sponsorship investment.

• Investing in a sport sponsorship is only one of an increasingly wide range of marketing opportunities businesses and funders can invest in.

• Sponsorship should be approached as a partnership. To be successful, each party needs to understand the drivers and objectives of the other, and contribute to their partner’s success.

• Responsibility for the success of a commercial partnership lies with the sports body. There are many sports properties to be sponsored, but a good sponsor is hard to find (and keep).

The sponsorship process:

STEP 1: BRAND MANAGEMENT

Sports bodies, from local clubs to national bodies, have a brand. Their brand is how they are known, and what they are known for. This includes the associations (positive and negative) that people hold about them. Sports bodies need to be very clear about how they wish to be perceived and understood, and manage their brands to achieve the image they desire.

In terms of sponsorship, brand management by sports bodies matters for three important reasons: appeal to funders, fit with funders, and value to the sports body.

Appeal: If a sports body approaches a potential partner who has no real awareness of them, or regards them in a negative light, then that sports body’s prospects of securing a sponsorship are very limited. Sponsors are increasingly concerned with sports’ reputations and governance.

Fit: Two factors are important: market and values. Does the sports body or its property (e.g. its national elite competition) attract the attention of the market that is of interest to the sponsor? Importantly, what values do the sport and/or its property represent? Are these values consistent or aligned with the values espoused by the sponsor and/ or their products and services? For example, if the potential sponsor is promoting a product with brand values of ‘excitement’ and ‘daring’, does the sport property have a natural connection with these values?

Value: A well-managed brand has greater commercial value. Two soap powders may be identical, but the soap powder with the more powerful brand can command a higher price. The same applies to a well-managed sports brand.

Online credibility as well is a crucial consideration. The credibility of any organisation today depends to a large extent on its online presence. Sponsors are increasingly sophisticated in their use of online and social media to build connections with their target audience. Many sponsorships now market themselves online as a key promotional channel. Engaging, interactive and regularly updated websites that incorporate active social media such as Facebook and Twitter are more than just shop windows. They are a communication channel to a target audience and they are commercial and marketing platforms.

STEP 2: PROPERTY IDENTIFICATION AND DEVELOPMENT:

Sponsorships are business partnerships where two parties add value to each other through their association. Sports organisations must be able to satisfy the marketing needs of a sponsor with a brand and/or property they own or control.

Central to property identification is determining those properties that will best meet the needs of potential sponsors and are thus attractive. Examples of such properties and sponsor benefits are given below.

A sports organisation owns a property and holds the rights to that property when:

• All financial obligations are met by the organisation

• All decisions are approved by the organisation

• A contractual arrangement which outlines ownership issues is in place

• No other party can lay claim to ownership.

Sponsor need generally exists within one or more of the following areas:

• Support for brand position: A fast-food chain sponsors key athletes to support the new brand offering of healthy alternatives in the menu.

• Exposure of brand: A phone company sponsors a high-profile sport to achieve higher television exposure of their brand or a new product or service. A charitable trust funds an event to demonstrate how it supports its local community.

• Corporate social responsibility (CSR): All sorts of businesses and funders seek to be seen supporting positive causes as a method of managing their brand’s profile in the community.

• Increased access to target audience: A finance company sponsors a sport because the demographics of the sport match their target audience and the sport provides opportunities to interact with that demographic.

• Employee engagement: A bank sponsors a sport event in part because many of its staff play the sport recreationally and they will stage fun days for employees and their families around the event.

The property identification and development process

1: IDENTIFY ALL OWNED PROPERTIES

Examples: Owned:

National office

National training facility

Contracted athletes

Membership database*

National tournament/championship

Regional events

Contracted officials

Website

Facebook page

2: ASSESS EACH OWNED PROPERTY IN TERMS OF THE PARTNER NEED IT MAY SERVE:

Position all owned properties into each of the five funder needs.

Example: Brand support • National office • Contracted athletes • National tournament/championship

Brand exposure • Contracted athletes • Television coverage agreements • Website

Corporate social responsibility • Youth events • Mass participation events

Access to target audience • National tournament/championship • Membership database • Facebook/Twitter followers

Employee engagement • Regional events • Hospitality opportunities • Contracted athletes.

3: UNDERSTAND YOUR SPORT’S PARTICIPANTS AND FOLLOWERS:

Before looking to build a profile of suitable sponsors, it is vital to build a profile of the people attracted to your sport. As much as possible, conduct research to create a clear picture of the people you can provide access to for a sponsor. A sponsor will want to know key information such as:

• How many people, of what age, gender and income, either participate in or follow your sport

• Any regional variations in numbers.

• Other interests they may have • Products or brands they may favour.

• Athletes they like and follow.

• Aspects of the sport that attract them.

CONSIDER INNOVATIONS AND NEW OPPORTUNITIES :

Consumer preferences for how they spend their recreational time and money are constantly changing, and businesses follow these changes closely. Many sponsors search for sports properties that will appeal to a new consumer preference or trend, and find nothing appropriate. Often the sponsors will then create an event or property to meet its own objectives, with or without the involvement of the relevant sports body (e.g. a sponsor does not need to sponsor the national Tiddlywinks Association in order to establish an extreme tiddlywinks made-for-television event to promote a product).

The challenge for every sports body is to consider what new properties it might develop to meet a new consumer preference. The rise of modified sports activities (e.g. extreme, beach, indoor etc) has attracted popular followings and media interest in recent years, and this trend will continue.

As a sports body you treasure your sport’s traditions, but failure to diversify and adapt your properties may mean you miss out on important new sources of revenue and followers. Even worse, you may leave your sport open to others who create activities and events that threaten your follower and funder base

STEP 3: IDENTIFYING THE SPONSOR TARGET MARKET

Selling sponsorship requires a clear understanding of who potential partners are and how to target them. It is also important to understand the role of the corporate marketing manager (the person who usually needs to be engaged and convinced). This person usually has two key roles: to build the brand and to enhance the marketing programme in order to increase sales.

The marketing manager is driven by targets and success or failure will determine job security or income level. So they are very focused people with an eye for opportunities and an ear for duds. The marketing manager must decide on a marketing strategy that may utilise a range of channels such as television, radio, print and web advertising, promotions, events, sponsorship, discounting and many others.

The manager will choose tools that have the greatest potential to work and are most cost effective. Sponsorship competes with every other element in the mix for a slice of the budget (and budgets are generally tighter than the marketing manager would like). Sponsorship has to deliver clear value for money and measurable outcomes in order to earn its slice of investment.

Sponsor target market identification process:

Carefully identifying your target market of potential sponsors will minimise time wastage and ensure good potential sponsors are not overlooked. There can be a temptation to look at only current contacts or high-profile businesses. This is very limiting and is avoided by a systematic approach as outlined below:

Create a list of suitable businesses operating in your area (national or regional)

A suitable business is one that has one or more of these qualities:

• A brand image (or product brand image) that appears to have a fit with your brand image

• Suitable size and profile

• Already uses sponsorship as a marketing tool (therefore has some expertise and systems). This information is often available on a company’s website.

While creating this list also bear in mind the organisations that are new in the market, or launching new products to consumers. Sponsorship is a key tool for businesses that are raising their profile or targeting new consumers.

Estimate the value of your property:

This can be difficult. At one level, value is determined by the market; that is, it is worth what someone will pay. Unlike television rate cards which calculate audience reach and apply consistent costs, sponsorship does not have a standardised valuation system accepted by the marketing industry. To establish a credible sponsorship value for your product, it is vital to use a credible methodology that a potential sponsor will respect. For premium properties, consult with sponsorship experts or other sports bodies. Note that if your property is new, or previously unsponsored, it is unlikely to have a high value in the sponsorship market. It takes time to develop the value of a property.

Revise the list to include only those businesses you believe have the potential to afford to sponsor your property:

Fish where the fish are. It is important to make a preliminary assessment of a sponsor’s ability to pay a sponsorship fee and undertake associated leverage activity. Leverage can take various forms including advertising to promote the sponsorship, promotional campaigns utilising athletes, the team or other property being sponsored, online competitions, product promotions and many more. Most successful sponsorships are fully integrated into the sponsor’s overall marketing activity.

As a rule of thumb, a company will normally need to spend at least one dollar on leverage for every dollar of sponsorship. Most companies will normally spend around 10% of their annual turnover on marketing activity, and sponsorship rarely exceeds 20% of the marketing spend.

In short, take the price you seek and multiply by 100. Businesses with turnover of less than that amount should not be on your final list.

Another aspect of affordability is timing. Large sponsors will have a sponsorship portfolio with several arrangements in place, which expire at different times. Knowing when sponsorships are due to expire or be reviewed can enable you to present a new opportunity at a time when the sponsor is most receptive. There are low-cost sponsorship advisors that keep records of sponsorship portfolios.

Research the businesses:

Using the web, newspapers and business magazines, build a brief profile of each business on your list, including:

• Their products

• Their competitors

• Their services

• Their customers/target market

• Upcoming events

• Marketing strategies

• Product releases

• Key personnel.

Result: a pre-qualified list of businesses with an appropriate fit and scale operating in your area.

STEP 4: MATCHING PRODUCT AND SPONSOR:

A lot of the groundwork has now been done. The next step is to match your sport and properties with potential sponsors. It is good practice to complete the process below for each of your properties. Begin with the most ‘sponsorable’ property.

Matching process:

1 Is there partnership potential?

Given what you have considered about your sport, property, business and brand, is there a strong case to be made that you can meet a potential sponsor’s needs? Put yourself in the shoes of the marketing manager. Would you consider investing in your sport as opposed to advertising or any other form of promotion? Make a list of three to four compelling reasons why the sponsor should seriously consider your property.

2 Set up a meeting with the right person

This is to be an information gathering meeting, not a selling meeting. It may be useful to give a background to your sport and property, but trying to sell a specific sponsorship at this preliminary phase may lead to more questions than you can answer fully, and this in turn may limit your credibility.

This meeting is to establish a friendly relationship (because nothing is at stake yet), and gather some critical information needed to qualify the potential for a partnership. You want to learn:

• What are the specific marketing goals and challenges over the next 12 to 24 months?

• How has sponsorship been used previously and with what results?

• When does the company do its planning and set its budgets?

• Are there any new products or regional expansions planned?

• What is the size of the marketing or sponsorship budgets?

And crucially…

• What criteria do they set before they consider approving a sponsorship?

• How do they like proposals to be packaged and presented?

3 Develop partner-specific marketing:

Now you have met with one or more prospects and qualified some prospective sponsors, you are in a position to develop a customised proposal. That will offer a modification of your sport/property that best reflects the needs of each prospective sponsor.

On a case-by-case basis, build an offering that specifically addresses the compatibility of your offer with their needs. This may involve grouping properties together to provide more value. Some sports properties may have little value on their own but may make a formidable property when bundled with other properties/rights. A good example of this is a sponsorship for a national elite team travelling to the world championships. On its own it may offer some value, but bundled into the entire junior programme of the sport, with website and social media rights, the opportunity becomes more compelling and valuable.

Result: an active shortlist of potential sponsors and specific offers packaged for each prospect. Time to move into the selling phase.

STEP 5: SELLING THE PRODUCT:

Selling a sponsorship has three key elements:

1. The pitch.

2. The negotiation.

3. The close.

The size of the sponsorship will determine the degree of effort required at each stage.

The pitch:

The pitch is a meeting with the potential sponsor where the proposal is presented. The aim is to introduce the product, clearly express how it can meet their needs, and motivate the potential sponsor to seek an involvement and move into a negotiation.

Larger and integrated sponsorships will require detailed proposal and presentation. A sponsorship of $10,000 may require only a brief document. A sponsorship of $100,000 will require a more sophisticated approach. No matter what the size of the sponsorship, the proposal should always be laid out in writing.

Some large companies have guidelines that lay out their key questions that any proposal must satisfy as a first step to being considered. Ensure you use this format if it exists.

If there is no proposal template, there are still some minimum standards for any proposal. Every proposal should have the following components:

1 Introduction: A brief outline of the sports body, its background, participation and following.

2 Executive summary:Introduce the product: the event, the competition, the programme, the team etc. Also include the proposed term, value and cost of the sponsorship.

3 Key attributes of the product:

Provide particulars of when, how often, where, how many etc.

4 How the product will meet their needs:

Detail the specific sponsor needs that will be met, and how they will be met (e.g. degree of exclusivity, media coverage, contact with consumers, structures in place for support, platforms for communication such as online and social media etc).

5 Specifics of the sponsorship – components and promotion:

Detail the sponsorship package offered. The package must focus on what value the funder will receive, and may include all or some of the following:

• Naming rights

• Rights to associate athletes with brands (a growing activity)

• Print advertising (newspaper, flyers, posters, T-shirts, stationery, event programme, tickets etc)

• TV and radio exposure and the right to use footage in the future.

• Event on-site recognition (banners, booths, sideline signage, field or playing surface signage, screen signage, banding on competitors, support crew or other personnel etc)

• Pre-event promotions (media launch, advertising, publicity, online competitions, Facebook page, Twitter campaign, website etc)

• Event promotions (sampling, booths, competitions, product sampling etc)

• Entertainment opportunities (special seating, hospitality, free tickets, car parking, meet the athelets session, celebrity guests etc)

• Public speaking opportunities

• Product placement

• Consumer promotion exclusivity

• Mobile phone content

• Merchandising rights

• Database access

• Online community building (Facebook page, Twitter campaign, competitions, push emails, ticket sales etc)

• Webcast rights (live stream or on demand).

The package you present must represent value for money to the sponsor. Note that your proposal is a starting point for negotiations and may end up very different when the final terms are determined.

The proposal should specify your target market and how you plan to reach them and engage with them. Specifically, the sponsor will expect to see a promotional opportunity for the proposed partnership, outlining activities and timing. In developing the promotional opportunity the importance of online channels and social media cannot be underestimated.

6 The costs:

All costs associated with the sponsorship should be listed:

• The sponsorship fee; what the sponsor must pay directly to the sport in exchange for the rights on offer.

• Signage costs, logo costs, website costs etc. All the items associated with branding the sport, team, venue etc with the sponsor’s message

• • Leverage or activation costs. Leverage may take many forms and it is possible that the sponsor may be able to achieve discount rates for various media products. However, you should list a budget allocation for leverage as part of the proposal.

7 How to move forward:

Prepare a clear plan with critical dates for moving forward if the sponsor is interested in the opportunity.

The negotiation

The negotiation phase is the opportunity for the two parties to further develop the product and the relationship to better suit both their needs.

The aim is to create a completely customised product that will represent a unique opportunity and great value for money for the sponsor. The customisation may take many forms, such as change of uniforms, innovative social media promotions, venue changes, date changes or anything that will draw attention to the product and the sponsor.

It is important that the negotiator, the CEO and the board are all clear on what things are up for change in the negotiation process. Limits on price and what can and cannot be changed should be established from the outset.

The close:

This is the writing and signing of a contract. Some sponsors have contract templates they will offer, but nothing should be signed without advice from legal counsel. If the sponsorship is complex with a broad range of rights involved, it might take some time to get a contract drawn up and signed. In such cases a heads of agreement should be considered to legalise the sponsorship until a full contract is signed.

STEP 6: SERVICING THE PARTNERSHIP:

Servicing the sponsor is the process of ensuring the sponsorship provides everything detailed in the contract. Good servicing results in successful sponsorships that work for all parties and tend to generate renewals and further opportunities.

Keys to successful sponsor servicing:

1 Ensure you get the ‘sell’ right: In conjunction with the sponsor, create a timeline, roles and responsibilities for how and when each element of the sponsorship will be achieved. Remember that responsibilities are a two-way street.

2 Plan with your sponsor: In conjunction with the sponsor, create a timeline, roles and responsibilities for how and when each element of the sponsorship will be achieved. Remember that responsibilities are a two-way street.

3 Constantly communicate with your sponsor: Throughout the sponsorship ensure you communicate with the sponsor and inform them of all relevant activity.

4 Constantly report to the sponsor: As each element of the sponsorship is fulfilled, ensure the sponsor is informed about what was done and what the result was.

5 Facilitate the planning of the sponsor’s leveraging activities: It is in your interest that their promotional activities succeed.

6 Deliver on every element of the contract: Develop an in-house plan to meet expectations, and ensure someone has a clear focus on delivering every aspect of the agreement, on time and to agreed specifications. It also pays to identify an area where you can over-deliver to demonstrate your commitment to the partnership. Ensure you tell the sponsor where you have gone beyond the terms of the contract to benefit them.

7 Get close and familiar: Consider ways to engage the sponsor’s senior management and staff in your product, or any other approach that will foster widespread goodwill in your sponsor’s organisation. (This will help secure the relationship in the event that the marketing manager leaves and the sponsorship is reviewed).

8 Discuss the sponsorship’s performance: Keep the sponsor informed on all developments related to the sponsorship. They are a stakeholder and partner and need to be informed.

9 Protect your sponsor from ambush marketing: Do all you can within your power to prevent a sponsor competitor from marketing themselves around your product. Ensure your partner knows what you are doing to protect them. This can be a complex area and if there is risk of ambush marketing that may result in a direct or indirect financial loss to a sponsor or encroachment of a sponsor’s rights, then legal advice should be sought.

10 Provide thorough post-analysis, while planning for the future: In report form, document how each element of the contract was fulfilled and to what extent. Remember that it is far easier to keep a current sponsor than to find a new one.

Summary of key risks and mitigations:

Reference:

Sport New Zealand (2014) Framework for sports organisations in securing, developing and retaining commercial partnerships., Sport New Zealand | Ihi Aoteroa. Available : https://sportnz.org.nz/resources/commercial-sponsorship-and-partnership/ (Accessed: January 2022).