This article examines corporate sponsorships including the growth and nature of sponsorships. The goals of corporate sponsorships and the process through which corporations initiate sponsorship are explained. High-profile sponsorships such as NASCAR, women's tennis, and professional golf are reviewed along with the potential benefits that corporations can gain from sponsoring these types of events or participants in these events. The need for evaluating the impact of sponsorships for both the sponsor and the organization, event, or person being sponsored is examined along with several alternative methods of evaluation. Some of the perceived negative impacts of corporate sponsorship are also reviewed.
Keywords Advertising; Advertising Equivalency; Corporate Sponsorships; International Olympic Committee (IOC); Media Coverage Inflation; Media Equivalency; NASCAR; Public Relations; SMART; Sponsorship Effectiveness; Sports Sponsorship; Women's Tennis Association (WTA)
During the mid-twentieth century, sponsorship was often not differentiated from philanthropy. Decisions to support a particular sport or sporting event frequently reflected the personal interests of senior management, rather than a careful assessment of the benefits that were likely to accrue to a company from its investment. In the past decade, the rate of growth in sponsorship has outpaced that of investment in any other form of marketing communication or promotion vehicle. In 1987, sponsorship spending in the United States amounted to $1.3 billion, but by 2003 it had escalated to over $10 billion. It is estimated that worldwide sponsorship investment exceeded $50 billion in 2012, with over half that revenue being spent in sports.
“The extraordinary growth of sponsorship in sport is exemplified by the increases in sponsorship income to the Olympic Games between Montreal in 1976 and Sydney in 2000. The 1976 Olympics in Montreal had 628 sponsors who contributed a total of $4.16 million. In 1984, the Los Angeles Olympic Committee persuaded 32 companies to each invest between $4 million and $13 million” (Crompton, 2004).
“The response of brands for sponsorship of the London 2012 games was positive, with Lloyds TSB, EDF and Adidas all involved as tier-one partners. The London Organizing Committee of the Olympic Games earned sponsors in the clothing, homewares, oil, gas, telecommunications, automotive, and airline sectors. The event also attracted interest from supermarkets and beer brands (Kemp, 2007).
The Olympics is not the only big game in town. In 2004, Nextel began a 10-year, $700 million track run as NACAR's title sponsor” (Janoff, 2005). In 2005, Sprint anteed “up $600 million for five years to become the official wireless telecom sponsor of the National Football League (NFL). In September 2005, Molson Coors renewed its sponsorship deal with the league via a five-year, $500 million agreement.The Driving Force behind Sponsorship Exchange Theory
“The central concept underlying sponsorship is exchange theory, which is one of the most prominent theoretical perspectives in the social sciences. It has two main precepts: Two or more parties exchange resources, and the resources offered by each party must be equally valued by the reciprocating parties. In response to the first precept of exchange theory, sport organizations and businesses have multiple resources that they may use as currency to facilitate an exchange. The sport facility or event may offer businesses increased awareness, image enhancement, and product trial or sales opportunities. Companies in return, may offer support through investments of money, media exposure, or in-kind services” (Crompton, 2004).
“The second precept of exchange theory suggests that a corporate partner will ask two questions, 'What's in it for me?' and 'How much will it cost me?' The trade-off is weighed between what will be gained and what will have to be given up. A key feature of this second precept is that the exchange is perceived to be fair by both sides. The fairness issue is resolved through the use of evaluation studies that measure the benefits that a company receives from its sponsorship investment” (Crompton, 2004).
“As sponsorship has matured, there has been a progression in the benefits companies prioritize, moving from awareness through image enhancement, demonstration platform, hospitality opportunities and product trial to sales increases. In the 1980s and early 1990s, sponsorship was viewed primarily as an alternative to advertising and as a way of obtaining media exposure” (Crompton, 2004).
Furthermore, because sport sponsorship is a flexible medium, leveraging opportunities such as licensing, merchandising, cross promotions, and dealer incentives can be exploited. Together, these features make sport sponsorship a unique vehicle for reaching beyond traditional advertising clutter and differentiating products or services.Uncertainty
However, sponsorship is not without its risks. For example, corporations are often inundated with requests for sponsorship funding, yet cannot always ensure that events sponsored will be executed in a quality fashion or that an adequate return on investment will be achieved. Even well-managed events can be plagued by competitors' ambush or parasite marketing efforts, scandals involving athletes, or any number of external conditions that compromise the success of the sponsorship agreement.
Decisions to enter into sponsorship arrangements were often predicated on the managers’ instincts or on the personal sport interests of marketing directors and CEOs. The recent necessity of greater expenditure accountability has led to the creation of a set of criteria for determining event selections and for evaluating event choices and outcomes. Yet, many sponsors acknowledge that they cannot measure the direct effects of their investments on revenues, with the exception of on-site merchandising.
Due to the transient nature of corporate sponsorship, a sponsored organization much be prepared with plans to continue operations in the case that a sponsor discontinues its affiliation. Successful event organizers may be the most traumatized by discontinued sponsorships. That is, the stronger the association a sport has with a sponsor, the more difficult it may be for future sponsors to make their own presence felt. Consequently, when a corporation discontinues a high-profile or otherwise successful sponsorship relationship, it is often very difficult for organizers to attract new sponsors.
While sport sponsorship relationships are of increasing academic interest, there remains a deficit of empirical data and research on the subject. Few empirical studies have considered sponsorship selection and evaluation criteria or the bases upon which sponsorships are maintained or discontinued. In practical terms, such information seems vital to sport organizers and corporate sponsors hoping to maximize exchange relationships. From a more theoretical perspective, such research can enhance our understanding of the inter-organizational exchange (Copeland, Frisby & McCarville, 1996).Application Sponsorship of High Profile Events
There has been a dramatic rise in corporate spending on sports sponsorships in many industrialized countries. Sports clearly possess attributes that are attractive to corporate sponsors because specific target groups can be reached through sponsorship in a more direct and cost-efficient manner than traditional forms of mass advertising. The image of products, services, or brands can be enhanced when a company aligns itself with the positive characteristics of a sport event or successful sport athletes. This is of particular interest to producers (such as those in the tobacco and alcohol industries) who now face increased government regulation over advertising and packaging. Sports also often generate considerable excitement and emotional attachment among its consumers. Such attachment may render consumers more susceptible to product-based messages and other marketing initiatives (Copeland, Frisby & McCarville, 1996).NASCAR
“Racing fans are not the only ones riveted to the corporate logo-covered NASCAR racers. Wall Street has picked up on the huge popularity of auto racing and is rewarding companies that are connected with it. Companies such as Ford Motor, General Mills and Georgia-Pacific have enjoyed big returns on the stock market after announcing they are sponsoring a NASCAR team, according to a study of sponsors. Investors recognize that when a company does a sponsorship of a NASCAR team, it gets them into a loyal and moneyed demographic” (Kantz, 2007).
“Researchers found the companies enjoyed mean gains in stock market value of more than $300 million two days after the announcement. The study found that sponsors from the auto industry enjoy the biggest gains. Companies such as Ford Motor and Daimler-Chrysler saw 2.4% average increases in their stock prices, beating the 1.3% average stock price gains of all the sponsors” (Kantz, 2007).
“Also, NASCAR sponsors have much freedom and can slap their names and logos onto just about everything in the sport. There's also the question of how long investors will continue to react so positively to NASCAR sponsorships. It all depends on the future popularity of the Sport” (Krantz, 2007). ..FT-.”NASCAR lovers also boast some appealing demographics: 30 million of its 75 million fans are women; 32% are between the ages of 18-34 and 58% are between the ages of 18 and 44; 42% earn $50,000 or more per year; and 40% have children under the age of 18” (Cassidy, 2003).
“NASCAR sponsorships have evolved from beer, auto parts and tobacco in the 1970s to now include a wide-range of consumer goods, as well as business-to-business and Internet brands. And as more sponsors clamored to get on board, endorsement prices skyrocketed. Estimates of the annual rates to endorse a top-notch driver grew from $6,000 in 1963 to $3 million in 1987 to numbers as high as $15 million by 2000. At that time, the price tag for a primary sponsorship slot on just a racecar, separate from driver and other endorsement fees, ranged between $8 million and $15 million. It was estimated that Dodge spent $60 million on a multiplatform endorsement deal. UPS' sponsorship deal was targeted at $15 million annually” (Petrecca, Friedman, Hughes, Cuneo, Goetzl & Chura, 2001).
“Marketers flocking to NASCAR follow spikes in popularity and attendance. The sport had a 97% attendance growth from 1990 to 1999, from 3.3 million to 6.5 million. Women made up 38.5% of that audience according to a 1999 ESPN Chilton Sports Poll” (Petrecca, Friedman, Hughes, Cuneo, Goetzl & Chura, 2001).
“M&M/Mars became one of the lead brands of NASCAR sponsorship in 1998. The company replaced Skittles with M&M's as the primary brand on the No. 36 Pontiac Grand Prix driven by Ernie Irvan. Then proceeded to plaster the car on M&M's King Size packages, displays and merchandise offers. The M&M's car debuted at the Daytona 500 the same month the candy maker shipped M&M's King Size floor displays for the plain and peanut varieties sporting racing graphics and Irvan. The King Size M&M's packs also flagged a year-long offer for an M&M's racing watch with the Red and Yellow animated characters. Skittles had become the top brand in the non-chocolate chewy candy category with $21.7 million in sales at drug, grocery and mass merchants during the prior year” (Beirne, 1998).
“In 1993, MasterCard paid approximately $2.5 million for its NASCAR sponsorship. However, MasterCard did almost nothing to leverage its NASCAR sponsorship, even as the sport's notoriously brand-loyal fan base has grown exponentially. NASCAR welcomed efforts by VISA to become a sponsor which typically anchored seasonal advertising and promotions to its big-ticket partners' events. MasterCard made wholesale changes since inking the 1993 NASCAR agreement; changing advertising agencies, sponsorship and marketing personnel. MasterCard began putting its sports sponsorship dollars in World Cup, Major League Baseball (MLB), Major League Soccer (MLS), Professional Gold Association (PGA) and the National Hockey League (NHL)” (Lefton, 1998).
In 1997, QVC tried to lure more male shoppers by sweetening its NASCAR sponsorship with a sweepstakes that plastered a winning home shopper's name on its car. QVC bought approximately $2 million in media to promote the sweepstakes during NASCAR broadcasts on ESPN and TNN, in addition to promoting the contest over its own airwaves, especially during its NASCAR licensed-product showcase, "For Race Fans Only." The NASCAR deal was part of a long-term QVC programming strategy to link its sales hours to sporting and cultural leagues and events that bring their own distinct fan base, as well as to provide an entertainment hook (Underwood, 1997).
The death of Dale Earnhardt led to calls for stronger safety measures for NASCAR racing. But little of that pressure came from marketers, who said they remain committed to their NASCAR sponsorships despite four fatal crashes in 2000 and 2001. Some companies, such as Home Depot, made statements about increasing safety measures, but no sponsors said they would drop out as a result of the accidents” (Petrecca, Friedman, Hughes, Cuneo, Goetzl & Chura, 2001).
Anheuser-Busch said in a statement that A-B was "saddened by the loss" of Earnhardt, and that the company would meet with Earnhardt's family at an appropriate time. Budweiser was the official beer of NASCAR at that time, as well as the primary sponsor of the car driven by Earnhardt's son; Dale Jr. Busch is also title sponsor of the NASCAR Busch and Busch North series” (Cassidy, 2001).
“Even though NASCAR is one of the most perilous sports, its highly devoted fan base remains a driving factor behind its sponsorship success. According to Newport, Rhode Island-based Performance Research, 72% of NASCAR fans buy products that support the sport. 40% of fans will switch product loyalties to a NASCAR-associated brand. The examples of die-hard supporters are endless. When Procter & Gamble switched its Tide sponsorship away from driver Ricky Rudd in 1999, Rudd devotees did not just shun Tide; many boycotted all Procter & Gamble products. The accident involving Earnhardt sparked negative e-mails to Coors Brewing Co., since the driver of a Coors-sponsored car was initially blamed in the crash” (Petrecca, Friedman, Hughes, Cuneo, Goetzl & Chura, 2001).
Although NASCAR draws considerable amounts of sponsorship money, corporate America pursues numerous top sponsor slots “in order to associate with the high-profile sports and entertainment properties deemed valuable for their level of exposure, fan affinity and marketing potential. Entitling individual events such as golf/tennis tournaments or auto races is a commonly practiced strategy, but rare umbrella title sponsorships present the tantalizing possibility of a broad-based marketing relationship with branding opportunities throughout the entire year” (Cassidy, 2003).The WTA
“For sponsors, however, those same deals carry high price tags and serious logistical issues, especially where global activation is required. Such complications have affected the Women's Tennis Association (WTA), which struggled to maintain a long-term title sponsor since the mid 1990s” (Cassidy, 2003).
“After successful long-term title relationships with Virginia Slims and Kraft dating from the 1970s to the mid-'90s, the WTA struggled to find the right partner. Corel did not renew its annual $4 million three-year deal in 1998, citing a shift at the company away from sports sponsorships. Sanex signed in 2000 after a long search, but pulled out of its five-year deal early, departing its annual estimated $6-7 million pact at the end of 2002-a year that culminated in poor promotion and attendance at the season-ending Tour Championships in Los Angeles” (Cassidy, 2003). Sony Ericsson signed an $88 million deal in 2005 to become title sponsor of the WTA Tour for six seasons (Janoff, 2005).The PGA Tour
“Despite the popularity of its top players, the women's pro tennis tour has few of its own assets to sell. It can offer the valuable real estate on its always-on-camera net posts, but has no real authority over individual players or tournaments and has no high-profile media deal with a single broadcaster. Thus, a title sponsor must spend additional money to reap the full rewards of the relationship” (Cassidy, 2003).
“The ability to create consumer outreach from an entitlement is a draw for Nationwide, which titles the PGA Tour's developmental circuit, an equivalent to baseball's minor leagues. In the first year of a five-year deal, the insurance company worked with The Golf Channel to produce twice-a-month programming called Quest for the Card: Inside the Nationwide Tour. The company runs a golf-specific ad campaign and has on-site sweepstakes at its tour events offering the chance to win tickets to upcoming PGA Tour and Champions Tour events. The tour regularly receives mentions on PGA Tour and Champions Tour telecasts because many of the players are Nationwide Tour grads” (Cassidy, 2003).
“The sponsorship also works because the PGA Tour structured the developmental tour to require and benefit a title partner. For example, the untitled PGA Tour typically gets $4-8 million for an individual event title sponsorship and the untitled senior Champions Tour ranges from $1.5-2.5 million. But individual Nationwide Tour events go for only $300,000 to $500,000, necessitating additional funding from a title sponsor, estimated at $6 to 7 million per year. For...
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