Making Sport Sponsorships that Work

This article looks at the challenges of creating an enduring sport sponsorship partnership. The difficulties involve finding ‘strategic fit’, articulating this well and then leveraging and activating the association for both parties. The investment – both financial and in-kind – is seen as a significant stumbling block as is the need to thoroughly enmesh two separate organisations and proactively align their goals and activities. The Resource-Based View approach is used to help determine the types of resources and capabilities that can be used complementarily and a case of a successful long-term partnership is described through this prism. Finally, measurement, ambushing and degenerative episodes are briefly explored with suggestions as to how they can be managed.

Introduction

Few would argue that creating and sustaining an effective sport sponsorship partnership is an easy task. Testament to the difficulty is the number of partnerships that dissolve or are seen to have been failures. Researchers point to a number of reasons for this, but chief among them is the lack of long-term vision, lack of objective setting, lack of planning, poor strategic ‘fit’ and insufficient financial and in-kind support to back-up the sponsorship (Amis, Slack & Berrett, 1997).

Strategic ‘Fit’

For a sponsor, the goal of a sport sponsorship is generally corporate or brand positioning – the ability to enjoy the ‘halo effect’ of “image transfer” from a valuable sport property to the sponsor’s brand (Gwinner & Eaton, 1999).

A good fit is thought to be the most important determinant of a successful sponsorship (Cornwall, Weeks & Roy, 2005). For similar organisations, the similarity or ‘congruence’ is seen to make the associations more easily remembered. However, an incongruous fit of two organisations can also be remembered in the mind of the consumer if the link is well articulated. Owens-Corning’s sponsorship of the Canadian freestyle skiing team is a good example of this. Owens-Corning is an insulation and buildings products company. The ‘fit’ between it and the sport centred is tenuous (cold weather) but the values overlap is of innovation, panache, and excitement (Amis, Pant & Slack, 1997).

Fit and long-term complementarity presents the first challenge for the sponsorship. A good fit can only be determined by having a deep and thorough understanding of each organisation’s brand, target market or fans, their demographics and psychographics, and the future strategy and commercial objectives of each (Cornwall, 1995). Essentially, an analysis needs to be conducted of the two organisations so that their brand associations can be overlapped and values manipulated (Ferrand & Pages, 1999).

This kind of due diligence requires both parties to consider the partnership as a strategic and long-term commitment, not simply an element in the communications mix in exchange for some funding.

Investment

Another challenge for many partnerships is the overall investment required. Many researchers cite the huge $37 billion p.a. worldwide investment made in sport sponsorships, but even this does not accurately reflect the total picture. Another $500 billion per year is spent on product packaging, much of this related to sponsorships (Woodside, 2008). Two – three times the initial sponsorship investment is generally required in order to leverage and activate the association (Argus, 2013). Crimmins and Horne pointedly argue (1996) that “if a brand cannot afford to spend to communicate the sponsorship, they cannot afford the sponsorship at all” (p.16 in Cornwall et al, 2005).

It is not sufficient for a sponsor to invest funds and expect any meaningful results. Nor is it sufficient for the sport property to accept the funds without making their own investments to activate the association. Successful partnering sport entities may invest as much as 30 per cent of their incoming investment in joint activities to strengthen and leverage the bond (Farrelly et al, 2006).

For the sponsor, effective leveraging activities may mean that a sponsorship-linked marketing approach be undertaken. This places the sponsorship in the centre of the organisation’s corporate strategy and brand positioning and is the central ‘theme’ that is extended throughout its communications mix.

Resource-Based View (RBV)

The theory underlying the RBV is that all firms seek to achieve a sustainable competitive advantage. This then results in above average returns, increased market share and higher levels of profitability (Argus, 2013). The advantage is derived from resources and capabilities; what it has and what it does.

Amis et al (1997) hold that in the RBV model, the advantage is the distinctive competencies which give it an edge. It is the breadth of the resource mix that underpins a good sponsorship.

Fahy, Farrelly & Quester (2004) write that in order to provide a source of competitive advantage, the activities should be all of the following:

  • of value for the customer
  • rare
  • inimitable
  • unable to be substituted

Farrelly, Quester and Burton (2006) studied successful sport sponsorship partnerships. They contend that both parties need to contribute at a strategic as well as operational level. They also believe it is helpful to think of the partnership as “a marathon, not a series of short sprints” in which the processes are as important as the outcomes, because they will, in time, deliver more value.

From a sport sponsorship perspective, the RBV model can be very helpful. A capability is the process of using and manipulating certain resources, which could consist of skills, people, routines, market intelligence and so on. The advantage for a partnership is the availability of two complimentary sets of skills and strengths.

By developing functional and integrative capabilities that generate activity systems of benefit to the partnership, the parties create an “idiosyncratic resource” that serves as a differentiator and a competitive advantage (Argus, 2013). In the same way that budget Southwest Airlines has created distinct activity systems to reinforce its positioning throughout its organisation (Porter, 1996), the activity systems created by the partnership become a strength in that they are difficult to replicate.

In terms of what would enable such an advantage, Fahy (et al, 2004) ascribe three broad categories:

  • Tangible resources: these could include finance; stadiums; venues; production and other facilities.
  • Intangible Resources: these could include brand equity of both partners; image; fans; teams.
  • Capabilities: includes market orientation; organizational cultures and routines; experience; sponsorship-related managerial expertise.

By establishing joint routines and ingraining elements of both organisations, the routines between the parties can become entrenched, refined and continually improve over time. By garnering a long-term and collaborative approach, the relationship itself becomes a source of value as new opportunities, skills and resources can be identified in an ongoing process.

Key Resources

By and large, much of the literature points to a handful of key resources behind the success of a sport sponsorship partnership from a RBV perspective. These are:

  • finance
  • brand-building activities
  • managerial capabilities
  • sponsorship-related organisation routines
  • market orientation (sensing, intelligence and sharing)

Relationship Approach

Needless to say, the challenge in creating long-term and holistic marriages between two organisations that may share little in common in terms of industry, category or operations is significant. Rather than a transactional exchange, in order to be of mutual and ongoing benefit, sponsorships require a relationship-approach.

Nufer and Buhler (2009) outline the requirements for a successful sponsorship as:

  • Trust
  • Mutual Understanding
  • Long-term perspective
  • Communication
  • Cooperation

To illustrate a successful long-term sponsorship from a resource-based view, Amis et al (1997) discuss Owens-Corning and the Canadian freestyle skiing team as a good example.

EXAMPLE: Owens-Corning & Freestyle Skiing

Owens-Corning (O-C), an insulation and fiberglass company, initially screened a large number of sport properties before deciding on Canadian freestyle skiing. This was a fledgling sport, alternative and exciting. The investment was considered to be cheaper than advertising and offered an opportunity to develop O-C’s awareness and positioning.

The linkages were good. O-C wanted to create an image that it was “fresh, exciting and worth investing in” and the freestyle skiing team was trying to do the same.

The overt link was the cold weather (insulation / snow) and the tacit associations were the desired brand attributes of having innovativeness, precision and panache.

O-C lobbied hard to get the sport of freestyle skiing registered as an official Olympic sport and eventually succeeded at the 1994 Lillehammer Winter Olympics. O-C also assisted in building a national training centre for athletes and built one of the world’s largest archives of photography and video of the sport.

It also embedded itself by helping retiring athletes relocate when they needed to.

Freestyle Skiing managed to lift awareness of Owens-Corning and provide a cost-effective method of promotion, a solid platform for its positioning and ongoing contracts. When the sport surged in popularity and many potential sponsors became interested in the sport, the early establishment of these activities, systems and people posed a barrier to competitors enjoying the same advantages earned by Owens-Corning.

The partnership demonstrates:

• Value to both the sport and Owens-Corning brand awareness and image

• Rareness (the linkages were strong; the resources and capabilities of each other supported the partnership)

• Inimitability (the systems were entrenched; the relationship well-established)

• and Difficulty to Substitute (another sponsor for O-C)

The challenge to enmesh two organisations and stay married over the long term may be why other companies, notably Red Bull (Gorse, Chadwick & Burton, 2010) take ownership of the sport entity or created he sport event themselves.

 

The Challenge of Measurement

A further challenge for successful partnerships is the difficulty in measuring and benchmarking returns on investment. Much of the value provided by sponsorship partnerships is intangible – it relates to brand equity and the power of the joint brand associations. Given the long-term, process-oriented nature of an enduring partnership, financial returns within short-term or predefined periods may undermine the potential of the relationship.

Fahy et al (2002) suggest that some of the arbitrary metrics used by firms such as changes in market share can fail to capture value and are “crude reflections” of the performance of the partnership.

Compounding this challenge is the difficulty of separating other communications activities from the sponsorship so that it can be independently measured. Newer tools such as the proprietary SponsorMap™ may assist here. This tool, for example, states to be “a consumer based research tool developed to measure the complex elements of a Property/Brand/Consumer relationship” (SponsorMap Website, 2013).

Other firms including IFM and Sports+Markt (Raynaud & Bolos, 2008) exist to provide quantitative results on sponsorship endeavours. However, the cost, complexity and inconvenience of outsourcing these performance metrics may deter potential partners.

RISKS

Sport Entity Failings

Embarking on a sponsorship poses a number of risks for a sponsor. There is no guarantee that a particular sport or athlete will rise in profile. While the rewards are rich in the event that an investment is astute (Volvo International Tennis Tournament; Nike and unproven basketballer, Michael Jordan [Amis, et al, 1997]), such matters are largely out of the control of the sponsor.

Degenerative Behaviour

The brands of both the sport and the sponsor are key to a successful relationship and so degenerative behaviour can impact them both.

Unfavourable behaviour of an athlete can cause damage to both the sport brand and the sponsor’s brand through ‘image transfer.’ Where degenerative behaviour is frequent or there is poor communication between sponsor and sport, the partnership can devolve into blame and early termination. However, if the relationship has been built upon good foundations of a long-term relationship approach, the partners can manage such issues without damaging their partnership. Westberg, Stavros and Wilson (2011) argue that as long as communication is open and transparent; the relationship is based on trust of each other’s processes, then it should survive.

Similarly, a well-developed relationship can turn a degenerative episode into a neutral or even positive effect by deepening the relationship between the parties or with their target/fan market. While the saga is ongoing, the AFL drugs scandal may have triggered a positive shift by sponsor, Jeep (Mumbrella Website, 2013). Instead of terminating their contract, they used the scandal to add emotional depth to the association.

The sponsor can possibly assist the sport by providing athletes and managers with media training, and the sport can minimise the risk of degenerative behaviour by establishing preventative measures and player protocols.

Ultimately, frequent episodes of anti-social or other degenerative behaviour can damage a sponsor’s brand and force them to invoke an irremediable termination of partnership as per Nike’s termination of Oscar Pistorius after he was charged with murder in early 2013 (Boran, 2013).

Ambushing

Ambushing is always a challenge for a sport sponsorship and the encumbrance of having to proactively protect and defend the association, rather than reactive measures (Burton & Chadwick, 2008), adds further layer of complexity and resources. Smaller organisations in a category also suffer the risk of having their sponsorship misattributed to the major category competitor (as in the case of Ansett and Qantas during the Sydney Olympics), which could also curtail some partnership investment (Cornwall et al, 2005).

Conclusion

There is great challenge for both a sport entity and a sponsor to engage in a successful partnership. To develop an enduring and mutually valuable sponsorship for both involves a few basic prerequisites. Both partners need to understand they are embarking on a strategic, long-term relationship rather than a brief transactional exchange. As such, both parties are required to make significant investment, both financial and in-kind. This investment may constitute at least twice as much as the initial outlay in order to truly activate the association. For the sponsor, effective leveraging activities may mean that a sponsorship-linked marketing approach be undertaken. This places the sponsorship in the centre of the organisation’s corporate and brand strategy and and provides values and images that can form part of the central theme that is extended throughout its communications mix.

In order to do this, great trust and cooperation is required. The compatibilities and complementarities of the two organisations’ resources and capabilities need to be analysed. Relationships need to develop into routines and information sharing. The partnership certainly needs to be reciprocal in commitment, collaborative, cooperative and brand-building. Both parties understand the value they can bring each other in the co-production of meaning. It is the skill of working together – with shared vision and passion – that will create a unique and strong basis of mutual value that is greater than either could create individually.

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