SBJ/June 17-23, 2013/Opinion

Has experience trumped sports in sponsorship market?

Editor’s note: This is the second of a two-part column about sports sponsorship.

In our last column (May 27-June 2, SportsBusiness Journal), we wrote about North American sponsorship trends and how the partnership landscape is evolving — both in general and for sports, specifically. Our findings suggested notable growth for sponsorship overall but areas of concern for the sports sector.

Our sponsorship and endorsement research led us to another series of questions:

1. Why is sponsorship still growing and continuing to work in a strained economy when marketing budgets are so scrutinized and volatile?

We believe the answer lies very much in the way sports properties view image transfer and its transformative power to benefit non-sports brands. This transfer concept is intuitive to most executives in sports marketing, almost a subliminal given, but much about it is misunderstood, and the concept of true fiscal balance is rarely explored in depth.

Let’s create a simplistic example to showcase this. Forgetting for a moment all existing deals, let’s suppose the New York Yankees want to sell their soft drink sponsorship rights. We all know they’ll want this high-profile category to go for as much money as possible. They’ll want a bidding war to break out between Pepsi (which has held the team’s rights) and Coke, and anyone else willing to pay the highest premium.

Intuitively, these beverage companies know a deal with the Yankees will connect them to one of the most valuable and recognized sports brands in the world and provide brand-benefiting images of “prestige,” “leader,” “winner,” “high performance” and “superstar.” These are adjectives most consumer brands want their positioning to portray, and if product exclusivity comes with the deal, they’ll pay a premium. In return for a massive fee (and value-in-kind product), the beverage companies will expect the Yankees to feature the company’s signage and pour its products in every team-controlled setting (the stadium, the clubhouse, the VIP boxes, the spring training ballpark, the fantasy camps, etc.).
 
Does a music festival provide a better consumer touch point for a sponsor than sports?
Photo by: GETTY IMAGES
Let’s say that Coke wins. Coke’s money will buy brand visibility and exclusive consumption. But what of the aforementioned image transfer? Will the Yankees logo on a Coke bottle drive sales? Will a sign on the center-field scoreboard truly drive awareness, trial, or usage by key targets? Will sales of product along the stadium’s concourses make this deal truly self-liquidating? Will a luxury box (as part of the deal) facilitate business-to-business initiatives? Even if the answers to those questions (and others) are yes, will the image transfer have better helped the Yankees or Coke?

Will both parties benefit equally in the equation of overall dollars secured vs. ultimate gallons consumed? Perhaps they will, but more often than not, one party will not get as much as they should have. And strangely, often unnoticed in the deal-making, it is the consumer who manages (in his or her subconscious) the actual image transfer.

What we’ve consistently witnessed is that the real image transfer happens when people experience products firsthand in social environments, and their passion is more connected to their experiential engagement. Said another way: Does a Coke music festival provide a different and more encompassing relationship with the consumer than a Yankees baseball game? If it does, it may explain why sports sponsorship’s percentage of the overall partnership pie is slipping.

2. Why are other property types like arts, causes and festivals giving sports a run for its money in sponsorship investments?

We arrived quickly at the issues of servicing (Who does it better?), experiential variability (Are other groups offering better in-sponsorship experiences?) and easier usage of intellectual property. Almost everyone in sports knows how aggressively the NFL and NBA protect their respective brand logos and how difficult it can be to use a sports logo on anything. We fully understand the need for those leagues (and their teams) to take this approach. But in doing so, have they become more difficult than a local festival or charity that is far more relaxed about how the image transfer is facilitated and how sponsors are allowed to activate?

We understand leagues and teams can’t go backward in their trademark protection, but if they are stodgy and if non-sport competitors make life easier for the Pepsis of the world, don’t for a moment think these “efficiencies” aren’t noticed by the entry-level and mid-level manager types who manage sponsorships. They may not negotiate contracts or speak at sponsorship conferences, but they construct frequent reports to bosses on which properties make life easiest.

3. Is there anything sports sponsorship-selling organizations should do differently?

This is a billion-dollar question because sponsorship, according to IEG, is now a $50 billion business worldwide, with sports taking about 50 percent of that pot. That $50 billion is more than double what it was a decade ago, although sports back then was 75 percent of the pie. If sports had kept its share during the past decade, it would have meant billions more poured into our industry.

Does that suggest it’s time for sports properties to up the ante on servicing, evaluation, post-sales activations, partner relations and more? Probably. Otherwise, if certain trends continue, future sponsorship numbers may transfer more than a few people out of this image-conscious sports industry.

Rick Burton (rhburton@syr.edu) is the David B. Falk Professor of Sport Management at Syracuse University and former chief marketing officer for the U.S. Olympic Committee. Norm O’Reilly (norman.oreilly@ottawa.com.ca) is a professor of sport management at Ottawa University.


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