Sponsorship is a healthy communication medium, and many brands are starting to see the value in it. New sponsorship categories can bring additional revenue to rights holders. But partnerships can also negatively affect brand equity, not just for the properties signing them, but also for existing sponsors. Brand transfer is not a one-way street. It can go both from property to brand and between sponsors, influencing how consumers perceive a given brand.
Not surprisingly, many new entrants to sponsorship are from disruptive business models that are coming to maturity.
Direct to Consumer Advertising
There has been an explosion of online direct-to-consumer (DTC) start-ups. (You’ve probably noticed that your Facebook or Instagram feeds are besieged by these sponsored posts.)
But what exactly is the direct-to-consumer model? Basically, industries that used to rely on a distribution and retail model are cutting out the middleman and attempting to sell directly to buyers.
This will likely continue to grow. Currently, one third of consumers consider doing 40% of their shopping on such sites, while 81% of consumers plan to make at least one purchase from a DTC brand in the next five years.
Many brands have gone to great lengths to offer an increased number of options, and this has made buying decisions more difficult for consumers. This new wave of DTC is a retail revolution, disrupting both the customer experience and the traditional retail model. The focus is on simplicity (a simple, usually well made product in limited quantities), customer experience, virality, and repeat purchases.
The vertical integration of these companies also allows them to explore different iterations of their offering. For instance, some don’t uniquely sell online. Instead, they’ve been playing with hybrid models, such as subscription-based memberships and a more traditional retail presence, which they tie into their online sales strategy.
Examples of popular companies using this model are Casper and Endy (mattresses), Warby Parker (glasses), Glossier (makeup), Harry and Dollar Shaving Club (razors), Allbirds (shoes), Bonobos (pants), BarkBox (dog treats), Chubbies (shorts), Soylent (meal replacement), The Honest Company (ethical cleaning and baby products), and HelloFresh and Blue Apron (meal kits).
For companies like these with a broad target, being top of mind is key to driving traffic and sales. This is mainly achieved through SEO optimization and sponsored posts, as well as a strong social mechanism. These companies have also widely used celebrity endorsement to generate buzz.
In Canada, for example, Casper is the official sleep partner of the Toronto Maple Leafs, which is featured prominently on the landing page of their site. This move was their first partnership with a sports team. Following this original agreement in 2017, Casper signed an endorsement agreement with hockey star John Tavares for its “Sleep Better, Hockey Harder” campaign, and uses the partnership to showcase the impact of sleep on performance.
The Honest Company also aligned with sports through a partnership with Major League Baseball (MLB) for a line of baby diapers featuring nine MLB teams.
Soylent, the meal replacement company, has turned to eSports to reach gamers that engage in marathon sessions without taking a break for a meal, making the partnership a natural fit for its audience. In fact, the company targeted the group as early as 2015, with partnerships such as the Electronic Sports League’s (ESL) Pro League. The brand now focuses on smaller local events as well as up-and-coming teams.
The jury is still out on the longevity of some of the start-ups in this category. What we do know is that, as this model gains in popularity, acquisition costs and the competition to drive traffic to these sites are skyrocketing. Some companies have recently seen a return on their investment while others have yet to turn a profit, which indicates a very volatile environment. Blue Apron slashed its advertising spend by 35% after fulfillment problems led to a 20% loss in sales.
Our prediction: sponsorship is here to stay, and it will mainly be used by the more financially sound organizations in this category in a bid to remain top of mind for consumers.
On Demand/New Economy
On-demand services are at our fingertips. And new models continue to disrupt long-established industries. Companies that fulfill needs we didn’t even know we had are booming, from car and tool sharing to car washing, cleaning, delivery and even plumbing services.
Both ride-share and food delivery services have become more prominent as they vie for an app spot on your phone. Though sponsorship programs in these categories aren’t new, they are growing.
Lyft and Uber
These two companies have taken their marketing battle to hockey. Lyft is the official rideshare partner of the 2019 World Junior Championships and the Vancouver Canucks. (Ridesharing is coming to the Province of BC in the fall of 2019.)
For its part, Uber is the exclusive rideshare partner of the Calgary Flames. And in 2018 Uber signed a three-year partnership as the official rideshare app, together with Uber Eats as the official meal delivery app, for all MLSE teams (the Toronto Maple Leafs, the Toronto Raptors, the Toronto FC, and the Toronto Argonauts), and it is the exclusive rideshare provider for the Scotiabank Arena and the BMO Field. Uber’s partnership with most of Toronto’s sports teams is a bold statement, especially with Lyft’s recent arrival in the market.
But Lyft is not letting its competitor own the whole city. It signed its first festival partnership with the renowned Toronto International Film Festival (TIFF) in 2018. The brand used festival touchpoints to promote its message of diversity and inclusion, which could become a key brand differentiator considering Uber’s recent PR issues. Lyft has also partnered with Toronto Pride and the Canadian National Exhibition (CNE, or simply “the Ex”).
In Europe, Uber signed a preeminent shirt sponsorship with soccer club Olympique de Marseille to promote the Uber Eats service. Starting in 2020, it will also be a title sponsor of Ligue 1, the Professional Football League (LFP) in France.
Finally, both Lyft and Uber are entering the bike sharing and electric scooter sector, and their marketing battle will no doubt be heating up as well. This will bring a range of sponsorship opportunities in various markets as companies aim to generate goodwill from lawmakers.
Companies will most certainly be using sponsorship to increase usage by ensuring their app is downloaded—and stays put—on users’ phones.
Advanced sports analytics and AI start-ups were omnipresent at the Sloan MIT Sports Analytics Conference in Boston earlier this year. While small players are trying to carve out a business niche, large cloud and on-demand platforms, such as Amazon’s AWS, are becoming ubiquitous in the sports sphere.
Sponsorship integration and broadcasting are a natural fit. By providing live predictions based on a thousand data points, these platforms are able to showcase their computing power to large audiences.
AWS joined Formula 1 in 2018, showcasing its machine-based learning system and advanced statistics by making predictions on overtakes and team strategies during the broadcast. Formula 1’s image as the most technologically advanced sport and a global platform is an ideal means to market AWS capabilities. The company also has ties with NASCAR, but in motorsport it takes a different approach: The series will use AWS to archive more than 70 years of records in a move that aims to leverage content to improve the fan experience.
America’s most popular sports league, the NFL, is using AWS for artificial intelligence, machine learning, and analytics on and off the field with a new branded service called Next Gen Stat. Using radio frequency, it places multiple sensors on player equipment and footballs to provide TV viewers with advanced statistics.
The company has taken a similar approach to its MLB partnership by using Statcast tracking technology since 2015. It has also partnered with the NHL to provide on-ice corner visibility during the 2019 Stanley Cup Playoffs.
The goal of AWS sports partnerships are to concretely showcase the company’s capabilities. By doing so, the company enhances the viewing experience and creates new broadcasting assets. This should help them increase visibility far more effectively than it would with a static logo display.
Finally, Dropbox, another cloud service provider, has partnered with events such as the Sundance Film Festival and SXSW. It has also used a consumer-facing approach to help fuel its rapid growth. Having noticed that the creative industry was relying heavily on its services, it chose to sponsor a music festival.
Wellness, a global industry that includes everything from boutique fitness gyms to day spas, is worth a whopping $4.2 trillion USD.
Using smartphones to keep track of or enhance wellbeing is a major business. The mHealth (“mobile health”) app market size was valued at $12.4 billion USD in 2018 and experienced double-digit growth in the last two years, with an estimated 84,000 mobile apps released. There were 3.7 billion app downloads in 2017–an increase of 16%. These mobile health apps are designed for various purposes, including fitness, lifestyle, nutrition, disease, medication management, etc.
Two apps created for mindfulness and meditation, Calm and Headspace, dominate a large share of the self-care revenues, and they have started to use sponsorship to promote their services.
This subscription-based app offers guided meditation to help users deal with various issues from sleep to stress management and even sports performance. The company entered into multiple major deals with sports leagues in 2018 and 2019. For example, its three-year agreements with both US Soccer and Major League Soccer (MLS) provide players, coaches, and league and club staff with free access to Headspace and live meditation sessions. The deal also includes scientific research on the impact of meditation on sports performance.
The mindfulness platform also developed a World Cup program for the United States women’s national soccer team (USWNT), with individually tailored meditation programs for players on the US team during the tournament. (This might partially explain the team winning the Women’s World Cup!)
Furthermore, as the Official Mental Training Provider of the LPGA, Headspace will introduce LPGA players and fans to its meditation and mindfulness content on everything from sports performance to sleep improvement. And the company took the same approach to basketball when it added original co-branded content featuring NBA athletes.
It was a smart move to create a tie-in with women's sport. Pro sports are a crowded sponsorship space, and though women’s pro sports have less funding and fewer large sponsors, it also has fewer competing brands–meaning that a properly activated sponsorship can end up having a greater impact.
Calm, the leading meditation app, is valued at $250 million USD. But it doesn’t follow the same strategy as its challenger. Instead, it has partnered with Samsung to provide a mindfulness icon on all Samsung devices.
In terms of sponsorship, Calm has partnered with RED to support the fight against AIDS, with special Calm content and co-branded essential oil products. It is also involved in a campaign to raise awareness around male suicide in the UK—the leading cause of death in men under 45 in the country.
With society’s focus on performance, its new obsession for self-care, and with millennials getting married and having kids later in life, there is fertile ground for wellness apps. The stigma around mental health is fading and conversations around such issues are more common. This is likely contributing to the popularity of easy-to-use meditation apps such as Headspace and Calm.
Headspace’s move toward sponsorship is an indicator that, as the wellness app category matures, it will have to rely more heavily on advertising rather than buzz around novelty.