Five Factors Impacting Sponsorship

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By Jim Andrews, Independent Sponsorship Consultant & Thought Leader

Sponsorship professionals spend a significant amount of time examining how we, as an industry, are succeeding or falling short in our constant efforts to improve. But we must also not lose sight of the external forces that can either propel or impede our efforts. Here are five factors that could have substantial effects on sponsorship:

1. Industries in low-growth mode

The largest companies and brands in important sponsorship categories such as packaged goods, autos, apparel, financial services and telecommunications have experienced little to no growth over the past few years.

Compounding that, marketers experiencing stagnation often focus on short-term goals to help impact quarterly numbers and try to please executives and shareholders.

A recent study showed that, while the optimal marketing mix is 60 percent long-term brand building to 40 percent short-term sales promotion, marketers have shifted to a 50-50 split, taking money away from impacting the future and instead trying to earn results today.

Sponsorships don’t typically fit into short-term plans. While digital and ad media excel at quick turnarounds, partnerships are a long-term play.

2. Growth in uncharted places

There is economic growth happening. It’s just not in the usual places. The slow growth cited above is among Fortune 500 companies, which is no doubt a critical group.

But, as noted by the Interactive Advertising Bureau’s excellent report, “The Rise of the 21st Century Brand Economy,” the hub of growth in the consumer economy has shifted to companies and brands that have tapped into low barrier to entry, capital flexible, leased or rented supply chains. These include thousands of small firms in all major consumer-facing categories that sell their own branded goods entirely or primarily through their owned-and-operated digital channels.

These brands are the marketers most in need of a cost-effective marketing platform—like sponsorship—that can raise awareness, build their brands, create stature and put them on a level playing field with well-known category leaders.

This is a true best of both worlds scenario. Consider the razor category. Clearly there is a chance in one world to offer relevant sponsorship opportunities to high-growth disruptors such as Dollar Shave Club and Harry’s, which are taking roughly one market share point away from category leader Gillette every year.

But there is also an opportunity with the heritage brands that are being disrupted. Yes, loss of share, sales and revenue means budgets are under severe pressure at companies like Gillette’s parent company, Procter & Gamble. But marketing spending isn’t gone. In fact, slow growth or no growth means brands like Gillette are looking for new opportunities to reach new consumers in new ways.

So, while we see a slow-growth threat when we note that Gillette exited its sponsorship of Major League Baseball in 2018 after 79 years, we also see opportunity when we look at the brand’s new deals in esports.

3. Zero-based budgeting

The latest trend in management is zero-based budgeting (ZBB). This accounting technique essentially forces adherents to rebuild budgets from zero every year, justifying each line item rather than targeting an increase or an aggregate spend and then backfilling. According to a recent Deloitte study, 22% of CPG brands—including Unilever, Kraft-Heinz, Mondelez and Kellogg—have adopted this approach, and it’s spreading to many other categories.

Zero-based budgeting is not a bad idea in itself. Budgets are built around what is needed for the upcoming period, regardless of whether any given budget is higher or lower than the previous one. The problem is when companies in low-growth mode and with a short-term vision poorly apply the concept of ZBB to try to cost-cut their way to growth.

It’s also clear that zero-based budgeting is no friend of long-term plans. It favours areas that can achieve direct revenues in the near term, as their contributions are more easily justifiable than investments in long-term—but necessary—objectives like brand building. If a sponsorship is subjected to an annual review under ZBB, it’s going to have to produce some measurable outcomes to ensure it sticks around.

4. Outcome-based marketing

In a similar vein, brands are growing accustomed to marketing platforms that can connect the dots between campaigns and actual sales. This has been digital marketing’s great strength. If you buy Google ads, Google Analytics helps you attribute conversions, sales, etc. at the user level. Facebook does the same.

And this trend is not limited to digital media. Increasingly, TV is preparing to provide real-time reporting and household- and user-level data just as digital does. Procter & Gamble Chief Brand Officer Marc Pritchard said last year, “What has occurred over the past several years is that digital technology and data analytics have allowed greater control of the marketing. We are now seizing that control back.”

This was both a major disruption of the ad agency media-buying model and a big deal for sponsorship as well. Our field currently lacks the campaign-to-result analytics and through-line. Yet, more marketers expect those as the norm as more brands are demanding greater accountability for their marketing spending—and are sometimes putting more of it into the hands of procurement departments. Sponsorship therefore runs the risk of getting left out if we don’t up our game.

And it’s not just analytics. Some media players are offering new models that reduce risk for marketers. Consider the digital agency that 1) sold media to a real estate firm based on cost per actual lead and 2) lowered the price in exchange for a profit share on any homes that were sold. The idea that “we are so confident this will be a good buy for you that we are willing to have skin in the game” goes a long way with marketers in today’s environment.

5. Brand safety

An issue causing much angst among marketers: “Can I trust that my brand won’t end up next to or associated with inappropriate content?”

Problems with programmatic buying and the fact that Google and Facebook refuse to allow third-party content verification have made brand safety a headline topic, with advertisers threatening to boycott YouTube, among other measures.

This issue is one reason that the digital spending free-for-all is over—good news for sponsorship and other sectors. Although digital is still where many marketing dollars are going and will continue to go, there is a market correction happening based on the things that digital has not done well. A great deal of money was spent on ads and videos that no real people ever saw for more than 1.7 seconds. Brands have caught on to that and are getting much smarter about where and how they spend their digital dollars.

Marc Pritchard himself has admitted that in going (almost) all in on digital, P&G and other brands had become blinded by shiny objects. Now they’re reallocating some of those budgets to other forms of media. P&G alone has shifted $200 million out of digital and back to other advertising and marketing channels.

Although the topic of brand safety has primarily been associated with digital marketing, sponsorship lives in a glass house and shouldn’t throw stones. Where once we touted sponsorship as a safer environment for brands—in alignment with trusted institutions that people are passionate about—that argument is tougher to make today.

The most egregious examples are those that are self-inflicted on the part of properties. Certainly, sponsors were justified in removing themselves from USA Gymnastics and there were no tears shed regarding FIFA’s World Cup sponsorship woes.

Other recent examples are more interesting. No doubt, the U.S. sponsors who chose to partner with the NRA knew they were getting involved with a controversial organization. There have always been brands that decide that reaching a sizable group of potential consumers is worth suffering the consequences of those who might be upset by the association.

That calculation is, however, harder to make in our transparent world where such partnerships are easily found and the reaction to them is much swifter and stronger thanks to the acceleration of social media. While partnering with the NRA would never have been a safe option, it was certainly safer in a pre-digital world.

Perhaps most interesting of all is the NFL anthem protest controversy, with so many angles and actors, and sponsors ultimately caught in the middle with both sides calling for boycotts. From any of these angles, it’s safe to say that sponsorship isn’t always a brand-safe environment.

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