How to Exit a Sponsorship

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You spend years building a partnership between a brand and a property and then, for various reasons—objectives not being met fast enough, lack of vision at the management level, a changing of the guard or simply the strategic realignment of a scattered portfolio—and the time comes to call it quits.

No matter how good the reasons are for leaving, every brand needs a solid exit strategy. There are multiple players involved, from the property to the media to fans and the general public, and their reactions should not be underestimated. You don’t want to run the risk of having years of hard work crumble with a single news story.

The property: a plan

Announcing your exit can hit the property like a ton of bricks. It can generate a lot of insecurity, most notable regarding the securing of new sponsors and the fact that the financial engagements of events are often made far in advance.

The key is to give the property a good heads up, ideally more than 10 months prior to the event, so that it has sufficient time to make the necessary adjustments. A common reflex is to wait for the contract to come to an end to avoid any discomfort between the two parties, but it’s best to prepare your exit as far in advance as possible. That helps keep bad press to a minimum and gives you the time to end the partnership on the best possible terms.

Announce the news in person. This will prevent any bad blood between the two parties and keeps negative comments from being made on the public stage. Then follow up with written confirmation and be sure to copy all administrators. Never lose sight of the fact that a sponsorship is a business deal between two organizations and is a contractual agreement. Written proof of the sponsorship ending will prevent any ambiguity when it comes to renewal clauses, option clauses or the right of first refusal (which can go beyond the end of the contract).

A divestment plan can serve as a good middle ground for both organizations. For example, when the property is delivering positive results, the brand can progressively pull back over two or even three years, slowly diminishing its status as a sponsor. It’s also possible to keep only the assets that are valuable for the company. For example, if you don’t want to maintain visibility across the entire site but you do want to pursue business development initiatives, you can continue to run a hospitality program. The inverse is also true if it becomes difficult attracting clients to the corporate box.

With such an approach, you can issue a clear press release indicating a change in the investment level or status without having to manage a total exit—a compelling option if you’re a title sponsor or the presenter of an event.

PR and media go hand in hand

Media outlets looking for a sensational story could be eager to jump on news of a sponsor exiting an event. Have a PR plan in place before you even announce the news to the property. Your message will be more credible if it’s controlled by a third party, and you can share your plan with the property so it too can communicate a positive message. Another good reason to maintain a healthy relationship even as you’re backing out.

The fans: a positive tone

With any sponsorship, fans are the ones you’re trying to reach. There are two possible strategies when exiting a partnership: thanking fans directly for their support or taking a more corporate tack. Generally speaking, the arrival of a brand partner on the scene causes more upheaval than its departure. What’s more, the public has become accustomed to brands rotating in and out when it comes to big events. The bigger risk is if the exiting sponsor leaves the property in a vulnerable position with regards to its future, as can be the case with more niche cultural and regional organizations.

What if you are exiting several properties?

The major divesting of several regional properties or a large-scale exit can have a far greater effect on the brand sponsor than if it’s backing out of only one property. In such circumstances, it’s a good idea to let the blade fall swiftly rather than to stretch out the bad news over a long period of time.

Some key elements to keep in mind when exiting a sponsorship:

  • Let the property know as soon as possible to maximize its chances of securing new sources of revenue
  • Notify all the interested parties in writing to avoid any ambiguity regarding option clauses and the right of first refusal in the sponsorship contract: these clauses are often open to interpretation
  • Task internal teams or an agency to build a communications plan or a contingency plan for public relations and social media
  • Remember that you will continue to be associated with the property for a certain period of time (the effects of sponsorship can last several years after the sponsor exits)
  • From a public relations standpoint, keeping quiet can be a favourable option when a sponsor exits because of a scandal (Read: How to react after a celebrity endorsement scandal)

Despite the risk associated with exiting a sponsorship, it can be good for the brand. A case in point: British American Tobacco pulled out of its various disparate sponsorship activities and invested heavily in one platform: a new Formula 1 team fits its communications objectives to a tee. Though it’s easy to worry about the immediate impact of exiting and its negative consequences, the key for any brand is to make the best decision for the long term.

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