Addressing The Black Hole of Sponsorships
Many struggle to manage multi-year commitments that were locked in when sales and marketing budgets were flush. And then there are the image issues. Bank of America ended discussions with the New York Yankees for fear of consumer backlash. Royal Bank of Scotland raised eyebrows by extending its sponsorship of the Six Nations' rugby tournament just before announcing $41 billion in losses.
Here's how black holes are created. A Performance Research and IEG study found that only 20% of companies do any primary customer research to evaluate the fit of their sponsorships. They're more likely to ask what competitors are sponsoring than to investigate the sponsorship's appeal to their customers.
And that's on the front end. On the back is a lack of metrics to evaluate sponsorships' impact. The Performance Research/IEG study also showed that 40% of sponsors spend less than 1% of their sponsorship fees on all of their sponsorship metrics; over 25% spend nothing at all.
To an extent, that's understandable. The confidential, deal-by-deal nature of sponsorships makes it difficult to assemble standard metrics. Sponsorships can have multiple objectives, ranging from driving awareness to improving corporate reputation, further complicating the issue. Most deploy a variety of marketing vehicles, increasing measurement complexity. Holiday Inn's sponsorship with Major League Baseball, for example, includes tickets for staying at a hotel, utilizes loyalty points for VIP experiences (like All Star games) and employs both billboards and television media.
Savvy marketers can escape this black hole of sponsorships, improving the impact of both individual sponsorships and their entire portfolio of sponsorships if they tackle three sets of issues.
First is establishing the sponsorship strategy and the optimal portfolio of sponsorship properties. What objectives can be met through sponsorships? What role should sponsorships play in the overall marketing strategy?
Second involves identifying, evaluating, and selecting high-impact sponsorship opportunities. What opportunities are the most and least attractive? What are the roles individual sponsorships will play in a portfolio of sponsorship properties?
Third requires analysis of ways to optimally structure and utilize individual sponsorship initiatives. What advertising, promotional and customer engagement programs will get the most exposure to and value from the sponsorships? What are the best levels of investment for each property and program?
From there, a measurement process must be put into place. We recommend a three-part process to measure sales response, brand equity impact and contribution to marketing efficiency.
- Sales response measurement typically involves combining purchase and investment data through marketing mix modeling or historical analysis. Coca Cola, for example, does this to distinguish between the volume generated at the event itself, through local market promotion, and through national advertising and promotion.
- Assessing brand equity impact requires identifying the key customer attitudes that drive consideration, purchase, and loyalty. Measuring the changes in attitudes before and after the sponsorship shows whether the program is really enhancing brand equity. This type of analysis can be extremely valuable whenever brand objectives are crucial to success, such as Citibank's commitment to the new Mets' ballpark, Citifield.
- Contribution to marketing efficiency is also important. Take local marketing activities of individual bars and restaurants on behalf of leading brewers for events such as the World Cup or the Super Bowl. Their micro-marketing clout obviously eliminates costs that the brewer would have to shoulder. But brewers need to know how efficiently a Super Bowl event drives bar and restaurant enthusiasm and participation versus other sponsorship alternatives or other local promotions.
The roiling economy has put pressure on businesses to ensure that their sponsorship commitments deliver. It's an incentive to better measure and manage sponsorship marketing. Sponsorships can be extremely powerful. But they must be demonstrably more effective and generate strong returns in good times and in bad.