The most popular game around at the moment appears to be brands dropping sponsorship. Vodafone ditches the English Cricket Board; General Motors pulls out of the Masters Golf Tournament; and 888.com and Saga Insurance dump snooker.
But a new report suggests that while cutting sports sponsorships may save some immediate cash, it does more harm than good. Companies could even face a backlash from fans who feel let down by exiting brands.
The report, from Brand Reputation, argues that the potential for brand damage is even higher for those companies withdrawing from community-level sports and events.
Those types of properties may struggle to find a replacement in the current climate, leaving the impression that the brand has left them in the lurch. So should brands choose cash now and worry about conscience later?
Sponsorship Consulting managing director Pippa Collett argues: “It depends on the case. Inevitably, some difficult decisions will be made. But we are in such an abnormal market that it may be that brand damage is limited because everyone is in the same boat.”
Collett suggests that consumers will be understanding towards those brands that have got involved with sport on a community level and are forced to withdraw due to economic constraints. For example, energy company e.on, which scrapped a seven-year long sponsorship of Ipswich Town Football Club last year, did so because the company had decided to close its operations in Ipswich.
Despite the closure leaving more than 300 local people facing redundancy, the decision to end the sponsorship has been largely perceived to be reasonable because the company is no longer part of that community in the same sense as when it took the deal on.
But Collett admits that some companies may use the recession as an excuse to back out of deals and “get away with it”. Because many so-called “vanity” sponsorships have been undertaken during fat years – the global sponsorship market was recently estimated at $30bn (£21bn) annually by agency IEG – some of the less relevant partnerships are likely to fall away in 2009.
Other businesses are trying to adjust their relationships with sport to retain the community feel at a lower price. Telecoms brand Vodafone has used its 12-year relationship with English cricket to promote itself to local and global audiences around the world. But when its deal ends in 2010, it is not renewing.
However, the company claims it is going to continue working with ECB to develop a “legacy programme at grassroots level”. Quite what that means remains unclear but Vodafone will hope it goes some way to combating any backlash from cricket fans.
In keeping with its softer style of sponsorship-shrinking strategy, Vodafone also pulled out of the Epsom Derby in 2007, only to step in at the 11th hour to back last year’s race when a replacement was not found. The classic race has yet to secure a sponsor for this year’s event, which takes place in June. But Vodafone has said that its 2008 rescue was a one-off and it will not repeat the act for the 2009 race.
For brands in the financial sector, the issue of whether to pull out of sports sponsorship puts them in a no-win situation. If they stick by their partnerships, they attract criticism for spending cash and if they pull out, they risk looking unsupportive of the wider economy.
Bob Mitchell, head of sports and sponsorship at legal practice Harbottle & Lewis, says: “RBS got a lot of stick for renewing its £20m sponsorship of the Six Nations rugby tournament for doing it at a time when people are losing jobs and shareholders have lost vast sums of money.”
Yet Mitchell argues that the sum of £20m against the billions that have been lost by banks over the past few months is relatively minor and insists it is in the interests of brands to keep their names “out there”.
Tim Crow, chief executive of sponsorship specialist Synergy, , agrees and adds: “It is a matter of trust; what better way of saying ‘We’re still here’?”
Crow insists that there are very few “vanity” sponsorships these days and that most sponsorships are thoroughly audited and many generate “huge returns” on investment.
It is a case of companies using common sense: bankers standing on the sidelines of local sports matches may look like community investment, but swanky weekends away at the Monaco Grand Prix will only rile cash-strapped consumers.
Northern Rock finds itself in a similar tricky situation to RBS. The bank, rescued by the Government and placed in public ownership last year, has been a major supporter of sport in the north east for many years, most notably Newcastle United Football Club and rugby union team Newcastle Falcons.
The bank has confirmed that it will continue to sponsor Newcastle United and Newcastle Falcons, due to long-term agreements being in place, but it has already pulled out of other lower profile deals. As yet, it is unclear how customers will react to this strategy.
Crow says there is a “litmus test” which establishes whether a sponsorship is “cutting it” or not and that is to answer the simple question – if the brand stopped doing it, would consumers miss it?
Crow adds that if consumers genuinely would miss a sponsorship, brands should not be afraid to stick with the high-spending strategy even in tricky economic times. “During times like these, there is a need for consumers to dive into something a bit escapist,” he says.
“If brands can help them do that then, arguably, the case for sponsorship is even stronger than when times are good.”
Peter McNeile, director of sponsorship, Cheltenham Racecourse, explains why brands should stick with niche, community-focused sponsorships
Often in the past, corporate sponsorship has been looked upon as an indulgence – a luxury companies could take on in order to boost egos or little more than overpriced corporate hospitality packages – often acquired on managerial whim.
Most companies never thought to question if there might be any return on investment. But times have changed. The marketing function of a business is now expected to work harder and deliver measurable results.
Corporate sponsorship allows brands to engage with individuals through an activity, place or event that the individual is passionate about. It has the ability to spark a personal connection, generating positive associations and increasing the likelihood that the individual will give consideration to the brand’s messages.
When evaluating what makes a good sponsorship package, I think potential sponsors should look for three key things – target audience reach, emotional buy-in and value for money.
Target audience reach
Beer brand John Smith’s is the sponsor of the Grand National, otherwise known as “the people’s race”. It aims to reach an audience of “ale-drinking men, aged 25 to 49, in the B, C1 and C2 categories”. By contrast, Royal & Sun Alliance sponsors the Cheltenham Festival to reach ABC1 professionals and company owners. Both are racing events but aim for quite different consumers. Within the same sport, it’s important for brands to find an event to suit their needs.
Sport appeals to its audience on a deeply emotive level. Guinness has been involved with the Cheltenham Festival for 17 years, capitalising on a tie-in with St Patrick’s Day to add some extra context to the deal.
It is important to maximise sponsorship, using other aspects of the marketing mix where possible, such as advertising and PR, to strengthen the messages you are promoting.
Value for money
Value for money also takes into consideration what you get for your money as well as the commercial returns.
Low-cost airline Ryanair has becoming involved in racing sponsorship. This may at first seem odd because chief executive Michael O’Leary is known for running an extremely tight ship; he insists that every penny of investment must demonstrate its return.
Ryanair’s involvement in the Cheltenham Festival has garnered more than 250,000 mentions on Google. Because the brand relies on online purchasing of ticketing, the internet brand association is a sound investment. The airline has even laid on up to 20 additional flights in the past to accommodate Irish visitors attending the event so it’s had a real effect on bookings too.
In the end, every marketer considering sponsorships must find the optimum vehicle to reach their target audience. It’s all about finding the right fit – the good news is that doesn’t necessarily mean a multimillion-pound deal.