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More for Less

By Apr 01, 2005

Sponsorship spending grew 8.4% in 2004, the highest amount since 2000, and will grow again in 2005, according to Chicago-based sponsorship analysis group IEG. North American brands spent $11.1 billion on rights fees in 2004, and IEG expects a further jump of 8.8% to $12.1 billion this year.

Of the marketers surveyed for the PROMO’s Industry Trends Report, 18.5% said sponsorship was one of their top-three promotional tactics in terms of dollars spent in 2004.

This shouldn’t be too surprising, considering that 2004 was an Olympic year. Brands from McDonald’s to Visa signed on as TOP sponsors for the event, with visibility both in Athens and at home.

But 2004′s growth could have been even bigger had brands continued to spend top-dollar on rights fees, says IEG VP Jim Andrews. Brands are cutting deals with properties to spend less on rights to a property, and more on activating their sponsorships. According to a 2004 study done for IEG by Performance Research, the average brand now spends $1.30 in activation for every dollar of sponsorship.

“You need to spend dollar for dollar in activation to see any kind of return on your investment,” Andrews says. “A lot of times, the sponsor pays a fee for the property and then tries to find out what to do with it.”

If brands spend more activating a sponsorship, they get a better return on their investment, says Octagon Executive VP Jeff Shifrin. As sponsorship sharpens ROI measures (or return on objective, as Octagon puts it), more marketers will see its value, Shifrin says.

“Across the board, from sports to music and entertainment to arts and to festivals, sponsorships are growing, outpacing promotions and advertising as well,” Shifrin says. “I can only attribute it to positive ROI and the fact that the marketplace is changing.”

Case in point: both Shifrin and Andrews note how brands are altering their deals with NASCAR. Instead of a brand sponsoring a team for an entire season (at an estimated $15 million), many are coming in as associate sponsors. They can get the car’s primary paint scheme for a handful of NASCAR Nextel Cup or Busch Series races and activate at the tracks or run sweepstakes for the rest of the season.

“It’s a new model for these teams,” Andrews says. “The price tag to become a primary sponsor of a Nextel Cup team has become almost prohibitive. NASCAR continues to be a juggernaut, but at same time companies are asking themselves if they can afford huge sponsor dollars to be at the top level.”

The definition of a property continues to expand, adds Andrews, which means properties are not going to see the same kind of dollars invested in concerts and events as in the past.

Shifrin notes that packaged goods companies are also trying to bridge sponsorship with product placement (see pg. AR 10 for coverage of entertainment marketing).

But Andrews says thereare more options available to would-be brand sponsors than simple sports and entertainment options. He sees a rise in non-traditional property sponsorship as the next big growth area, and says that physical venues are recognizing it.

“Membership groups and trade associations are a great niche opportunity for certain brands,” Andrews says. He cites a recent trend among pharmaceutical companies, which are jumping on the AARP and hospital bandwagons to reach a more-focused customer for select product lines.

“If you want to reach an entire industry, can do that by sponsoring a trade association. It gives you a very focused, loyal audience and can help create a lot of B-2-B marketing opportunities.”

SNAPSHOT 2004

18.5% of those surveyed say it’s a top tactic for their brand

An 8.4% growth rate in 2004 is the highest since 2000

The average brand spends $1.30 in activation for every dollar’s worth of sponsorship