Sponsorship in a Scary Economy

It’s ugly out there. Really ugly.

Most corporations are not in imminent danger of total collapse, but many are talking about big cutbacks. In the past, sponsorship continued to grow when marketing and advertising spends dropped, but I wouldn’t bet on that being the case now. Uncertainty rules, and it’s very hard to make strategic decisions when the entire global economy is sitting on a knife’s edge.

So, what’s a sponsor to do? Do sponsorship seekers need to be changing their strategies? If you’re like most sponsors, you have a portfolio with at least some of the following characteristics:

• Your biggest expenditures are tied up in multi-year deals.

• Most of your sponsorships revolve around a standardized benefits package (logos, tickets, hospitality and endorsement).

• MANAGING MANDATORY BUDGET CUTS

  A significant portion of your sponsorships are underperforming.

• A proportion of your sponsorships can only be classed as dead wood.

• You have a significant leverage budget, typically 50% to 150% of your spend on sponsorship fees (but I’ve seen a lot more and a lot less).

• You have a community/charity portfolio that is largely unleveraged.

WISDOM VS. CONVENTION

If any of this looks familiar, I have some good news: There is no need to panic. You can get better results from your sponsorship portfolio and probably spend less doing it.

What if you’re told by the powers that be to cut all marketing-related budgets by 20%? Or to cut sponsorship by 30%? Is that wise? Realistic? Even possible? That depends.

What does your budget look like?

AUDIT YOUR PORTFOLIO

The first consideration is the proportion of your sponsorship budget that is tied up in multi-year contracts. If 90% of your budget is committed to paying the rights fees for sponsorships that have a year or more to run in their contracts, your options for reducing your sponsorship budget are going to be very limited.

The second consideration is the amount you currently budget for leverage. If you are spending another 50% or 100% or 200% of the amount you spend on rights fees to leverage the sponsorship, you definitely have some scope for cost reduction. I’m not saying that you should leverage less — in fact, I think most sponsors are not leveraging enough — but there are a number of techniques that will allow you to leverage more effectively at a much lower cost. By using those techniques, most sponsors could reduce their incremental leverage spend to 15% to 20% of their investment in rights fees.

While I’m not a believer in spending your way out of trouble, I think companies should think twice before cutting the guts out of their sponsorship programs.

I strongly suggest that you make the deepest cuts in the marketing areas that are providing the lowest returns — that is, being least effective at changing the perceptions and behaviors of your target markets, and hence, making you the least amount of money.

No hope

If your sponsorship program is delivering real returns, or if the only thing standing in the way of those big returns is some best-practice education and inspiration, then stick with it and invest in some staff training or coaching.

Renegotiate

I’m a big fan of portfolio audits, in general. Doing a thorough audit will tell you what is and isn’t working in your sponsorship portfolio, what could work if it were approached or leveraged more effectively, and what could work if it were renegotiated. All up, it’s a worthwhile endeavor, even in good times. In uncertain times, however, it is an absolute necessity.

Commit to improved leverage

In an audit, you will examine every investment in your sponsorship portfolio against the key areas of fit:

• Leave alone

  Is it relevant to a significant segment of your target markets?

• Is it a natural fit with your brand attributes and values?

• AMBUSHING UP

  Does it provide the tools (benefits and information) you need to meet your objectives?

From this audit process, you would divide your portfolio into four groups:

RENEGOTIATE

These are sponsorships that have no hope of ever working for your brand. They should be exited at the end of the contract, and no effort should be made to leverage them for the duration of the contract.

Renegotiating better or more appropriate benefits can happen at renewal time or during the term of the sponsorship. Midterm negotiations can result in better benefits, but you are unlikely to negotiate to a lower level.

If a sponsorship has the right fit, but is not being leveraged thoroughly or creatively, there is a lot of scope for improvement.

INVEST IN UP-SKILLING

These are performing and don’t need any major changes, aside from a regular freshening up, to keep performing.

(I should note that this audit overview is, of course, a gross simplification of a multifaceted process.)

EXIT GRACEFULLY

Before you get the wrong idea, this recommendation is not about embarking on a strategy of ambushing events you don’t sponsor. Rather, this is about reconsidering whether you really need naming rights or a major sponsorship, considering lower-level sponsorships, and leveraging them so well that you look like a much bigger sponsor than you really are — in effect, “ambushing” the bigger sponsors.

In lean times, rethinking whether you are paying for a bigger package than you really need to achieve your goals is essential. The answer may be that you need the full complement of benefits at that high level to provide you with the best platform for leverage. On the other hand, you may decide that a sponsorship that costs you half or a third as much, but is leveraged thoroughly and in line with best practice, is more appropriate.

In a scary economy, renegotiating will be one of the best and fastest ways to improve the performance of your investments. This could happen as the result of a formal audit process or as a general strategy to improve results from current investments.

Go in to a renegotiation with the reassurance that you are not trying to reduce your financial commitment (that would be unlikely to happen, anyway). Make it clear that your goal is to get the most out of this sponsorship, but that you don’t think the benefits you are currently getting are the most appropriate for your needs.

And be fair. Do not expect additional benefits without giving some back. You are exchanging benefits you don’t need for benefits you do, not demanding freebies.

I know times are tough, but this is an area where you may want to consider investing a small amount of money.

What this means is that everyone needs to be on the same page, understanding at least the basics of best practice. This will require up-skilling a broad range of people, which could mean investing in a top-quality external trainer.

Sponsors decide not to renew sponsorships all the time. The difference now is that the number of exits is likely to increase and the impact on the sponsee is likely to be greater.

So, first and foremost, let your partner know you won’t be renewing just as soon as you know that will be the case.

Second, be truthful. Tell them why you are not renewing and don’t put all the blame on them. You might want to leave the door open for future sponsorships.

This article is adapted from “Sponsorship in a Scary Economy.” The full text is available at www.powersponsorship.com.

Kim Skildum-Reid is a corporate sponsorship consultant, trainer, coach and co-author of The Sponsorship Seeker’s Toolkit and The Sponsor’s Toolkit.