Many companies are moving away from using traditional media to promote their brand, relying more on sponsorship and event opportunities. Here’s some evidence:
- A recent EventView study by the George P. Johnson Company reports that across industries, event marketing accounted for an average of 25% of the overall marketing budget in 2006.
- A survey of Association of National Advertisers members in 2005 showed 24% of marketing dollars going to event marketing.
- The IEG Sponsorship report shows that North American companies plan to spend $14.9 billion on sponsorships in 2007, an increase of more than 10% from the previous year, outpacing growth in spending on traditional media.
With all this spending, you’d think companies would have in-depth knowledge of the effect of sponsorships on sales and brand equity. Yet according to the IEG/Performance Research Sponsorship Decision-Makers Survey, “Sponsor spending on research to determine the impact of partnerships lagged behind the lip service typically paid to wanting to measure ROI.” In fact, only one-quarter of marketers spend more than 1% of their rights fees—what they pay to do the sponsorship in the first place—on research. A startling 81% did not have a dedicated budget for either evaluating opportunities or measuring results.
Instead of using factual evidence to support their case that sponsorships and events will yield a higher relative return on investment (ROI) than traditional media options, marketers still base their decisions on gut feelings.
This can’t go on. As John Nardone of Marketing Management Analytics said recently, “Right now, money is flowing to sponsorship without accountability, not because everyone knows it works, but because there are doubts that TV works as well as it used to. Marketers are searching for alternatives. But without validation of effectiveness, it’s likely that the current sponsorship bubble will burst in three years.”
The Fact-Based Approach to Sponsorship and Event Marketing
There are several types of research tools that companies can use to make a more informed decision for a brand. Here’s a short list:
- Pre-testing. To screen different sponsorship ideas, respondents are exposed to a sponsorship concept, just as they might be in a pre-test of a new product or service, and asked questions about the event, sponsoring brand, and brand preferences.
- Short-term ROI measurement (sales). If a sponsorship is big enough and can be measured within a defined geography (e.g., Dunkin’ Donuts’ sponsorship of the New England Patriots), a company can:
- Measure the effect on sales to gauge short-term effects of the sponsorship on the brand in general.
- Compare the relative ROI of sponsorships in terms of sales of other forms of marketing-mix elements (TV, magazine, promotions, etc.).
- Understand the interactions between sponsorship advertising that promotes the brand’s relationship to the sponsorship and other marketing investments. A company might discover, for instance, that magazine advertising complements the performance of sponsorship-related advertising.
- Long-term ROI measurement (brand and customer equity). Research that assesses brand and customer equity can offer insights into the long-term impact of a sponsorship on the brand and continuous tracking research could measure the effects of sponsorship in the context of overall marketing effects.
- Pre-post tracking research. Companies can further assess the impact of a sponsorship or event along what is referred to as the “hierarchy of effects.” A chain of events occurs after buyers are exposed to marketing communications. In a perfect world, buyers become aware of an event—a NASCAR race or film festival, for example. Next, they become aware of a brand’s involvement, followed by awareness of the message the brand communicates at the event. Their perceptions and attitudes are then positively impacted by the message and, finally, their preference for the brand and intention to purchase improve. But the world isn’t perfect, and very often there are missing links in the chain. By pinpointing where major or minor problems have occurred, a company can understand why performance isn’t what they had hoped for and how to address the problem.
The type of research you might do is dictated more by the size of the sponsorship, a company’s budget, and availability of existing sales and tracking data than by lack of readily available research tools. Clearly, hunch-based media selection has a fact-based counterpart that will quickly capture the attention of marketers looking beyond gut-based decisions.
The Four Elements of an Effective Sponsorship or Event Campaign
Marketers can look to an extensive supply of case studies of sponsorships and events for insights into the characteristics of highly effective campaigns. Our company, Copernicus, analyzed a selection of nine sponsorships and events looking for general attributes of effectiveness. The analysis drew cases from the banking, beer, coffee, energy supplier, engine oil, fast food, insurance, and pizza categories. Eight of the sponsorships were sports-related and one was entertainment-related.
We found that the effect of a sponsorship or event is greatest when:
- Fans are engaged. Some people will spend almost as much time weighing the merits of different toothpaste brands as other people spend choosing a new car. If there’s a high concentration of buyers who are involved in a category among a sport’s, singer’s, celebrity’s, or art form’s fan base, then the sponsorship is more likely to have an impact, for example, Motor oil and NASCAR.
- Investment is substantial. The event is supported by serious money (i.e., substantial investments in activation and promotional activities) to leverage the sponsorship. The ratio of spending on activation to rights has been on the increase. Still, according to the IEG/Performance Research survey, 43% spend at a 1:1 ratio, spending the same amount on activation—advertising and promotions that communicate the relationship between the brand and a particular sponsorship or event—as they do on rights fees. While the Copernicus analysis did not reveal the magic ratio of activation to fees, if a company does not invest at least as much on promoting the sponsorship to the target as it does in the rights to an opportunity, it will see little to no effect.
- The campaign conveys a clear message. The company uses the sponsorship to communicate a clear and compelling message about the brand to a target excited by the sponsorship and responsive to the brand. For example, Fidelity Investments sponsored Paul McCartney’s 2005 U.S. tour. The theme of the tour: Never stop doing what you love. Fidelity’s message: Let us plan the next stage of your life. For McCartney’s predominantly baby-boomer audience who are at least thinking about—if not already in the process of— retiring, communicating that Fidelity could help them continue doing what they love, just like McCartney, resonated deeply. By the end of the tour, Fidelity had reportedly generated $100+ in new and incremental business.
- There is clear linkage between product and sponsorship. Examples of clear connections are Yahoo! Music and XM Satellite Radio sponsoring the Grammy Awards; Beaches family resort sponsoring the Sesame Street Live tour; Michelin sponsoring Formula 1; a “clean, green” energy company sponsoring the concert tour of a musician with a well-publicized penchant for the environment. When the connection starts to become far-fetched—a fast-food company sponsoring the Olympics, for example—effectiveness decreases. If it takes longer than five seconds for you to explain the connection between a brand and an opportunity, it’s a safe bet most target buyers aren’t going to get it.
Although the sample of the Copernicus study was small, it is illustrative of what marketers can discover by taking a closer look at common attributes of effective sponsorships and events.
The take-away message? Before you invest heavily in sponsorship or event marketing, do the research. Stop relying on your gut and start using the facts from data and solid analysis to guide your sponsorship and event choices.