Sports sponsorships: a win-win proposition?

Packed with highly-popular and revenue-generating international sporting events – such as the UEFA European Championships, the Olympic Games and the Tour de France – the month of July is an ideal time to look into the world of sports sponsorship and the challenges that make it a risky game.

According to a European Sponsorship Association (ESA) report published earlier this year, the size of the European sponsorship market was thought to have had hit $US 36.2 billion by November 2011, a much larger figure than previously thought. Sports marketing, which can be described as using the platform of sports for businesses to maximise their marketing potential, is becoming more appealing because more and more brand marketers understand how to activate sponsorships more effectively, recognising that they will often need to invest as much as double their original sponsorship investment in supporting marketing budget.

“They [brand marketers] understand the medium of sponsorship far better, understand how to maximise its benefits and how to research its results. Its popularity is not due to it being a cheaper option, merely a more effective one on which increasing brand budgets are being allocated,” said Karen Earl, co-founder of the ESA in the report.

The advantage of sports sponsorships, despite the economic downturn still strongly affecting the US and European markets, is that they are long-term investments. In January, McDonald’s extended its top-tier sponsorship of the Olympic Games to 2020 and by doing so continues to have exclusive rights in the retail food services category.

Such agreement acts as a win-win situation. The sporting committee benefits from a direct financial input, as well as from the endorsement provided through the sponsoring brand, while the brand gets massive global prime exposure and an exclusive revenue-generating opportunity. Emirates Airline seems to have found the perfect balance between promoting its image as one of the world’s fastest growing airlines and strengthening its brand partnership ties with major football clubs. In May, Arsenal fans found out that the carrier would be the presenting sponsor of the club’s summer tour of Asia and Africa. Arsenal’s sponsor since 2004, Emirates is literally bringing the club closer to its millions of loyal fans across the six continents where it flies to.

Emerging markets are increasingly picking up major sporting events, with FIFA taking the World Cup to Brazil, Russia and Qatar, for instance. This allows local sponsors to gain exposure on the international stage and in turn allows existing global sponsors to retain their foothold too.

However, there seems to be a lack of understanding in the MENA region as to the true potential a sport sponsorship can give a business, according to Jimmy Poon, managing director of the Boqin Group, a Dubai-based sports management and entertainment business.

Poon said the local marketing directors of brands such as Adidas and McDonald’s, which are both official Olympic Games partners, haven’t activated them locally. He comments: “It’s a missed opportunity. They should budget equal amount of more to activate the brands. They need to connect with the consumer, and utilise the positive brand value that the event is creating and associate with the brand.”

Poon believes that there is a perception that the MENA market is too small to justify the large scale investment that sports marketing often needs. “But if you take the region seriously, with 30 million people in Saudi alone, plus the rest of the Arabian Gulf, the Levant and North Africa there is a very high spending power here,” Poon said.

However, there are a number of brands proactively utilising sports marketing in the region. For example, when Barclays sponsored the Dubai Tennis Championships, the banking giant ran its own campaign capitalising on the popularity of tennis to attract customers. In 2010, Puma launched the Bahrain National football kit through an active above-the-line and on-ground campaign where the players toured the city in a branded bus, ending with a press show to unveil the kit. Visa, one of the global Olympic partners, is a good example of sponsorship being executed well currently in the region, including on-site activation at Mall of the Emirates which started in January. Abu Dhabi government investment vehicle Mubadala has also used Formula One, and its sponsorship of Scuderia Ferrari team, to great effect.

Sponsorship acquisitions always need to help drive sales in their particular markets, be it global, niche, or local, to make sure there is a final return on investment (ROI). Being able to match the event to the target customer is a critical consideration, hence luxury brand affiliation with golfing events, mainstream brands with football and so on. As well as sales, effective sports marketing also allows companies to take advantageof corporate hosting opportunities: a key part of a business’s sponsorship activation. Indeed, hosting business partners and customers at events is often an important justification for the expense of sponsorships.

Poon believes that no marketer can calculate a precise ROI because there are too many variable factors involved that are not scientific. “How do you measure brand awareness and brand loyalty to the dollar?” he said. His preferred method is to look at the return on objective (ROO), which involves meeting the objectives that you set out and spending your money efficiently. “Were you able to invite ten of your biggest clients to Wimbledon? Did a deal come out of that?”

An important challenge for brands to consider is the damaging impact of competitor activity in the same where. Due to athletic endorsement and above-the-line advertisement, it’s no longer necessary to be an official Olympic sponsor to gain brand promotional benefits from the Games. In the past few years a movement known as ambush marketing has emerged, when major companies put their advertisements in places near the venue of the Games or during the event without paying sponsorship fees. For example, while Adidas pays the fees to be the official apparel brand for the Olympic Games, Nike sponsors many of the professional athletes in their day-to-day sports activities, therefore causing potential brand confusion in the mind of the consumer. The fast-developing landscape of digital marketing has also caused grey areas and potential for ambush, as often sponsorship regulations cannot always keep up with the pace of change online.

“It’s an ongoing battle for the International Olympic Committee and other sporting event owners,” said Poon.

Regulation concerns aside, as both global interest in sports and creativity in sports marketing continue to grow, the field of opportunity for brands grows ever larger. Sports marketing provides an ideal long-term platform on which to reach customers and other stakeholders, providing the event or sport is well matched to the target audience, invested in and protected.