In Depth
Sponsors Send Clear Signal: We’re Coming Back
Unlike a year ago, corporate marketers are no longer looking to cut sponsorship spending.
3/19/10: If the ’09 edition of the IEG/Performance Research Sponsorship Decision-makers Survey provided proof that the industry would face its toughest year ever, this year’s study offers evidence that the worst is behind us.
The tenth annual survey also sets a new benchmark in terms of the level of commitment companies have to the sponsorship medium compared to other forms of marketing and advertising. Specifically, corporate marketers reported that sponsorship now accounts for, on average, 25.4 percent of their overall marketing, advertising and promotion spending.
That is far higher that the survey’s previous high of 19.5 percent recorded two years ago and comes after the average portion of marketing budgets devoted to sponsorship had dipped to 17.6 percent last year.
Apart from signifying corporate interest and belief in sponsorship’s ability to meet business objectives, the sharp rebound also most likely is attributable to the large hit suffered by traditional media advertising budgets during the economic downturn. If ad spending recovers along with the economy, such an unprecedented market share gain for sponsorship may be a temporary phenomenon.
Chart 1: How will your 2010 sponsorship spending compare to 2009?
The best news to come out of this year’s study is marketers’ response to direct questions about their sponsorship budgets.
In last year’s survey, 51 percent of sponsors indicated spending would decrease compared to the prior year. For ’10, that percentage has shrunk to 31 percent. While nearly half of sponsors (49 percent) said budgets will remain at ’09 levels, 20 percent of sponsors indicated they will increase spending this year.
Although certainly a step in the right direction, the results do not indicate the industry is back to pre-recession levels since the positive movement is based in many cases on lowered ’09 expenditures. For comparison, two years ago 40 percent of sponsors said they would increase budgets and only 19 percent said they would spend less.
Chart 2: How will your 2010 leveraging and activation spending compare to 2009?
Percentages do not equal 100 due to rounding
Looking specifically at activation spending, 80 percent of sponsors said they would either spend the same or more on leveraging this year versus last, while only 21 percent were expecting to cut activation dollars. Last year, nearly twice as many sponsors (40 percent) said they were slashing activation spending.
Chart 3: What is your company’s typical promotional spending ratio?
Regarding the ratio of activation spending compared to the amount spent on sponsorship rights and benefits, there was no change from last year, with companies continuing to spend on average $1.40 on activation for every $1 spent to acquire sponsorship packages.
Chart 4: Is your company considering new sponsorships in 2010?
Just about two-thirds of sponsors (66 percent) said their companies would consider adding sponsorships in ’10, up from 60 percent last year.
Chart 5: Over the past few years, has your return on investment from sponsorship increased, decreased or stayed the same?
Percentages do not equal 100 due to rounding
When it comes to evaluating the success of their sponsorship portfolios, sponsors again indicated general satisfaction with their performance, but a large number still cannot say what their return on investment is.
Half of respondents said their overall ROI has increased over the past few years, with only three percent indicating it had gone down and 23 percent saying it had stayed the same. But another 23 percent admitted they did not know how their return was trending.
Chart 6: How valuable are the following property-provided services?
Percent of respondents who ranked the factor a 9 or a 10 on a 10-point scale, where 10 is extremely valuable
That may be why nearly half of sponsors said “assistance in measuring return on investment and return on objectives” is the most important property-provided service, ahead of post-sponsorship fulfillment reports, leveraging ideas and various types of audience research.
However, sponsors also indicated that properties’ delivery of such assistance leaves much to be desired. When asked whether properties “meet your expectations in helping you measure or provide measures of your ROI,” two-thirds (66 percent) said no they did not.
Chart 7: What percentage of a sponsorship’s total budget is typically spent on concurrent or post-event research to measure success?
Percentages do not equal 100 due to rounding
Sponsors could easily also point the finger at themselves when it comes to lack of attention to measurement and evaluation. Despite the nearly constant conversation within the industry about the importance of accountability, spending on research to determine success appears to be heading in the opposite direction.
The percentage of sponsors spending nothing on evaluation jumped five points to 36 percent in this year’s survey, while just 23 percent spent more than one percent of a sponsorship’s total budget on measurement, a figure many believe to be a minimum standard.
Chart 8: What percentage of a sponsorship’s total budget is typically spent on pre-selection research to evaluate fit?
Percentages do not equal 100 due to rounding
The situation is not much different when discussing investments made in pre-selection research to determine the appropriateness of potential sponsorship opportunities. Forty-one percent of sponsors said they spend nothing on tools to help evaluate prospective partnerships—up two points from the ’09 survey.
Overall, 79 percent of sponsors—a six point increase from last year—reported they did not have a dedicated budget for sponsorship research.
Chart 9: How valuable are the following benefits to you?
Percent of respondents who ranked the factor a 9 or a 10 on a 10-point scale, where 10 is extremely valuable
While category exclusivity remained the sponsorship benefit most valued by sponsors, the right to promote a co-branded product or service with a sponsored property climbed dramatically up the list of most important rights. In ’09, only 29 percent of survey respondents judged it to be a nine or 10 on a 10-point scale of value, placing it outside the top 10 benefits; this year, that figure was 40 percent, placing it fourth.
This significant gain most likely stems from sponsors recognition that partnerships can be the basis of new product development and from the fact that revenues from such products can provide clear justification of the sponsorship investment.
Chart 10: How important are the following objectives when evaluating which properties to sponsor?
Percent of respondents who ranked the factor a 9 or a 10 on a 10-point scale, where 10 is extremely important
As with sponsorship benefits, the objectives at the top of sponsors’ most important rankings remained the same, with “increase brand loyalty,” “create awareness/visibility” and “change/reinforce image” taking the top three spots.
Rising significantly in importance were the goals of “showcasing community/social responsibility”—which rose seven percentage points and from eighth to fifth place on the most important list—and “access platform for experiential branding,” which made the top nine, with 40 percent of sponsors scoring it a nine or 10 on a 10-point scale of importance.
Chart 11: Which of the following marketing communication channels do you use to leverage your sponsor programs?
Not surprisingly, given the drastic reductions in corporate entertaining by banks, financial services companies and others during the heart of the recession and TARP-related scrutiny from government and media, hospitality fell from the third to the fifth most popular form of activation, passed by public relations and online promotions.
Chart 12: Which types of agencies, if any, do you use to help leverage/support your sponsorship programs?
Chart 13: Which of the following property characteristics do you typically analyze when making a decision to sponsor?
Chart 14: How important are the following analyses in the decision to change or renew your sponsorships?
Percent of respondents who ranked the factor a 9 or a 10 on a 10-point scale, where 10 is extremely important
Chart 15: During which time period does your company determine its sponsorship budget?
The survey was conducted online in late February and received 106 responses.
Sources
Performance Research, Tel: 401/848-0111