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The (R)evolution Of Sports Sponsorships

Forbes, April 22, 2013

By Jason Belzer

Last week, thousands of executives representing hundreds of brands, agencies and properties descended upon Chicago for the 30th annual IEG Sponsorship Conference. For over three decades, IEG has been an industry leader in the world of sponsorship, providing: insights, evaluation and guidance to companies and brands who seek to partner with organizations and events throughout sports, arts, entertainment, and causes—for mutual benefit. It’s annual conference has become the ultimate think tank for the exchange of ideas and the fueling of innovation in the world of sponsorship.

As advertising and marketing strategy has evolved over the last 30 years, no one tactic that companies and organizations use to reach consumers has undergone more transformation than sponsorship. Defined by IEG as a “cash and/or in-kind fee paid to a property in return for access to the exploitable commercial potential associated with that property,” sponsorship has gone from in many ways a mere novelty in which brands paid to be associated with “cool” properties in sports, arts, and entertainment, to arguably the most important weapon in the more than $100 billion world of advertising.

In decades past, advertising executives could buy vast quantities of commercial airtime on network television and bombard viewers with ads; the formula was simple – whomever spent more, won. Yet as consumers watch less live television and the selection of viewing options has increased exponentially, brands are forced to shift advertising spend to find new ways of engaging potential customers and clients.

According to Andy England, Chief Marketing Officer of beverage giant MillerCoors, “One of the biggest challenges for marketers is fragmentation — not just in terms of the proliferation of brands/styles in so many CPG [consumer packaged goods] categories, but also in terms of consumer interests and the way they engage in those interests. Twenty years ago, you could advertise on the networks; sponsor the four big sports; get involved with a few big-name concert tours and rest assured that your brand message was being delivered. Now, you have dozens of cable channels with programming that draws passionate followers, let alone original programming that lives only on online; emerging sports and local sports opportunities; a music landscape that is much more diverse; the impact of social media; and new trends and passions emerging every day!”

In other words, the options available for an individual to spend their free time have become essentially limitless. While it took years of diminished returns to realize this, consumer brands have now recognized that simply paying for their logo to appear next to that of a professional sports team, or purchasing advertising television or in stadium advertising during games no longer provide the same return on investment. Consequentially, there has been an escalation of advertising spend brought on by an proverbial arms race of rowing competition coupled with a limited market of potential consumers. Finding ways to stand out is no longer an option, but a necessity.

“[Insurance] is in one of the most competitive industries in terms of marketing,” says Edward Gold, State Farm’s Advertising Director,”we were in a $500 million dollar advertising category just 15 years ago, now it’s closer to $4 billion! The fact of the matter is that the marketplace hasn’t grown much during that time period (there’s only a finite number of people who need car insurance). Some advertisers argue that the only way to stand out is to have exclusivity in sponsorship, but there’s really no such thing as exclusivity anymore. We may have it for an hour, but as soon as the next program goes on you immediately see one of our competitors.”

For brands like State Farm and MillerCoors, both leaders in their category, the focus has now shifted on find dynamic partnerships that allow engagement with consumers on a ongoing basis and that become part of the fabric of the events and properties that they sponsor rather than simply using them as a means to an end.

“We’ve shifted our sponsorship focus towards integrating our brands into [the properties] our clients are loyal to. State Farm was one of the first insurance companies to partner with a movie studio (Pixar) to become part of the feature animated film, Cars. We weren’t just advertising in the movie, we were part of it,” says Gold, continuing, “When it comes to sports, it may not be the last place to find an attention focused consumer, but its close. What matters more is that people will always watch live sports and they’ll engage with their friends and other fans unlike any other activity.”

Yet State Farm’s appearance in a feature film is one small element of their sponsorship arsenal.The brand recently expanded its partnership with the NBA to create one of the most successful integrated sponsorship campaigns in recent memory. While State Farm is the presenting sponsor of the league’s games on both ESPN and TNT, and activates in over 20 team markets, these traditional advertising channels offered little more than peripheral brand awareness without a catalyst to spark consumer engagement. By building a viral campaign based around Los Angeles Clippers star point guard Chris Paul, and his long lost brother “Cliff Paul”, the brand was able to utilize its various assets with the league to become more than just another paying advertiser.

If the notion of garnering a high return-on-investment from traditional ad campaigns is all but dead, and sponsorship activation now requires more than just simple brand associations, where do companies look to successfully get their brands in front of consumers?

“Leveraging paid and owned media to drive earned media is going to continue to grow in importance,” says Andy England. “In order to effectively break through the clutter and amplify brand storytelling, marketers will rely on precision marketing – right message, right time, right location. Work will focus on understanding the consumer experience, navigating across multiple screens and building relevant connection points to fuel consumers passion points and fostering brand relationships. Partnerships have to enhance the consumer or fan experience,” he adds.

Whatever the future might hold for sponsorship, the message this past week in Chicago was clear – survival depends on the ability to create dynamic and engaging campaigns that allow brands to become a literal part of property being used as a channel. Moreover, alignment of values and congruent messages between the brand and property is essential.

Simply put, brands using sponsorship as their primary tool in reaching consumers must evolve or face extinction.