The State of Sponsorship: An Unconventional SWOT Analysis in Two Parts

By Jim Andrews May 15, 2018

The State of Sponsorship: An Unconventional SWOT Analysis in Two Parts

As I was preparing my opening remarks for last month’s IEG conference, I realized that what I had pulled together was a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, although the narrative required it to be presented in a different order — TOWS, to be specific.

This post takes a look at the current threats and opportunities facing sponsorships and partnerships. A second post will examine the weaknesses and strengths.

Four External Threats Poised to Impact Sponsorship Spending

1. An economy in low-growth mode.

The first threat is the fact that many of the categories and brands that really are the fuel of our industry are not experiencing strong growth. Clearly, a low-growth environment does not put anyone in the mood to increase spending.

Top Sponsorship Categories Fortune 500 Sector Growth 2014-16
Food & Beverages -1.4%
Automotive 0.2%
Apparel 0.3%
Financial Services 1.1%
Telecommunications 2.0%
Retail 2.1%
Technology 6.3%
Quick-Service Restaurants -0.1%
Professional Services 0.5%
Healthcare 12.6%
Household Products -0.3%
Media 0.0%

But in addition, marketers in low-growth situations often focus on short-term goals to help impact quarterly numbers and try to please executives and shareholders. A recent study showed that while the optimal marketing mix is 60 percent long-term brand building to 40 percent short-term sales promotion, recently marketers have shifted to a 50-50 split, taking money away from impacting the future and instead spending to try to earn results today.

Sponsorships don’t typically fit in short-term plans. While digital and ad media excel at quick-turnarounds, partnerships are a long-term play.

2. ZBB

The latest trend in management is zero-based budgeting. This accounting technique essentially forces adherents to rebuild budgets from zero every year, justifying each line item rather than targeting an increase or an aggregate spend and then backfilling. According to a recent study by Deloitte, 22% of CPG brands — including Unilever, Kraft-Heinz, Mondelez and Kellogg — have adopted this approach and it is spreading to many other categories.

Zero-based budgeting is not a bad idea. Budgets are built around what is needed for the upcoming period, regardless of whether any budget is higher or lower than the previous one.  The problem is when companies in low-growth mode and with a short-term vision poorly apply the concept of ZBB to try to cost cut their way to growth.

It’s also clear zero-based budgeting is no friend of long-term plans. It favors areas that can achieve direct revenues in the near term, as their contributions are more easily justifiable than investments in long-term but necessary objectives like brand building. If a sponsorship is subjected to annual review under ZBB, it’s going to have to produce some measurable outcomes to ensure it sticks around.

3. Outcome-Based Marketing

In a similar vein, brands are growing accustomed to marketing platforms that can connect the dots between campaigns and actual sales. This has been digital marketing’s great strength. If you buy Google ads, Google Analytics helps you attribute conversions, sales, etc. at the user level. Facebook, the same.

And this trend is not limited to digital media. Increasingly, TV is preparing to provide real-time reporting and household- and user-level data just as digital does. Procter & Gamble Chief Brand Officer Marc Pritchard said last month, “What has occurred over the past several years is that digital technology and data analytics have allowed greater control of the marketing. We are now seizing that control back.”

Now this made news because it represented a big disruption of the ad agency media-buying model, but it’s a big deal for our industry as well. Sponsorship, right now, doesn’t provide the analytics, doesn’t draw the through-line from campaign to end result. As more marketers expect that as the norm, as brands need to be more accountable for their marketing spending — and sometimes put more of it into the hands of procurement departments — sponsorship runs the risk of getting left out if we don’t up our game.

And it’s not just analytics. We now have some media players offering new models that reduce risk for marketers. Consider the digital agency that 1) sold media to a real estate firm based on cost per actual lead and 2) lowered the price in exchange for a profit share on any homes that were sold. The idea that “we are so confident this will be a good buy for you that we are willing to have skin in the game” goes a long way with marketers in today’s environment.

4. Brand Safety

Another issue causing much angst among marketers: “Can I trust my brand won’t end up next to/associated with inappropriate content?”

Problems with programmatic buying and the fact that Google and Facebook refuse to allow third-party content verification made this a headline topic in the last year, with advertisers threatening to boycott YouTube, among other measures.

Although brand safety has primarily been associated with digital marketing, sponsorship lives in a glass house and shouldn’t throw stones. Where once we touted sponsorship as a safer environment for brands—alignment with trusted institutions that people are passionate about—that argument is tougher to make today.

The most egregious examples are those that are self-inflicted. Certainly, sponsors were justified in removing themselves from USA Gymnastics and I don’t hear too many tears being shed that FIFA’s World Cup sponsorship program is not doing well.

Other recent examples are more interesting. No doubt, the sponsors who chose to partner with the NRA knew they were getting involved with a controversial organization. There have always been brands that make the determination that reaching a sizable group of potential consumers is worth suffering the consequences of those who would be upset by the association.

But that calculation is harder to make in our transparent world where such partnerships are easily found and the reaction much swifter and stronger thanks to the acceleration of social media. While partnering with the NRA would never have been a safe option, it was certainly safer in a pre-digital world.

Perhaps most interesting of all is the NFL anthem protest controversy, with so many angles and actors, and ultimately sponsors caught in the middle with both sides calling for boycotts. From any of these angles, it’s clear sponsorship cannot be considered a brand safe environment.

Three Opportunities to Seize Now

1. Growth in Uncharted Places

There is economic growth happening, just not in the usual places. The slow-growth figures above are for the Fortune 500 companies in those sectors. Now clearly, that’s an important group, so that fact is a threat.

But, as noted by the Interactive Advertising Bureau’s excellent February report, “The Rise of the 21st Century Brand Economy,” the center of growth in the consumer economy has shifted to companies and brands that have tapped into low-barrier-to-entry, capital flexible, leased or rented supply chains. These include thousands of small firms in all major consumer-facing categories that sell their own branded goods entirely or primarily through their owned-and-operated digital channels.

image of various logos

These brands are the marketers most in need of cost-effective marketing platforms that can raise awareness, build their brands, create stature and put them on a level playing field with well-known category leaders, etc. Know of a medium that can help them?

This is a true best of both worlds scenario. What do I mean? Consider the razors category. Clearly there is a chance in one world to offer relevant partnership opportunities to high-growth disruptors such as Dollar Shave Club and Harry’s, which are taking roughly one market share point away from category leader Gillette every year.

But there is also an opportunity with the heritage brands that are being disrupted. Yes, loss of share, sales and revenue means budgets are under severe pressure at companies like Gillette parent Procter & Gamble. But marketing spending isn’t gone. In fact, slow growth or no growth means brands like Gillette are looking for new opportunities to reach new consumers in new ways.

So yes, maybe we see the slow-growth threat when we note that Gillette exited its sponsorship of Major League Baseball this year after 79 years. But we see the opportunity when we look at the brand’s new deals in esports.

image of various logos

In addition to all those direct brands, opportunities abound with all kinds of companies in emerging categories. Consider the brands in the image above, all of whom signed seven-figure or higher partnership deals in the U.S. alone within the last year.

2. The Bloom Is Off the Digital Rose

Yes, I noted all the things that digital marketing does right under Threats. But it’s also true that the digital spending free-for-all is over. Digital is still where many marketing dollars are going and will continue to go. But there is a market correction happening based on the things that digital has not done well. A great deal of money was spent on ads and videos that no real people ever saw for more than 1.7 seconds. Brands have caught on to that and are getting much smarter about where and how they spend their digital dollars.

Marc Pritchard himself has admitted that in going (almost) all in on digital, P&G and others had become blinded by shiny objects. He and others are reallocating some of those budgets back to other advertising and marketing media. P&G alone has shifted $200 million out of digital and back to other channels.

3. Turning Data into Personalized Marketing

I struggled with including this one. On one hand, it should hardly need to be mentioned anymore, but if also felt remiss not to at least acknowledge it, because connecting your audience data and making it accessible and actionable so that you can offer one-to-one marketing and engage with each individual in your audiences remains a revolutionary opportunity.

Your fans, ticket-buyers, participants, members, donors, etc. expect individually targeted marketing that understands them and what they want, and when and where.

And we are seeing more and more properties across all sectors seize it. Take for example Global Giving, the charity crowdfunding website that provides an opportunity for social entrepreneurs and nonprofits to raise money for grassroots causes in communities throughout 160 countries.

After seeing steady declines in responses to its emails, Global Giving has taken an Amazon- or Netflix-like approach and developed a recommendation engine that personalizes emails based on people's past giving habits, their interest in projects that they've shown some sort of an affinity to, etc.

These hyper-personalized recommendations delivered a 10X increase in donations. And this is not an unusual story. It’s happening across all kinds of organizations.

So much for threats and opportunities, stay tuned for strengths and weaknesses...


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Jim Andrews

About the Author

A 30-year sponsorship industry veteran, Jim is responsible for developing and sharing thought-leadership content based on ESP Properties’ groundbreaking work in the areas of sponsorship strategy, valuation, measurement, digital content, data-driven marketing and fan engagement.

In addition to identifying key trends and delivering his unique insights into the critical issues facing rightsholders and their commercial partners, Jim is the chairman of the Annual Sponsorship Conference, responsible for the program and speakers, as well as hosting and delivering the event’s opening address. He also is responsible for the company’s annual report and forecast of overall sponsorship spending, as well as its compilation of biggest spending companies and annual industry surveys.

A frequent media commentator and guest, Jim has been a featured speaker at hundreds of sports, entertainment and marketing conferences around the world.



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