Why you need a sponsorship policy. (Especially now.)
September 30th, 2020 | Francis Dumais, Associate, Elevent
While past financial crises barely made a dent in sponsorship expenditures (chiefly due to ongoing agreements), this pandemic has impacted the sports and entertainment industry like no other calamity in recent times. As shows, festivals and sports ground to a halt, many brands were obliged to axe activation and slash their budgets, ending decades of growth for the communication medium.
Fewer Resources and an Influx of Funding Requests
Not only have large sponsors cut back their expenses in the short term, but a quick foray to LinkedIn gives clues to the extent of the damage suffered by the entertainment industry. Properties of all categories have been the most severely affected by the current situation. Rights holders and non-profits are in dire need of financial backing.
Many surveys have been conducted since the start of the crisis. However, with the data shifting rapidly from month to month as the health crisis unfolds, these studies have limited validity. That said, there is a consensus among industry professionals that there will be a drop in sponsorship revenues for 2021 unless a vaccine or cure becomes available.
An Elevent survey conducted among a sample of 150 industry professionals in May 2020 found that:
- In the short term, sponsorship budgets are expected to decline by 37% on average for 2020;
- Forty-seven percent of properties declared that it was currently difficult to retain sponsorship revenues and 86% said that it was either difficult or very difficult to sign new agreements.
The SponsorshipX COVID-19 study surveyed 76 sponsorship professionals in June 2020. It found that:
- Sponsors expect a reduction in rights fees investments of 27% for 2020;
- The activation spend is expected to be slashed by forty-nine percent.
Both sets of data point in the same direction: there will be a reduction in sponsorship budgets in 2020, a trend that is expected to continue in 2021.
On the other hand, we should expect to see a sharp rise in sponsorship and donation requests, likely to overwhelm corporations having to cope with fewer resources — both smaller teams and shrinking budgets.
This points to major shifts in many brands’ sponsorship strategies, which were historically very stable.
A change in strategy means a different sponsorship policy, which acts as a guiding light for decision-making in selecting the right sponsorship and donations recipients.
Creating a sponsorship policy involves understanding the purpose of sponsorship in the organization and its role in contributing to business objectives, which streamlines the decision-making process.
And that has never been more relevant than in these (bizarre) times.
Many companies have shaky strategic foundations regarding sponsorships, which are not directly anchored in the company’s objectives. Additionally, the perception that sponsorship is an extravagance, largely due to the nature of the beast (entertainment space, hospitality, large sums of money, high visibility), is thankfully fading.
But the fact remains: sponsorship is, as are most elements of the MarCom budget, under scrutiny. Decisions must be held to high standards as they often must be justified to the finance department, company executives, the board and even shareholders.
A sponsorship policy rallies the entire company to guiding principles and is the first step in good sponsorship governance.
Where to start?
First, managers must conduct an audit of the company’s practices, challenges, corporate, marketing and communication objectives. This seems obvious but is too often overlooked. This step should include discussions with various relevant stakeholders, from investors to front-line employees.
Then, a closer look at the current portfolio and sponsorship practices are necessary to know what the starting point is. Should partnerships be changed or can existing properties be better informed by the objectives?
With the majority of partnerships requiring category exclusivity (granting exclusive presence to one brand per sector or industry), it is imperative to take into account what the competitors are doing in the sponsorship landscape. That will help determine which space is available for your brand. For instance, if hockey is highly sought after, a differentiator could be to align with music events.
Finally, opportunities in the market must be aligned with the objectives and KPIs must be determined to track performance of the sponsorship investments.
In the end, the process of creating a sponsorship policy is more important than the final document that is created from it.
The creation of a sponsorship policy’s role is two-fold: 1) It can be turned outward to let the public know what you, as a company care about; 2) It can be used as an internal guide to select worthy partnerships that are in line with your objectives.
Sponsorship Management Tool
While one may be tempted to let a sponsorship request inbox go unanswered due to lack of time and resources, brands should be mindful of the potentially negative impact on their image and on consumers. Furthermore, hidden gems may lie buried in the hundreds of requests.
There is software that can act as an assistant, evaluating and classifying all partnership requests as they come in, filtering unsuitable applications and even automating email communications to applicants, such as one from Elevent called BrickRoad.
While this current health crisis and upcoming recession will certainly be a rough ride for many of us, the relevance of sponsorship will not disappear. It accomplishes things that advertising and digital tools can’t do alone: it’s the handshake with the consumer. And that too, will come back.
Who are we?
Elevent is a sponsorship marketing-tech company. We are sponsorship marketing professionals and geeks that created bespoke tools to value and manage sponsorships.