Managing Sponsorship Initiatives Post-Pandemic
May 12th, 2021 | Ian Malcolm, President and CEO, Lumency
Of little surprise, the COVID-19 pandemic will have an impact on how brand marketers should be thinking about sponsorship for the remainder of 2021, and at least into 2022, if not longer. Consumers expect the pandemic to continue to be a concern until December 2021. It will likely be between 15 and 18 months between their ‘normals’.
We expect consumers to reengage with the world around them in stages, moving from household and neighborhood to their wider communities and regions, and then to national and international travel. It is the trusted brands that are alongside Canadians on that journey that can build relevance and earn attribution.
Live events are still a large part of what makes up traditional sponsorships. Latent demand for live events has continued to grow during the pandemic, with consumers stating that they have stronger intent to attend live events than they did before the pandemic. Live concerts, live sporting events, festivals, community events – all have double digit growth in consumer intent over pre-pandemic levels, according to research from IMI International.
Three things you need to think about as your sponsorship initiatives come back post-pandemic include, what a return to live events will look like post-pandemic, any lost value from previous investments that didn’t run during the pandemic, and an evaluation of the deal structure for new or renewing sponsorships.
Return to Live Events
We believe people’s physical safety in returning to live events will be addressed before their psychological safety is.
Some public health experts believe that herd immunity for COVID-19 can be reached when between 60-80% of the population are carrying antibodies. While subject to change, based on current vaccine rollout, herd immunity should set in around the third week of August (national average). The point at which herd immunity is reached is likely to be the most pivotal point in a return to a more normal Canadian society.
According to research from IMI International, Canadians indicate that they will be comfortable attending indoor events (trade shows, indoor live sporting events) starting in October, scaled outdoor events (large festivals, outdoor live sporting events) starting in September and spaced community events in July.
A thorough scan of the live event landscape across Canada, including sporting events, music festivals, community events and marathons shows that before about the third week of June, most events have either been cancelled or have moved completely virtual. As of now, many events scheduled after the third week of June are set to go ahead. Communication from rights holders and event organizers in most cases states that they are monitoring pandemic conditions and will make decisions accordingly.
Based on the anticipated pandemic conditions through the balance of the year, based on consumer sentiment (evolving), and based on what properties are planning, we have provided our Canadian market clients with guidance for brand safe planning for both ‘when’ and ‘how’ to return to live events.
- No outdoor events in geographies that are in red restriction level or higher (based on the Ontario Government’s restriction/alert level classification system).
- Outdoor, spaced events only after July 1st.
- Indoor events only after October 1st.
- Adjust against conditions as they change.
- Exit clauses in sponsorship in case of cancellation or changes in public health restrictions that contravene our own guidance or limit opportunity.
- Contract language that requires rights holders/operators to have on-site pandemic safety protocols approved by provincial or local health authorities.
- Any live engagements to include what we are calling ‘smart’ experience design elements, including restricting numbers within any experiential activation footprints, highly visible sanitization activity, restricting the use of shared surfaces.
Many of us spent a good deal of our time in 2020 dealing with lost value from our sponsorship deals. How we managed in 2020 will not work now and it is time to evolve our approach.
First, you may already have some additional value sitting in the 2021 term of your agreements that you rolled forward from 2020. It is advisable not to roll any additional value forward from 2020 and 2021 into subsequent years of your term.
It is important to move quickly. Your property partners will have to address lost value with all their sponsors, so best for you to be first, or early, in line.
Push to renegotiate your full deal, protecting existing entitlements while pushing for new assets. This may require you to add years to your term.
Now is a great time to think differently about your portfolio. Consider if all the properties you came into the pandemic with are still necessary over the short or midterm, or at all.
For new or renewing sponsorships, it is time to modernize the structure of your sponsorship deals.
Improve the protection that is built into your agreements. Of course, be sure that pandemics, epidemics, and communicable disease outbreaks are part of your new Force Majeure language, as are quarantines and lockdowns.
Contemplate value loss determination as part of your agreements with a negotiated approach to value loss that you can quickly enact once a crisis hits, rather than having to address value loss during a crisis.
Improve the flexibility that is built into your agreements. Move specific assets to value banks, with some convertibility from bank to bank (i.e., instead of a set of specific social media posts, move to an impressions/engagement bank for social media).
Build option years into your term length, giving you the ability to terminate the deal if it is no longer meeting your objectives (i.e., instead of a 5-year term, 3 + 1 + 1, or 2 + 2 +1).
Include a buy-out option, particularly for longer term or naming rights deals, giving you the flexibility to pay your way clear of the partnership early, if needed.
Enable portability to other brands or other business units. For example, during the term, you move your category rights to a different brand to better support commercial objectives.
We have had good success over the last five to six years moving our clients’ sponsorship deals to variable compensation models, protecting downside if the sponsorship does not perform as expected. For example, if a sports team’s performance drops, this can negatively impact broadcast/OTT numbers, attendance numbers and fan interest. Conversely, this compensation model also rewards the property for upside.
The pandemic has likely been incredibly challenging for the sponsorship initiatives within your broader connections strategy. Coming out of the pandemic, it will be important to return in a way that meets consumers where they are, that protects risk for your brand and that builds opportunity for the balance of 2021, and for the years ahead.
Ian Malcolm, President and CEO, Lumency
Ian has more than 30 years of experience in brand marketing, with special focus in sponsorship marketing. He has been a contributing writer for strategy and Marketing Magazine, a speaker at SponsorshipX, the IEG Sponsorship Conference and many other sponsorship events, and an instructor in the SMCC’s Fundamentals of Sponsorship professional development program.
Established in 1996, Lumency is a global brand-side sponsorship, experiential and content marketing consultancy that operates from bases in New York, Toronto and Chicago. Its client partners include Toyota, Lexus, Labatt, Anheuser-Busch, AB InBev Global, Danone, General Mills and others.