Roles of Sponsorship - Essay Example

? Management of the Introduction In today’s globalised economy organizations are seen hugely dependent upon marketing. Every day the consumers are bombarded with messages regarding improved and new products and services. Traditional advertisements that are creating the buzz regarding how their products or services are better than that of their competitors or highlighting the features that would attract the customers are now turning to be ineffective and appear to be shear wastage of money. A better way of creating a buzz word regarding the company is through event marketing. Event marketing is now gaining fast importance as a promotion mix (Sneath, Finney & Close, 2005). This strategy is now followed by large number of organizations as a response to the challenges faced in the traditional media like fragmentation, clutter and cost. The events provide the company with an opportunity of face-to-face interaction with the target customers who have grown and have become significant contributor towards the marketing communication program. Research studies have shown that about 22 percent of the total marketing budget is dedicated towards the sponsorship of events and activities (O'Connor, 2004). Sponsorship is defined as “the alignment of a brand with an activity in order to exploit the commercial potential created by the association, thereby positively impacting the brand image and/or sales amongst the sponsor’s target market, in order to attain marketing and corporate objectives” (Koekemoer, 2004, p. 456). In simple terms sponsorship can be defined as the provision of resources like equipment, people and money by an organization who acts as the sponsor, to the sponsoree or the beneficiary. As compared to the traditional advertising sponsorship acts as an alternative that provides opportunity for selling the product and services of the marketer and building brand image for the organizations. Sponsorship is a very powerful marketing tool. It has the capability to cut through the clutter, provide a unique opportunity to create relationship with the customers by producing emotional bondage with them and speak something rare as far as the business is concerned. This study focuses on gaining an in-depth knowledge regarding the role and importance of sponsorship and the negative and positive impacts it creates. Roles of Sponsorship The role that sponsorship plays can be understood from the objectives that the companies look for achieving through sponsorship. The success of sponsoring an event by the company is well defined by the objectives, evaluation of the end results and benefits that the organization enjoys. As per Andreff & Szymanski (2006), there are two types of objectives that can be classified as indirect and direct objectives. A dramatic change in the behavior of the existing and the new customers due to sponsorship is signified as direct objective. On the other hand indirect objective is signified by the increased visibility of the product and the brand, enhancement in the brand image and contact with the target segment. By accomplishing the indirect objectives the organization look for attaining growth in sales as the long term goal of the organization. Five significant principles of sponsorship objectives have been proposed by Jobber (2007). The objectives include gaining publicity, creating opportunities for entertainment, nurturing favorable company and brand association, enhancing the community relations and generating opportunities for promotion. Sponsorship provides an effective way to the organizations to promote their products, logos and brands; thus, providing opportunities for promotion. The company can use products like pens, sweatshirts and bags with their logos on them to create a wider recognition and retention among the audiences. Social responsibility is another reason that drives the company towards going for sponsorship. Companies engaged in sponsoring schools can create a socially responsible and caring image of the organization amongst the consumers that helps the company in boosting its reputation in the community. Sponsorship also leads to the association of the brand with the event, which is being sponsored by them. The positivity of the event is seen to be reflected in the products that the company deals in, which in turn creates brand image for the company. Jobber (2007) argues that by sponsorship the company not only aims to gain publicity but also tries to reach out to the consumers who are placed high in various fields. When top celebrities are participating in the events then high rewards are provided to the employees who are involved in that. Sponsorship is the most easy and efficient way to reach a large base of target customers at one time, some of whom can be the potential customer for the organization since huge international coverage are provided to these events that facilitates the process of publicity. Jobber (2007) claims that the events are responsible for creating awareness regarding various products. Dolphin (2003) has provided some more objectives that the organization can follow while entering into sponsorship. However these objectives are seen to differ from industry to industry. The objectives are enhancement in corporate image, stimulate sales, alter public perceptions, create goodwill, increase brand awareness, corporate reputation, build relationships and enhance employee motivation. Dolphin (2003) argues that the corporate image can be enhanced by influencing the impression of the company that it has in a particular market. However increase in the awareness regarding the brand is accrued naturally from the sponsorship, which implies that the profile of the corporate brand is increased. This in turn leads to the creation of value for the brand. The corporation looks toward increasing the corporate value, which is an intangible value. Through sponsorship the company can succeed in returning back something to the community in which it operates. This in turn is seen to change the perception of the public towards the companies and their products. On the other hand it also creates goodwill for the company that increases the motivation of the employees. Thus sponsorship is seen to play a very strategic role in the success of the organization. According to Mullin, Hardy & Sutton (2007) there is not only a single objective that is responsible for the corporation to think about whether to go for sponsorship but a series of objectives are responsible. The objectives proposed by Mullin, Hardy & Sutton (2007) are increase in the awareness regarding the company and its product and services among the customers, alter the perception of the customers towards the company, make the company visible to a particular market segment, associates the company with the community, creates goodwill regarding the company among the decision maker, creates media benefits, achieves sales objectives, gets an opportunity to exhibit the unique features, advantages and technologies of the product, through exclusivity and association the company gets an advantage over its competitors, gains exclusive opportunity in terms of entertainment and hospitality and helps in securing naming rights and entitlement. According to Andreff & Szymanski (2006) the objective of sponsorship can be described in two ways both in terms of marketing objectives and in terms of corporate objectives. The objective that the organization follows impacts the preferences of the CEO whether to sponsor an event or not. Significance of Sponsorship The global budget provides concrete evidence regarding the growing significance of sponsorship. The ongoing trend of the sponsorship market is provided in the report of IEG Sponsorship Report. As per the report of IEG (2008, cited by Hund-Goschel, 2009) the global spending on sponsorship has reached $43.5 billion, which signifies an increase by 14.8 percent as compared to the figures of the previous year. The European companies were seen to increase their spending on sponsorship from $9.5 billion in the year 2006 to $10.6 billion in the year 2008 (Hund-Goschel, 2009). The budget was raised from $6.4 billion to $7.4 billion in Asia Pacific companies (Hund-Goschel, 2009). A more brisk pace has been observed in the increase in spending on sponsorship in the North American companies in the year 2008, which is by 12.6 percent (Hund-Goschel, 2009). This agency is expecting a further growth in the popularity of the sponsorship. The recognition of sponsorship has increased among the practitioners as an effective and established way of marketing communication (Cornwell, Roy & Steinhard, 2001). Sponsorship effectively influences the awareness and perception regarding the brand due to the fact that sponsorship is perceived to be high esteemed by the audience (Cornwell, Roy & Steinhard, 2001). On the other hand it is also seen to create emotional bonding with the customers. It also leads to the popularity and publicity of the organization since these events get huge media coverage that in turn creates recognition for the company. Corporate Social Responsibility (CSR) is top priority for the management of the organizations. Sponsorship is an effective and efficient way through which the organization is able to give something back to the community in which they operate (O’Hagan & Harvey, 2000). By accomplishing the CSR objective the organization succeeds in creating a socially responsible corporate image, which again results in increasing the visibility of the company (Bennett & Sargeant, 2005). The common link between individual motives behind engaging into event sponsorship is the overarching need of congruency between the event and the sponsors (Cornwell, et al., 2006). Strong congruency leads to encouragement regarding positive response of the consumers towards the sponsorship that increase the recall of the brand (Colbert, D’Astous & Parmentier, 2005). On the other hand lack of congruency may lead to reduction in the favorability of the brand and decreases the brand value as the consumers of the brand are unsure regarding what the brand tries to represent (Becker-Olsen & Simmons, 2002). The increasing recognition of sponsorship as strategic role player in the marketing strategy of the firm has made it a source that provides sustainable competitive advantage to the firm. The investment made towards sponsorship helps in generating value for the customers that enhance the brand image by providing a large number of associations in form of prestige, power, achievement, youthfulness etc. These associations are considered to be unique especially due to the involvement of exclusive rights to an event. The characteristic of an event is the basic foundation of brand association. It is recognized that the investments made towards sponsorship turn to be ineffective if they are not supported by the commitment of significant amount of additional resources like expenses related to marketing. However it should be noted that resources do not only signifies the finance going towards marketing but also includes the marketing experiences and skills as well as the other capabilities of the organization (Fahy, Farrelly & Quester, 2004). Fahy, Farrelly & Quester (2004), in their study has used a Resource Based View (RBV) of sponsorship in order to develop a model forming a relationship between advantage creation and sponsorship. Keeping the predictions related to RBV in mind, they claimed that the firm can attain advantages only by using the inimitable resources that provides a unique combination for the firm. The resources should be as such that they fit into the requirement of the competitive market and the main challenge for the management is to identify, create and leverage the resources. In case of competing sponsorship the use of unique resources may lead to achieving advantage but if the sponsorship fails in translating the delivery of value to the customer group then the competitive advantage for the market will not be created. Moreover, the interaction between the parties entails a unique collaboration which is a source of new skills and resources. For instance the marketer of sports or arts are seen to rely heavily on creative talents and the sponsors acts as a source that provides creative ideas to the organization in form of communication strategies that includes design, development and launch of new products and services, branding and provides flexible and creative approaches that helps in out-maneuvering the competition. Therefore, it can be concluded that the relation that sponsorship entails provides an excellent opportunity for both the individual firms to tap the new human-based resources, which is considered to be highly complementary since they are embedded in the relationship and is very difficult to duplicate (Fahy, Farrelly & Quester, 2004). Positive impacts of Sponsorship When the companies are entering into sponsoring certain activities then they always have clear objectives and reasons behind doing so. The sponsorship goals of the organization should be linked to the promotional objectives and the marketing objectives of the company (Shank, 2009). Thus, the positive impacts that the sponsorship causes are given below: Exclusivity: Many of the companies are seen to negotiate on the licensing or sponsoring agreement that makes the firm an exclusive sponsor of the event. The main advantage of such sponsorship is that the firm need not worry regarding the cluttering and competitors, which are used synonymously in traditional marketing. Sponsorship intends to communicate the message of the organization in less commercial and more different way. For example in 1988 while the Seoul Olympic IOC designed exclusivity contract that selected certain companies who can use the Olympic rings as logo on some of their products with a guarantee that the sport entities will be using their product lines and not that of their competitors (Abiodun, 2011). Naming Rights or Entitlement: The companies by entering into the sponsorship agreement in various events can achieve entitlement and naming rights. The company can be a part of the whole event or any particular section under the whole event that includes the facility. In sports marketing investment, naming rights are considered to be most expensive and less exploited approach of sponsorship. Goodwill creation: Certain specific level of goodwill is created by the company through sponsorship, which is a great way of conducting business on a personal basis. Through sponsorship the entertainment and hospitality that the company provides create an amicable business environment that boosts the image of the company in a positive way. Relationship marketing: Sponsorship is considered to be the most effective and innovative way of developing long lasting relationship with the customers. Many of the organizations are seen to generate incredible success by creating memorable experiences for the customers, which in turn creates long lasting and loyal relationship with them (Armstrong & Kotler, 2009). Sponsorship is seen as an effective mean by which the customers are integrated with the organization that creates a sustainable relationship. Increment in sales: Through sponsorship the organizations aim to increase the level of sales. The organization before deciding to invest and entering into a sponsorship contract assesses the marketing goals and organizational objectives and then decides on which type of sponsorship they would be entering. Competition: Some of the companies are seen to enter into sponsorship agreement for experiencing threat from the competitors. This serves as one of the primary reasons for the organization for going for sponsoring some events. In simple words it can be said that if the organization is not interested or fails to go for significant investment towards the sponsorship and if their competitor does it then it will result into losing of market share for the former company. Image Building: By going for sponsorship deal the company aims to create high level image for the organization and maintain the same. This is a two-way street for both the entities entering into the sponsorship contract where the sponsoring organization is seen to associate its brand with the positive image of the event and gains a unique personality. This can lead to the example of the situation where various companies like General Motors, AT&T, Accenture and Gillette were seen to terminate the sponsorship deal with Tiger Woods owning to the breaking out of the news related to numerous infidelities (Abiodun, 2011). This clearly reveals that many of the organizations do not want to associate themselves or their brands with the scandals, which can negatively impact their image. Negative impacts of Sponsorship Apart from numerous positive impacts that sponsorship creates there are some negative impacts too. While entering into the sponsorship agreement the organization needs to consider these negative impacts very seriously (Runsbech & Sjolin, 2011). The negative impacts are as follows: Ambush Marketing: Ambush marketing is a substantial curse for the sponsoring industry that imposes significant amount of threat to the participants of the sponsorship agreement. It affects the image of sponsorship that leads to the question regarding the whole integrity of the sponsorship campaign or event. Ambush marketing is related to the marketing campaign that takes place in the event but does not involves any type of sponsorship fee payment towards the event. In simple words it signifies that one brand pays to sponsor a particular category or categories of event that creates exclusivity for that brand but creates problem for other brands. These latter brands then adapt some other means through which they can promote themselves in the same event but by not paying any sponsorship fee and without breaking the law at the same time. The Beijing Olympics 2008 is an appropriate example of Ambush marketing. In this event the Chinese gymnast, Li Ning was seen to light up the Olympic torch by wearing the shoes of his own brand (Li-Ning) while Adidas was the official sponsor of shoes and clothing of the athletes. This was witnessed by almost millions of viewers of both China and other countries all over the world. Moreover they also provided outfits for many of the athletes who participated in the Olympic. Li-Ning was not the official sponsor of the event but this activity lead to huge popularity for the company. It was a small company in China but its sales were boosted immensely by this event (Abiodun, 2011). Legislation: Sponsorship is seen to be affected by the increasing legislation in some of the countries regarding banning the use of tobacco and alcohol products. Countries that are located in Asia, Australia, European Union and Northern America have initiated some level of ban on the sponsorship of alcohol related products and have completely banned the sponsorship of tobacco in the sports events (Abiodun, 2011). Media Coverage and Sponsorship Clutter: The organization has less control on the media coverage related to various events. The high level of media coverage of the events generates avenues for the non-sponsor to go for ambush marketing, which affects the official sponsors. In this way they gain some access to the positive benefits generated from the sponsorship agreement. 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Retrieved from http://faculty.unlv.edu/angeline/EventMarketing_JAR2005.pdf. Read More