Corporate Sponsorship - Essay Example

Corporate Sponsorship Critically discuss the importance of corporate sponsorship in the event industry. Various kinds of companies use the sponsorship of arts, social cause, sports and entertainment (also known as event marketing) in order to build brand equity. In this sense, sponsorship characterizes investment placed into causes or events that bolster corporate objectives. These objectives could be such as enhancing the corporate image or building brand awareness (Dean, 2002). Research indicates that consumers view sponsorship more favourably compared to other kinds of cause related marketing spending including providing gifts or monetary benefits to charity organisations when products are bought by consumers (Creyer & Ross, 1996). The phenomenon of event sponsorship by corporate entities has been on the rise. As per the Independent Evaluation Group (IEG) Sponsorship Report (a leading resource on sponsorship research), the amount of spending by North American corporate entities for event marketing has gone up from $850 million in 1985 to some $10.3 billion in 2003 (Independent Evaluation Consortium, 2003). There is a growing need to explore why corporate brands are willing to support event management more than ever. This text will explore the growth of sponsorship and its importance for the event industry by analysing the process and motivations along with the advantages and disadvantages of sponsorship. In itself sponsorship has evolved into a complex phenomenon over time and there are multiple possible definitions that may cause confusion. Research on the matter indicates that there are myriad definitions of sponsorship that have appeared over the last 25 years (Skinner & Rukavina, 2003). This text will utilise the definition of sponsorship provided by BDS Sponsorship Limited (which is one of Europe’s leading commercialisation and sponsorship consultancies): “Sponsorship is a business relationship between a provider of funds, resources or services and an individual, event or organisation which offers in return rights and association that may be used for commercial advantage in return for the sponsorship investment.” Sponsorship has been deeply rooted in history given that wealthy patrons would invest in the works of artists in order to receive appreciation from people who would view those works of art. The expansion of sponsorship became more common in the seventies as the amount of sponsorship in the United Kingdom grew by some 250% (Lawson, 1984). On the other hand, sponsorships were given for works of art till a point in time after which these sponsorships were diverted the music and sports industries. This trend continues into the modern day as “the value of sponsorship towards the arts— [this] appeared especially with books and less so with music. The area of the arts generally received an honour or prestige rated above commercialisation” (Lawson, 1984). Sponsorship for sports can be seen as booming in the aftermath of Peter Ueberroth’s sell out of the LA Olympic Games. Skinner and Rukavina (2003) have described this as “an explosion of sponsorship marketing.” Before this point in time it was felt by event managers that they would be seen as sell outs if they tried to attract too much attention from sponsors. Lawson (1984) has described this in the following words: “Sponsorship, it was thought, could detract from the popular image of the arts as being untainted by money.” Although this line of thinking persisted before this point in time but after Ueberroth’s actions, “many event managers forgot the notion that their events could be tainted. They increased their sponsorship levels dramatically, and approximately 40,000 events were created in the next ten years because of sponsorship funding” (Skinner & Rukavina, 2003). In this respect, it must be kept in mind that without support from sponsors it would not be possible to hold many different kinds of events. This takes place because sponsors often provide the major financial components of these events. The involvement of corporate stakes in these events allows greater financial advantage to be attained. Consequently, the product or service being marketed is able to reach more people and thus a greater audience as financial backing allows it greater spread with the same amount of effort involved. The domain of large scale corporate sponsorship is steadily overtaking the sponsored. When major events such as the Edinburgh Festival, the Glastonbury Festival and the V Festival are considered they can be seen as “battlegrounds” in order to secure various kinds of sponsorship deals. Resultantly the scope of sponsorship in business and corporate roles is increasing and as per the International Events Group (Hoyle, 2002): “... sponsorship is fastest growing form of marketing. It is estimated that, in 2001, entities from around the globe will spend over $24.6 billion to sponsor a variety of events, almost quadrupling the amount spent in 1998. (...) Although sports events still dominate the types of events sponsored, there has been a steady increase in other categories such as art, causes, festivals and entertainment tours.” It is often the case that sponsorship is mixed up with various other forms of marketing. Most people contend that fundraising and sponsorship are the same things but this is not true at all. Fundraising is more about providing to charitable causes and events with the option of being anonymous while sponsorship refers to investing funds in order to strengthen the existing brand image or to create greater brand awareness. This investment could stem from any form of corporate entities, individual entities, or government entities or from a combination of these elements. Sponsorship must also be differentiated from advertising. Advertising can be seen more as “a one-way business street. We advertise products, services, and activities in order to maximise sales and profits” (Skinner & Rukavina, 2003). Sponsorship can be seen as more of an investment because the sponsor is providing the cause or event with funds in order to get something back in return. The return depends in part on the nature of the business and the nature of the sponsor. In simpler terms the sponsoring entities are looking for exposure. The sponsoring entity wants to be more recognised and more dominantly available in the public consciousness in comparison to their rivals. This in turn tends to benefit these sponsoring entities by enhancing their overall image, bringing them more customers and by increasing their overall sales volumes. For example, Virgin Mobile became the headline sponsor of the V Festival which was one of the biggest music events ever held in the United Kingdom. According to research (Bowdin et al., 2006): “There is also evidence that committed and loyal fans of a music group or sport will attach themselves to those brands that support their interest. Similarly, V Mobile, as a major festival sponsor in the United Kingdom, considers that ‘festivals offer a fantastic opportunity for brands to get close to consumers when they are excited and passionate.” Another sponsorship was utilised by Apple Inc. which was again based on the principle of a music event as well. Apple became the chief sponsor for the iTunes Festival in order to enhance brand awareness and standing around the globe. The current economic climate tends to accentuate such competition. Apple being a highly competitive company tended to use the online domain to hold the event online reducing the cost for the overall event. As per Apple: “The iTunes Festival is a new type of music festival. Free to attend. Running for the entire month of July and to be enjoyed from anywhere in the world via the web.” The benefits of such tactics for Apple are undeniable as this form of sponsorship would allow Apple to enhance the overall consumer base through television-based advertisements. It must be kept in mind that the relationship between the sponsor, the event and the customers must benefit all involved parties. The entire situation needs to be win, win and win for all the involved stakeholders (Adkins, 2000). Corporate sponsorship has been projected as being analogous to cause related marketing. As per Adkins (2000): “Cause Related Marketing works by integrating the core trading objectives and activities of a business with the needs of a particular cause or charity. Indeed, when done well, Cause Related Marketing provides a win for the charity or cause, a win for the consumer and other stakeholders and a win for the business.” The core reasons behind a corporate entity’s sponsorship for a cause or event are often finding greater exposure along with bagging more customers that would tend to increase profits and enhance the corporate citizen image. This in turn allows these corporate entities to emphasize their social responsibility duty. It has been suggested that a “mantle of good citizenship” is donned by various corporate entities in order to get themselves involved with the lives of the community around them. This involvement often centres on some kinds of improvement being brought into the collective life of the community whether this takes place at the local or the national level. It could be generalised that a sponsorship of the kind mentioned above tends to assume roles similar to the roles held in public relations (Meenaghan, 1983). In contrast, the IEG has allotted ten prominent reasons to explain why corporate entities tend to sponsor events. Some of these reasons include (Skinner & Rukavina, 2003): differentiating products from the rest of the competition; providing incentives to retailers, dealers and distributors; recruiting and retaining employees. However, it has also been suggested that similar to other facets of business the competition between sponsors can be highly fierce as well as just “down right dirty”. This assumption has been validated by Turn et al. (2006) by stating: “Sponsors are very useful to an event manager, but may also be a source of limitation or inconvenience. One might wish to be the main sponsor, and cause confrontation with other sponsors or limit or change your own plans.” As time proceeds, more and more organizations and corporate entities are learning to sponsor events through ingenious methods. Sponsorship is becoming a prime commercial interest for many corporate entities and businesses around the globe. This is true for companies that are involved with the arts and sports businesses. Furthermore, companies that are involved in the business of sponsorship are also projecting themselves in the form of a media that can be utilised by other businesses to enhance their own businesses (Lawson, 1984). There are distinct advantages and disadvantages of being a corporate sponsor. It has been related before that the advantages include positive exposure that will bring greater revenues for the sponsoring entity. Furthermore, using sponsorship on the corporate scale allows the sponsoring entity to build the brand and to reinforce the brand. It also allows the sponsoring entity to demonstrate and being to life the very corporate values that the corporate entity believes in. Sponsorship has the benefit of making both corporate social responsibility and corporate community investment more visible than before (Adkins, 2000). It has also been suggested that sponsorship benefits include the continuation of business partnerships for both the corporate entity and the organisation. The sponsorship of causes and events also allows the corporate sponsor to develop other business partnerships and thus to expand the frontiers of business. On the other hand, there are chances that the corporate sponsorship may lead to a situation where one of the involved stakeholders is at a disadvantage. In the worst case scenario, both involved stakeholders could be losing as a result of corporate sponsorship. These are not the only disadvantages as the event being sponsored may turn out to be unprofitable. This could lead to fiscal loss for both involved parties. In this sense, events such as music festivals and soccer games can only proceed if they can turn out to be profitable. If these events were not profitable then there would be little point in providing sponsorship for these events. Financial commitment can for these events can be gauged from the fact that in 2009 two of London’s major music festivals were cancelled. The Stokefest (Stoke Newington music festival) and the Rise festival (a popular anti-racist music festival that was due to be held in Finsbury Park) were cancelled due to fiscal constraints. The mayor of London, Boris Johnson claimed that the credit crunch had led to the cancellation of both events. This in itself speaks volumes for the need of corporate sponsorship for events. The lack of funding could only have been covered if corporate sponsors were ready to donate to this event but the credit crunch undermined their ability to do so. In addition, another disadvantage of corporate sponsorship is the chance for both sides to misunderstand each other and the event situation. There are chances that both sides may underestimate the management problems involved in the sponsorship scheme and this could in turn lead to fiscal obligations and other related management issues (Skinner & Rukavina, 2003). Overall, it could be concluded that corporate sponsorship is essential to event management and the event industry. For most purposes the funding provided by corporate sponsors is the lifeline of events especially in recent years where the credit crunch is threatening the foundations of this industry. The corporate sponsors are put in an advantageous position due to the sponsorship as they acquire greater brand awareness and following. The corporate sponsorship of events needs to be profitable so that the overall equation produces a win-win situation for all involved parties. 1. Bibliography Adkins, S., 2000. Cause Related Marketing- who cares wins. Oxford: Butterworth-Heinemann. Bowdin, G., McDonnell, I., Allen, J. & O’Toole, W., 2006. Events Management. 2nd ed. Oxford: Elsevier. Creyer, E.H. & Ross, W.T., 1996. The impact of corporate behaviour on percieved product value. Marketing Letters, 7(2), pp.173-85. Dean, D.H., 2002. Associating the corporation with a charitable event through sponsorship: Measuring the effects on corporate community relations. Journal of Advertising, 31(4), pp.77-87. Hoyle, L.H., 2002. Event marketing: how to successfully promote events, festival, conventions and expositions. New York: Wiley. Independent Evaluation Consortium, 2003. Sponsorship spending to increase 8.7% in 2004. IEG Sponsorship Report, 22(4), pp.4-5. Lawson, R.W., 1984. Sponsorships- Their Nature and Role as a form of Media. Sheffield: University of Sheffield. Meenaghan, J., 1983. Commercial Sponsorship. Journal of Marketing, 17(7). Skinner, B.E. & Rukavina, V., 2003. Event Sponsorship. New Jersey: John Wiley & Sons. Turn, J., Norton, P. & Wright, J., 2006. Management of Events Operations. Oxford: Butterworth-Heinemann. Read More