The Sponsorship Trends that Should Impact Decision Making

The volatility, uncertainty, complexity, and ambiguity of the world around us is significant.

Social change, geopolitical issues, supply chain challenges, economic headwinds, a lingering pandemic—, the way we do business has changed. And with it, so has sponsorship.

At the start of each year, we publish the nascent trends and the trends gaining momentum as we see them through the lens of our global sponsorship practice. Whether you are a brand, a property, or an agency, these are the trends that you need to be aware of as you navigate the coming year.

For 2023, we have identified ten global sponsorship trends. These trends are not rank ordered since the importance of each trend varies for different sponsor brands, for different industry categories, and within different property types.

In this first of two articles, we share the first five trends. Read about trends six through ten in part two of our series on Global Sponsorship Trends.

  1. The Primacy of Data (Nascent)

After associative benefits and borrowed imagery, the second most important asset a property can provide a sponsor is data.

The opportunity for a brand to identify its customers in a property’s databases, connect with them, and reward them, is significant. Even more significant is the opportunity for a brand to identify category-active consumers and convert them to customers.

It is also a bit of work. It requires a willing property partner, and intention from the brand. Larger properties are sophisticated in understanding their audiences. They see the benefit in enabling sponsors to leverage that data, in part to create stronger sponsor activations that add value to the fan/patron/attendee experience. Smaller properties are open to working with sponsors around data, sometimes with a bit of coaching required.

In a cookie-less world, zero party and first party opt-in data becomes more important. The accelerated trust that a sponsor can earn with fans/patrons/attendees through a sponsorship property can enable it to bring consumers over to their databases with express permission.

For brands, using a property’s database to gain consent from new customers, as well as the connection they earn through the sponsorship, is an effective way to convert those customers into the brand’s customers, and even advocates. The accelerated trust that a sponsor can earn with fans/patrons/attendees through a sponsorship property can drive stronger mid and lower funnel performance.

  1. The Importance of Managing Reputational Risk (Momentum)

Consumers are far more willing than they used to be to penalize sponsors for a property’s missteps.

If you’re a sponsor part of managing your portfolio effectively needs to include understanding how properties are prepared to handle their own risks. In an area of risk management that we call Life Safety, for example, what are the property’s procedures and protocols for active shooter situations, terrorist threats, extreme weather, or any situation where they need to evacuate a site or facility?

What is the environmental sustainability and social equity position of the property and how much light is there between your position, if you are a brand, and their own?

A sponsor should consider a property’s governance policies around malfeasance, corruption, sexual impropriety, whistle blowers. How do they protect data, including personally identifiable consumer data?

And then if something does go sideways for one of your property partners, what are the playbooks that you have ready to execute against? What have you defined in the morality clauses in your sponsorship agreements? What are the conditions that would cause you to terminate a sponsorship agreement? When would you need to be prepared to make public statements and do you have those public statements 90% written and in your own playbooks ready to fine tune and release quickly? Under what conditions do you need to assemble your executive team or get your CEO out of bed?

  1. Variable Compensation (Momentum)

We’ve been using a KPI-driven variable compensation model to approach rights-fee spend on behalf of our clients for over a decade. A variable compensation approach to spend protects a sponsoring brand from downside risk when a property under-performs, and rewards the property when it performs well. This is especially important over longer-term deals for properties with volatile performance records. For example, when a sports team is performing poorly on the field, some sustain attention, turnstile/gate, and viewership while some don’t.

Variable compensation is based on a property meeting and exceeding key performance indicators that are important for the sponsor, not the KPIs that are only important to the property. The pandemic highlighted the risk in value delivery for sponsors, and variable compensation helps mitigate that risk.

We look for an average of 30% of a deal’s total compensation to come from variable. We have deals in the portfolios we support with 100% variable compensation, though they are rare.

Variable compensation also changes the nature of the relationship between the sponsor and the property. When a property is being compensated, in part for delivering KPIs that are meaningful for the sponsor, the property becomes more of a partner – they want to understand the sponsor’s business better and they want to help drive results for the sponsor in a more deliberate way.

  1. Deeper Partnerships (Nascent)

For many years as an industry, we’ve been referring to sponsorships as partnerships and sponsors and properties as partners.

This is evolving into deeper commercial partnerships.

We see this happening in a couple of ways – first, monetization of assets.

Not across all categories, but increasingly, sponsors are looking for opportunities to monetize entitlements including around NFTs, co-branded merchandise or exclusive access. For example, we work with a client that is a sponsor of a premier football league. Monetizing hospitality assets and turning them into experiences that drive revenue for the sponsor is significant to that client.

While monetization of entitlements doesn’t cover rights fees, it does subvent them. It also takes activation to a new level, with an activation funding formula that underwrites getting consumers closer to the fan experience, driving higher engagement for the sponsor and delivering attribution.

The second way we are seeing this deeper kind of partnership show up is in instances where sponsors and properties create co-branded products/services with both parties committed to shared success. Both property and brand support the product/service launch and sustainment through marketing pressure and distribution support.

  1. The Middle Gets Squeezed (Momentum)

The pandemic put a lot of pressure on properties, especially those in the middle tiers of size and investment.

Lower tier sports leagues across Europe, for example, couldn’t put teams on the field of play during pandemic lockdowns and didn’t benefit from lucrative broadcast deals that could enable them to play without fans in the stands.

Music festivals across APAC and North America went 1+ years without being able to stage events.

Lockdowns made local communities and properties more relevant to consumers while also pulling attention to larger properties, which were still able to provide entertainment and connection during the depths of the pandemic. Cash strapped and, in many cases, no longer in business, the midsized property tiers are struggling to regain their footing, and sponsors are finding it challenging to rationalize investment.

By: Ian Malcolm

See part two for trends six through ten.

The Sponsorship Trends that Should Impact Decision Making
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