Sponsorship as a form of marketing pressure, once largely emotionally driven and lacking strategic depth, has undergone a revolutionary transformation in recent years. The Lumency report, The Evolution of Sponsorship, published in partnership with the World Federation of Advertisers (WFA), aims to unravel the current state of sponsorship, drawing insights from research drawn from by participating WFA members in Q2 of 2023.
Respondents represented brand, procurement, and sponsorship-specific roles within their organizations. These organizations boast a combined estimated annual sponsorship spend of USD $6.9 billion, approximately 7% of the estimated global sponsorship spend.
What follows is a summary of the report, published in late 2023.
CURRENT STATE
Navigating the current consumer landscape, especially with the challenges posed by engaging Generation Z and Alpha cohorts, has become more complex.
Global sponsorship spending by brands reached USD $97.4 billion in 2022 and is expected to soar to USD $189.5 billion by 2030, representing a compounded annual growth rate of 8.7%. Aligning with these projections, 34% of brands anticipate increasing their sponsorship budgets in the next two to three years.
With a surge in spending through this decade, sponsorship is poised to become an increasingly vital form of marketing pressure. It provides a unique opportunity for brands to forge emotional connections by engaging target audiences through shared passion points, enriching their experiences as fans, patrons, guests, or attendees.
Moreover, sponsorship serves as a powerful platform for brands to showcase their values, drive attribution and impact marketing/sales funnel activity through strategic activations around sponsored properties.
Brands foresee refining their sponsorship approach in three key areas over the next three to five years:
- Improved Process: A shift towards more data-driven analysis, robust evaluation, and enhanced measurement tools
- Enhanced Strategy: Adoption of a more evidence-based approach to decision-making regarding sponsorships
- More Choiceful: Prioritizing fewer, larger, and more impactful sponsorships with enhanced activation strategies
Despite this positive outlook, a mere 5% of brands express high confidence in the efficacy of their sponsorship portfolio investments in 2023. In contrast, 51% of brands report being neutral, not so confident, or not at all confident. This is concerning since, on average, sponsorship constitutes 12% of a brand’s marketing budget, second only to media spend.
PAIN POINTS
Measurement
Chief among the challenges faced by brands in their sponsorship activities is measurement. The majority identify measuring the return on investment (ROI) as a top-three challenge. Yet, post-evaluation and impact measurement receive only 1% of the sponsorship budget, with 21% of brands allocating nothing to this critical aspect. The dissatisfaction with their organizations’ measurement approaches is clear, with brands expressing a need for more robust and category-specific measurement models.
Governance
Effective governance, encompassing the process and frameworks used to manage sponsorship investments, is essential. Although 58% of brands report having a sponsorship strategy, 45% lack a governance framework. This gap poses challenges in managing renewal cycles, ensuring organizational alignment, and committing to effective activation design.
Property Selection and Evaluation
Proper evaluation of sponsorship opportunities emerges as one of the critical functions for success. Surprisingly, only 31% of brands use a model or framework to determine the commercial value of rights and entitlements. This misses on the importance of a comprehensive evaluation that factors in rights valuation, brand fit, target efficiency, activation opportunity, reputational risk, and negotiation strategy.
Activation
Activation, functioning as the bridge between sponsorship value and measurable impact, faces hurdles. A significant 41% of sponsors report being unsure or not tracking their activation spending. This misses against the best practice and the importance of maintaining balanced activation-to-rights fee ratios to optimize return on investment.
Sourcing/Procurement/Funding
The management of sponsorship budgets varies, with 47% of brands having dedicated procurement resources. Procurement can be more than just negotiators, emphasizing their potential to bring structure, governance, and added value. Establishing organizational stakeholder funding formulas that guide how sponsorship investments are funded is crucial for organizational alignment and effective utilization of resources.
THE ROAD AHEAD
With sponsorship spending set to grow at an 8.7% compounded annual rate from 2023 to the end of the decade, brands grapple with short and mid-term macro-economic uncertainty, impacting marketing budgets and complicating long-term sponsorship commitments.
Brands are increasingly adopting a data-driven approach to access, activate, and measure sponsorships. They seek heightened accountability from property/rights-holder partners, demanding proof of capabilities tailored to their unique needs. Customized asset packages and deeper engagement by properties in the brand’s business are becoming essential for successful partnerships.
As brands balance their expected investment levels, with 35% anticipating an increase, 31% expecting no change, and 29% expecting a decrease in sponsorship spend over the next two to three years, the need for strategic decision-making, effective measurement, and value-driven activations becomes more apparent.
CONCLUSION
The Evolution of Sponsorship provides valuable insights into the dynamic landscape of sponsorship, unraveling the challenges faced by brands, outlining the trajectory of this potent form of marketing pressure and providing advice for change. While short-term uncertainties persist, sponsorship spending is poised for significant growth, emphasizing its increasing importance in establishing emotional connections with consumers through shared passions and values. Despite the existing pain points related to measurement, governance, property selection, and activation, brands are positioning to better leverage sponsorship’s potential for creating meaningful connections and delivering measurable impact on brand and commercial objectives.
For a more on the full report, reach out: [email protected]
