Richard Denton, academic director of the ‘Sponsorship 360: International Sport Marketing and Sponsorship’ program at Johan Cruyff Institute, reviews the current situation and upcoming trends in sport sponsorship, a tool that brands are increasingly taking into account to connect with society
The Tokyo 2020 Olympic Games will be a unique opportunity to demonstrate the power of a nation to overcome the greatest tragedy of its recent history. The magnitude 9 earthquake chain reaction that triggered the tsunami with waves of up to 10 meters and the explosion at the Fukushima nuclear power plant on March 11, 2011, left a tragic balance of tens of thousands of dead, thousands of missing persons and a country turned to rubble. Nine years later, Tokyo will organize the XXXII Olympic Games with more than half of the income being contributed by local sponsors, which will exceed $3 billion, as confirmed by the Organizing Committee. The brands’ bid to sponsor the Tokyo Games responds, clearly, to a social interest. And they have experience in that: Tokyo organized its first Olympic Games in 1964 and at that time the event marked the resurgence of the country after World War II.
Sponsorship is the gateway for many brands to the world of sport, one of the most established industries in the global economic landscape. Sport is perseverance, evolution, competitiveness, optimism, personal and collective effort, self-improvement. Values that brands want to convey to society through inspirational or aspirational messages. Whether to promote social change, for technological reasons, as a way to test their products in high-level competition, or as drivers of a greener world, many companies consider sport sponsorship a good vehicle to reach society.
Richard Denton analyzes how sport sponsorship strategies have evolved in recent years, and examines success stories, future trends and how brands are able to connect more effectively with their target audience, both local and global, be they traditional, millennial or Z generation fans. Sport can reach everyone.
The Olympic Games are probably the sporting event that arouses more interest internationally. But, Tokyo 2020 Organising Committee has reported that local sponsors will provide $3.3 billion, which corresponds to 56% of the revenues. How do you explain the significant interest from the Japanese companies in comparison with international brands?
Pride, innovation and revitalizing a stagnant economy. The Japanese as a nation are fully behind the Olympics and just as Beijing in 2008 are seeking to maximise the opportunity from a sporting, business and social perspective to showcase ‘brand Japan’ and all the positive aspects of this proud nation. Secondly, the sales and marketing partner of TOCOG, Dentsu has played an influential role which has attracted criticism in some quarters, but this is still a spectacular achievement.
Has the possibility of using sport as a test bench to evolve its products made sponsors consider longer contracts?
In some cases, yes. Tata Communications has just completed an 8-year partnership with Formula 1, a number of broadcasters (Sky and Star Sports) and F1 Teams (Mercedes and Williams). One of the goals was to drive innovation in the business and the sport, which Tata now confirm has been achieved and therefore Tata has not extended the technical partnership. In some cases, 8 years may not be considered that long as there are sponsors such as Coca Cola and Heineken who have been associated with some sports for 20 or 30 years or event longer. IBM and Wimbledon have a technical partnership stretching back to 1990 that has resulted in numerous services both for The Championships but also more personalised fan experiences. Given the speed at which some products or services evolve today, it might be possible to test or benchmark their products in a shorter time period but as the IBM-Wimbledon partnership suggests, once there is a mutually rewarding arrangement that works for multiple stakeholders, these partnerships can extend for a long time.
How do brands reposition their ‘green’ products and services?
By persuading existing rightsholders to adopt more sustainable and environmentally friendly ways of operating that will reflect positively on their sponsors, or by partnering with some of the more ‘green’ sports who have the credentials to demonstrate their limited or carbon-free impact on the environment. In some cases, Formule E might be able to offer this proposition to sponsors but that does not mean the fans and viewers will automatically change their opinion without robust evidence. This is an area that is only just evolving and there is a lot of work to be done before the average sports event can be considered beneficial to the environment which would make their proposition more appealing that some of the more traditional sponsorships. The key to this transition is credibility and trust that sponsors are genuinely trying to make a difference and they are willing to change their sponsorship activities to reflect a different attitude.
How can sponsors play a role in social change?
Many brands already play an active role in social change. Often it is the brands who are pushing the sports administrators, marketers and providers to incorporate activities that facilitate social change. In some cases, charitable events have established themselves as their main purpose is to benefit society or raise funds to address an issue, which in turn has attracted more sponsors. The London Marathon is not only a sporting event but one which generates millions for charitable causes as well.
Where is there growth in the development of sponsorship rights from global to local and why?
That’s quite a question! There is growth globally as published figures from research agencies and consultancies confirm that sponsorship is a mature market but in recent years Asia has accounted for more growth than Europe and North America. But North America is still the biggest market by share of sponsorship spend. Predictions from experts suggest the sponsorship market will continue to grow at 5% from 2019 to 2023, although this can be revised at any time subject to geo-political, environmental or business conditions. An example at the moment is the challenge facing the Australian Open tennis championships due to the extensive natural fires affecting the host venue. Whilst this will not reduce sponsorship spend that has already been committed to the 2020 event, it could have an impact in future years if the issue is not resolved. The same applies to the unrest in the Middle East which has resulted in some football clubs withdrawing from planned training camps to the region. In turn, this will affect the level of investments from existing and future sponsors. However, at the pinnacle of sport sponsorship, the ‘trophy assets’ such as the Olympic Games, World Cup and European Championship, Champions League or Wimbledon tend to retain or increase their market value. As long as there is competition between sponsors to secure these top properties, it is likely their ability to command increased fees will remain. The challenge is often for those sports or rightsholders representing tier two or smaller less developed properties that are not in a position to command a higher market value. One area with more activity in recent years is the private investors or venture capitalists who see an opportunity to generate business from a long term sports partnership. Manchester City Football Group or CFG is one example where Silver Lake has acquired a 10% stake for $500 million which is a symbolic amount but reflects a changing of attitude to the growth potential of sports. If there is continued support for women’s sport this could also see increased expenditure but this could also be at the expense of men’s sport.We will continue analyzing the content of the program in two future installments:
· Sponsorship as a fan engagement tool
· New sponsorship scenarios
International Sport Marketing and Sponsorship
The Sponsorship 360: International Sport Marketing and Sponsorship program aims to provide participants with the knowledge to apply sponsorship as a powerful tool in the marketing mix to deliver brand, business and social goals. Define and develop sponsorship activation concepts and strategic plans for sponsors (brands), rights owners, agencies and sporting organisations to increase revenue, satisfaction and loyalty from partners, suppliers, fans and participants.Sign up!