Corporate Sponsorship Law and Legal Definition
Corporate sponsorship is a form of advertising in which companies pay to be associated with certain events. When the sponsorship of a nonprofit or charitable event is involved, the sponsorship activity is often referred to as event marketing or cause marketing. Corporate sponsorship has been growing rapidly in recent years, faster, in fact, than the growth in overall corporate advertising in the late 1990s. According to Trevor Hartland, writing in the International Journal of Sports Marketing & Sponsorship, "global sponsorship reached an all-time high of $26.2 billion in 2003."
Most of the sponsors of large events are, of course, large companies. However, part of the increase in corporate sponsorship worldwide is attributable to the number of small- and medium-sized firms that are becoming involved. Not long ago, only large entities could afford to sponsor large events as a way of building goodwill and boosting revenue. But in today's business environment, small companies have embraced sponsorship of everything from local softball and volleyball teams to festivals, fairs, and park cleanups as an effective means of increasing their visibility in their home community. Many of these kinds of sponsorships enable small companies to increase their public profile in a relatively cost-effective manner.
A company can benefit in many ways from sponsorship. Nation's Business contributor Harvey Meyer touts a wide range of potential benefits: "[Sponsorships] can enhance a company's image and visibility; differentiate the company from competitors; help develop closer relationships with current and prospective customers; showcase products and services; unload obsolete inventory; and allow the company to compete more effectively against bigger firms that have much larger advertising budgets. In addition, tickets to sponsored events can be used as incentives for employees, vendors, and customers and to promote worker loyalty. And proponents say that if sponsorships are well-conceived and strategic, they can boost sales—both long-term and short-term—as they improve the community through the events they support."
In an article that discusses recent trends in corporate sponsorship entitled "Why Sponsors Sponsor," author Jim Karrh lists the four criteria that not-for-profit fundraisers expect to be used by most companies in assessing the request to become involved as a sponsor. The four criteria are as follows:
- Relevance—the cause must be relevant to the company's products or service.
- Branding Fit—there must be a good fit with the overall company brand.
- Mission Alignment—the partnership must align with a company's mission.
- Business Result—the company must believe it can achieve some measurable business result through the partnership.
In addition to the advertising and promotional aspects of corporate sponsorship, it also provides benefits in the realm of community relations. A comprehensive, ongoing community relations program—including event sponsorship—can help virtually any organization achieve visibility as a good community citizen. Organizations are recognized as good community citizens when they support programs that improve the quality of life in their community, including crime prevention, employment, environmental programs, clean-up and beautification, recycling, and restoration. Some other examples of ongoing programs might include scholarship programs, urban renewal projects, performing arts programs, social and educational programs, children's activities, community organizations, and construction projects. These kinds of sponsorships—also sometimes referred to as "causerelated marketing"—may also be linked to national or even international social causes. For example, a kayak manufacturer who donates a percentage of its boat sales directly to a national river conservation organization not only supports a worthwhile cause, but also creates an effective marketing tool for itself.
Good community relations programs give employees a reason to be proud of the company, which increases loyalty and may help to reduce labor and production costs. Furthermore, a company with happy employees and a good reputation in the community is likely to attract highly qualified new employees. A small company may also generate new business through the contacts and leads it generates in its community relations activities. Such contacts might also make it easier for the company to obtain financing for expansion, find promising new locations, or gain favorable treatment in terms of taxes, ordinances, or utilities. Good community relations can also be beneficial in times of crisis, such as a fire or a plant closing, by rallying the community around the affected business.
Event sponsorship, in particular, is an attractive option because it provides a business with access to various audiences, including employees, business decision makers, and government regulators as well as consumers. It can be an especially good marketing tool for companies that participate in international trade, because sponsorship transcends language and cultural barriers. Many marketers feel that corporate sponsorship is superior to other methods because it allows for an immediate customer response to new product offerings. Events provide business managers with an opportunity to come face-to-face with their customers. They also provide customers with an opportunity to try a company's products out firsthand. By comparison, marketing research tools like focus groups can be expensive and may not target the right people, while market questionnaires or surveys generally do not give potential customers a chance to try the product.
Corporate sponsorship also provides marketers with a unique opportunity to position their products in the marketplace. With corporate sponsorship—unlike conventional marketing techniques—the company, the product, and the event or cause being sponsored tend to become linked in consumers' minds. By sponsoring an event or funding the broadcast of an event, a sponsor is able to gain visibility while simultaneously creating an association to itself with the event's values. The event generates the audience while projecting values associated with the activities of the event. Each sponsorship vehicle has certain associated images in the consumer's mind that transfer to the sponsor.
Given this tendency for consumers to associate sponsors with events, it is important for sponsoring companies to choose events that fit well with the image of their products. Indeed, small businesses should not associate themselves with any cause or event without first undertaking a serious examination of the potential drawbacks of a sponsorship opportunity. For example, effective sponsorships often require active participation on the part of companies and segments of their workforces. In addition, some companies shy away from sponsorship because of fears that they will be exposed to litigation or bothered by organizers of other events. Finally, affiliation with a community event that is poorly organized or violates local standards of good taste can be quite costly to a small business. With this in mind, small business owners should always undertake a background check on events or organizations they are considering sponsoring. Talking with current and past sponsors is one good way to learn more about the event from someone other than its promoters. It is worth noting that the growing popularity of corporate sponsorship has spurred many market research firms to aid businesses in the selection, implementation, and evaluation of sponsorship opportunities. But these services may be prohibitively expensive for smaller companies.
Even when there is a good fit between sponsor and event, it is still vital for a company to promote the event and its involvement in order to gain benefits. After all, sponsorship is a form of advertising, even when it is of a nonprofit venture or charitable event. Possible ways to promote events sponsorship include billboards, print and broadcast advertisements, and direct mail. Sponsoring companies may also find it helpful to issue press releases about the event to the media, as well as to contribute articles and editorials to publications that reach the target audience. Marketers of consumer products may also engage in joint promotions with retailers, such as coupons and tie-ins.
The fees involved in event marketing can range from a few hundred dollars to hundreds of thousands of dollars, depending on the scale of the event and the level of the sponsor's involvement. In addition to the cost of staging the event itself, there are also associated advertising, publicity, and administrative costs to consider. Many small businesses choose to begin as a co-sponsor of an existing event, which allows them to take advantage of the other sponsors' experience. It may also be possible for a small business to underwrite a new event and share advertising costs with a co-sponsor. Some businesses find it difficult to justify the expense of corporate sponsorship because it can be difficult to gauge the results in monetary terms. But it is often possible to conduct before-and-after interviews with attendees of the event, or to give away coupons and then track redemption rates. Some businesses also attempt to gauge the success of an event by providing a toll-free telephone number for attendees to call for more information about their products or services.
The benefits provided by corporate sponsorship can be decreased significantly by competitive tactics known as "ambush marketing," which occurs when competitors take steps to deflect an event audience's attention away from the sponsor and toward themselves. Ambush marketing tactics include sponsoring the media coverage of an event rather than the event itself, sponsoring a subcategory of an event, sponsoring individual athletes or teams involved in an event, or planning advertising to coincide with the event. Although the practice is considered unethical by paid sponsors and event owners, others consider it a normal part of competitive advertising.
There are several preemptive measures corporate sponsors can take to reduce the chances of being hit with ambush marketing. Sponsor companies should try to anticipate competitive promotions and establish those specific rights with the event owner, identify related avenues for promotion and block them, and seek legal remedies when their sponsorship rights are infringed upon. But perhaps the most effective way for sponsor companies to reduce the effectiveness of ambush marketing tactics is to promote their involvement effectively.
SEE ALSO Charitable Giving
Fry, Andy. "Sponsors Play to Win." Marketing. 7 August 1997.
Hartland, Trevor, and Heather Skinner. "What Is Being Done to Deter Ambush Marketing? Are These Attempts Working?" International Journal of Sports Marketing & Sponsorship. July 2005.
Karrh, Jim. "Why Sponsors Sponsor." Arkansas Business. 12 December 2005.
Kasrel, Deni. "Corporate Sponsorship Grows." Philadelphia Business Journal. 2 May 1997.
Meyer, Harvey. "And Now, Some Words About Sponsors." Nation's Business. March 1999.
Moore, Paula. "Companies Unearth a Gold Mine of Goodwill: Using Generosity as a Marketing Strategy." Denver Business Journal. 22 August 1997.
Hillstrom, Northern Lights
updated by Magee, ECDI