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In the previous few articles, we have already studied the pros and cons of sponsorship. However, we have come to the conclusion that the pros of sponsorship far outweigh the cons. This is the reason that corporate entities across the world are spending large sums of money in order to be associated with large sporting events as a sponsor.
It is important to note that not every sporting event is a good sponsoring opportunity for every corporation. There are several factors that impact the suitability of a sponsorship opportunity for a corporate entity.
In this article, we will have a closer look at some of the factors which corporates consider when they decide whether or not they can sponsor an event.
For example, the sponsorship of the FIFA World Cup for soccer might run into several hundred million or even billions of dollars.
Corporate entities need to make sure that they have the scale of business to justify such an extravagant expense towards sponsorships. There have been some startup companies that have tried to sponsor large events in order to raise their brand awareness.
For example, Byju is an EdTech-related application in India run by a startup company that has been paying huge sums of money for sponsoring the Indian cricket team. However, over a period of time, the company has run into financial troubles. While the troubles cannot be directly attributed to the sponsorship decision, it would not be wrong to say that the sponsorship deal did have a significant contribution towards this downfall.
Sporting leagues generally have detailed and verified reports about the demographics of the audience that they have been able to reach in the past. These reports also try to map the demographics by the level of engagement with the viewers. This means that the demographics of fans and enthusiasts are mentioned separately as compared to the demographics of casual viewers.
It is important for the demographics of the sporting league viewers to overlap with the demographics of the target market of the corporate entity. If the overlap is not large, a big part of the sponsorship money is being thrown away by advertising to an irrelevant audience.
For instance, soccer leagues have large viewership across Europe and sparse viewership across other continents. Hence, the company sponsoring such a league should have significant business interests in Europe.
It would be unusual for an American corporation with a small part of their business in Europe to sponsor such an event unless they are trying to use this event as a way to generate publicity before the launch.
For instance, companies like Adidas and Nike sell sporting equipment for a wide variety of sports. It is for this reason that it generally makes sense for these companies to sponsor sporting events in some capacity or the other. However, it is not uncommon to see corporates engaged in unrelated activities such as real estate or banking agree to sponsor large sporting events since it allows them to be projected to the community in a positive light.
Any corporate entity is likely to sponsor a sporting event if they have the potential to build a dedicated advertisement campaign around the same.
Generally, sporting entities have a clean image. However, if the sporting league has been associated with some kind of scandal or negative event in the recent past, then many corporate entities may not want to be associated with such a company. This is because of the fact that the negative image may rub on the sponsor and may lead to a negative impact on their brand.
However, if the length of the sponsorship contract is too long, it could expose both parties to risks that arise from the loss of reputation which either party may face.
Generally, sponsorship agreements are done for the medium term i.e. for a period of three to five years. This allows both the sponsors as well as the sporting league to fulfill their objectives in a mutually beneficial manner.
If there are too many other brands that are also trying to do the same, then there is a chance that the association may not be clearly formed in the mind of the consumer. The corporate entity is more likely to invest in sponsorship if the league offers some degree of exclusivity by taking money from a few sponsors.
The bottom line is that the sponsorship decision is a complex decision that depends upon several factors. However, it is important to realize that this decision is generally taken almost unilaterally by the sponsor i.e. the corporate entity.
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