What is Negative Working Capital ?
Traditional financial analysts would consider a negative working capital i.e. having more current liabilities than current assets, a sign of imminent danger. This view was deep rooted in the belief that a company must always have sufficient cash on hands to meet its short term liabilities failing which the credit will dry up and the […]
Preferred Shares: An Introduction
Whenever the topic of fixed income securities is considered, the obvious assumption many investors make is that the conversation is about bonds. It is true that bonds are the most commonly traded types of fixed-income securities. However, they are not the only type of fixed-income securities. Preferred shares are another common type of fixed income […]
Why do Retail Restructurings Fail?
The retail sector has been under significant financial distress in the recent past. An alarmingly large number of retail companies are facing bankruptcy proceedings in courts across the world. However, it needs to be understood that bankruptcy proceedings and liquidations are not a preferred solution for creditors either. Before creditors initiate bankruptcy, they generally try […]
Bretton Woods Agreement and Smithsonian Agreement
The transition of the world monetary system from gold standard to the modern Forex markets was anything but smooth. Governments from all over the world collaborated to make two pacts which would form the basis of the modern monetary system. However, both the arrangements failed. In this article, we will have a closer look at […]
Problems With Using Internal Rate of Return (IRR) for Investment Decision Making
In the past article we discussed about the concept of internal rate of return. We discussed how it could be used to make proficient investment decisions. In this article we will see the drawbacks and pitfalls of the Internal Rate of Return (IRR) number. We will see how these problems make it a number that […]
In the previous few articles, we have already seen that sports sponsorships have been witnessing a significant rise in the recent past.
We know that corporations have been shelling out billions of dollars in order to be able to sponsor prestigious sports occasions. This sharp rise in budgets is because corporations now view the sponsorship deal as being transactional in nature. This means that they also derive monetary or non-monetary benefits from these deals. This is in sharp contrast to the earlier viewpoint wherein sponsorship was considered to be a largely philanthropic endeavour.
However, now the question arises about why these corporations are interested in handing over big sums of money in exchange for sponsorship rights to these sports leagues. The answer is that not all corporate organizations sponsor sports events for the same reason. Corporations have different objectives. It is possible for an organization to have more than one objective while sponsoring events.
There are four objectives which organizations generally have when they decide to sponsor sporting events. In this article, we will have a closer look at these four corporate objectives and how they impact the sporting league as well as the organization.
The corporate organization may want to increase awareness of a new product that they are planning to launch. Alternatively, they could also be trying to increase the awareness of their brand as a whole or even publicize the entire company. There have been instances where film studios have sponsored international soccer clubs in order to be able to promote the different movies that they produce.
Sporting events are a good platform for brands to increase their brand recognition when they enter a new market. Since the sports league is well known and widely watched, the brand also ends up becoming a household name. This is the reason why many companies across the world decide to sponsor well known sporting events in their target market in order to gain the required level of awareness.
Companies which have an image objective behind sponsoring events are generally struggling from a negative public image. This means that the company may have received some kind of negative publicity in the recent past. It is for this reason that these companies want to associate themselves with the positive emotions and good image associated with the sports league.
If the company doesn’t already have a negative image, then they may be trying to reposition their brand in the eyes of their target audience. It is possible that they may want to associate their brand with youth, energy, competitiveness or speed. Since these attributes are associated with sporting events, sponsoring such events seems to be a reasonable idea.
There are some companies who believe that the publicity blitz received during the event will lead to a short-term rise in sales. Such companies usually also come up with special discounts and offers that coincide with that period.
For instance, such companies may provide scratch cards with the products being sold. Users can scratch these cards and win a chance to travel to witness the main event. Alternatively, they could also be provided a chance to have dinner with their favourite celebrity. Since a large number of people are interested in these things, they tend to buy more of the product and as a result the sales also go up significantly. However, given the fact that the cost of sponsoring these events can be very high, the financial objectives may be difficult to meet.
The return on investment tends to be quite low if the company follows only the financial objective. This is why financial objectives are seldom followed individually. Instead, they are followed in combination with some other objectives.
In some cases, companies sponsor events because their founders may have been associated with the sport in some way and they want to keep this association fresh in the minds of the customers.
In some other cases, companies provide sponsorship to events so that they are able to avail of certain VIP seats. These VIP seats are then given to clients, vendors or even employees as a reward for their good performance. Hence, it is possible for companies to use sponsorship as a motivational tool.
In summary, it can be said that sports sponsorship is a very versatile medium of marketing. It can be used by companies across the world to meet a wide variety of financial and non-financial objectives.
Your email address will not be published. Required fields are marked *
