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What keeps you awake at night? (Part III)

How to optimize sponsorship investments
Written by: Mick Hedberg
Date: June 26, 2023

We’re back to help you get a good night’s sleep and bring solutions to your business problems. In part one and two of this series, we’ve looked at how to win over new customers and help improve short- and long-term planning processes. This time we’ll delve into the complex world of sponsorship and explore the challenges faced by brands when it comes to optimizing their investments.

Sponsorships are a key part of many marketing strategies – the global sports sponsorship market, for example, is projected to reach $90 billion by 2023. These investments are popular because they can help brands connect with consumers on an emotional level, while they engage with their favorite activities. However, it can also be expensive, and the impact can be difficult to measure.

If sponsorship investment is keeping you up at night, here are some tips on how to optimize it:

Know what you need

When signing a sponsorship deal, you need to make crucial decisions, such as how much to invest, what to sponsor, whether to renew a contract, and how to evaluate the return on investment. All without really knowing what kind of impact you are going to achieve, or you have received in the past.

The sharper understanding you have of your objectives, and what truly brings value to your organization, the better you can screen out opportunities that aren’t for you. As a result, you can then negotiate more favorable contracts by focusing on the rights that specifically help you achieve those objectives.

Our framework for assessing potential sponsorships starts from this question: what is your business objective? Our models help you weight and filter different opportunities to narrow down the numerous options and prioritize the best fit. By assessing the effectiveness of various sponsorships and offering tangible insights on what works and what doesn’t, we can help you measure the impact of different opportunities. This is extremely important in an environment where you often do not have the exact data and structure that you need.

Sponsorships aren’t a standalone tactic, so you need to ensure that there is a cohesive fit between the sponsorship and the other marketing communications that your brand runs throughout the year.

Understand consumer passions

Once you’ve developed a clear understanding of your business objective, you may find that it isn’t enough to simply sign the sponsorship that reaches the most people. The next step is to have a clear definition of your target customer.

The goal is to meet your consumers in an authentic and (ideally) value-added way. So, it’s important to define your target to understand where your brand should play when it comes to sponsorships. Understanding the passion points of your audience is key to identify where to focus your investment. However, the connection to these “points” can vary among individuals. So, it’s important to understand the different nuances to reach and engage your target effectively. Even consumers who share common interests (for example, music), may connect to them in very different ways. Understanding the demographic and psychographic dimensions that define your audience provides the foundation for the analysis of those consumers’ behaviors, attitudes, and interests.

Those details can be lost if you don’t start from a clear picture of who you are targeting. It is easy to fall into the trap of selecting the opportunity that has the greatest reach. But as proven in other areas of marketing, reaching a lot of consumers can be great but doesn’t guarantee a strong return on investment.

Understand who you are

Different events communicate different values, attract different crowds, and have different “personalities”. Let’s take the Olympics as an example. The Olympics carry attributes such as diversity, equality, and fairness, so it’s great to associate with them if these aspects are at the core of your brand ethos, and you want to make these messages resonate with consumers.

A brand that’s doing it right, and is making their personality shine through sponsorships, is Red Bull. As an energy drink, being all about taking the risk and feeling the adrenaline, their strategy focuses on extreme sports competitions and events. The synergy between Red Bull and extreme sports is an incredibly effective way to create a lasting impression in consumers’ minds, while communicating what the brand is all about. It has the added benefit of creating experiences that truly feel unique and ownable, which should be the aspiration for any brand.

So, slapping your brand on a stadium signage alone will not achieve that. Unfortunately, what’s most effective is not easy to do. If you really want to optimize and achieve ROI, you need to be selective, strategic, and when you invest, do so with the intent to build something authentic and ownable.

Once you’ve made the right choice, activate accordingly

It is surprisingly common for businesses to sign sponsorship deals and then scrimp when it comes to the investment of bringing it to life. Almost 70% of sponsorship decision-makers report that they end up spending half or less on ‘activating’ the sponsorships as they do on the rights themselves[1].

This is the equivalent of buying a new car and then deciding you can’t afford gas. You should be very disciplined and tactical in deciding which investments to make. However, once you’ve made them, you should follow through to realize the potential you saw in an opportunity in the first place. Don’t leave the car in the garage!

Build a system for continued learning

This area is frequently overlooked. Almost a third of sponsor brands do not invest in measuring the return on the investment, and almost 80% invest 1% or less of the total sponsorship budget in measurement[2].

Although it may seem like an added cost, it is an investment in improving the ROI of your sponsorship investments. Effective measurement creates the foundation for organizational learning and improvement, providing the foundation for decisions about cutting, or expanding.

One of our passions is helping companies to build a cohesive system around their sponsorship investments. We help to instil rigor and discipline into a process that is too often lacking in data. Companies should build a “virtuous cycle”, whereby they enter sponsorships with clear objectives and expectations, then make the proper investments to realize those expectations and measure their outcomes; to enter the next campaign with even better clarity. Everyone knows that you need to bring your car in for check-ups every so often, and failing to do so will cost you in the long run.

Remember that when it comes to sponsorships there’s no one size fits all. Each brand has their own unique business model and objectives, which need to be considered when deciding on which sponsorship to sign. By identifying your goals, target, and values, you can make informed decisions to confidently get the best out of the world of sponsorship, maximize your return on investment, and create meaningful connections with your target audience. All of which can last a lifetime.

[1] IEG HOW BRANDS & PROPERTIES CAN REALIZE SPONSORSHIP’S FULL POTENTIAL

[2] IEG WHAT SPONSORS WANT & WHERE DOLLARS WILL GO IN 2018