The Basic Fundamentals that are Needed to Understand Sponsorships

5 minute read |

What are Sponsorships?

Sponsorships are a powerful tool to help build the brands of sponsors and create profitable commercial opportunities for sponsorship seekers. When used correctly, sponsorships will generate revenue for the sponsorship seekers’ organization, grow their business, and add value to the experience of their event or activity.

This article will introduce readers to some of the basic fundamentals required to understand sponsorships largely from the lenses of sponsorship-seekers.

As sponsorship-seekers, it’s important to first understand why companies sponsor so that you can effectively meet sponsor needs in a business partnership that is supposed to be mutually beneficial. Therefore, when brands and businesses invest in sponsorship, they expect to receive a return on their investment (ROI). This anticipated return is typically aligned with the brand’s specific business objectives.

One of the most common business objective and reason for a business to sponsor is to support a move or expansion into a new market, which may require consumers within that market to have a top-of-mind awareness of product and/or service offerings. In this case, the business objective is long-term-focused and to build brand equity by increasing awareness, relevancy, and consideration among consumers – There are few effective substitutes to earn this type of attention from passionate consumers than to sponsor their favorite event or activity.

Alternative to the long-term vision strategy, some businesses have short-term goals and are very direct with their sponsorship approach. They’re objectives are not to strengthen their brand image with the sponsorship opportunity but to create direct sales opportunities and increase the number of products or services sold to customers. For such sponsors, common sponsorship activities (aka activations) like offering exclusive promotions, product sampling, license to operate business on-site, etc. are the most effective tools to achieve objectives.

The final big reason that explains why companies sponsor is to drive quality engagement with particular audiences. This can be internally where the company wants to educate and engage their employees to increase motivation. Additionally, they may want to portray a favorable employer image to attract new talent to the organization. External engagement is also a priority for some companies. Their focus here is to leverage the sponsorship to create better relationships with, for example, the local community or local government groups.

How Do Sponsorships Benefit Your Event?

Simply put, a sponsorship is when a sponsor pays a property (aka rights-holder) an agreed fee in exchange for certain rights, access, or benefits. A sponsor can be defined by any entity such as an individual, small business, or a big brand that invests cash into a sponsorship opportunity. The party on the other side of the transaction is the property. They can be defined by an entity that owns the rights to the name, image, or likeness of an event or activity, which is individual or infrastructural in nature.

The benefits of sponsorships for a property vary depending on the type of sponsorship, but they can generally be boiled down into four main types of benefits:

Financial gain
Value in kind
Marketing
Enhanced attendee experience

Financial investment from the sponsor is the most desired benefit by the sponsorship-seeker because it is flexible. It provides funding that can be used by the sponsored party to cover costs associated with their event or used in other ways required for the advancement of the organization.

Value in kind involves receiving materials and products from sponsors, which preferably would help decrease the cost associated to providing those same items from the sponsored party’s budget. For example, an audio-visual company that provides a music festival with sound equipment will eliminate the need for the festival organizers to budget for essential items required to operate the event.

Marketing your event on the sponsor’s media channels usually includes the benefit of added exposure to an extended audience that otherwise would not have known of your organization. This type of marketing is a great opportunity to use a free or cost-effective channel to get your message out to an audience that are likely bring new fans and visitors to your event.

As mentioned above, the most sought-after sponsorship benefit of all may be tied to direct cash investment, however, there is another benefit that is considered to be just as important – Enhanced attendee experience will not only show your visitors that you put their needs first but it increases the perceived value of your event thus creating an opportunity for future growth.

Summary

Sponsorships are generally a simple concept. A brand or business entity invests cash, in kind products & services, and/or marketing resources to a property in return for benefits that help the brand to achieve business objectives. Understanding the basic fundamentals of this concept creates a solid launch pad for sponsorship-seekers to achieve more successful partnerships and sponsorship results that closely align with sponsor objectives.

Lastly, these objectives are as varied as the type of businesses out in the marketplace, nevertheless, they’ll likely fall into one of three categories. These include brand strengthening, commercial success, and internal & external engagement. If sponsorship seekers can add value into these buckets, their sponsorship program will be set-up for success.