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Investigating Sports Sponsorship and Merchandising

Sponsorship Marketing

The use of Sport in your marketing program (through sponsorship and merchandising) is one of the communication vehicles available, which, if used appropriately and consistently, will aid a long-term relationship with your consumer.

Sport cuts through the barriers of generations, cultures, race, and gender and income levels - we all remember the emotion of a nation urging its team to win in the Rugby World Cup of '95 and more recently the trials and tribulations at the Soccer World Cup held in France. Emotion and power exist in all sports at all levels - the differences are the size of the audience and the perceived importance of the event in the eyes of the audience.

There is significant evidence that sport has a large following of participants and fans. According to extensive research commissioned by Eskom (SA Focus, Consumers in South Africa 1998), more than 60% of adults (16 +) are interested in sport (this includes participants and active supporters.) Sport has a more active following with younger people than with older people and it has a male bias. In the 'Tween' category (12 - 15 year olds) almost two thirds are interested in sport.

With regard to media, Sport has had an established position for many years - dedicated columns and pages in newspapers, television and radio coverage and more recently a number of specialist publications. Sport has all the elements to make it exciting and bring viewers back (and new viewers in), for example competition, action, debate, heroes, personalities, ups, downs, etc

Sports sponsorship and merchandising:
Sponsorship and Merchandising are effective means to actively get your company face to face with the consumer. Sponsorships will align your company with the event itself, for example "The Vodacom Tour". Merchandising will take a co-branded product or service (your company logo or product band and the team logo) and present it to the consumer in a retail environment.

For example, Standard Bank Cricket Series replica wear sold through clothing retailers. It is important to note that sponsoring a team or retailing the merchandising lines are merely parts of your total advertising message. You still need to communicate via television, radio, press, public relations etc. so that your target audience is aware of your sponsorship program and understands why you are involved in it and how it benefits him and his community. The use of Sport in your communications strategy will aid simplicity and consistency in your messages (as they are now linked with a common, easily identifiable thread) and ultimately build consumer loyalty.

Research, supplied courtesy of BMI Sport Info, provides the following indicators of the size and potential growth of the market:

Direct sponsorship spend is R642 million. A further R530 million is spent on promotional campaigns around these sponsorships. (The international norm is $2 promotional spend for every $1 spent on sponsorship. The return on investment seems to vary from 4:1 to 8:1.)

The sponsorship market has been growing at a rate of 22% per annum since 1986. More than 1,000 companies are currently involved in sponsorship agreements. (The number makes it look like everyone's on board but the reality is that 30 companies have negotiated 50% of the sponsorship market. Most companies do not have a clear strategy, nor do they have the correct resources in place to implement a sponsorship strategy effectively.)

Sponsorship agreements are in place across almost 90 sports categories. (However, 15 sports dominate, accounting for more than 70% of the total sponsorships signed.)

Internationally the sports sponsorship market stands at US $ 9.1 Billion. (The total turnover of Sports Merchandise in the USA is $ 14 Billion per annum.)

Sponsorships and Merchandising agreements are normally negotiated separately and encompass different elements. Sponsorship agreements cover issues such as branding on the team's kit and training wear, as well as, in the stadium's home ground, use of the team logo (and players if required) in advertising and public relations, stadium tickets and VIP passes. Merchandising agreements are entered into where companies wish to use the loyalty base of the club to sell licensed merchandise to the public. This would include replica team wear, collector's mugs, stationary lines, videos, software, publishing etc. (Manufacturers produce these items under license and pay a royalty fee for the use of the intellectual property and trademarks.) These programs effectively connect the consumer with the team. It is therefore critical that all merchandise programs are carried out under the strict control of the club or its Licensing Agent.

Both sport sponsorships and merchandising agreements are medium to long-term projects, which require a planning window of between three to five years. The closer you get to the consumer the greater your exposure, which are both a benefit and a risk, so your planning, execution and feedback must be precise and timeous.

Case studies:
The following guidelines can be seen in the case studies:

Generate sufficient income for the sport so that it can have the financial resource to grow and develop. Your communication and identity is aligned to that team and that sport - make sure that it can't wither and die!

Involvement. Commit internal or contract external resources to facilitate the agreements, implementation and feedback processes. In some instances (for example technology companies) the company's product is actually used by the teams or at the event (there can be no better acid test!). Involvement at the community level has rewards for both the sport and the sponsors in the long term. This is a physical hands-on process as opposed to the more 'esoteric and academic' traditional advertising methods.

  • PC WEEK (July 6, 1998) estimates that Hewlett Packard spent close to US $ 50 Million on sponsorship, promotions and a technical infrastructure for Soccer World Cup held in France this year. It is believed that HP brought 5,000 customers to the event. Why?

  • In 1997, Norwich Life's communications mix consisted of 59% sponsorship investment and the balance for above-the-line, PR and other communication spend. Their rationale behind this was high media inflation coupled with declining readership bases. They wished to take their message directly to their target market by sponsoring Western Province rugby. A social responsibility program that was of benefit to the community extended their commitment. For example: the grass used at the V&A Waterfront mini touch rugby tournament was donated to Xolani School in Guguletu together with an irrigation system.

  • Have they seen positive results from this sponsorship?

  • The Standard Bank Cricket Series has run for the last three years. ROI is quoted as being in multiples of the cost of sponsorship. Standard Bank decided to acquire the Merchandising Rights as an extension to their Sponsorship. Products include replica sports and fashion wear, ties, games, collectable cards and figurines. Royalties made from the merchandising are paid into a trust for cricket development in South Africa.

  • The PGA Tour is a non-profit organisation whose merchandise royalty and event earnings are reinvested into the game in the areas where the money was earned. The logo is the symbol of prestige and accomplishment and has been used in unique ways in retail environments.

In summary, using sport in your communication mix is effective in that can get closer to your consumer than traditional forms of advertising. However, it requires a long-term plan, hands-on management, financial resources and an effective feedback and control mechanism.

Extracts from an article by Greg Jones, General Manager, Americom (Pty) Ltd, published in 1998 volume of the Brands & Branding Encyclopaedia of SA. The complete article contains assessments of the effectiveness of the four case study sponsorships and other detail.

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