How do you justify sponsorship? A popular question for executives at presentations, dinner parties and indeed anyone involved in a sponsored event. Let us examine the issue.
Sponsorship has a problem as an industry. Ironically, it is one of brand perception. The name itself can bring misconceptions as to what it actually delivers.
This is changing, as can be seen by the spectacular growth of the sector, estimated at 5.1 per cent last year to a total US$48.6 billion (Dh178.5bn) globally.
The "problem" with sponsorship is that it is multidimensional when done properly. Part media buy, part brand showcase, part PR tool, part sales promotion, part staff engagement platform, part corporate social responsibility initiative.
Sponsorship is no longer the one-off whim of a chief executive following a good sales pitch on his favourite pastime.
Evaluation techniques in sponsorship are a constant debate. The industry is obsessed with models that ideally provide a "one suit fits all" approach. For such a flexible business tool, this is a slightly quixotic, straightjacketed ideal.
One of the best of the advertising-based models is Repucom. Its analysis tools allow the likes of Emirates Airline and Etihad Airways to see their media and brand returns from the English Premier League at the touch of a button each week.
Such tools provide useful comparisons - and good negotiation strategies for both brands and rights holders. They can steer a sponsor towards the best rights platform or activation strategy. But ultimately this kind of evaluation can blind a sponsor to the true value of sponsorship.
This is related to sponsorship's other challenge: is it a sub-division of marketing or corporate communications?
In both departments, sponsorship needs to justify its existence. If not, a potential client's spending will go elsewhere, often on "quantifiable" or traditional outlets.
But when done properly, sponsorship should be placed on a par with marketing and corporate communications - and human resources and sales for that matter.
Sponsorship's real master should be the chief executive, or the board. Again, not a popular view in the marketing department, but the biggest sponsorships require the ultimate decision-maker to sign off the strategy and then ensure every other department buys into it.
When sponsorship fails, it is often because of a lack of corporate commitment. Some might say a lack of passion, which means missing the whole point of good sponsorship.
Successful sponsorships are about the right marriage between a company and a sponsorship platform. The strategy behind, and the activities of, the sponsorship needs to have been thoroughly considered for the right reasons.
Those reasons may be as multidimensional as the potential benefits. However, if the bottom line does not work, normally neither does the sponsorship.
This is partly why the best sponsorships usually come from companies where great leadership is combined with great commercial strategies. The good news for sponsorship is twofold.
Firstly, that it is driven by the passion of people - fans and fanatics. These are the same people who drive brands and businesses. The key word is passion.
Second, sponsorship is content and content is king - particularly in our digital age. The internet has changed the rules of sponsorship. It brings both reach and evaluation in one quick fix.
Any serious business today that does not have a sponsorship strategy needs to question why the world's leading businesses and brands use it so successfully. Sponsorship does not necessarily mean spending millions either.
According to IFM Sports Marketing Surveys' 2011 World Sponsorship Monitor, the largest number of sponsorship deals announced last year were between $150,000 and $499,000.
These figures do not include any activation spending, which is acknowledged as having risen significantly.
Some doubters often say that sponsorship only suits some industries. Not true. It is interesting to note the top 10 sponsoring industries from last year. Why is sponsorship important for a car manufacturer or a bank or a utility business? Because it is a mass-market differentiator.
Ultimately, sponsorship is a judgement call. It is primarily an art, with some science.
When done properly, it wins new customers, creates new revenue streams, encourages your customers to do more business with you, makes your employees feel more motivated, helps your community and - here's the key - adds sparkle, a brand gloss if you will.
To illustrate how sponsorship can transform the fortunes of a company, let us imagine a scenario: we start a new business. It is well researched, well-funded and the product is good. This company takes an unconventional approach to its global marketing campaign.
Instead of the traditional 5 per cent of marketing spending going on sponsorship, this company decides that sponsorship will be at the core of its marketing effort.
It will spend closer to half its total marketing budget on sponsorship and in some years more than that. The company not only buys sponsorship opportunities, it also creates events and properties that it will own.
These properties and events are shaped 100 per cent around the brand and its values, and they become assets and revenue streams in their own right.
Within 25 years, this company becomes far and away the world market leader.
Business-school fantasy? Not really; that company is Red Bull.
Jamie Cunningham is the chief executive and founder of Professional Sports Group
