Marketing’s Potent Weapon

Sponsorship is often the unsung hero of the marketing universe but with brands trying to make the most out of their budgets, it is becoming an increasingly popular and important part of the overall marketing mix. John McGee talks to John Trainor of Onside Sponsorship  about Ireland's E124m sponsorship market.

Sponsorship is big business. Globally, the context, the €124m spend on sponsorship compares propositions are always emerging while brands market is estimated to be worth in the region of $53.3 billion this year while in Europe it will be worth in the region of $14.5 billion, give or take a few million here and there!

For many of the top global brands, sponsorship forms an integral part of their marketing communications strategies and can account for anything between 5% and 25% of total marketing budgets according to some estimates. For some companies it can be as high as 40%.

Here in Ireland, the sponsorship market has always been a hive of activity and while the market is small compared to other European markets, this year it is likely to be worth in the region of €124m according to leading sponsorship expert John Trainor, founder and managing director of Onside Sponsorship.

This is a figure that looks set to increase significantly over the coming years as brands look to tweak their marketing mix and how they allocate their precious budgets. Putting this in with the estimated €170m that will likely be spent on print advertising this year, the €170m that will be spent on online advertising and the €98.5m that will be spent on radio advertising.

"The analogy that is often used is that advertising is a speedboat and sponsorship is a barge. Advertising will take you across the top fairly fast but sponsorship is a longer term and deeper impact, says Onside Sponsorship's John Trainor.

"Is it better value than advertising? It can be, when done well, as it can invoke more of an emotional response from people and certainly something we find from our own research. Consumers actually like sponsorship."

Research carried out by Onside shows that 70% of adults agree that in today's economy it is more important than ever for companies and their brands to invest in sponsorship and this compares with just 43% back in 2009.

According to Trainor, the Irish sponsorship market is relatively mature but new innovative ideas and have become a lot more careful when it comes to spending their budgets.

"The market has been through a difficult three years of decline. The mad double digit growth in the early part of the 2000s has definitely slowed down. It hasn't stopped and there are sponsorship deals being done all the time but the decision making process has become a lot slower. Brands are being a lot more considered and rightly so. They are not being rushed into doing deals and they are definitely looking for value. Some deals we have been involved with over the past two years have taken up to twelve months to get across the line from initial sponsorship needs definition to final agreement, whereas in the past they might have taken two months. Now some brands go through a whole range of stages like business planning, carrying out their own research as well as consulting more stakeholders internally. As I've said, in the past the marketing director may have signed of and that was it. Now everyone in the building is being consulted," he says.

Another development in the marketplace in recent years is how valuations have changed and the old days of simply writing the cheque are long gone. "There are lots of different processes and inputs involved to decide whether a sponsorship is worthwhile and how much its worth. Again this is important because if a brand is putting a certain amount of money aside, it needs to be able to work out what's in it for them and how they can prove its worth to the business. In the past the media value equivalent might have been used as the main way of valuing a sponsorship deal now, however, it is a lot more sophisticated and the big brands have it down to a fine art," says Trainor.

"Where sponsorship is increasingly demonstrating its strengths is its ability to generate commercial returns and being able to link sponsorship to revenue and ultimately the bottom line. There are now sophisticated models which can demonstrate this and companies are using them all the time to evaluate their sponsorship deals. The majority of the big Irish sponsors that we are working with can clearly demonstrate the benefits of their respective sponsorships not just in terms of the brand but also to the bottom line. I think that's the reason why sponsorship is winning greater credibility around the boardroom tables of top businesses today" he adds.

"The business case for sponsorship is clear and the arguments in its favour have become a lot stronger in recent years and that can only be good for the industry."

So what are the key sponsorship trends at the moment? Arguably one of the biggest trends is that sponsorship is finally moving out of its historical?silo and is becoming part of the strategic planning process for brands. Now it is more likely to be?talked of in the context of integrated marketing programmes that can take advantage of the reach of traditional advertising as well as the emotional and experiential benefits earned through partnerships with entertainment, sports, municipal, cultural and media entities. Indeed many brands now prefer to call themselves partners rather than sponsors.

"We are also seeing a blurring of the lines between CSR and sponsorship and brands are increasingly trying to define what the link actually is. Being associated with good causes is good for brands but partnering with them is even better," says Trainor who cites SuperValu's sponsorship of the annual Tidy Towns Competition as a perfect example of this.

"Another good example is the Dublin bike scheme which is a collaboration between JC Decaux and Dublin City Council. The scheme has been so successful that it will be rolled out to other cities in Ireland. It is also a very innovative partnership with both partners benefitting while the public now have access to bikes all around the city," says Trainor.

Indeed community-related partnerships/initiatives are big in demand and sit in the top three list of propositions that have the most growth potential according to the 2013 edition of Onside's survey of Ireland's Sponsors and Rights holders. Not surprisingly rugby and GAA are the top two.

Onside Sponsorship's "Deals Tracker", which tracks reported deals, has found a significant increase in the number of deals reported year-on-year. In fact the number of deals has increased by 21% in the first half of 2013 compared to the same period last year.

"This is a reflection of a combination of more activity in the market, a greater willingness by sponsors to broadcast the deals they are making, and an increased interest from media in sponsorship related stories," Trainor says.

According to the Onside Deals Tracker one of the more active sectors this year has been the motor- trade. While the industry battened down the hatches as car sales went off a cliff over the past number of years, there are signs that the worst may be over and some brands are now attempting to regain market share that may have been ceded to other motor brands during the downturn.

"We've also noticed that food and drink brands have also been more active, along with financial services brands," notes Trainor who also points out that sports-related sponsorships made up just over half of all deals reported to date in 2013, with the GAA in particular "having a good first half." According to Trainor, the sustained endurance of sponsorship in tough economic times even saw the Government reaching out to sponsors for its recent Presidency of the EU earlier this year. Companies like eircom, Audi, UPC, Agtel, Adobe and the ESB provided goods and services to the tune of €1.4m during Ireland's tenure.

"Another interesting development is a greater interest in women's' sports with brands such?as Hunky Dory's extending their sponsorship of Tyrone GAA to include the women's senior and minor football and camogie teams. In addition Costcutter too came on as sponsor of Cork camogie for a three-year period while Liberty Insurance's new deal with the GAA was ground breaking in that it unified the GAA family across both hurling and camogie sponsorship," says Trainor.

So who are Ireland's top sponsors in 2012 and the first half of 2013? Not surprisingly the list reads like a who's who of corporate Ireland. Based on a combination of factors including investment levels and consumer appeal indicators Onside' own analytics point to major sponsors like Guinness, Heineken, O2, Vodafone and SuperValu as top -sponsors that have committed to significant investment to a wide range of sporting, cultural, community and entertainment related activities and they are seeing significant consumer returns. They are joined at the top of the game by the likes of eircom, Aviva, 3 Mobile, Carlsberg and AIB. Other sponsorship leaders that represent?the stand-out investors in the tool over the past year include financial institutions Bank of Ireland, Ulster Bank, and RaboDirect, and energy providers Bord Gais Energy and Electric Ireland. The list also includes Etihad, Allianz, Liberty Insurance and Centra, according to Trainor.

"These companies are getting better every year at knowing the value of sponsorship to their brands and their bottom line and they have been to the fore in supporting a wide range?of properties in the past and with perhaps the exception of the alcohol companies, who are facing a possible ban on sports sponsorship sometime in the future, I don't see this list changing all that much in the medium term at least," says Trainor.

The elephant in the room of course is the proposed Government ban on sports sponsorship by drinks companies which, if it goes through, is likely to come into effect in 2020. Including rights and activation, drinks companies spend in the region of €30m a year on sponsorship, around 75% of which is ploughed into sport. Any move to axe this crucial investment will be a deadly blow to sporting organizations around the country.

"The removal of an entire sector from sponsorship would make it increasingly difficult?for national rights holders down to grassroots clubs and events to obtain sponsorship and sustain overall rights valuations at current levels. Innovative and collaborative sponsorship strategies between sports and alcohol brands could be part of a solution to alcohol misuse in Ireland rather than the cause," says Trainor.