Sponsorship is a machine that seems to just keep on growing. According to IEG, sponsorship spending grew at a rate of about 4-5% every year between 2014 and 2018. PwC is just as bullish, citing that it expects sponsor income to eclipse gate revenues in North America by the late 2020s.
With all of this growth, though, it is still unclear how the marketing discipline affects companies bottom lines.
Last year, a study by MKTG showed that “only 19 percent of sponsorship professionals say they can measure return on investment.”
What’s going on here? It seems to me that there's a fundamental disconnect between how companies perceive the effectiveness of sponsorship, and how consumers actually respond to sponsorship.
In my view, most companies are spending on sponsorship because they feel like it is the best way to “get in front of their audience.” But the way that consumers interact with brands is changing. Sure, consumers are getting exposed to companies through sponsorship, but does that actually mean that they give a shit about those companies?
More and more, consumers are demanding that brands take a stand on social, political and environmental issues. This has implications on how businesses approach their marketing strategies, and in a high-stakes arena like sports and entertainment sponsorship, sponsors should heed this new wave of conscious consumerism.
People hate “ads”
Some of the most successful companies in today’s consumer marketplace are products in which customers pay a premium for ad-free content.
Netflix launched in 1997 as a direct-to-consumer DVD-mailing business, but has evolved into one of the biggest success stories of the past decade with a market capitalization of over $130 billion. Millions of their customers pay between $8.99 - $13.99 per month to access the company’s massive library of streamable entertainment content, without commercials.
Spotify offers both an ad-supported and a premium ad-free music streaming service. As of April 2019, more than 100 million people worldwide paid Spotify $10 per month for Spotify Premium to avoid ads on their platform.
HBO, Disney Plus, and Amazon Prime Video are all products that consumers access ad-free.
What this suggests to me is that consumers are so tired of advertisements, that they are actively looking to eliminate their exposure to ads in their daily lives.
Of course, we can’t cut out all ad exposure in our lives, as we still become inundated in our social media feeds, email inboxes, and in public transit, as companies desperately try to get our attention.
Even if they get in front of consumers, research shows old-fashioned ads are widely disliked and distrusted.
“Nearly 80 percent of consumers don’t trust corporate advertising in any form, and the percentage is even higher for younger customers,” cites Mark Schaefer in Marketing Rebellion.
Marketers run the risk of completely wasting their companies’ resources if they continue to spend on the wrong things. There has to be a better way to break through and connect with the consumer today.
Purpose is becoming a must have for businesses
Over the summer, CEOs from several of the largest companies in the United States who make up The Business Roundtable, released a new statement on “The Purpose of the Corporation.”
This new statement indicated that business leaders are coming around to the idea that business is about more than providing value to shareholders. Rather, businesses “share a fundamental commitment to all of our stakeholders,” including customers, employees, suppliers, communities, and shareholders.
The era of purpose-driven business is upon us.
If companies want to win and retain customers, and attract and retain employees, they must show that they serve people and the planet, not just the bottom line.
This is particularly important for younger people. In the 2019 Porter Novelli/Cone Gen Z Purpose Study, 72% of survey respondents aged 7 to 22 said that they considered purpose when deciding what to buy, and 83% of Gen Zers hold a company’s purpose as a core consideration when considering where to work.
Furthermore, 90% of Gen Z consumers believe that companies “should take action on social and environmental issues.”
In order to win over young consumers and employees in the next decade, companies must invest in the purpose-driven activities that are meaningful to this generation.
The brands that effectively build purpose into their sponsorship strategy will win
So while sponsorship spending continues to go up by 4% every year, it’s unclear if brands understand the need to evolve their sponsorship platforms with the growth in “conscious consumer” behavior.
In order to break through to customers, brands will need to weave their purpose-driven messaging into sponsorship activations in the sports and entertainment arena where people congregate.
Companies that leverage the vast amounts of attention and influence that sports, music, and entertainment have over society to do good will be the ones that stand out and win in the next decade.
The evidence is there that purposeful companies will win out in long-term valuation creation for their shareholders as well. A report by BofA Merrill Lynch Global Research earlier this year concluded that “a strategy of buying stocks that ranked well on various ESG metrics—buying only the best-behaved companies, in other words—would have beaten the broader market by up to 3 percentage points a year over the past five years.”
Purpose can lead to profit, and all marketers should keep this in mind when they build sponsorship deals going forward.
John Balkam is the author of 3-Win Sponsorship: The Next Generation of Sports & Entertainment Marketing, available on Amazon. John is also the founder of Third Win Group, a social impact sponsorship advisory firm based in Washington, D.C. You can get in touch with John on Twitter and LinkedIn.