We are living in extraordinary times, however we will get through this health disaster, the world will open up again and we will get back to ‘normal’ (or a new normal, whatever that might be). So, during this enforced period of isolation there is time for reflection to ascertain how to best aid our personal and collective economies once we get back to our working lives. By analysing trends from previous times of economic uncertainty, in this article we will try to predict what is coming down the line in order to protect the industry’s best interests and ensure that sponsorship continues to be one of the most effective marketing mediums.
Whilst it might seem crass to be highlighting commercial opportunity at such a time, preparing for our recovery will not only keep our minds active and positive but also allow us to hit the ground running once the restrictions are lifted. Our physical recoveries will be relatively short term but the economic challenges the world will face will present longer term social problems.
By analysing two significant moments in recent times, which have challenged the sponsorship industry, we can assess obstacles that are likely to confront us in the short and medium term. The 2008 financial crisis and Brexit uncertainty both impacted heavily on our industry with the primary result being a shortage of sponsors leading to reduced rights fees. These events undoubtably created challenging environments for rights holders, however also led to a positive shift in behaviours amongst marketing professionals. Fundamentally, it forced marketers to take sponsorship more seriously. Whilst the days of ‘Chairman’s Whim’ are, thankfully, mostly behind us, sponsorship hasn’t always received the most robust strategic scrutiny. When budgets tighten, CEO’s and CFO’s, correctly, demand greater justification on what benefits any partnerships will bring to the business. This calls for more vigorous strategy development, maximising of rights and more effective activations amplifying the sponsorship. Whilst this may seem obvious, this level of analysis has not always been present. A deeper level of planning scrutiny is likely to be demanded after this crisis ensuring that sponsorships will increasingly impact businesses more positively.
Additionally, recent economic downturns have proven that brands who reduce their marketing budgets suffer big hits in brand equity and take far longer to recover versus those who maintain or increase their spend. According to the Kantar/BrandZ 2019 report, strong brands recovered 9 times faster after the 2008 financial crisis than weak brands. So, whilst it might be tempting to rein in the marketing purse strings (and sponsorship in particular), this will inhibit the brand’s long-term prospects. Brands who embrace the power of sponsorship during the period of upcoming financial uncertainty will come out of the end far quicker than those who don’t.
If another trend from recent uncertain economic times is replicated, shorter contracts will be demanded by brands to ensure that they are not tied into the long-term financial obligations usually associated with sponsorship agreements. The most common term of sponsorship contracts is 3 to 5 years, however we would expect brands to start demanding shorter deals (or potentially break clauses) to provide flexibility in these uncertain times. Whilst it is understandable, if brands are pursuing short termism, we would have to question the value of their strategy. Most brand planning maps long term development (i.e. 3-5 years). On the assumption that the strategy is robust, why would there be a need to change direction and exit from a sponsorship in the short-term? Rather than demanding an opportunity to exit a sponsorship, brands should scrutinise the efficacy of their planning process to counter the short-term commitment argument; if a sponsorship is correct for the present, it should remain relevant in the future as well.
Cancellation of the world’s greatest events is a necessary casualty of this crisis. Watching someone kick a football or perform in a concert is insignificant in the overall scheme of global health. However, sport, music and the arts play such an important role in our society by driving passion, loyalty and social cohesion that these will be vital to our collective self-healing (physical and psychological) once social distancing restrictions are lifted. In fact, we will need to get these events up and running as soon as possible to assist in our personal and societal rehabilitation. This presents an opportunity for brands who are willing to commit and engage.
However, we understand that there is likely to be less money within most brand’s marketing budgets, resulting in the fall of rights fees (due to simple laws of supply and demand). This will hurt rights holders however with this reduction in revenue generation capability rights holders will need more help to engage with their fans which may result in less emphasis on money and more about positive engagement.
Charities are going to be particularly vulnerable; Karl Wilding, chief executive of the National Council for Voluntary Organisations, recently told the Digital, Culture, Media and Sport Committee that he estimated charities would lose around £4bn of a predicted £12.5bn income in the next financial quarter due to a loss of trading income (bbc.co.uk, 31st March 2020). This is a very worrying prediction, further highlighted by the news that the Virgin Money London Marathon has been postponed until October, leaving a shortfall in charitable contributions from this one event of over £65m (virginmoneylondonmarathon.com). Whilst this event has, at this stage, only been postponed, this is still a significant shock to both the sporting and charitable sectors, however it also presents opportunities for sponsors.
It is likely that for the foreseeable future there will be holes in public services, which will impact sport and the arts hard. The state won’t be able to fill all these gaps providing opportunity for brands to unquestionably demonstrate shared passions and add genuine value. Whilst brands ultimately need to generate sales, trends in consumer demands for greater societal responsibility resulting from the Corona pandemic should persuade them to take a more significant role in fixing our societal challenges through their partnerships. There will be activation opportunities to do good; grassroots sports clubs for example, are more likely than ever to need financial assistance. It will be more important than ever for brands to act positively rather than just shouting about how much they love the territory; positive actions rather than words will be key for brands in the post Corona world.
This deeper level of activation focused on philanthropy is already materialising, with some rights holders already organising the provision of tickets for health workers (Brighton & Hove Albion and Aintree Racecourse donating thousands of tickets to NHS workers). There has also been talk of Champions League final and Olympics tickets being given to front line health workers. This is great news and very admirable, however we are suggesting a deeper and longer-term engagement strategy.
There will be elation when we all return from this crisis. When we watch our first football match or attend our first concert, things that we once took for granted will once again become very special. Brands will have the choice of whether to shy away or to elevate this occasion. Those who embrace this approach through their partnerships and place a greater emphasis on philanthropy will realise the benefits.
Out of all of this negativity, just from a sporting perspective, the positive excitement and anticipation of the sporting year in 2021 will be mouth-watering with, for example, the Olympics, Euros, Lions Tour and Ashes all taking place over the summer months alone. What an amazing year we are due; for brands to be part of this will not only allow them to elevate the occasion but also help to heal the world.