Should Brands Drop Their Sponsorship Deals When Trying To Cut Costs?

Bathurst, Australia - January 6, 2014: A car drives past the main grandstand along the Mount Panorama Motor Racing Circuit. Most prominently used for the Bathurst 1000 car race, the public can drive around it outside race days.

In this opinion piece by Research Director at True North Research, Chris Hobden explores the relationship between sponsors and sports teams during COVID-19 and whether brands should drop sponsorships to cut costs…

In times of uncertainty there is a temptation to avoid additional costs. Companies tend to focus investment in the core competencies only and look to reduce unnecessary spend where they can. It is a strategy that makes sense, the business has to survive. If it doesn’t, then more people are out of a job and more contracts are lost. The debate is not whether this is a sensible thing to do, of course businesses (and people) cannot keep spending beyond their means. The debate is what is deemed to be ‘essential’ spend vs. ‘non-essential’.

Brand and marketing activities and by extension, sponsorship are often among the items considered for cutbacks. Until now, it has been hard to prove ROI, particularly when the benefits of this spend are often more apparent in the long term. Throughout COVID-19 there has been a mixed reaction to sponsorship, with some pulling out of their partnerships as soon as possible to save on costs and others proudly declaring they are going to stick with their team for as long as it takes. But which has been the right thing to do?

The impact of COVID-19 on sport

True North has been measuring the impact of emotional connection on sports for a few years now, we know that it matters, and have the data to prove it. Via our BenchMark study we can see that emotions drive outcomes, affect long term advancement, and protect a property when in crisis. Furthermore, True North’s BenchMark tool provides a unique level playing field for sponsorships. We deliver an overall value metric that mitigates differences in sporting code, size of supporter base and the cost of sponsorship, so sponsors can now uncover which partnerships are truly performing.

We have continued to gather data through the last year as we tackle the affects COVID-19 has had on sport and the insights are fascinating. Overall, people are watching less sport. The lack of opportunity to participate at grassroots, the additional mental load of COVID-19 amongst key demographics including women, those aged 30-39 (in the young family stage of life) and those on lower incomes, and less opportunities to attend live sports have all contributed to this. On the surface this would appear to support those who have pulled out of their partnerships. Importantly, however, respondents are more connected to the sports they are still watching, with fan engagement increasing in the last 6 months.

So, what does this mean for sponsors?

A higher emotional connection leads to greater positive reactions to sponsors. This means that those who have stayed the course are connecting more with the fans of the teams they are partnering with and gaining more positive sponsor outcomes as a result. Fans and supporters with a strong BenchMark Emotional Connection score are three times more likely to report a positive sponsorship reaction than those who have a poor score.

Sponsors such as Puma, who continues to drive the highest level of first-time usage through its ‘Witness Fearless’ activation in partnership with Melbourne Vixens, show that even in these tough times the rewards are there. During the Super Netball season, Puma invested in outdoor advertising, full page ads in print media and extensively via social media. It filled a vacuum left by other sponsors, and it has been rewarded for this. However, what is most notable about the partnership, is that it is anchored in the drivers of emotional connection to netball. This means its reach is far wider than the Melbourne Vixens’ fan base alone.

Alongside Puma, Telstra’s partnership with the NRL is one of the few partnerships to see positive improvements to a range of sponsorship metrics in this latest wave, taking advantage of a difficult situation by asserting its commitment to partnerships throughout 2020. Where some sports and sponsors have lost, Telstra have managed to maintain and improve its sponsor outcomes by improving awareness, which is filtering down to better outcomes. Furthermore, Telstra is reaping rewards from its partnership with the NRLW which sees the biggest Impact rating (positive sponsor reaction with difference in awareness levels accounted for) of all sponsorships evaluated in the October wave of BenchMark.

The impact of COVID-19 is such that, without attendance possible, FMCG brands which would usually use game day activations to drive sponsor outcomes have had to seek out alternative ways to engage the supporter base. Partnerships such as Balfours/Adelaide Crow’s (positivity towards the brand) and Grill’d/Melbourne Storm (consideration/usage) have done this and have continued to perform well.

Such is the importance of emotion in sport, the partners that are visible now are likely to be remembered. Fans will appreciate those who stuck by their teams and sponsors are likely to be rewarded as such. And in the long term, as attendance increases again, so too does the opportunity size of that sponsorship base. Sponsors with the right partnerships, particularly those aligned to the brand values of their organisation and the emotional connection drivers of the supporter base they are targeting, will reap these benefits in the coming year. This makes sponsorship an essential spend for brands wanting to perform strongly in 2021.

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