Perspectives on Partnerships – How sponsor expectations will evolve as a result of Covid-19

The evolution of partnerships for rightsholders

After hosting the inaugural Perspectives on Partnerships event in February, Stephen Hutchison, Fuse MD, and the agency’s Head of Strategy, Alex Charkham, liaised once more with the sport and entertainment rightsholder community to understand how sponsor expectations will evolve as a result of the coronavirus pandemic.

Stronger business cases; more contractual and rights flexibility; smarter category targeting; balancing short-term performance with long-term brand growth: these are just some of the big themes that see 46% (‘yes’) and 41% (‘maybe’) of rights holders acknowledge that they are considering evolving their commercial models to meet the rapidly evolving set of sponsor expectations.

We’ve identified three key themes where rights holders should look to take action to future-proof their sponsorship models:

Stronger justification that sponsor investment will positively impact their business

It is difficult to precisely quantify the implications of current scenario on sponsorship spend, especially as many brands are locked into multi-year deals.

By way of comparison, the latest forecasts from Omnicom Media Group suggests that global media spend in 2020 will contract by about 15%. Furthermore, categories that have been hardest hit by the crisis are those that feature prominently in sponsorship – travel, automotive, betting and finance.

We can assume, therefore, that sponsorship spend (rights fees and activation) spend will come under much stronger scrutiny with some brands acknowledging the inevitability of  portfolio reviews in the short to mid-term coupled with a likely scaling back in activation.

While it is difficult to influence those that hold the purse strings (especially when many businesses are in survival mode), there is much more that rights holders can do to validate current partner investments and increase the chances of securing new partners. These validations must extend beyond metrics that have decreasing significance in a board room scenario, such as media value, reach and shared values.

Demonstrating absolute audience relevance; more sophisticated audience segmentation and categorisation; market sizing the conversion potential for sponsors; forecasting the business impact; provision of rights that balance brand building and sales. These are some of the techniques rights holders need to deploy to increase the viability of their overall proposition.

Flexibility and adaptability

Working within the narrow parameters of multi-year sponsorship contracts has impeded many brand’s ability to flexibly adapt their sponsorships in a way that meets the ever-evolving needs of their respective businesses.

Length of contract; the ability to regularly review rights based on performance and needs; mitigating and supporting the increasing costs of activation; one sided force majeure clauses; the imbalance between digital and offline rights: these are some of areas that need to be addressed to increase the viability of investments while providing an opportunity for regular checks, challenges and optimisations.

Breaking down the rigidity of the traditional sponsor-rights holder relationship will go some way to shifting the long discussed desire to create a model based on “meaningful partnership”.

Balancing the short and long term

Research conducted by Fuse suggests that sponsorship is very much a long-game. Major investments can take 4-6 years before we start to see uplifts in effectiveness, particularly around consideration. Although we are seeing strong long-term commercial ROI against their investments (our research suggests an average of about £3.4 commercial return for every £1 spent on sponsorship), it can take up to 25 years before brands reach their maximum effectiveness threshold.

While this argument supports sponsorship’s viability as a long-term brand builder (in a not dissimilar way to brand-led advertising), the proposition falls down for brands seeking short-term return; we anticipate many sponsors to be asking more questions around short-term return as the commercial impact of the current crisis deepens.

As a result, rights holders need to identify new ways to provide sponsors with short-term opportunities. This isn’t about throwing the baby out of the bathwater and impeding sponsorship’s long-term viability. It’s about balance.

Segmentation of audiences based on their behaviour and value to potential sponsors and their sectors; analyse their buying behaviours, potential to convert and presenting this as a package; understand the performance of your content; investigating how to better integrate performance conducive media and rights such as search and CRM.

The current crisis has added an additional layer of complexity to an environment that is already cluttered and competitive. However, it should serve as a catalyst for much needed change in the industry to make it feel fresh, contemporary and relevant.

In order to maintain or even attract higher levels of brand investment, rights holders will need to quickly accelerate their capabilities.