Tough times for sponsored sport
Despite a modest increase in outlays on sports sponsorship last year, the slump affecting this branch of the marketing mix is not over. And the alarming fall-off in leveraging (spending on supporting media to create awareness of the sponsorship deal) has continued to worsen.
For while the traditional rule of thumb is that every rand spent on buying rights should be leveraged by a matching amount, activation budgets have dropped to an alarming 34% of the direct spend on sponsorship rights, according to BMI Sport Info’s David Sidenberg. This means that much of the money spent on sponsorship rights is being wasted.
And as the perceived effectiveness of sponsorship declines, there’s a danger that disillusioned sponsors will move their marketing rand elsewhere, causing considerable harm to the cause of the sporting codes dependent on this money.
Between 2006 and 2012, sponsorship budgets increased by 76%, but activation levels rose only 7%. The result was the leverage ratio fell from 84% of the direct sponsorship spend in 2006 to 51% in 2012. Sidenberg points out, however, that rights fees now include more contractual benefits than ever before, thus reducing the need for leveraging spend.
Another indication of concern is that while every single sponsorship property in soccer has been renewed for 2012, most of them were signed at fees reportedly below the initial asking price. “The market may have f inally put a cap on the perceived rampant hyper-inf lationary rights fee increases of recent years,” says Sidenberg, who is also managing partner at Sponsor Value Research Services.
“Commercially speaking, the last 24 months have been described by many as a period of consolidation rather t han growth,” says Sidenberg. “Some marketers had begun to pronounce that the elephant in the room is the high cost associated with acquiring sponsorship rights, which continues to escalate and which are now deemed less desirable for real marketing return.
“Additionally, rampant allegations of corruption and poor administration among a growing number of top sporting federations could not have come at a worse time as marketing budgets continue to retract.