Sponsorship has been increasing in popularity as a marketing tool for brands to create awareness, drive sales or new business, and increase customer loyalty or employee engagement.  With added interest and investment in Sponsorship, brands are now beginning to tread very carefully around the marketing tool and here are some of the reasons why. 

Mismatched brands and rights

Brands spend a lot of time and money carefully planning and deciding on the right property to sponsor (either this or its Chairman’s choice).  Despite this, there are brands that have spent huge sums of money on the wrong rights, which have not paid dividends and certainly haven’t offered much return on investment.  In some cases sponsorship has had negative effects in terms of ROI and a bad fit between brand and property has led to damaged reputations for the former and reduced commercial value for the latter.  However, today, brands have become much savvier about what they attach their name to because of the huge cost of sponsorship and with the global recession this has never been as crucial as it is now. 

Financial Services

During the recession’s worst moments any financial services company about to spend money on sponsorship was met with harsh criticism and serious public backlash.  Even now, as we begin coming out of the worst of it there are still strong opinions on the practice.  Bank of America ended any talks with the New York Yankees due to huge financial difficulties and UBS cancelled its sponsorship of the Hong Kong Open after it received a $59.2 billion bailout from the Swiss government.  Both did so for fear of major public backlash.   RBS on the other hand announced $41 billion in losses just after extending its sponsorship of the Six Nations – a decision which was met with outcry, especially as it is 70% owned by the government. 

The effects of digital

With digital, bad news can travel extremely fast.  This has meant that companies have had to rethink marketing strategies.  Bad press around a property can cause devastating effects for any company that has created a strong association through heavy marketing activity.  To illustrate the enormous implications of a scandal, combined with the power of digital, just look at Tiger Woods.  As soon as the story broke about his behaviour it spread across the world in seconds.  Shareholders of Nike, Gatorade, and other sponsors consequently lost a collective of $5 to $12 billion due to a significant drop in their stock’s values. 

Embarrassment 

Poorly performing teams, embarrassing scandals, politically damaging stories.  These are all reasons for brands (or in some cases properties) to cut-off associations with partners.  Famous and very recent examples of this are Accenture dropping Tiger Woods, Nationwide dropping the FA, and only last week, two Indian state-run firms – NTPC and Power Grid Corp of India – have decided to scrap their multi-million dollar sponsorships of the Delhi Commonwealth Games due to negative publicity around allegations of corruption, mismanagement and malpractice. 

In addition, the BP oil fiasco that has engulfed the Gulf of Mexico has severely damaged the reputations of many of the arts properties it sponsors, primarily The Royal Opera House, Tate Galleries, and British Museum.

Brands are now very cautious about what they attach their name to.  Understanding sponsorship and the effect that it has on consumers is key to understanding the possible risks of association, as well as the benefits.