Sports sponsorship: is it worth it? is it overpriced?

"Yes, it is absolutely worth it, this is one of the marketing tools that's working for us as it allows us to reach most of our targets," Lynn Naude, ABSA group marketing GM sponsorship, said. "We develop a close relationship with the right holders to ensure that they understand our business."

Balancing act

Naude said there should be a balance between commercial value and the need to enhance the game, adding that despite the lack of a CSI element, her organisation was trying to incorporate it as it is important for the brand. ABSA is the official sponsor of the national rugby team, the Springboks, among others.

David Sidenberg, managing partner at BMI Sport Info, an independent research company focusing exclusively on sport and the sponsorship market, said sports sponsorships is working because it is driving the brand, but he said it has to be relevant.

"Advertising needs to make sense and needs to add value," Sidenberg said, adding that the return on investment will be highest if the fit is there as it also depends on the brand's objective.

According to a BMI Adult SportTrack report, the SA sport sponsorship market increased to R4.3 million billion in direct spend (rights fees) in 2010. Sidenberg explained: "Growth in 2010 over 2009 was a respectable 9.3% taking into consideration the global economic and sponsorship landscape.

"While down on the comparative 12.1% year-on-year gain witnessed last year, it was nevertheless more than double the comparative 2010 global average sponsorship growth rate and also one of, if not the highest growth rates recorded," he told Bizcommunity.com on the sidelines of the forum. Worldwide, he added, few marketing disciplines have experienced the same double-digit growth over the last two decades as sponsorship.

Why big brands pull out

Asked why more and more big brands, including Standard Bank, have been pulling out of the market, he said, "In general terms, some companies have begun to cut some or all of their sponsorship budgets for the same reason they are cutting any of their marketing spend. It's the economy and budgets are tight.

"While there has clearly been a few high profile examples of major sponsors parting ways with their long standing sponsorships, what is often not reported in the press is the fact that in almost every single case, these same properties have already found new sponsors and more often than not at a higher price."

However, it is believed that some sponsors have left their long-time partners due to management crisis, allegations of corruption and ill-discipline. The case of Tiger Woods (US) and the Caster Semenya saga (SA) are perfect examples of sponsors breaking up their partnerships. Sidenberg said the onus lies on the sports code to get their house in order.

Primedia Sport CEO Lyndon Barends said cutting new packages will allow for new entrants.

Strategy is key

Nevertheless, Total SA brand and communication manager Nadia Vosloo, believes sports sponsorships still works and is worth it. However, she warned: "Strategy is key because it will drive all other things. You have to plan strategically.

"This is not a short-term commitment - you cannot do it for six months and walk away. It takes time to build this partnership."

Asked if the market is overpriced, Sidenberg told Bizcommunity.com: "Supply and demand will, as always, ultimately resolve the current concerns over the perceived high pricing of premium sponsorship rights.

"But, it must be cautioned that as long as they remain a concentrated demand for just these two or three codes, and as long as there are companies that are prepared to pay nearly any cost to buy into certain properties ahead of their competitors, cries of an over-priced market for premium rights are likely to fall on deaf ears".

Sidenberg revealed that the SuperSport deal has paved the way for the lowest-ranked Premier Soccer League (PSL) team to earn more money than all cricket teams. He also said PSL clubs are earning more money than the sports federations.

The forum was hosted by Future Group, in association with Sappi and ABSA.

Corrected on 26 August 2011 at 11.50am