AJPark

What is sponsorship?

Essentially, sponsorship is a basic trade mark licence.  In return for a financial or other form of contribution, one business allows its name and brand to be used by another business in commercial activities.  The types of activities sponsored are limited only by imagination.

It is not uncommon for businesses to sponsor sports, business or cultural events.  Charitable and other not for profit causes are also targeted by businesses for sponsorship. Sponsorship enables a business to bring itself or its products or services to the attention of its customers in a favorable and positive way. 

Sponsorship is different from advertising. Advertising speaks directly to a customer. It announces the launch of a new product and creates an image for a brand.  Advertising may also provide information on characteristics, price, quality, and performance of products and services. 

Sponsorship seeks to strengthen advertising messages. Sponsorship can create powerful associations with an event, club, individual or team that shares similar image qualities and values as your brand or business. Often a sponsorship relationship is perceived by the public as support for your brand or business by an independent third party.

What can sponsorship do for your business?

The right sponsorship can transform your brand.

Let’s take the hypothetical cat food brand WHISKITS to show the difference sponsorship can make. Creating interest and energy in this brand and making it important to customers is challenging.  Few people are motivated to read cat food advertisements.  Cat food is perceived as an undifferentiated product.  But innovative and imaginative sponsorship activities can transform WHISKITS into an essential part of the pet care scene. This is when everything changes. 

By sponsoring a pet care programme and associated pet events (perhaps the national cat show), the WHISKITS brand becomes multidimensional. The WHISKITS brand can create its own family of cats called Whisk and Kits.  A website can provide details of the daily routine of Whisk and Kits. Customers can adopt the cats with all money paid donated to the local SPCA.  It can become possible to send branded Whisk and Kits greeting cards, buy WHISKITS cat food and accessories, and download a screen saver depicting Whisk and Kits.  Through creative sponsorship WHISKITS becomes much more than simply a brand of cat food. It can become so closely related to the care of a pet that it becomes part of the customer’s family.

The customers targeted by the WHISKITS sponsorship would be those who treat their cats as part of the family.  The WHISKITS sponsored pet care programme has the potential to influence this target group in several ways.  It provides credibility for the makers and sellers of WHISKITS and displays leadership in the cat food market.  Cat owners would not use the WHISKITS product if it were not superior; the well-being of a family pet comes first! 

And sponsorship provides other more subtle possibilities.  By choosing WHISKITS, a customer can receive self-expressive benefits, as it is a way to associate oneself directly with other cat owners.  Research shows that this association pays off for the brand.

Sponsorship can be the key that makes the product relevant to customers and moves the brand upward into an acceptable, more positive or even leadership position. 

Sponsorship can communicate more about the brand than product advertising could ever say.  Research has also shown that well-conceived and well-managed sponsorships can make a difference and add to business profits.

Focus on the brand

Because a brand is central to any sponsorship arrangement, it is important that steps are taken to register your brand as a trade mark before you grant another business the rights to use it in a sponsorship arrangement.

But you need to go further than that.  It is essential the sponsorship agreement specifies how and in what circumstances your brand and imagery is used.

It is critical to ensure that you have the right to withdraw from the sponsorship arrangement if your brand and imagery is not used correctly.  Any damage caused by incorrect brand use may not be recoverable.

Making it work

If you, as the trade mark owner, become a sponsor you should ensure that you will get the benefits you seek.  It is important to understand and explain the objectives you are seeking before heading down the sponsorship trail.

Any sponsorship arrangement entered into must create value or status to your brand.

All sponsorship arrangements should be in writing.  An agreement should be negotiated clearly defining the terms of the arrangement.

Make sure you know about any other sponsorship arrangements.  Be wary of potential damage which you might suffer if your competitors are already sponsoring or become sponsors of the same event or programme.

Points to consider

Depending on the particular circumstances of the sponsorship, you may play no active role in the arrangement other than simply lending the use of your brand to the licensee. The licensee takes on all the responsibility for planning, promoting and conducting the sponsored activities.  In such cases, you may find that your lack of control places you at commercial and legal risk.

If the sponsored activities are poorly conceived and carried out, or if they cause harm to members of an audience or to participants in an event, the resulting publicity would reflect poorly on your image.

To reduce these risks, you should secure rights of approval over those areas within the sponsored activity which have the potential to cause brand or trade mark damage if they go wrong.
 
Seek contractual assurances that suitable skills and expertise will be displayed in planning and carrying out the sponsored activities. And where necessary, ensure indemnities and insurance are taken out.

Co-branding

Sponsorship arrangements often involve co-branding.  Co-branding arises when the owners of two or more brands lend their brand (and sometimes other intellectual property) to an arrangement for their joint exploitation.

Combining your brand with someone else’s brand can be an excellent way of leveraging your brand into a new market, and with that, a new customer base.

Before entering a co-branding arrangement, there are many issues that each brand owner must think about.  The aim of the co-branding arrangement may be to develop a co-brand which is greater than its two component brands.  However each party should take care to ensure the co-branding arrangement does not dilute their own brand and image.

Before entering any co-branding arrangement, it is important that your rights are in order.  Make sure that your own brand is protected with a trade mark registration.  That trade mark registration should cover the goods and services that you currently deal in, as well as those goods and services which you may branch into in the future under a co-branding arrangement.

Ambush marketing

With so much money being invested in sponsorship, businesses are increasingly concerned at the growing trend of ambush marketing - a technique used by competitors and others to free ride on the enthusiasm and goodwill created by an event.  Ambush marketing is most prevalent at international sporting events like the FIFA World Soccer Cup.

Sponsors and consumers view ambush marketing increasingly negatively because it is an attempt by a brand owner to associate its brand with an event despite not having paid to be an official sponsor. 

New Zealand is looking at introducing legislation to counter ambush marketing in major sporting tournaments.  The specifics of the proposed legislation are still being worked through. The first test of any new anti-ambush marketing laws will undoubtedly come up at the Rugby World Cup in 2011. 

It is important to recognise, however, that while legislation could help sponsors in some circumstances, it is also up to organisations and sponsors to make thorough and sensible deals to protect those who are involved in the genuine sponsorship deals.

Proceed but take care

Sponsorship can heighten your brand and reputation and create awareness of your business and products in the minds of a new set of customers.  But before you embark on sponsorship, be clear about the reasons for doing so. 

Ensuring your brand marriage results in a healthy union takes time and effort and attention to detail.  But the results can be worth it. Sponsorship will raise awareness and position you in a new market.  Seeking advice on commercial sponsorship arrangements will avoid messy divorce proceedings downstream.

An edited version of this article was published in NZRetail magazine May 2007

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  Corinne Blumsky

  Partner