The Basics of Sponsoring

Associate Professor Hans Mathias Thjømøe, Norwegian School of Management, OsloAssociate Professor Erik L. Olson. Norwegian School of Management, OsloVegard Arntsen, Managing Director, Sponsor Insight, Oslo

These days, most sponsoring is a cheap and profitable way to communicate with your customers. In Norway, sponsoring is the second most used advertising media, following direct newspaper advertising, and ranks just ahead of TV advertising. In Norway, approximately 3.2 billion NOK (516 mill USD) is used for sponsoring. This is a large amount, especially considering that Norway has only 4.9 million citizens.

Despite this, it seems that some companies perceive sponsoring as expenditure and not an investment in future profit. As a result, sponsoring and advertising is the first activity dropped when the economy weakens. However, when the finance crisis arrived in 2008, the use of sponsoring did not decline either in Sweden or in Norway, which might be caused by long lasting contracts, but also caused by the fact that many companies have discovered the advertising power of sponsoring.

A study performed in Norway in 2001 among 400 companies showed that, on average, companies used about 9.8 % of their advertising budget on sponsoring. Of this, 32 % was used to sponsor sports. The rest was used to support medical research, cultural events and educational organization. The main objective for this sponsoring was stated to be grabbing attention (Olson, Thjømøe and Brønn, 2002).

From our own studies and from those of other researchers, we now know that sponsoring is a very cost effective form of marketing communications/corporatecommunications. For some business leaders, showing your logo to your target group to create preference is not obvious. However, such exposures actually create preference for your product or your company. This effect is based on the theory of the “mere exposure.” That being exposed to a message, an object, or whatever, is creating a preference for that message or object, has been known for 100 years. A recent study, tested the “mere exposure” effect in more depth, and concluded:   Exposure creates preference, even if the customer doesn’t know what the message or object is about. The customer even does not have to recall what she has seen (Olson and Thjømøe, 2003).

As to the effect of this exposure, a large study conducted in Norway in 2005 and funded by several Norwegian banks, Telenor and also Carlsberg in Denmark confirmed these findings  The results of the study were published in the Journal of Academy of Marketing Science (Olson and Thjømøe, 2009).  The results therefore are controlled by some of the world’s most skilled scholars.

Briefly, the study showed that compared to television advertising, an exposure of a logo on a perimeter-board surrounding a sports arena (in the study a handball field), resulted in 20 % of the effect per second compared to a traditional direct television commercial. This effect was measured as “buying intention.” The studied perimeter-board had about 25 % of the available space on the sports arena, a typical proportion. Thus, if we compare the cost of production and the  cost of showing a board with the equivalent cost of TV commercials, sponsoring is far more effective than TV advertising.

Today, there are several methods available to measure the effect of a particular sponsorship. Sponsor Insight in Norway, Finland, Denmark and Sweden measure the effects of perimeter boards shown on TV during a soccer match, a handball match or a ski event. The exposure is measured as the time during which each logo if visible and how often the logo is exposed during the event. The results are then modified by a conversion rate to the effect of a 30-second TV advertisement. Sponsor Insight also uses data from TNS Gallup in Norway that tells us how many persons are actually viewing the event. By combining these data, the sponsor can get important information about how effective a particular sponsorship is.

Based on research organized by Sponsor Insight and the Norwegian School of Management, we also have data that tells us how the effect is influenced by dominance (or clutter). That is, the fewer number of other brand names that might be in the picture, the more dominant and effective this particular exposure is.

Internationally published studies have shown that “fit” between the sponsor and the sponsor object is influencing the effect:  the better the fit, the higher the effect. A good fit exists between, for example, Nike and soccer, while fit between a bank and soccer may be less good. However, the fit can be improved by being a sponsor of a particular sport or cultural event over a long time, for example several years.

Studies have shown that if a customer understands why A is sponsoring B, the effect is likely to increase (Olson and Thjømøe, 2010). This effect is called “clarity”.  Further effect will be achieved if the sponsor “activates” the sponsorship. Activation means that you have to tell your customers that you actually are sponsoring. In addition you should use every opportunity to utilize the sponsor object in a different setting,  such as using an athlete to be the coach for the staff in a company for their physical exercise.

To sum up: Sponsoring is a very cost effective form of marketing communications/corporate communications, and is looked upon by more and more companies as an important communication tool, not just the management’s playground.

Literature

Olson, Erik L. and Hans Mathias Thjømøe (2009), "Sponsorship Effect Metric: Assessing the Financial Value of Sponsoring by Comparisons to Television Advertising", Journal of Academy of Marketing Science, Vol. 34,  pp. 504-515.

Olson, Erik L. and Hans Mathias Thjømøe (2010), "Explaining and Articulating the Fit Construct in Sponsorship", Journal of Advertising, Forthcoming.

Olson, Erik and Hans Mathias Thjømøe (2003), "The effects of peripheral exposure to information on brand preference", European Journal of Marketing, Vol. 37,  pp.243-255.

Olson, Erik, Hans Mathias Thjømøe and Peggy Simcic Brønn (2002), "Decision-Making Process Surrounding Sponsorship Activities", Journal of Advertising Research, Vol. 42,  pp.6-15.