$pagename = “sponsorship-investment-expense”;
= “Sponsorship Investment Expense Essay | Business”;
$description =”Business Essay – Analyse the costs and benefits of sponsorship for both the sponsor and the recipient.”;
$subject = “Business”;
For the recipient, any financial investment, particularly in arts projects with limited budgets, can help to boost productivity and cashflow in the short-term and financial stability and sustainability in the long-term. In the arts industry, capital is key factor of production; in order to produce good quality work, heavy investment in resources is vital. Covering salary costs is the biggest overhead for many organisations, but in creative industries, this expense can reach new heights. In the case of film, actors’ salaries often hit the multi-millions, particularly in Hollywood. Clearly, this eats into filmmakers’ budgets and makes the need for financial input even more pressing.
“Executives green-light pictures just so they can say: ‘we’re doing so-and-so’s next picture.’ It enhances the company’s image. They know the figures don’t add up, but signing on the dotted line keeps them in a job for another year.” (New Statesman, 2005).
Added publicity and PR opportunities can also result from sponsorship deals, as the recipient can expect to be mentioned in promotional and corporate material issued by the sponsor.
However, it is important for a the recipient to think carefully about the kind of image they want to portray before entering into a sponsorship deal, as this will be influenced by that of the sponsor. This is especially a consideration for arts organisations, where correct positioning is key and traditional marketing methods are sometimes problematic.
This is because marketing is about identifying and satisfying customer needs:
“The true marketing approach involves the determination of consumer needs and values and the design and supply of goods and services to satisfy them.” (Needle, 2004: 361)
To attract the consumer, the benefits of a product or service need to be communicated. However, in the arts industries, and entertainment in particular, these benefits are often intangible and subjective, eg, the ‘experience’ of watching a film. It can therefore be more difficult to identify, manage and meet customers’ needs and demands.
Recipients need to ensure that their objectives do not conflict with those of the sponsor. Risks in this area include the possibility that the sponsor will receive negative publicity, which could reflect badly on the recipient. Another scenario is that that recipient’s project will become ‘swamped’ by the sponsor’s self-promotion, detracting from the project being sponsored. Good communication is vital for the recipient to retain the required amount of control over the way their work is presented.
Sponsorship can increase recipients’ credibility, showing that other companies have the confidence to associate their brand with them. The added financial stability and prestige can also positively impact on morale and confidence of those involved in the project.
However, recipients have certain responsibilities and obligations to their sponsors to give them a return on their investment, as the sponsor is putting their reputation and credibility in their hands. This can add pressure when resources are already tight. If a project does not perform well, or the recipient fails to meet their sponsor’s expectations, this could this could lose further investment from the sponsor, or involvement from other sponsors in the future.
“… a sports team which does not perform well or a theatre production that flops is unlikely to provide its sponsor with the type of image they are expecting from the association.” (Pickton and Broderick, 2005: 518)
Those within the arts industry may see this emphasis on satisfying the sponsor for financial gain as a challenge to their artistic integrity, which is, after all, what has driven them to be in the business in the first place.
According to R E Caves (2000), creative industries differ from what he terms “humdrum” industries, because satisfaction comes from the act of creativity itself, ie art for art’s sake. Nevertheless, to successfully run a business, attention, in at least equal part, must be paid to other activities such accounting, finance and marketing, of which sponsorship, and the obvious commercialisation it brings with it, forms part. This could cause conflict between the administrative and creative functions of the party receiving sponsorship.
This problem could be exacerbated because job satisfaction, for many of those involved in a creative project, will not simply be about factors such as wages, or work conditions, as it may be in a “humdrum” job. When team members in a company do not have common approach or share goals, this will affect how successfully it works together, impacting on employee motivation and influencing the effectiveness of the team in achieving business objectives.
While running an organisation involves bringing together a team with diverse skills, interests and expectations: “Teams need to decide how they will work together to accomplish their common purpose.” (Boddy, 2002: 255)
For the sponsor’s part, sponsorship can form an important part of a wider marketing campaign, boosting and complementing advertising and PR activity. However, sponsorship can have further reaching, longer term advantages, than straightforward advertising.
Customers in the modern marketplace are media-savvy, having become bombarded by such marketing material. They recognise immediately that an advertisement is trying to sell them something and it may ignore or dismiss the message, whether consciously or subconsciously. Consumers can be engaged more readily by sponsorship:
“‘It’s an unbeaten way to improve the reputation of a business or brand because it does not have the fingerprints of self-interest on it,’ says Colin Tweedy, chief executive of Arts & Business, an organisation that fosters partnerships between business and the arts. ‘Consumers know that an advertisement is of interest to the advertiser so they have got all of their defences up. What’s great about arts sponsorship is it goes straight over the defences without alerting the consumer’s radar. It gets a level of reputation enhancement more quickly than anything else.’” (The Marketer, 2004)
Sponsorship of the arts, and other community-orientated initiatives, can enhance the sponsor’s reputation as an organisation that prioritises corporate social responsibility (CSR): that they are active in addressing, and promoting awareness of, issues concerning social and the community. This portrays the sponsor in a positive light, and boosts confidence among customers and clients, particularly those who have a personal interest in such issues.
According to the website of Arts and Business, an initiative that encourages businesses to sponsor arts projects: “An increasing number of businesses of all sizes are finding there are real business benefits from being socially responsible.”
Arts and Business PR manager, Jonathan Tuchner (quoted in The Marketer, 2004), says: “In a marketplace saturated with brands, the arts are a cost-effective way for a company to differentiate its products. The benefits include nurturing talent, encouraging loyalty, delivering a CSR programme and supporting the community.”
In addition to fostering brand awareness and loyalty and increasing sales, arts sponsorship can stimulate innovation within an organisation, as well as help improve communication and instigate positive cultural change. This, in turn, can improve staff motivation, job satisfaction and, ultimately, productivity:
“87% of the UK’s population regularly engages with the arts in some way and benefit packages which include making the arts accessible are highly valued by employees. At individual and team level, offering your employees opportunities to get involved with arts projects and organisations can help you attract and retain talented people. The arts and culture embody values that enrich every company that engages with them.” (Arts and Business website, 2004)
In wider terms, building links with other companies and organisations through sponsorship campaigns can provide opportunities for networking, an important, ongoing activity for most businesses. Attending events linked to the sponsorship campaign increases visibility and creates an opportunity to entertain and communicate with new and existing customers, client and partners.
“Sponsorship can also transcend cultural and geographical boundaries. It is effective at targeting different audiences (and) can help forge links with local business and political communities (Gardner and Shuman, 1988).” (Pickton and Broderick, 2005: 516)
However, if the project or event is unsuccessful, it could reflect badly on the sponsor. The sponsor is heavily reliant on the recipient for the way their organisation is perceived. This is unlike advertising, where the company would have a much greater proportion of control over their image and reputation:
As well as the recipient, sponsors must also take into account whether there are other companies offering sponsorship, how many there are and the likelihood that their brand will be impacted by association. Many companies actively avoid becoming involved in events that are over-commercialised as ‘sponsorship clutter’, which can have an adverse effect on the reputation of a brand.
Part of the inherent risk associated with the arts can be attributed to the uncertainty about demand for creative products. Caves (2000) identifies uncertainties about the economic outcomes of such activities and the need to manage risks through contracts that ensure mutual obligation to meet commitments. This is particularly pertinent in the case of sponsorship deals.
While sponsorship can work appear less expensive than purchasing advertising, a sponsorship campaign may involve more extensive planning and a deeper, long-term, involvement. This can mean higher costs in terms of the time, money and resources that need to be committed and invested. Effectiveness can also be more difficult to evaluate.
It is clearly important for both parties to set out clearly what they hope to gain from the partnership and what they are willing to give in return, before committing themselves to the sponsorship deal.
Bibliography
- Arts and Business. (2004) The unique role of the arts in enabling business to deliver socially responsible, sustainable business practice [online]. Available from: http://www.aandb.org.uk/render.aspx?siteID=1&navIDs=1,6,416 [Accessed 6 October 2005]
- Boddy, D. (2002) Management: an introduction, 2nd edition: F T Prentice Hall.
- Caves, R E. (2000) Creative industries: contracts between art and commerce: Harvard University Press.
- The Marketer. (October 2004) Local Heroes: The Chartered Institute of Marketing.
- Needle, D. (2004) Business in Context: an Introduction to Business and its Environment, 4th edition: Thomson.
- Farrow, B. (July 2000) Gimme the money. New Statesman.
- Pickton, D. and Broderick, A. (2005) Integrated Marketing Communications: F T Prentice Hall.