Covid-19 and The UK Sponsorship Industry - Tackling The Current Crisis And Preparing For The Future: Part 2

Last week, we explored the immediate impact of Covid-19 on the sponsorship industry. But what about the coming period as the sector slowly starts to come back to life? How different will things look as brands, rights holder and consultancies adapt to the new normal imposed on them? There’s no simple answer to that, but here are some of the key themes we are likely to witness in 2021/22.

Flexible contracts: The unpredictability of Covid-19 makes traditional long-term commitments more difficult to justify; so we are likely to see more nuanced contracts that seek to ascribe value in a new way: KPMG’s assessment is that the crisis “has highlighted the issues that exist in applying the current term-based approach commonly used in sponsorship agreements. Structuring contracts around value (not time) and linking performance to payment would alleviate many of the points of dispute that will result from this period of disruption. An opportunity exists for the industry to modernise and enhance its partnerships in a mutually beneficial way by moving to a model supported by return-based metrics. Both parties stand to benefit under this approach, as an increase in effectiveness for the sponsor would lead to more significant payments for the rights holder.” For a deep dive into the future of sponsorship contracts, why not crack open a packet of Hob Nobs and read this Taylor Wessing explainer.

Improved evaluation: KPMG’s argument above only stands up to scrutiny if contracts are built up sound evaluation processes. So expect to see plenty of innovation in the field of sponsorship measurement. One of the first companies off the mark in this respect was IEG, which has unveiled a new evaluation product called Valuation Next, which it says reflects changing industry needs and provides context around critical sponsorship performance factors. Designed to be simple, transparent and useful, IEG says Valuation Next is much more than a fair market value audit of sponsorship assets. A greater emphasis is placed on the premium of association and other important variables that influence consumer behaviour and distinguish sponsorship from traditional advertising. “It is a significant and necessary evolution for the sponsorship industry,” says Peter Laatz, global managing director, IEG. “The current pandemic and its result on limiting exposure for sponsors underscores the importance of the Valuation Next approach we have spent months building and testing.”

IEG is taking an upbeat view on the impact of coronavirus on sports sponsorship. “In a counterintuitive way, this global pause in sport may actually be healthy for both brands and properties in the long term – a great realignment,” says Terence Burns, EVP of Global Sports, Engine Shop, which collaborated on the report. “Brands are rethinking every sport investment from a value basis, and some properties won’t make the cut. Properties will have to look beyond the previous, often antiquated grant of rights to create measurable benefits for brands.”

Greater emphasis on insight-driven strategies: In The Drum, SponsorshipX founder Mark Harrison, observed that, far from slumping into a Covid-19 inspired depression, the sponsorship industry is “creating an unprecedented and growing list of new and innovative sponsorship platforms”. Echoing IEG’s perspective, Harrison told The Drum that his agency has been advising brand sponsors to: “Gather insights from consumers and the consumers of your partners so you can best understand how they plan to engage with your properties. Understanding these nuances and complexities will drive your ROI up. Generate entirely new sponsorship plans and concepts that focus entirely on your most valuable clients, customers, and prosumers. This is not a time to appeal to the masses.”

Reimagined event hosting: As and when events are up and running, rights holders will need to ensure they adhere to social distancing, track and trace and hygiene rules. But it won’t stop there. Food concessions will need to shift to digital ordering and seating will need to be configured to maximise visitor safety. If alternate seats are empty, sponsors and rights holders will need to think about how they transform that into a visually positive or neutral site, to avoid the impression of the venue being half empty. More broadly, all partners are going to have to think about ways to amplify and enhance the excitement of their events and the exposure of their brands in order to create engagement with fans watching via media platforms. To date, rights holders have tried everything from cut out fans in stadia to artificial crowd noise. ESSMA, the European Stadium & Safety Management Association made a few suggestions for sponsors here, related to branding on pitches, player tunnels and the potential for increased branding on vacant seats. In general, spaces like post-match interview backdrops suddenly take on much greater significance.

Deeper fan engagement: Sponsors have been talking about engaging more closely with fans for years – and now is the moment to put those words into action. As Mediacom Sport & Entertainment observes: “If there is one thing we know about sports fans, it is that they want to be participants in the sports experience, not just spectators. For brands, it’s therefore key to engage people in a way that genuinely creates utility, rather than in an attempt to sell more product. GoPro have done just that by launching their #HomePro challenge. Knowing that people are likely to be suffering from cabin fever, the brand created a competition encouraging people to share whatever they’re getting up to at home for a chance to win their latest camera. Dick's Sporting Goods has done something similar, launching the #LongLiveSport campaign across its social channels encouraging everyone to share how they’re playing their sport at home.”

Sponsorship Staycation: In the same way holiday-makers have been encouraged to stay close to home, sponsors should consider whether domestic properties can provide a viable alternative until the disruption surrounding the virus diminishes. There’s also an argument for favouring grassroots over elite sponsorship. At a time when consumers are looking to brands to play a positive leadership role in society, nurturing talent and supporting local clubs and venues could be exactly the kind of activity that resonates with people.

Build back better: In a similar vein to the above, there is a growing movement encouraging companies to “build back better” as they emerge from Covid-19. Agencies may be smarting from lost accounts or reduced activation budgets, but maybe now is an opportunity to target environmentally-friendly brands or become immersed in esports. Perhaps it’s also a long overdue opportunity to restructure teams and introduce remote working as a permanent fixture. In tough times, it’s hard to look beyond the immediate priorities, but there is certainly an argument for using disruption to trigger innovation.

The rights holder POV: Sponsorship can be a relatively slow moving business as brands and agencies go through the process of building objectives, identifying properties that fit and verifying their value. But there is an argument in the current climate for rights holders to be proactive – pushing their partners to embrace an agile, tactical approach. Art spaces, for example, may not be able to welcome as many visitors as usual (if any), but that doesn't mean the space they occupy can’t be utilised in some other way (virtual tours, activities based around artists and designers). Likewise, the annual event calendar continues to be decimated by postponements and cancellations. Does that mean attractive venues that would have been booked are suddenly available for use by different events? And what about elite sporting talent that isn’t able to compete because of restrictions? Does that open up opportunities to create branded content around their lives away from the arena? Tactical activities don’t need to replace long-term strategy, but they may be a useful form of engagement until the new normal resembles the old normal. At very least, coming up with creative alternatives is a way for rights holders to show that they have their sponsors’ interests at heart.

Next week, in Part 3, we’ll look at how some leading brands have tried to make the best of their sponsorship assets during Covid-19.  Ivf you missed Part 1, please click here