Monday, 20 July 2015

Mind the Sponsorship Value Gap

Here's a pub quiz question for you: How many of the world's top 100 businesses adorn Premier League football club shirts? 
It depends which measure you use of course, but whichever way you cut it, the answer is: not many.

Taking PwC's list of the top 100 global companies, listed by market capitalisation, the answer is zero. Interbrand's top one hundred shows two: Hewlett-Packard (17, Tottenham Hotspur) and Chevrolet (86, Manchester United). Both lists have Chelsea's recently-departed Samsung (PwC, 28; Interbrand, 7) and other former sponsors such as Vodafone but it's clear to me that something is missing. Incidentally, the PL's own recently-departed title sponsor Barclay's didn't make the top 100 of either list.

The Premier League is rightly feted as the biggest year-round global sporting property but the absence of the world's biggest brands got me thinking about a couple of things:

1. There is clearly a value gap between what buyers want and what the sellers are offering. Club's have never been particularly good at speculating to accumulate but with so many global mega-budgets not touching the PL, how much is being left on the table? It's clear to me that there is much work to be done in bridging that value gap.

2. What is the point of sponsorship? In my mind it's a strategic partnership, used to accelerate the growth of one or more partners, where combined, the whole is greater than the sum of the parts. In that case it absolutely matters with whom one partners and what that deal looks like. Looking at the PL, it looks like just another revenue stream with little concern for the identity of the shirt sponsor. Such partnerships do nothing to build equity in the club's own brand and a succession of lookalike logos on the shirt does nothing to build value in customer relationships. Short-termism is undermining much bigger long-term value.

To me it's pretty clear what is missing: ownership of the customer. Smart and mature brands (those with the big marketing budgets) moved away from logo-based sponsorships years ago. There is an upper limit to the level of awareness a brand can achieve and at that point, those brands moved into the realms of long-term customer strategy: understanding, segmentation, personalisation, retention, loyalty, advocacy and lifetime value. These are marketing-led rather than sales-led organisations. They're in it for the long-term and partner only with like-minded organisations.

Of course there is a role for media value in sponsorship - particularly if you're a new market entrant, a challenger brand or operating in a hugely competitive or commoditised market - but marketing budgets are being spent on D2C platforms, where that brand can offer a life-enhancing and tailored value proposition at the right time to the right person. There is some work being done in the PL - and beyond - to try to adopt customer-centric practices but it's clear there is a long way to go before it can convince the market.

Sponsors should be viewed not as a revenue stream but a means to accelerate an existing strategy. We need to get out of the short-term sales mindset and understand how brands can bring value over and above just cash and understand that it's absolutely vital to work with the right partner. We need to understand that the brand's customers is also the club's and working together will bring a much richer experience and thus a better long-term return from that individual. The emergence of a marketing - rather than sales - led commercial model is now a necessity.

Such partnerships bring commercial elasticity and can help transform an otherwise rigid business model. There is a vast amount of commercial value out there just asking to be harnessed but we do need to do a little bit of work first.