Sponsors mean money, so it makes perfect sense to try to retain all of the sponsors you possibly can. Honestly, though, there are times when you will be better off without a sponsor – even if that means you need to do the hard work to replace them.
In other words, two birds in the bush can be a far better situation than having one bird in the hand. Why? Let me count the ways…
Category exclusivity – exclusive financial services provider, exclusive automotive partner, etc – is not only acceptable, it is the norm, for most rightsholders. That exclusivity guarantees a marketing platform to your sponsor that their competitors won’t have and makes the sponsorship more valuable.
But there are some sponsors who define exclusivity so broadly that they are cutting across other, much less directly-related categories that you could have otherwise sold. An example is a bank that also demands exclusivity across all types of insurance, brokerage and international services, fleet leasing, superannuation and other investments, and financial planning. If that’s the way they define their competition, that’s their prerogative, but they need to be willing to pay an appropriate fee to offset the potential revenue you’re giving away.
If the exclusivity clause in the contract was left a grey area, they may exploit that, costing you potential revenue. Even worse is the sponsor that knows you’re desperate to get some revenue in and throws in a draconian exclusivity clause at the last minute because they know you’ll go along with it. I have even seen situations where a sponsor took advantage of a well-publicised cash-flow issue to offer a pittance for “sole and exclusive sponsorship” of a major property – so the property couldn’t seek any other sponsorship from any company in any category. In the short term, it fixed the cash-flow issue. In the longer term, it stopped the property from raising what could easily have been several times the income from a complement of much more partnership-oriented sponsors.
As you approach renewal, you should make it clear that you won’t be renewing them at that level of exclusivity (or at least that you won’t do it without a commensurate fee). If they baulk, you need to be prepared to let them go. This is a case where a bird in the hand is often not your smartest option, and you need to back yourself to go after more birds in the bush.
Related to wanting too much exclusivity is sponsoring too low for their category. This happens when a sponsor invests at the lowest possible level that will give them category exclusivity and keep their competition out. That’s all well and good, but what if that category should be bringing in more money?
This would be like a well-known food and wine festival being sponsored at the lowest level by a national chain of wine retailers. This would be a home show being sponsored at the lowest level by a bank, or a top ballet company having a tiny sponsorship from a luxury car brand. These are categories that should be amongst the biggest sponsors – or at the very least, solidly in the mid-range – as there is huge benefit to those brands for being involved.
Take a look at your sponsorship portfolio. If you’ve got any large brands that are a strong fit, but they’re sponsoring at an incongruously low level, you need to flag it. As you approach renewal time, tell them that you’ve done a review and determined that commercial reality is that their category should be bringing in more money for your property. “Commercial reality” is doing a lot of the work here, as it’s basically saying that if the sponsor were in your shoes, they’d be saying the same thing.
Tell the sponsor that you’d like to work with them to create a more comprehensive offer, bringing them correspondingly more comprehensive results. If they decline, wanting to stay where they are, you should very strongly consider letting them go. This is a case of having a weak, scrawny bird in the hand, and bunch of big, strong birds in the bush.
Sponsors often look for ways to extend their sponsorships and get other related brands involved. An example would be a telecommunications provider sponsoring a series of music festivals and doing in-store promotion around it in partnership with Samsung. That’s all well and good, but imagine that you have an existing sponsorship with LG and the telecoms company starts using their sponsorship out-of-store as an ambush platform for Samsung. (It happens.)
Then there are sponsors who have products across a number of categories, like a major bank. They may have exclusivity across financial services, but not insurance. But then they start leveraging their insurance products as well, putting you in strife with your insurance sponsor.
You want sponsors that play nice. They don’t have to play nice with their competitors, but they should not abuse the relationship.
The ideal situation is to start a relationship with a tight contract, so any activity involving brands or categories outside of the one you’ve sold them are subject to approval. You may also have a clause prohibiting them from any activity that breaches the exclusivity offered to other sponsors.
If you’ve done that, but the sponsor is playing fast and loose with the contract, you need to pull them up – legally, if necessary – before it costs you the other sponsor.
If they’re exploiting grey areas and loopholes, you should have a stern word with them. If they aren’t prepared to stop their harmful activity, there may be little you can do during the tenure of the sponsorship. You should, however, tell them that you won’t be renewing them or any other sponsor who is prepared to undermine your commercial value.
More to the point, they do pay their bills… eventually, and only after dozens of panicked phone calls to them and endless juggling with suppliers needing to be paid.
Some sponsors have terrible payment systems, and some just do this because they can. If the lag in payment is due to their own payment policies (“we pay on the 30th of the second month following the month of invoice”), then you need to work with them to create a plan for invoicing that results in payment when agreed in the contract.
If you’re dealing with a company that either just doesn’t, or can’t, pay their bills, you can either cross your fingers and live with it or terminate the contract due to non-compliance with the payment terms. If you decide to persist, and they want to renew, you need to be firm. You will not renew unless you get full payment up-front, and in the case of multi-year sponsorships, you require full payment by no less than six (or more) months prior to the event/season, so you have time to seek other sponsorship if they let you down.
While this isn’t as directly detrimental as some of the above situations, it is no less cause for concern.
When a sponsor invests in sponsorship, they are investing in opportunity. It is their leverage around it that delivers results for their brand. If they don’t leverage the sponsorship, a number of things happen:
What you want are engaged, active sponsors who are leveraging hard, adding value to the target markets’ fan experience, extending your marketing activities, and have the vision to pay a fair and fully justifiable fee.
You can try feeding leverage ideas to the sponsor. This isn’t your job, but is highly recommended to develop that vision and, frankly, get them off their arses.
A couple of other options:
If none of that works, you need to reconsider whether you want them in your portfolio. So, before you renew that slack sponsor one more time, remember this: A sponsor that doesn’t leverage is taking up a space that you could be selling for more money to a much better sponsor.
Sponzilla. That’s my term for a major league bully of a sponsor. That “sole and exclusive sponsor” for a pittance of a fee? Sponzilla.
We’ve all dealt with them. They’re power-hungry bullies because they can be, often timing their most damaging moves for those moments when you’re most vulnerable. They’re ugly to deal with and can make you hate your job. I’ve even had a few as clients, eventually changing their ways as I outlined how being a sponzilla is actually bad for their results.
If you’ve tried diplomacy, reason, and providing more constructive options, and they’re still a living nightmare, ditch them. Tell them they won’t be renewed for any reason. Tell them that you will gladly work with their direct competitor and help that competitor kick their arse. Tell them that their sponsor karma sucks… because it does.
For all you need to know about sponsorship sales and servicing, you may want to get a copy of The Sponsorship Seeker’s Toolkit 4th Edition. You may also be interested in my latest white paper, “Disruptive Sponsorship: Like Disruptive Marketing, Only Better“.
Want to build your sponsorship skills and strategies fast? I’ve got comprehensive online sponsorship training for both sponsors and rightsholders. Get the details and links to course outlines and reviews here.
If you need additional assistance, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive Sponsorship Systems Design service for large, diverse, and decentralised organisations. Please feel free to drop me a line to discuss.
Please note, I do not offer a sponsorship broker service, and can’t sell sponsorship on your behalf. You may find someone appropriate on my sponsorship broker registry.
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