Note: This blog was written in January 2020, before COVID-19 brought recession down on the world. I stand by all of this advice for riding out this recession, and recession-proofing yourself, in future.
We’ve all seen the news reports about the increase in recession warning signs. Economies are slowing down. Some countries and business sectors are already in, or on the brink of, recession. At best, global economic indicators are mixed. It’s also been ten years since the end of the Global Financial Crisis (AKA, the Great Recession). This, in and of itself, concerns some economists, as historically, this makes us “due” for a recession. And with ample coverage in both financial and main media about the potential for a recession in the near term, it’s clear that experts are on alert.
Maybe all of this is wrong, and we’ll sail through another few years with a reasonably stable economy. I honestly hope that’s the case. But when things do start to head south, our industry has a long history of being hit hard and swiftly.
If we do drop into a recession – or if it looks like one is truly looming – some sponsors will have a directive to cut spending. If a company has a culture that categorises sponsorship as a luxury spend, budget cuts will disproportionately affect rightsholders. Even if your direct contacts totally understand the value of best practice sponsorship, if the C-suite isn’t across the power and flexibility of this medium, financial decisions may be out of their hands.
For other companies – and I’m going to go out on a limb to say most companies – they’ll use a recession as an excuse to clear out dead wood, and fair enough. The question you need to ask yourself is, “Are we dead wood?”. The second question is whether you’d know it if you were?
Either way, you don’t want to be on the losing side of the budget cut equation, so I’ve compiled some things you can do to increase your odds if a downturn comes along. The kicker is that making these changes takes time, and economy-driven financial decisions can come fast, so you need to get onto this preparation now.
Worst-case scenario: You’ve minimised the financial impacts of a recession on your sponsorship program. Best-case scenario: It’s a false alarm (for now), you’ve significantly upped your game, and the work you’ve done has you increasing your annual sponsorship revenues.
Are you expendable? Realistically, all properties are expendable, so the question should probably be, “How expendable are you?”
Whether it’s mandatory budget cuts or opportunistic portfolio rationalisation, a recession is an opportunity for a brand to reinvent their approach, and restructure their portfolio, turning it into a powerful, efficient, meaningful, and lean marketing engine room for their company. That’s the mindset they’re going to be in, and that’s not a situation where you want to be presenting yet another weak, self-absorbed, strategic black hole of a renewal offer. So, it’s time to assess your approach, and get real about how good you are.
Once you’ve got a handle on how imperilled you are, you need to make changes, and you need to do it right now. Don’t wait to roll out some new, whiz-bang approach at renewal time. Chances are that if they’re going to rationalise their portfolio, they’ll be making decisions on what gets the chop based on your past performance, not what’s in the renewal. What that means is that you need to improve your body of work with them now, so that they get some strong wins with you, before they start assessing their portfolios.
What you need to do will depend on your danger signs, and if you’ve ticked a lot of them, you could have a lot of work ahead. But what’s the alternative? Letting your sponsorship revenues crater?
Establishing a vision for what sponsors can accomplish with your property isn’t about doing some presentation with lots of pretty pictures and charts, in an attempt to tell them how great you are. Not even close. This is about helping them to see the full strategic potential in the sponsorship – the scope for their brand, the scope for their relationships with all their various target markets, the scope over time and geography.
Some of those target markets will be yours, but not all; your target markets may be just a drop in the bucket of who they could influence. Sure, they want to leverage during your event or season or whatever, but however long that lasts, it’s a fraction of the months – or even years – that they could meaningfully leverage the sponsorship. And geography-schmeography. Great leverage isn’t limited by geography or who actually attends. If people care about what you do – or even just the larger themes around what you do – they can be influenced by a great leverage program, no matter where they are.
So, if you think back at all those whiz-bang presentations and proposals that focused with laser precision on your property, you need to now realise that you were setting those sponsors up to think small. You were setting them up to think, “two-day festival in Memphis”, not “powerful marketing epicentre, leverageable nationally for at least eight months”.
How do you do create this vision? There are a few options:
Going hand-in-hand with creating vision is positioning your property as a sponsorship multi-tool – a marketing tool that can do almost anything that needs doing.
That list could go on for ages! The point is that you want to be seen as a flexible marketing platform, that they can go to for whatever they need, over and over again. And the key here isn’t being big or sexy – it’s relevance. If what you do is relevant to the sponsor’s target markets, and you have the strategic nous and willingness to be flexible, your value to them will skyrocket.
Start talking about renewals early, and get them contracted early. From a purely practical point of view, this could insulate you from knee-jerk decisions, and if they don’t renew, you’ll have a longer time frame to secure new sponsorship.
And speaking of insulating you from knee-jerk decisions, do everything you can to secure multi-year renewals. If corporate finance comes down with a directive to cut 30% from the sponsorship portfolio, but you’re under contract for the next two or three years, chances are good that some financial equilibrium will have been restored, by the time you’re up for renewal again.
In addition to wreaking havoc on sponsorship portfolios, economic downturns take a heavy toll on workforces. They shrink. They’re restructured. And if that happens, there’s every chance the sponsorship decision-maker you work with now, won’t be in that job, when it comes time for renewal.
This doesn’t mean you shouldn’t have a good relationship with that person, but when it comes to how you manage the sponsorship, concentrate on adding value to the brand, not the individual. With high turnover in sponsorship jobs, this is always smart, but takes on even more import in a downturn.
Make the effort to learn about the critical factors that are driving sponsor decisions, because newsflash, it’s not visibility, image transfer, or sales.
A good place to start would be to download and read, “Last Generation Sponsorship Redux” and “Disruptive Sponsorship: Like Disruptive Marketing, Only Better”. If those two white papers don’t change your perspective on what you’re selling, nothing will.
While you’re doing homework, make the effort to learn about your sponsors. One of the biggest complaints I hear from sponsors is that their partners have no idea what their overall marketing objectives are, who their target markets are, their organisational culture, or even how their business works. This is research you should have done before selling to them, in the first place, but if you didn’t, the second best time to do it is now.
First, do the desk research. Take tons of notes. Find their pinch points, priorities, and hot buttons.
Then, use those notes as a platform to get more information and clarity from the sponsor. Say, “I notice from your recent social and a media release from last month that you’re making some big changes in how people use your service. I’d love to find a way to help you with that, but I need some more background.”
I’m an optimist. Truly, I’m incorrigible. So, I get that you want to think if you clean up your act, you’re not going to lose any sponsors in a downturn. That would be a great outcome, but it may not be realistic.
The thing is, if a sponsor is going to exit, you want to know about it as soon as possible. With a long lead time, you may be able to find another sponsor. With a long lead time, at the very least, you’ll be able to reassess your plans, so the loss of revenue isn’t catastrophic.
So, to mitigate any ugly surprises, you need to be willing to ask the hard questions. You can tell a sponsor that you understand their sector is being hit hard, right now, and that your goal is to be a powerful and efficient marketing tool for them. But you should also say that if it’s unlikely the sponsorship will be renewed, for whatever reason, you’d appreciate knowing sooner, rather than later.
Whether it’s looming, or still years away, we’re going to have another recession. And when it does, you don’t want to be dead wood. You don’t want cutting you loose to be a no-brainer, and with the above steps, that’s a lot less likely to happen.
But the optimist in me wants to you know that, even if we don’t have a recession soon, your effort won’t be wasted. Every day you’re a great partner makes your place in a sponsor’s portfolio more secure. Every new skill you develop will make both renewals and new sales easier. And the more you build a sponsor’s vision, the more your sponsorship is worth.
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.
If you need additional assistance, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive sponsorship capacity-building 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.
© Kim Skildum-Reid. All rights reserved. To enquire about republishing or distribution, please see the blog and white paper reprints page.