A few years back, I read an article entitled, “The Impact of Sponsorship on Share Price Brand Value”. The main assertion is that companies that sponsor have better performing share prices than companies that don’t. While that was the first time I’d seen anyone make that contention in any serious way, I continue to hear it from conference speakers, and in articles and blogs, to this day.
On one hand, I can believe that there is a correlation. On the other, I think implying causation could be a long bow to draw.
Sponsorship, and in particular modern, strategic sponsorship, is a powerful marketing tool. Is the correlation in share price performance simply because better, more aggressive, creative, strategic marketers choose sponsorship as a significant component of their marketing mix? In other words, do companies who are better, more strategic marketers have better-performing share prices, and investing in sponsorship is just another symptom of being a great marketer? The answer here is clearly “yes”.
That said, there is some evidence that sponsorship of mega-events and stadiums does affect share price. There was a study of American stadium naming rights that showed newly announced naming rights sponsors had an average market capitalisation increase of 1.65%, with larger and more sustained gains for sponsors of home town stadiums and stadiums housing winning teams. The same study asserted that sponsors of top echelon athletes and mega-events (World Cup, Olympics) also saw a market cap bump at announcement, but it wasn’t as big. It’s also worth noting that there are other studies that show any increase is negligible.
Getting back to the main point, I can absolutely believe that companies with sponsorship portfolios perform better than companies that don’t sponsor. But I think that could be more accurately stated like this:
Companies that are great marketers perform better in the stock market. Companies that are great marketers also identify and use the power of sponsorship as an important marketing tool.
Correlation, not causation.
The issue with sponsorship professionals putting this kind of miscategorisation out there in conference presentations and articles, is that by stating that by simply being a sponsor, they’re getting a financial or reputational result, it takes the onus off sponsors to do meaningful leverage around their sponsorships.
Sophisticated sponsors will see through this fallacious reasoning, but others may not. And by simply resting on the laurels of “being a sponsor”, rather than embarking on the leverage required to achieve business and brand objectives, they run the real risk of getting little to no real result at all.
Need more assistance?
For sponsors, all you need to know about best practice sponsorship selection, leverage, measurement, management, and more, you may want to get a copy of The Corporate Sponsorship Toolkit. Sponsorship seekers, you’ll find all you need to know about sponsorship sales and servicing The Sponsorship Seeker’s Toolkit 4th Edition
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