Sponsorship in a Recession: A Sponsor’s Guide

Left of boom. It’s a term used by intelligence agencies referring to the timeline leading up to some kind of attack. The idea is that they want to be working left of boom – before it happens – to either stop the attack, or mitigate the effects.

The sponsorship industry is staring down the possibility of yet another economic crisis. Reserve banks around the world have raised interest rates dramatically, trying to curb inflation. Economists are all over the map on what the fallout will be. Many are predicting a global recession, some think it will be short and not particularly painful, while some countries are already struggling.

I’m not going to wade into the morass of what caused the inflation situation, nor whether raising interest rates to this point was really necessary. Nope, I’m going to stick to what I know, and that’s sponsorship, and how we should be preparing now – left of boom – because if we don’t, we may not be in control of what happens to our sponsorship portfolios if a crisis does hit.

Fastest impact vs smartest impact

Our industry is particularly susceptible to knee-jerk recession decisions. You and I and most people working in sponsorship know the unique value of this powerful marketing tool, but there are still people – including plenty of people in the C-suite and finance – who view sponsorship as a frivolous luxury spend. To them, it’s an expendable cost, not a crucial marketing investment, and as such, anything at or nearing renewal is indiscriminately disposable, with no real ramifications for the brand.

They’re wrong, of course, as not all sponsorship investments are created equal. It’s true that most sponsorship portfolios include some dead wood, but most sponsorship portfolios also include brand workhorses that deliver great results against objectives every year.

The tension ends up between the fastest budget impact and the smartest budget impact, and it’s going to be on sponsorship and brand management to make the case for smart budget cuts, not just convenient ones. I’ve got strategies for that outlined throughout this blog.

Do a ruthless audit

Following on from my previous point, the best preparation for a possible economic downturn is to do a ruthless audit of your sponsorship portfolio.

Sponsorship portfolio audits are a team sport. If you’ve got a cross-departmental sponsorship stakeholder team, this is a great time to work with them. In this process, your job isn’t to fix anything; it’s simply to put every sponsorship into one of four buckets:

  • Keep – Performing well as-is
  • Keep – Commit to more creative, comprehensive leverage
  • Renegotiate – Try to negotiate better, more leverageable benefits. If impossible, drop
  • Drop

The ones that end up in the “drop” bucket will likely fall into one of these categories:

  • Sponsorships that aren’t (or are no longer) a good fit with your brand, your markets, or your objectives
  • Legacy sponsorships that are stale or neglected, not having been well-leveraged for some time
  • Sponsorships that lack broad, internal buy-in (for why, read A Sponsor’s Guide to Getting Buy-In)
  • Sponsorships where the rightsholder is painful, obstructive, or so clueless that it’s hard to get a strategic result

If you want to go really ruthless, do a zero-based audit. This kind of audit supposes that you have the same amount of money (or your new reduced budget), and no commitments. What would you sponsor, if you could sponsor anything? How would it be leveraged? Use this to clear out anything that doesn’t fit into that ideal portfolio, and commit to filling it out with more ideal investments, as budget starts to come available from exits or future budget increases.

The most important part of this, as we stare down an uncertain economic future, is to do it now. Like, RIGHT NOW. Make the decisions about what you’re going to drop and why, laying them out on a timeline, so the rolling impact on the budget is crystal clear. Sign off on these recommendations as a group, mitigating any political downsides.

For more on how to exit right, read How to Exit a Sponsorship.

Identify your multi-tools

As part of your audit, you want to pay particular attention to potential sponsorship multi-tools. These are sponsorships that are…

  • Relevant to a sizeable cross-section of your target markets – either the property itself or the larger themes around it (eg, sustainability, K-pop, or children’s wellbeing)
  • Leverageable in many different ways
  • Leverageable over a long time period
  • Leverageable beyond the immediate geographic location

Of these points, the first is the most critical. If you have that, you can likely find ways to leverage a children’s museum on a regional or national basis, or a two-day Pride festival for months.

What isn’t particularly critical is the size of the property. As long as the broader themes are relevant to lots of people, a small, local property can be a great multi-tool.

For more, read Sponsorship Multi-Tools: The Holy Grail for Sponsors.

Don’t invest incremental resources if the property is weak

Shifting to a lean and very shrewdly leveraged portfolio means making every leverage dollar, and all of your team’s strategic effort, count.

If you’ve done an audit and identified properties that you want to exit, but you’ve still got time to run on the contracts, stop leveraging them. Stop throwing good money after bad. Stop wasting your time flogging a dead horse.

Don’t overbudget for leverage

A few years ago, IEG were all in a lather because the average amount of money sponsors spent leveraging a sponsorship had increased to over two-to-one. That is, for every one dollar spent on a rights fee, sponsors were spending over two dollars on leverage.

On one hand, it’s great that sponsors are committing to comprehensive leverage. On the other, that amount of money is (almost always) overkill.

Their budget dropped precipitously, while their results improved.

I’ve been a sponsorship strategist a long time, and I’ve worked with many sponsors in their quest to lower the sponsorship budget, whether driven by an economic downturn or other budgetary pressures. When I review the financials, many of them have huge leverage budgets, and I can often get them to their goal – and do it quickly – by addressing that.

For instance, a client was under a directive to reduce sponsorship spending by 25%. Their sponsorship budget worked out to be about 40% rightsholder fees and 60% leverage, so they were spending about 150% of rightsholder fees, incrementally, on leverage.

I cut the leverage budget by two-thirds, so it made up 50% of rightsholder fees. I then built them a sponsorship leverage process based on design thinking – analysis and empathy, followed by unbridled creativity. The end result was a huge amount of leverage across already budgeted channels, and a broad range of other creative leverage ideas, vetted for maximum impact for the amount spent. Their budget dropped precipitously, while their results improved.

For more on this, read How Much Should We Budget for Sponsorship Leverage.

For the full design thinking-driven leverage process (and lots more), check out my comprehensive online course for sponsors, the Corporate Sponsorship Masterclass.

Rethink experiential and onsite activations

I don’t hate experiential sponsorship leverage, nor do I hate onsite activations. They just tend to be extremely expensive and effort-intensive for the impact.

What you’re doing may be cool as hell, but when you really parse the cost vs impact of experiential and onsite activations, the maths are often a lot less cool.

Realistically, how many people will participate in some onsite activation or branded experience at an event? What percent of the total in-person audience does that make up? How much influence does that have on your overall market, including the remote fans, who don’t get to participate? How much is that costing, per person? How much bang are you getting per buck?

What you’re doing may be cool as hell – and there are some exceptionally cool things happening onsite – but when you really parse the cost vs impact of experiential and onsite activations, the maths are often a lot less cool.

Clearly, it’s not fun to cut back on these onsite activities, which people enjoy and deliver instant gratification to your brand – all those smiling fan photos you put in reports! – but when your budgets are being squeezed, you need to be pragmatic. I’m not telling you to give up onsite activities forever. In fact, there may be some much more cost-effective options to keep doing stuff onsite. But I do really want you to think through the opportunity cost before committing, because chances are, you could be doing a lot more – for a lot more meaningful impact – with that money.

Remember that the fans are feeling it, too

If your region – or the entire world – goes into recession, your markets will be feeling it, and so will the fans of whatever you’re sponsoring.

Their motivations around the property may shift. Their finances may limit access to the property. They may be looking for cheap or free options around the events, sports, cultural institutions, or whatever else you’re sponsoring. They may be feeling under stress and looking for things that bring them joy. This needs to factor into your leverage calculations, so when you’re developing empathy for that fan experience – understanding what they want, what the best and worst things are, etc – be sure you’re addressing the financial and stress angles, alongside the other meaningful things around the property.

Temper your opportunism

If you need to cut the budget, and a property just isn’t good enough to hang onto, by all means, exit. These are unpleasant choices, impacted by very real commercial realities.

What you shouldn’t do is bully rightsholders into giving you gigantic discounts, because they’re under financial stress, and you can. It’s terrible sponsor karma, and you’ll end up in a bad relationship. Unfortunately, there are still a lot of jerks who won’t hesitate to use an economic downturn as a stick to hit rightsholders with.

If a sponsorship is worth keeping in an economic downturn – it’s relevant, you’ve got strong benefits, it’s a multi-tool – then pay a fair fee, and work collaboratively on leveraging it. If it’s not worth keeping at a fair price, it’s not worth keeping.

Create and socialise a recession strategy now

As noted early in the blog, you want to be working left of boom – analysing and making moves before a crisis. This doesn’t mean just going through the steps above; it means creating and socialising a recession strategy. This strategy will include…

  • Things you’re doing now
  • Things you’ll do if a recession starts to bite
  • Things to be added – and in what order – once a recession starts to ease
  • Any resources, support, sign-offs you need in order to do the above

Be clear that this strategy is pre-emptive, and that parts of it may not be needed, but it’s been created to ensure that there’s a plan in place, just in case.

Get expert help

Cutting sponsorship budgets, and particularly auditing a sponsorship portfolio, can be politically fraught. Everyone’s got an opinion, and that includes department heads and the C-suite.

Using an external expert can be a very smart use of some of your budget.

If you’ve got a cross-departmental sponsorship stakeholder team, ensure recommendations and the strategy comes from the whole team. If you don’t have a stakeholder team, the portfolio is complex, and/or the politics are intractable, using an external expert can be a very smart use of some of your budget.

A good consultant will find efficiencies, maintain or improve your results with a leaner portfolio, insulate you from the political hits, and cost far less than you’ll save.

I’m very happy to chat with you about this. I have a long track record of creating lean, efficient portfolios in tough times. For more on that, see Sponsorship Downturn Consulting.

The upshot

None of us is wishing for a recession, and fingers crossed, we might not get one. That doesn’t mean preparing now is a wasted effort.

Most of the above strategies is about creating a lean, efficient sponsorship portfolio, using less money and more creativity around leverage. There’s no economic scenario where that’s a bad thing.

Need more assistance?

You may also be interested in my white papers,  “Last Generation Sponsorship Redux” and “Disruptive Sponsorship: Like Disruptive Marketing, Only Better“. I’ve also got a self-paced, online sponsorship training course for sponsors, covering the whole process of sponsorship strategy, selection, negotiation, leverage, measurement, and management, with lots of inclusions. Interested? Check out the Corporate Sponsorship Masterclass. I’ve also got Getting to “Yes” for rightsholders.

If you need additional assistance with your sponsorship portfolio, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive Sponsorship Systems Design for large and/or diverse organisations. Please feel free to drop me a line to discuss.


© Kim Skildum-Reid. All rights reserved. To enquire about republishing or distribution, please see the blog and white paper reprints page.

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