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Go Beyond Faith When Making Decisions About Sponsorships and Events By Kevin Clancy
and Peter Krieg Executive Summary
"It finally sank
in on Madison Avenue in 2005 that the 30-second commercial is fading as
a means of hawking products and services," proclaims The Wall
Street Journal (WSJ) in its first edition of 2006. And Carl Johnson,
former chief operating officer at advertising agency TBWA Worldwide, tells
the New York Times: "It's almost accepted that the model is
broken and it's time for a new approach. No one comes to us for more of
the same. Our last resort is an ad, if we can't think of anything else."
The Economist echoed his sentiments in a June 2004 article: "The
advertising industry is passing through one of the most disorienting periods
in its history." These statements certainly capture the mentality of many marketers who have just plain lost confidence in traditional media, particularly TV advertising. Although they employ different methodologies, many studies have come to the same conclusion: The vast majority of traditional advertising programs yield disappointing results.
A few years ago, reports such as these wouldn't have fazed marketers. But CEOs and chief financial officers (CFOs), in this age of accountability, demand evidence of marketing's contribution to the bottom line. They have marketers running from traditional media-like scalded dogs from a fire-into nontraditional media such as branded entertainment, simulated word of mouth, and of course sponsorships and events. Is This the Promised
Land? According to Sponsorclick,
a global sponsorship marketing consulting company, 54% of Fortune 500
companies report that sponsorship is now "an integrated part of the
marketing mix." Sponsorships and events are the fastest growing communications
channels, with spending growth at $43.1 billion in 2005 and forecasted
to top $48 billion in 2006, according to Sponsorclick. IEG, a Chicago
sponsorship industry information resource, estimates that North American
companies will increase spending by double digits (the first time since
the go-go days of dot-coms), to $13.39 billion this year alone. And a
recent Intellitrends Survey from the Event Marketing Council reports that
more than 22% of the total marketing budget is devoted to events, a number
that is consistent across industries. This explosion in
spending might lead one to conclude that marketers have some significant,
fact-based insights into the ROI and brand impact of sponsorships and
events. Instead, the opposite is true: Marketers have no more of a clue
what they're getting from sponsorships and events than they did with TV
50 years ago. Formula One.
The situation described in a recent WSJ article, about Michelin
and Bridgestone's Formula One (Grand Prix racing) sponsorship, is a common
one. Both tire manufacturers state that Formula One helps them sell more
regular tires. But from a marketing standpoint, it's unclear whether either
company is winning anything. People familiar with the numbers claim that
Michelin spends about $70 million a year on Formula One, and Bridgestone
spends more than $100 million. Yet neither company can point to hard evidence
of an impact on sales and profits. Snapple. The
case of the massive melting popsicle is also a familiar situation. To
launch the Snapple on Ice popsicle, Cadbury Schweppes Americas (headquartered
in Plano, Texas) staged a major outdoor event in June 2005, in New York:
It attempted to make it into Guinness World Records by constructing the
world's largest popsicle. Unfortunately, the company's bid promptly melted
in the day's blistering 80° F temperature. It had to pay for workers
to hose down the area after waves of sugary water rushed into the surrounding
streets, and for additional security to protect the public (at what must
have been a significant cost). Media coverage generally mocked the mishap.
Nevertheless, Cadbury considered the event a success. "We gave away
ice pops and Snapple to 45,000 [consumers], but who knows how many more
we reached?" reported a company spokesperson. Cadbury, like the
majority of marketers today, relies on head count or "eyeballs exposed"
to measure the ROI of sponsorships and events. According to PROMO Magazine's
2005 Event Marketing Survey, 51% of marketers measure ROI this way. The
problem is that head count is barely better than the total audience reached
for a TV buy, or circulation figures for a magazine or newspaper. It offers
little if any information about the short- and long-term effects of a
sponsorship, and no insight into how it's working. For instance, is awareness
translating to brand preference? If not, then why? The Olympics.
Unfortunately, the results of New York research firm Gfk NOP's "Power
of Olympics Advertising" report are not unusual. When asked to name
any official Olympic sponsor, only 33% of American consumers could do
so on unaided bases. McDonald's, a perennial sponsor, fared the best with
a 10% recall. When prompted with specific names, 53% of consumers recalled
Nike and Visa. This was great news for Nike (which wasn't an Olympic sponsor),
but not so great for Visa and the other 11 official sponsors: Each paid
upwards of $50 million for the rights, as well as significant dollars
on advertising during the games to promote the sponsorship. There's mounting
evidence that most sponsorships and events might prove just as disappointing
in the ROI department as the traditional media it's supposedly replacing. Although their current spending habits might indicate otherwise, most marketers probably aren't completely confident or comfortable making decisions about sponsorships and events based on little more than faith (which grows shakier with each passing day) that they will perform better than TV and other traditional media. We know that CEOs and CFOs surely aren't. With modest diagnostic and prescriptive information about the performance of sponsorships and events, marketers have no guidance on steps they can take to fix problems and improve execution. Thankfully, the days of faith-based media selection—as far as sponsorships and events are concerned—are quickly coming to an end. Converting Faith
to Fact In hot pursuit of answers, "developing pre-and post-event measuring attributes has become a full-time job for many brands," according to a PROMO Magazine report on event marketing. For instance, ING (a financial services company headquartered in Amsterdam) spent significant time developing a research process to evaluate sponsorships and events, which it continues to fine-tune. "It's vitally important," explains Steve Baskins, ING's head of advertising and sponsorships. "We wouldn't be able to justify the sponsorships without some level of effectiveness. We measure every move we make." The illustrative model of sponsorship effectiveness below demonstrates how marketers can think about sponsorship and event program inputs that influence performance and outputs that gauge performance.
Pretesting.
For decades, companies have pretested new products and services in concept
form before investing substantial time and money in product introductions.
Given the explosion in the number of global, national, regional, and local
opportunities, pretesting is an equally valuable tool for guiding investment
decisions in sponsorships and events. To screen different sponsorship
ideas, members of the target audience are exposed to a sponsorship concept
(just as they might be in pretests of new products or services) and asked
questions about the event, the sponsoring brand, and brand preferences.
For example, study participants might read a one- or two-paragraph description
of Orange, Calif.-based mortgage lender Ameriquest's sponsorship of the
Rolling Stones tour and then answer questions about what they think of
the band, how they feel about Ameriquest sponsoring the tour, and how
likely they are to contact Ameriquest the next time they're in the market
for mortgages. As with traditional
concept testing of products and services, the drawback to testing only
a few concepts is that the result rests on having picked the best few
to test in the first place. Next generation pretesting systems allow companies
to test different configurations of sponsorships (not just a few concepts
individually) in competitive contexts, and use batteries of measures to
capture the likely effects on consumer behavior and ultimately ROI. Ameriquest might test
three bands whose tours it could sponsor (e.g., The Rolling Stones, U2,
Green Day), four National Collegiate Athletic Association (NCAA) sports
(e.g., football, basketball, baseball, women's gymnastics), five entertainment
events (e.g., the American Music Awards, the Academy Awards, the network
premiere of a Hollywood blockbuster, the Golden Globes, the network broadcast
of a Faith Hill holiday concert), and all potential configurations/interactions
to identify the options with the biggest impact. For instance, the effectiveness
of the Rolling Stones sponsorship might be enhanced or hurt by involvement
with the American Music Awards. Although the more conventional kind of
concept test could be used as a go/no-go decision-making tool on an opportunity
already on the table, the goal with this more sophisticated form is finding
the best opportunities and lineup of opportunities from the constellation
of possibilities. Short-term ROI measurement. For many sponsorships and events, it's possible for companies to:
For instance, a company
might discover that print advertising—particularly in magazines—complements
the performance of sponsorship-related advertising. To do this, "cutting
edge marketers are increasingly turning to marketing mix modeling in order
to demonstrate financial proof of performance to bottom-line oriented
CEOs and CFOs," explains John Nardone, executive vice president at
Marketing Management Analytics. In a nutshell, marketing
mix modeling is a mathematical representation of a brand or product's
business environment, which isolates each factor (whether a controllable
marketing element or an environmental factor such as interest rates and
weather) that has a significant impact on sales or leads. Marketers can
use it to look backward to understand the ROI of the marketing factors,
or forward to forecast performance. For example, one Fortune 500 health-and-beauty-aids
company is measuring the ROI of its National Association for Stock Car
Auto Racing (NASCAR) sponsorship to determine how much to spend next year.
And a major consumer packaged goods company measured the ROI of its NCAA
sponsorship—and the interactions between this sponsorship and other
media vehicles—to optimize its spend across the marketing mix. There are three major requirements for modeling the short-term ROI of a sponsorship.
A marketing mix model
enables a company to attribute a percentage of sales to sponsorship activity,
define an ROI score, and establish an apples-to-apples comparison of a
sponsorship with all other marketing activities. It also produces marginal
ROI curves (diminishing return curves) that marketers can use as inputs
into optimization and forecasting tools, to determine the most efficient
allocations of budgets across their marketing mixes. Long-term ROI measurement.
One of the great debates currently raging in marketing circles is whether
sponsorships and events are sales-building or brand-building tools. Ideally,
they should improve profitability by increasing both sales and brand equity.
Furthermore, given the limited-time nature of most sponsorships and events,
considering only their short-term effects on different ROI measures provides
incomplete pictures of their value. Brand equity, like
IQ and SAT scores or price/earnings ratio, is a number. It's an overall
assessment of the goodwill associated with a brand, which is reflective
of past marketing performance and predictive of sales and profit potential.
It has different components that companies can study individually, to
diagnose its contribution to changing overall equity and market share
over time. Knowing a brand's equity—relative to competitors—and
what drives it enables a marketer to develop and implement stronger marketing
programs. By quantifying the direct impact of a sponsorship or event specifically
on brand equity, a marketer has a clear picture of a particular opportunity's
effectiveness as a brand-building tool. Pre-post tracking research. Having concrete ROI numbers is certainly important for demonstrating performance to CEOs and CFOs, but where do marketers go from there? And what if ROI is lower than expected? Part of making marketing more accountable—and pleasing senior management—is being able to explain the reasons for failure and offer a plan to turn around negative trends. Pre-post tracking research analyzes the "hierarchy of effects": the chain of events that occurs after buyers are exposed to marketing communications. In a perfect world:
Sadly, as most marketers have realized, the world isn't perfect. Often, there are missing links in this chain. Suppose Ameriquest
does pre-post tracking research after each of five stops on the Rolling
Stones tour. It asks study participants questions such as whether they're
aware of Ameriquest's sponsorship (e.g., seen/heard advertising promoting
it), what they can recall about the ads (messages in particular), what
their perceptions are of the Ameriquest brand, and how likely they are
to contact Ameriquest the next time they need mortgages. Analysis might reveal
that—wow—Ameriquest achieved record-level awareness of its sponsorship
and message, "Not your average mortgage company." Unfortunately,
that message didn't resonate with the target; it had no impact on perceptions
of and attitudes toward the brand, so preferences and intention to contact
Ameriquest didn't change. Again, this situation is hypothetical, but it shows that by pinpointing where problems (major or minor) occur, marketers can diagnose difficulties and more readily identify appropriate remedies. Here, Ameriquest would know that it needs to work on developing a more compelling message, to change brand perceptions and purchase intentions. What Does History
Tell Us? There are engaged
fans, greatly involved in the product category. Involvement is a characteristic
of the consumer, not of the product or service. Some people will spend
almost as much time weighing the merits of toothpaste brands as others
do choosing new cars. The larger the proportion of a particular sport
or event's fan base that is heavily involved in a product category, the
more likely the sponsorship is to have an impact. Many NASCAR fans, for
example, are heavily involved in the engine oil category; they spend time
investigating choices and are knowledgeable about brand differences. The event is supported
by serious money (i.e., substantial investments in activation and promotional
activities). According to Sponsorclick, 33% of marketers spend less
on sponsorship activation than on rights fees, 13% use a 1:1 rights-to-activation
ratio, 14% use a 1:2 ratio spend rate, 10% spend three-to-five times the
amount on activation than on rights fees, 5% spend five times on rights
fees, and 25% don't know what they spend. Although our analysis didn't
reveal the magic ratio of fees to activation, if a company isn't investing
at least equally as much in promoting the sponsorship to the target as
in the rights to an opportunity, then it will see little or no effect. The company uses
the sponsorship to communicate a clear message about the brand to a target
excited by the sponsorship and responsive to the brand. Linking a
brand to a property like the Olympics or the Sundance Film Festival—to
build awareness for the brand name only—is a poor investment of marketing
dollars, and a lost opportunity to speak to a group of buyers ready to
listen. Finding a compelling message is as critical to the success of
sponsorship and event marketing as appropriately spending on activation.
For example, Fidelity Investments sponsored Paul McCartney's 2005 U.S.
tour. The tour's theme was, "Never stop doing what you love."
Fidelity's message was, "Let us plan the next stage of your life."
For McCartney's predominantly baby boomer audience (who are thinking about
retiring, if not in the process of it), Fidelity's communication that
it could help them continue doing what they love likely resonated deeply. There is a clear
link between the product and sponsorship. The connection is pretty
clear in iPod sponsoring the Grammy Awards, Mott's sponsoring the Wiggles'
U.S. tour (a popular kid's musical group), Michelin sponsoring Formula
One, and a "clean, green" energy company sponsoring the tour
of a musician with a well-publicized penchant for the environment. But
when the connection becomes more subtle or stretched (e.g., a fast-food
company sponsoring the Olympics, a breakfast cereal sponsoring NASCAR,
a national bank sponsoring the NCAA basketball "March Madness"
tournament), the opportunity's effectiveness begins to decrease. If it
takes longer than five seconds to explain the connection between a brand
and an opportunity, then most target buyers aren't going to get it. Granted, our sample was small, but it certainly is illustrative of what marketers can discover by examining common attributes of effective sponsorships and events. Nontraditional
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