While the world of sport is constantly evolving, sports sponsorships have been the same for decades. Archaic methods have made sports sponsorships stagnate, and the industry is losing out big time. We think it’s time for an update.
What’s the problem with sports sponsorships? More importantly, what’s the solution? Read on as we discuss the flaws with traditional sports sponsorship deals and what can be done to improve them. Alternatively, listen to our Sports Desk Manager explain it himself in the webinar below. We guarantee that this is one you won’t want to miss.
Commercialisation has arguably twisted the way business is conducted within sporting spheres, which begs the question, are clubs being clever? Are they really grasping the power of their brand and using it to its fullest potential?
Sport as a business has become extremely lucrative in today's market for many companies that have absolutely nothing to do with sport. Why is that? It's because Sport has something unparalleled to any other form of entertainment - it appeals to the masses, and the masses keep wanting it more and more. It’s safe to say that the wealth and power of most modern sporting enterprises wouldn’t be anywhere near the levels seen today without sponsorship. This gives clubs and governing bodies power, and lots of it. However, with power comes distraction, often by numbers. So, are clubs simply underselling their brand to sponsors, or are they getting a fair deal and using the affiliation wisely?
The term ‘partnership’ is being ever-increasingly used to replace ‘sponsorship’. This is a great place to start as this change in descriptor shows that sporting bodies are actually changing the way they approach working with other companies. Throughout this article, we’re going to be quite specific in regards to the type of partnership we’re alluding to, and that is with companies similar to Currency UK in terms of being a financial service provider using a softer, more knowledge-based approach.
How current partnerships work
Every time we look to work with a sporting club, the initial proposal is almost always the same across the board. Firstly, there's a fee to become a partner, which is to be expected with a deal of this kind. Sporting clubs have an obvious, inherent value that sponsors look to tap into and that needs to be paid for, and of course, commercial directors need to hit their targets.
Furthermore, every time we receive a sponsorship proposal, it includes a long list of commercial benefits such as free tickets, signed shirts, LED advertising space, access to players, etc. For a company like ours, this isn’t necessary; we’re not a ‘quick sell’ like a gambling company or an FX Trading company, for example, and I think a lot of businesses are in a similar position. We are much more service and knowledge-led and we want that to be portrayed by our marketing. Unfortunately, people don’t look at our brand and our name and know exactly what we do. Similarly, our market isn’t front-of-brain thinking so some types of marketing are absolutely useless! For us, the sell takes time.
Here’s an example to elucidate: a fan is unlikely to look at LED advertising of Currency UK and immediately know what we do, and even if they did, they wouldn’t think ‘oh I need to exchange my Pounds to Euros to buy my house abroad, let me just do it now whilst watching the game’. Whereas, if they were looking at a betting company, it spurs the immediate thought to be to place a bet on the match. I’m not saying that the brand awareness that comes with LED advertising is unwanted, but a more specific and applicable type of marketing is much more appropriate for us, and I feel that it’s the same for many other kinds of business.
As part of a partnership, it is assumed that the club would utilise the sponsor for their own requirements, in this case, Forex. This is a saving grace for a lot of companies in our sector, as they make back lots of money, in some cases even more than the initial partnership fee they paid. This is especially true when lots of international player transfers (and payments for them) are being made. So it appears that sports clubs sometimes pay out more than what they initially receive in the lump sum at the start of the partnership, and they don't even know it! When that is the case, they're also basically giving away all the aforementioned benefits of the partnership for free.
It is often the case that partnering with a football club is extremely ego-driven, and a way for a company to have a big name associated with them. But have they benefited at all from the partnership or extracted the value on offer? We believe this current way of ‘partnering’ is both extremely out-of-date and a nonspecific approach to a partnership. It’s almost as if the entity the club doesn’t care who the proposal goes to, but rather that they’ll send it out to as many companies as possible and accept the highest bidder.
But here’s the thing, football clubs give away all the goodies that come as part of their proposal - what do they gain other than the financial element?
We’ve looked at the current problems with sports partnerships, but sport can actually be a driver for so many innovative and beneficial schemes within the community. This may seem irrelevant and unrelated to sponsorship, but the two can be intimately related, as we’ll discuss in due course.
What is the ethical aim of sport?
The aim of sport is often best summed up by sports associations and governing bodies themselves. Sport England have pledged that their aims and objectives involve ‘recognising and taking full advantage of the unique role of sport and physical activity in contributing to a wide array of policy and community aspirations, including leisure, health, and education’1.
FIFA say that their ‘mandate is to develop football everywhere and for all. We turn the success of [football] into football development and redistribute its resources to the global football community. We are investing more than ever in global football development,’2 and their vision is laid out in the image below.
It is clear from governing bodies and government policy that sport should be used as a tool to promote physical activity, a healthy lifestyle, and sustainable communities. Is it such a bad idea to incorporate this in a partnership and work towards giving something back to the community?
What should be done?
It's time that these sort of partnerships become truly bilateral and create lucrative benefits for both parties. Clubs have a huge stored value in terms of their connections, whether that be individual people, i.e. their fan base, or on a more corporate level. Even more in line with this is the loyalty that football brings with it, in the sense that, for many people, if their football club uses Company X or are partnered with Company X, then they’re more likely to use Company X over a competitor.
The question is: how do we extract the value? We’re going to explain, using an fx company like Currency UK as an example.
A proper bilateral partnership should be a combination of both club and sponsor working in tandem to extract that value inherent within any sporting team but also do it’s best to give something back to the community. In terms of FX, lots of people privately send money abroad and, obviously, businesses do exactly the same. Using a club as a marketing vehicle for this will only increase business and that’s, of course, why sponsorship itself exists.
So, when a club uses their fx company sponsor for their transfers and such, and when their fans and corporate partners use that fx company for their needs as a result of the marketing involved in the partnership, why not split that with the club? Furthermore, why not pump this extra revenue into the club’s community? This can be done as a charitable donation directly where it’s needed most, and it also creates a beautiful, marketable story for both parties who can be seen to be working closely with the community, something that sport is meant to promote.
We believe that, on many occasions, a partnership should involve a profit share, which has a number of benefits especially for a company like ours. When I talk about a profit share, I mean a slightly different take on the usual profit share. A kickback/contribution fee would be donated to the Trust/Foundation from all associated pieces of business that were introduced to Currency UK directly/indirectly from its network through the vehicle of their sporting team partner.
A profit share also creates a difference in how the service is utilised on a sponsor-to-club basis. By this I mean that the FX company actually has to care to keep the relationship and can’t just pay for relationship up front and do what they like. Risk mitigation comes into it here, as I’ll explain later, and can act as a big money-saver and risk-reducer. We don't sit in front of rate screens all day and then not bother to consult with our clients and explain to them what’s happening in the market. It’s our job to put them in the best position to make a decision.
So, what am I trying to say in explaining all of this?
The point I’m making is that, especially in the case of more international clubs, when dealing with huge international payments often linked together and over a number of years, it is so important to ensure risk is mitigated. The relationship between the FX company and the club matters and is arguably the most important part of mitigating risk. Using a broker for this is essentially like appointing a risk manager as well as a facilitator for international payments, who wouldn’t want that in any international business with lots of risk associated?
In all of this, what are we trying to do?
We’re trying to unite the commercial, financial, and community elements of a sporting body in the way we think a partnership should be. These are three extremely important parts of any business that can marry together to provide benefits for lots of different people related to a club. Whether that be fans who use our service to get cheaper currency rates when moving money internationally or the youth of the community who benefit from the donations passed back to the club on the back of the collaboration.
So why wouldn’t you want to be sure that your partner is working with you financially and commercially all under the umbrella of a more philanthropic approach?
Posted in Business Resources on Dec 5 2017