And Now, Some Words About Sponsors.

- Corporate sponsorship as a marketing tool

Becoming a backer of an event or organization can bring a wide range of benefits to a small company.

Some people viewed Rachel's Gourmet Snacks' three-year, multimillion-dollar sponsorship of two Indianapolis 500 race cars as a harebrained gamble, especially for a financially struggling small company.

Surprise, surprise. The Bloomington, Minn., potato-chip producer scored a publicity bonanza when driver Eddie Cheever, beating 30-to-1 odds and 32 other racers, won the celebrated auto race in May As Cheever, sporting a mile-wide smile, piled out of his steel-blue car, 300,000 fans at the raceway cheered and millions of television viewers watched.

"When the car was wheeled into the winner's circle and you saw 'Rachel's' on the car and on Eddie's and the pit crew's outfits, it was like magic; it was like winning the Super Bowl," says Leo Short, executive vice president of sales and marketing for Rachel's.

Since the lady 500, Rachel's-a 25-employee subsidiary of Bloomington-based Go-Rachels.Com that had gushed red ink for four straight years-has been flooded with calls from customers. New distribution outlets have been secured around the country, and employees are beaming with pride. Even if Cheever hadn't won, Short insists, the sponsorship strategy would have paid off in accelerated sales.

While such a high-stakes gambit isn't for everyone, the Rachel's story illustrates the potential power of sponsorships for small businesses. They can enhance a company's image and visibility; differentiate the company from competitors; help develop closer relationships with current and prospective customers; showcase products and services; unload obsolete inventory; and allow the company to compete more effectively against bigger firms that have much larger advertising budgets.

In addition, tickets to sponsored events can be used as incentives for employees, vendors, and customers and to promote worker loyalty And proponents say that if sponsorships are well-conceived and strategic, they can boost sales-both long-term and short-term-as they improve the community through the events they support.

"Companies are finding that sponsorships work," says Bill Charney, whose Denver consulting firm, Charney & Associates, counsels both sponsors and the events and organizations they back. "Of all the forms of marketing communication, sponsorship is the most well-received and accepted by the public."

A Few Drawbacks

Sponsorships do not always lead to smooth sailing, however. Because it's a relatively new marketing vehicle, many small companies are uncertain how to deploy it effectively.

Additionally, many of the rewards are intangible, and effective sponsorships require active participation and, often, a fair amount of money.

Plus, in these lawsuit-happy times, some companies are gun-shy about sponsorships, fearing that they will increase exposure to litigation. And some business owners justifiably worry that once they become sponsors, they will be hounded by organizers of other events.

Still, sponsorships are riding a wave of popularity. North American companies spent an estimated $6.8 billion on sponsorships in 1998, a 15 percent increase over 1997 and 60 percent more than in 1994, according to IEG Sponsorship Report, a Chicago-based newsletter that tracks marketing in the areas of sports, arts and entertainment, and causes.

The booming interest is partly a result of the success of the sponsorship-saturated 1984 Olympics in Los Angeles and 1996 Olympics in Atlanta. Also, the number of opportunities to sponsor has risen rapidly. In the past 15 years, the number of U.S. festivals and events has approximately doubled to about 50,000, according to Bruce Skinner, president of the International Festivals and Events Association in Port Angeles, Wash., which offers information, education, and networking to its members.

Another factor is a decline in government financial support for nonprofit organizations, which hold thousands of fundraising events each year. The nonprofits are increasingly turning to business sponsorships to help fill the funding void.

For instance, Greg Morris, president and founder of Pet People Franchise Systems, a San Diego-based pet-food and -supplies retailer with 55 employees, 10 company stores, and two franchisees, says that since his company first became a sponsor, non-profits have been "relentless in calling me about sponsoring their events."

It's Not Advertising

For all the rising popularity of sponsorship, many companies remain uncertain about just what this marketing instrument is and what it offers.

Sponsorship is not the same as advertising, which involves direct promotion of a company through a medium such as print, television, or radio and which can be readily quantified. Rather, sponsorship is a marketing effort that often involves active association with the organization or event being sponsored. Its aim is to create an awareness that builds an affinity for the company among the public, says consultant Charney. Companies sponsor everything from Little League baseball teams and health fairs to charity auctions and park cleanups.

Sports events are far and away the most popular object of sponsorship, according to IEG, Inc., publisher of IEG Sponsorship Report. But Bill Chipps, an IEG editor, says that business sponsors are increasingly being attracted to other types of events, such as festivals and fairs.

Some companies are also participating in cause-related marketing, a form of sponsorship that links a firm and its products or services to a group's social mission. For example, a company might develop a line of conservation-oriented products, with a percentage of sales going directly to a conservation organization.

Unlike most advertising, sponsorship often offers access to a live audience and opportunities to entertain clients and have people sample your product or service. In some instances, sponsorship may also offer more bang for the buck than advertising, says Chipps.

According to the IEG newsletter, the costs of traditional advertising continue to rise even as TV ratings and print readership decline. But the leveraging opportunities that come with sponsorship- access to an event's mailing list, for instance-provide possibilities for recouping sponsorship fees.

Still, according to IEG, it's not wise to channel a majority of your marketing dollars into sponsorship. Indeed, even the most active sponsors rarely spend more than 10 percent of their marketing budget on sponsorship.

"Sponsorship is most effective when it's an element of a coordinated marketing mix," says Charney.

Define Your Expectations

If you find yourself intrigued by sponsorship, there are some things to consider before you plunk down a hefty fee to sponsor an event or organization.

First, be clear about your expectations and goals for the sponsorship. Because many of the rewards of sponsorship can't be easily quantified, you should think through the pluses and minuses beforehand.

For instance, are you aiming primarily to boost awareness of your firm, or are you more concerned about enhancing its image? Are you looking to entertain clients or motivate your employees? Is the cost of the sponsorship worth the value received? Is the sponsorship easy to administer and staff, and can it be leveraged?

'The biggest problem companies have is unclear expectations" of what the sponsored event can provide, says Charney. "So be specific; say in the sponsorship contract that this is the consideration you're giving and this is what you expect in return."

Then, much as you would research a potential vendor or customer, do a background check on the event or organization you plan to sponsor. This review might extend to touring the organization and examining its financial stability

Talk with current and past sponsors, and ask for access to mailing lists, post-event surveys, documentation of the attendees at the event, media mentions, and the rate of sponsorship renewal.

In addition, a sponsorship agency-which may be a public-relations or advertising firm-can handle sponsorship negotiations for you for a fee. Make sure that the agency has experience with firms of your size and type.

Finding A Good Match

When Digital Corral Corp. in Denver elected in 1996 to become a sponsor of the city's Cherry Creek Arts Festival, the primary selling point was the professionalism of the event, says Dale Bradley, president and CEO of the $2 million computer-services firm.

"Every detail [at Cherry Creek] has been thought out," says Bradley, 26. "Cherry Creek is like a well-run business. It's in good financial shape, and it takes care of its sponsors, which can be likened to taking care of clients or vendors."

Despite Digital Corral's satisfaction with the Cherry Creek sponsorship, the company decided not to renew for 1999. Bradley explains that he wanted to get more involved in marketing that directly promotes technology. For example, the firm is considering ways to help developmentally disabled and underprivileged children improve their computer literacy

Generally, the audience profile and image of a sponsored event should match up with your company's current and prospective clients, says IEG's Chipps. It makes sense for a music shop to sponsor a blues festival, for instance, but a brewery's sponsorship of a children's fair might be controversial.

"You could take a bigger [financial] hit with a badly matched sponsorship" than from the sponsorship fee, says Bill Johnstan, who teaches management at Babson College in Wellesley, Mass.

If the event or organization you plan to sponsor is sound and offers the right demographics and image, there are two other things to bear in mind before committing to a sponsorship, says Beth Seigenthaler, president of Seigenthaler Public Relations in Nashville, Tenn.

First, she says, your firm should seek exclusivity-meaning it should preferably be the only company from its industry represented at the event.

Second, it's good if your firm can be the dominant sponsor of a small event, says Seigenthaler, who has advised dozens of small firms on sponsorships. A company's name and contributions tend to get lost in huge gatherings that have dozens of sponsors, she says. And small events such as neighborhood festivals are often quite inexpensive to sponsor-in some cases, fees can be $1,000 or less.

One proponent of the big-fish, small-pond approach is Greg Hennes, CEO of Interior Resources, a 40-employee art consulting and custom-framing firm in Golden Valley, Minn. For the past several years, Hennes' company has been the only sponsor of a charity auction that benefits an adoption service.

Sole or dominant sponsorship "allows me to be in charge of an event," says Hennes, whose firm is the dominant sponsor of another charity event. "And because of that position, we get most of the attention."

Hennes acknowledges that the time and energy required to be a sponsor can divert attention from day-to-day business, but he believes that if a company is going to be a sponsor, it's important to choose an event or organization that the owner and the employees believe m.

"If you believe in the event, it shows in how much work you're putting in and in the fun you're having," Hermes says. "And that will have a spillover effect on how much fun those attending the event will have." And if the attendees enjoy themselves, he says, they'll be more likely to remember the event-and the sponsoring firm.

When negotiating the details of a sponsorship, be clear on the costs and the level of participation. And feel free to offer creative ideas to get the most out of your sponsorship.

The worst mistake a company can make is signing a check for the sponsorship fee and then walking away without any further participation, says Lance Helgeson, managing editor of IEG Sponsorship Report. Companies typically derive more mileage from their investment by involving their employees and customers and using varied means to promote the sponsorship, he says.

For instance, potato-chip manufacturer Rachel's garnered substantial pre-race publicity by distributing news releases about its Indy 500 sponsorships. Rachel's plans to further capitalize on the publicity windfall it received from Cheever's win by scheduling driver appearances at distributorships and developing point-of-sale materials reminding consumers of the sponsorship.

"Just putting up a sign of your company at an event isn't enough," says Helgeson. 'You have to leverage your sponsorship-spending money on advertising and promotion, for instance-so people know you're a sponsor. In fact, if a company spent $10,000 for a sponsorship fee, it should count on spending two to four times that on leverage."

One way that some firms leverage is by offering samples of their product or service at the sponsored event-sometimes shedding obsolete inventory For instance, PetPeople employees dish out dog-food samples and company literature at events such as pet fairs.

Digital Corral received two trade-offs for designing and maintaining the information kiosks at the Cherry Creek Arts Festival: a sponsorship-fee waiver and opportunities for festival visitors to electronically request literature about the company. About 500 people did, and Digital Corral sent them brochures.

Many small firms have discovered that sponsorships can also be used to motivate vendors, distributors, and merchandisers. For instance, a microbrewery sponsoring a festival might supply liquor stores with tickets based on their sales of the microbrewery's beer.

Measuring The Results

Although sponsorships are often difficult to evaluate, one way to quantify a sponsorship's benefits is to observe sales during and immediately after a sponsored event.

Another way is to conduct surveys on consumer awareness of your company before and after a sponsorship. And there are yet other ways to assess results. Among them are tallying media coverage of your sponsorship; charting the number of people who visit your company's booth; and issuing coupons at an event and recording the number of coupons redeemed.

"An increase in sales shouldn't be the sole way you evaluate a sponsorship," says Seigenthaler. "But if you want increased sales to be one measure, then before the event you should define by how much and over what period."

However, it's not easy to assess the bottom-line effect of some sponsorship activities-for instance, hobnobbing with current and potential clients.

Despite the evaluation and other challenges involved with sponsorships, participation among small businesses will continue to rise, believes consultant Charney. "Sponsorship is no fad," he says.

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