Ask three experts to estimate the size of the UK sponsorship market, and they will give you three very different multimillion-pound sums. But whatever figure you go with for the total cost of rights fees, it does not come close to the true amount that is spent around such activity.
The common perception has been that whatever the initial cost of a deal, a sponsor will spend about 150% more in leveraging the association. This now appears to be a conservative estimate, with many brands spending closer to two or even three times the initial rights fee. Such expenditure has meant that the sponsorship industry has had to grow up quickly in proving a return on investment. In previous years, sponsorship had been justified on its sex appeal and corporate hospitality opportunities. This is no longer enough to persuade brands to part with sizeable chunks of their marketing budget, and in recent years the industry has taken major steps toward developing sponsorship as a sophisticated marketing vehicle.
'The days of the chairman's whim dictating sponsorships are largely behind us,' says Karen Earl, managing director of Karen Earl Sponsorship, whose clients include Royal Bank of Scotland and Coca-Cola. 'There is much greater understanding, both from the client and agency side, of what can be achieved if the right approach is adopted. Clients are eager to use sponsorship as a key element of their marketing strategy, which is a direct result of the industry becoming more sophisticated and proving its worth.'
The ability of sponsorship to deliver on many fronts has meant that agencies offer a variety of skills, from PR to rights negotiation, with many specialising in one element of the sponsorship mix. As well as the increased sophistication of agencies in exploiting sponsorship's potential, the rise in the use of the medium can also be linked to the need for brands to find new ways to market to consumers.
'The bombardment of advertising messages presents a challenge for marketers to achieve engagement with their message,' argues David Peters, managing director of Carat Sport. 'If advertising's key strength is its intrusiveness, sponsorship's biggest benefit is its ability to engage consumers through brands associating themselves with the consumers' passions and interests.'
There is an ongoing struggle to educate clients about how sponsorship fits into the marketing mix. 'It should not be seen as a direct replacement for advertising, but as a platform from which a range of marketing activity can be initiated,' says Ben Wells, account director at Redmandarin, which works with Philips and Unilever. 'Too many brands see it as another channel like direct marketing or sales promotion.'
Strength in numbers
Sponsorship can be used to raise brand awareness or drive sales, but, Earl argues, it cannot work in isolation. Sponsorship agencies need to have regular contact with a client's other agency partners if they are to deliver true value.
Most clients that misunderstand sponsorship are not regularly active in the industry, but there is also a feeling among agencies that many regular sponsors have bad habits. One of the most damaging has been the failure to establish clear goals and evaluate an association before signing up. Many brands sign deals and then look at how to leverage them, but if the initial fit is wrong, the sponsorship stands little chance of success.
'Evaluation methods are a major issue if we are to convince brands to spend more,' says Ben Pincus, chief executive of The Works London. 'There are a lot of good measurement tools that can accurately tell a client what a property can deliver.'
The past few years have been dominated by debates about the need for a single industry-wide measurement tool to prove sponsorship's value to clients, but many now see this as a red herring. 'You can't use a single tool to evaluate sponsorship,' states Steve Martin, managing director of M&C Saatchi Sponsorship. 'Every deal is unique in terms of what the client wants to achieve and should be treated as such. By setting clear goals before you sign up, you can evaluate as you go along.'
Redmandarin's Wells agrees that evaluation techniques should be unique to each sponsorship. 'There are varied goals for a sponsorship, not only between brands, but also between departments within the brands. To try to push a single measurement device onto all these different strategies is impossible, not to mention impractical.'
Earl believes the myth that sponsorship cannot be measured has been largely dispelled, but thinks that too many brands are still evaluating after the activity has taken place. 'Ongoing evaluation allows you to ensure that the sponsorship is consistently delivering on your objectives, which also enables you to adapt if things aren't going according to plan,' she points out.
Whatever the evaluation technique, it is clear that brands are becoming more insightful in their sponsorship decisions. Agencies are being appointed earlier in the process - in some cases up to a year before signing - meaning an increase in consultancy work in matching a sponsor to a property. Previously, much of a sponsorship agency's role had been in integrating and event-managing the association once a deal had been struck. Other issues, such as organising access to players if it is a sports tie-up, also need planning in advance if a sponsorship is going to have its greatest impact.
Anthony Wagerman, head of group marketing and communications at Travelex, which undertakes a variety of sponsorship activities, firmly believes in evaluating the sponsorship fit. 'Consumers are becoming more cynical about simple branding initiatives, so sponsorships must offer more. We get sponsorship offers every day and most are wide of the mark in terms of fitting with our brand character. We are looking for a creative and innovative approach that truly extols our brand values, such as our sponsorship of the Royal Opera House.'
The downside of the increase in sponsorship activity has been that the most popular properties have become cluttered, making it harder for a brand to benefit from the link. This is particularly true in sports such as football which are extremely expensive to get involved with and equally difficult for brands to derive true value from.
'There is a huge issue around maximising rights, particularly in the bigger sports properties,' says Martin. 'A lot of brands pay for everything and only have the budget to exploit, say, 60% of the rights. The bigger shirt deals in football are a classic example where you pay £5m for all the rights and don't use £2m worth. Why not pay only for what you need?'
While many brands are clamouring to get into the top sports properties, there is a lack of understanding among clients of the value of some smaller sponsorships. 'Clients still can't get their heads around the idea that some of the niche properties can really deliver,' says Aidan Day, managing director (Western Europe) of Octagon, whose client Zurich Financial Services has backed rugby union's Premiership. 'You can get much more targeted marketing through these sponsorships at a fraction of the cost of bigger vehicles. There is still a lot of gut instinct being used when clients choose which sponsorship to sign up for - they automatically gravitate toward the sexier properties as opposed to the ones that could work best for them.'
The clutter abundant in sport has also meant an increase in sponsorship of events in the arts, education and, particularly, music. Many brands, including Carling, Heineken and Coca-Cola, are now fighting it out to be the primary brand associated with music sponsorship.
The Works London has set up its own music sponsorship division, Jungle Jim, which has already worked with Tiger Beer and Heineken on branded events. 'At the moment, music is nowhere near as cluttered a sector as sport, which makes it very attractive to potential sponsors,' says Pincus. 'It also mirrors sport's passion factor, which is one of the core reasons why brands get involved in it. We will see an increasing amount of activity in this area in the future as brands try to own the space.'
The potential for growth in the sponsorship arena remains strong. One need only look at the comparatively small number of FMCG brands active in the area to see that potential. Now the industry has grown up and can prove that it is delivering real value to clients as a business tool, the likelihood is that its uptake will rise exponentially.
THE SARBANES-OXLEY EFFECT
A number of sponsorship agencies could not be placed in the league table due to their ownership by US parent companies. Such agencies are affected by the US Sarbanes-Oxley Act, designed to clamp down on financial misinformation, which prohibits the financial information firms are allowed to make public. These figures can be obtained from Companies House, but in the majority of cases cannot be separated from the overall income and turnover of the parent company. The biggest omission from this table is sports marketing giant IMG, for which it has proved impossible to extract sponsorship activity from the rest of its business. Other agencies for which information could not be found include 141 Premiere Sports and Entertainment, Performance Sport and Entertainment and Hill & Knowlton Sports Marketing.
TOP SPONSORSHIP AGENCIES 1-10
Agency Fee income Fee income Chng
2004 2003 (%)
Octagon Marketing* n/a 4,796,000 n/a
1 Fast Track Sales 4,178,363 3,840,141 9
2 The Works London 3,300,743 2,034,382 62
3 EdComs 2,945,484 2,330,313 26
4 The GEM Group (Europe) 2,429,934 2,386,410 2
5 Karen Earl Sponsorship 1,958,182 2,302,586 -15
6 Redmandarin 1,609,356 982,664 64
7 WSM Sports 1,190,000 1,600,000 -26
8 Capitalize 887,499 785,464 13
9 M&C Saatchi Sponsorship 804,000 1,228,000 -35
10 Benchmark Sport 415,000 235,000 77
Agency Turnover Turnover Chng
2004 2003 (%)
Octagon Marketing* n/a n/a n/a
1 Fast Track Sales 5,426,189 5,068,474 7
2 The Works London 9,675,214 7,268,655 33
3 EdComs 5,686,491 5,030,145 13
4 The GEM Group (Europe) 5,233,738 4,977,140 5
5 Karen Earl Sponsorship 5,841,492 6,572,604 -11
6 Redmandarin 1,719,386 1,252,790 37
7 WSM Sports 1,380,000 1,750,000 -21
8 Capitalize 2,157,043 1,982,289 9
9 M&C Saatchi Sponsorship 1,335,000 2,245,000 -41
10 Benchmark Sport 1,300,000 650,000 100
Agency Staff Brands Rights
Octagon Marketing* 60 90 10
1 Fast Track Sales 50 25 75
2 The Works London 34 100 0
3 EdComs 38 100 0
4 The GEM Group (Europe) 40 93 7
5 Karen Earl Sponsorship 30 100 0
6 Redmandarin 13 100 0
7 WSM Sports 8 41 59
8 Capitalize 16 82 18
9 M&C Saatchi Sponsorship 12 100 0
10 Benchmark Sport 8 35 65
Founded 1998. Subsidiary of Interpublic. MD Aidan Day. Activity
breakdown not disclosed. Clients include Zurich, IBM, Mastercard.
1 Fast Track Sales
Founded 1998. Subsidiary of Quink Music BV. MD Alan Pascoe. 10% PR,
30% consultancy/rights negotiation, 25% integration, 35% event
management. Clients include Volvo, Camelot, Barclays Capital.
2 The Works London
Founded 1997. Privately owned. CEO Ben Pincus, MD Clare Foot. 20% PR,
20% consultancy/rights negotiation, 30% integration, 30% event
management. Clients include SAP, Heineken, Canon.
Founded 1995. Privately owned. CEO Nick Fuller, MD Martin Finn. 26%
consultancy/rights negotiation, 69% integration, 5% event management.
Clients include BT, Army, NSPCC. www.edcoms.co.uk
4 The GEM Group (Europe)
Founded 1981. Subsidiary of CSS. Chairman Marcus Robertson, MD Kate
Waterfall. 10% PR, 2% consultancy/rights negotiation, 68%
integration, 19% event management. Clients include Vodafone,
Powergen, B&Q. www.gemgroup.com
5 Karen Earl Sponsorship
Founded 1984. Subsidiary of Incepta. Chairman/MD Karen Earl. 25% PR,
25% consultancy/rights negotiation, 25% integration, 25% event
management. Clients include Royal Bank of Scotland, Coca-Cola,
British Airways. www.karen-earl.co.uk
Founded 1999. Subsidiary of Huntsworth. Joint CEOs Sally Hancock,
Chris Roe. 80% consultancy/rights negotiation, 15% integration, 5%
event management. Clients include Philips Electronics, Unilever,
7 WSM Sports
Founded 1999. Privately owned. Chairman/MD Andrew White. 7% PR, 27%
consultancy/rights negotiation, 54% integration, 12% event
management. Clients include Brit Group Services, Aberdeen Asset
Management, Nobok. www.wsmsport.com
Founded 1996. Privately owned. Managing partner Rupert Williamson, MD
Richard Moore. 38% PR, 25% consultancy/rights negotiation, 2%
integration, 35% event management. Clients include Yamaha, Bacardi,
Hastings Direct. www.capitalize.co.uk
9 M&C Saatchi Sponsorship
Founded 1997. Subsidiary of M&C Saatchi UK. MD Steve Martin. 50% PR,
10% consultancy/rights negotiation, 20% integration, 20% event
management. Clients include Orange, Coca-Cola, Reebok.
10 Benchmark Sport
Founded 2000. Privately owned. Chairman/MD Nicholas Keller. 33% PR,
33% consultancy/rights negotiation, 33% event management. Clients
include Sport England, Kooga, GLA/London 2012. www.benchmarksport.com
*This figure refers to fee income derived from Octagon Event Marketing
and Octagon Sponsorship Consulting only. Companies House data provided
by Willott Kingston Smith for agencies affected by the Sarbanes-Oxley