Sponsorship and Brand valuation in sport: Understanding its true value
Sports is a massive industry, which involves high levels of investment into sports sponsorship and the inherent opportunities and risks involved, often a lot of money can be left on the table. Sponsorship is no different from any other form of marketing expenditure - it requires clear and concise evaluation against its aims to justify its existence and ultimately its associated expenditure.
Sports Sponsorship
Sports sponsorship and its complementary activation actions can be described as one of the most effective marketing tools. The passion and interest that sports stimulate and its less intrusive character than traditional advertising, has positioned sponsorship as an extremely efficient discipline within the marketing field.
The real revolution of sponsorship all stemmed from initial TV coverage of sporting events that date back to 40s and 50s. With time, sports events were being broadcasted globally, giving brands the opportunity to be seen all around the world. Nowadays, sports sponsorship has become international, as depicted by the numerous brands that sponsor clubs or competitions abroad. For example, major Premier League clubs such as Arsenal, Chelsea, Manchester United and Manchester City have first sponsor companies from the United Arab Emirates, Japan, and the USA. In addition, while newspapers and sports brands were the first sporting event sponsors, sports sponsorship now clearly appeals to brands from a diverse range of industries.
Sports sponsorship has been increasing for the last 10 years and will only become more valuable as the years continue with technological advances being made, changing the whole dynamic of content exposure for sporting fans. While sports continue to attract many people to stadiums, digital advancements and the social media expansion have brought new possibilities for brands to increase their visibility and improve their sponsorship message. In this context, brands have been forced to adapt to this evolution in sponsorship.
Value Based Sponsorship Approach
A valuation-based approach to sponsorship evaluation provides a practical, logical, and commercially driven basis for assessment. Through an approach that establishes linkages between changes in brand equity, stakeholder behaviour and ultimately business and brand value, a solid platform of insight to inform future sponsorship decision making.
Understanding a sponsorship’s contribution to business performance (value) through a discounted cash-flow valuation model provides true firepower at the negotiation table with existing and potential sponsors.
Importance of Brand Valuation within sport
One of the most valuable assets a sport entity possesses is its brand. However, existing sport branding research has largely examined brands at an individual level and not taken into account the relationships between connected brands or the actual behavioural outcomes of branding.
The importance of brand equity is often financially expressed in the sport industry reports. An example is that the top 20 European football teams generated €8.2bn in revenue during the 2017/2018 season, while the combined brand value of the Big 5 European football leagues (England, Spain, Germany, Italy, and France) exceeded €19.9bn in the 2018/2019 season. Social media platforms have also helped sport organizations and individual athletes to increase their brand values, gauging the interest of fans, teams, sponsors, and other stakeholders world-wide.
With unexpected changes occurring in the world, the sports industry is constantly needing to adapt and many businesses within the industry have maintained, and some have even improved their brand value, taking advantage of technology and other factors that have become of value within the past couple of years due to the Pandemic. This allows sports sponsorship to become more effective and valuable due to the global reach that it has within the virtual sports set up, stepping away from only being exposed to fans through stadium attendance. This raises the question of what sports sponsorship and brand valuation will look like in the future?