Corporate Sponsorships

Corporate sponsorships are arrangements in which corporations pay for the privilege of publicly attaching their names to products, events, venues, causes, and even people. Sponsorships can build corporate reputation by capitalizing on the positive associations publics might have with the things being sponsored, but their value (either to reputation or to corporate bottom lines) is notoriously difficult to measure.

In the early days of television, broadcast advertising essentially began as corporate sponsorship; television programs sometimes even included the names of their corporate sponsors in their program names (e.g., Texaco Star Theater). Though broadcast television’s business model is still similar (i.e., corporate advertising underwrites or “sponsors” much of the cost of programming on nonpremium television channels), the notion of “corporate sponsorship” has narrowed to become something separate from broadcast advertising. This entry examines what sponsorship is and what sponsorship is not. Then it discusses what corporations sponsor and why, the ethical questions surrounding sponsorship, and practical critiques of sponsorship. The entry concludes with a discussion of the outlook for sponsorship.

What Sponsorship Is

Sponsorship happens when a corporation exchanges money for a visible, public link to some public good that exists outside the corporation. A company might, for example, donate money to help promote a 5K run to benefit breast cancer research—in exchange, the company name would appear on banners about the event and possibly even on T-shirts worn by the runners. Some sponsorships are more tangible and enduring, especially sponsorships of buildings and places.

What Sponsorship Is Not

Sponsorship requires public credit, which distinguishes it from some other forms of corporate giving or support of public goods. Cause-related marketing, for instance, attaches a corporation’s name to some good cause and generally results in a donation to that cause; it also, however, allows the company to make money. A consumer products company, for instance, might market specially packaged items, for which the corporation donates some small amount to charity from the purchase price. This arrangement attempts to associate the corporation with good causes but at a very small cost and maintaining a financial benefit for the corporation. Cause branding is a focused combination of corporate giving whereby a corporation tries to be associated with a primary type of good work or corporate social responsibility: Avon’s connection to breast cancer research or the Ronald McDonald House charity supported by McDonald’s are good examples of this kind of focused program that might include some combination of sponsorship, cause-related marketing, fund-raising, and other kinds of corporate communication. Philanthropy differs from corporate sponsorship because it requires no recognition or publicity—while there might be some credit given (it need not be anonymous), the giving does not come with strings attached requiring public recognition, mention of the sponsor on signs or flyers, or other kinds of prearranged acknowledgment.

What Corporations Sponsor

Sponsorship is typically connected to something generally accepted as a public good. Corporate coffers frequently fund charitable organizations and events: grants for schools, education-related materials and technology, medical research, public campaigns against social ills, and the like. But sponsorship is also often linked to entertainment—a less altruistic but still publicly valued commodity.

Corporate money commonly supports the arts, sports, and other kinds of recreation. In the arts, sponsors underwrite symphonies, operas, art and museum exhibits, and performance series. Venues for the arts are often sponsored as well—concert halls, museum spaces, and auditoriums. In sports, at the most local level, sponsorship can fund children’s sports leagues, community playing fields, and school athletic facilities. At a broader and more expensive level, corporate sponsors pay to attach their names to arenas, stadiums, racing series, tournaments, specific games and championship events, race cars, trophies, and awards. The Tostitos Fiesta Bowl (an American college football game) and the Kentucky Derby Presented by Yum! Brands (America’s most significant horse race and an example of “light branding,” where the sponsor’s name comes after the event name rather than before) illustrate the type of sponsorship increasingly prevalent in sports. Other kinds of recreation and quasi-public locations receive sponsorship as well—parks, convention centers, and exhibition spaces.

Sponsorship can even support people. Sometimes, the people sponsored are taking on a very altruistic task (e.g., the Canadian Terry Fox’s epic run to raise money for cancer research). At other times, they are highly paid professional athletes, in disciplines from cycling to tennis to surfing to mountaineering. The types of athlete sponsorships range from free equipment (in exchange for explicit or implied endorsement) to millions of dollars per year in direct payments to the athlete. This type of sponsorship bears some of the highest risks because of the inherent unpredictability of human behavior or life circumstances. A star athlete can suffer a career-ending injury but may still be locked in an endorsement contract. More troublesome for corporate reputation is when a sponsored athlete becomes embroiled in a scandal: charged with a crime, or caught using a banned substance or engaging in offensive behavior. Though athletes from golfer Tiger Woods to racecar driver Tony Stewart have experienced personal crises that might have damaged their value to corporate sponsors, one of the biggest examples of the risks of athlete sponsorship is cyclist Lance Armstrong. His admission of using banned substances when he was a top-level cyclist (after years of denial and attacking his accusers) created problems not only for him but for his sponsors as well. There have also been occasions when corporate sponsors chose to capitalize on the quirks of an individual, however; tennis great Andre Agassi, famed for his nonconformity, was a natural choice to be sponsored by Canon’s EOS Rebel camera.

Much of the growth in the variety of activities, places, and people sponsored by corporations has occurred since 1990, when stadiums and arenas began to find sponsored naming deals. While some such sponsorships remain controversial or contested, many arts and sports organizations have come to rely on corporate sponsorships as part of their funding models.

Why Corporations Sponsor

The main reason for sponsorships is the belief that they allow corporations to borrow some of the positive feelings and goodwill associated with the events, places, and people being sponsored. By sponsoring a season of the opera, for instance, Delta Airline’s intent is that someone who loves opera will see a notice of the sponsorship in the program and perhaps be more likely to fly Delta in the future. Or if a local grocery store chain sponsors a Little League baseball team, perhaps the parents of the players will think more positively about that grocery store and be more likely to shop there.

Corporate sponsorship relies to some extent on the concept of values advocacy. Rather than promoting an explicit value (e.g., freedom, peace, or integrity), sponsorship agreements involve implicit values. Sponsoring scholarships for students, for instance, implicitly values education. Sponsoring a sports venue implicitly values community pride and physical fitness. Sponsoring a convention center values local economic development. The implicit nature of these sponsorships allows corporations to frame themselves as organizations with values that align with the values of the publics they care about. In this manner, corporate sponsorships have the potential to play a large role in building corporate reputation. The implicit value associations that come from sponsorships can encourage support from publics with interests in the sponsorships and boost those publics’ perceptions of the sponsors’ reputations.

The other primary reason for sponsorship is related more tangentially to reputation, focusing on the corporate reputation for a small and elite group of clients—providing them access to experiences. Corporate sponsors usually receive special access to the events or places they sponsor—luxury boxes, front-row tickets, backstage access, and other such perks. This access can be used to reward valued employees, but it is often used to pamper valued clients. So this function of corporate sponsorship does relate to corporate reputation, but only to a very tiny group with outsized influence. Sponsoring tennis at Wimbledon or golf at Augusta National might be as much about being able to cement relationships with existing high-value clients (or impress potential clients) as it is about building corporate reputation with broader publics.

Ethical Questions Surrounding Sponsorship

Some corporations have such damaged reputations that their sponsorships, regardless of the public value of what they sponsor, become controversial. In the late 20th century, tobacco sponsorship began to come under fire, eventually resulting in the Food and Drug Administration banning tobacco sponsorship of sporting events. This change was illustrated most dramatically when R. J. Reynolds was forced to drop its long-standing sponsorship of the NASCAR (National Association for Stock Car Auto Racing) circuit (until then known as the Winston Cup). In the early 21st century, companies criticized for a perceived lack of environmentalism (e.g., oil, coal, energy, and mining companies) have been undergoing similar critical scrutiny but without the regulation.

The other significant ethical challenge of sponsorship is that publics sometimes perceive that there is little consistency between what values companies support with their sponsorship and what values they support by their actions. So if a corporation reputed to be a significant polluter sponsors an Earth Day celebration or if a junk food company sponsors an elite athlete, the mixed messages they send can suggest that the sponsorship for them is merely a way to throw money at a problem rather than a way to reinforce existing corporate actions.

Practical Critiques of Sponsorship

Measurement has always been a challenge for sponsorship: How can a company know for sure that the price of putting its name on a marathon or a symphony hall is worth it? By making large investments in sponsorship, companies place great faith in the value of name recognition, hoping that the lighted sign on the side of a stadium, the sponsor’s name in news reports about an event, or the sponsor’s name on a concert ticket will result in a better corporate reputation, consequently resulting in more profitable operations.

Studies of sponsorship effects, however, rarely justify sponsorship expenditures. Even in studies that find positive behavioral effects from sponsorship, the actual value of those behavioral effects is not quantified and compared against the actual cost of the sponsorship. So even if in theory the sponsorship will lead to a better reputation and increased sales, the justification for the expense of corporate sponsorship does not generally rest on solid data.

Another problem is that sometimes a sponsored name is not widely adopted, or is so long as to be unwieldy, becoming an object of scorn and ridicule rather than a goodwill gesture to boost corporate reputation (e.g., American college football’s MagicJack.com St. Petersburg Bowl, succeeded by The Beef O’Brady’s Bowl).

Outlook for Corporate Sponsorships

On many occasions, corporate sponsorships appear to be almost vanity projects for well-heeled companies. They bring prestige, and they create opportunities to impress clients. In terms of corporate reputation, they at least have the potential to create implicit associations between corporations and the goodwill associated with the events, places, or people that the corporations choose to sponsor. Despite the lack of direct evidence that sponsorships are worth the costs, they have become a prominent part of the business landscape.