Tuesday, September 29, 2009

Creating real value for sailing's sponsors

To start off the second posting in this series, I want to quickly discuss the partners that make up a Volvo Ocean Race or America’s Cup team:

The Sponsor: The sponsor is the end customer. The sponsor’s key competence is aligned with their core business, whether it be manufacturing cars, writing software, consulting businesses, banking or designing handbags. The sponsor makes decisions on building new factories, hiring employees or launching marketing programs, based on that project’s investment yielding a positive Net Present Value (NPV).

The Activator: This is typically an events agency such as Momentum, Octagon, or IMG. They work for the sponsor to build all of the auxiliary activities upon the sailing property platform.

The Property: This is the sailing team. It provides the base for the activator to build a positive NPV business development program targeted at the sponsor’s core business. The end goal of the sailing team is to manage the sporting operations, while supporting the activator’s plan.

I’ve read a lot of team sponsorship proposals over the past 5 years: Volvo Ocean Race, America’s Cup, World Match Racing Tour, European IRC, and Med Cup teams... Most sponsorship proposals lose sight of, both, the customer and the product. When I read most sponsorship proposals, generally, my first thought is ‘Hey, I’d love to sail for this team. This is going to be fun.’ The proposals talk about the race, adventure, prestige, competition, sailing team members and the program’s management structure - all of the key elements to winning a sail boat race. While this type of presentation does have a place in the sales cycle, it does not focus the product to the customer. The product that we are selling is a platform for corporations to leverage their core business goals.

Remember, we are selling the activation plan, and not the sailing team. The reason for this is straight forward; If a sponsor only financed the sailing property and did not make a further investment into activation, they would, most likely, just barely recover their costs of the property's sponsorship cost. However when the property is coupled with a sophisticated activation program, then 2 things happen; Not only is the activation the source of the most significant returns on investment, but also, the activation, through network effects, brings more attention to the sporting property, thus increasing the returns that the sporting team generates. The following illustration gives a basic insight to this principle.

Since we've examined the marketplace (in part 1), understand how commercialized sailing projects are structured, how sponsors financially justify their investments, and where the real value is generated we are now ready to look at the sell cycle....stay tuned for part 3 of this series.

Thanks for posting questions and comments, I'll continue to post responses.

-Matt out
37 48.0N
122 26.6W


David Fuller said...

Interesting series of posts Matt.

There seems to be a couple of key pieces missing from your model(though alluded to) 1. The buyer of the sponsor's products or services - the consumer and 2. The product, which in this case is the event that the team (property) is competing in.

Whether it be b2b or b2c, if nobody is watching, then the sponsor is not going to be able to get much activation. And the thing that determines whether people care about the activation is whether the product delivers.

While I accept that many sponsors participate in marketing activity of this kind for all kinds of reasons, many of which are completely unknown to the spectators - without making the property compelling to a (large) desirable market the value of the sponsorship is never going to be high.

Looking forward to the rest of the series. Let me know if you would like us to re-publish them on www.yachtsponsorship.com (with due credit of course)


Bill Doyle said...

Matt and David,

I concur entirely. As a profession, I consult with, and measure the results of sponsorships, on behalf of corporations world-wide. There are hundreds of reasons why companies sponsor events / competitors / venues, etc.. the key for the property is to always, first -- understand the objective of the sponsor, then second -- propose how your "opportunity" provides solutions or helps them meet their goals. (Not how it helps you, your event, or your level of competitiveness -- in this transaction, it isn't about you.)

I too have sat through way too many presentations that show every minute detail of the excitement of the event / team / etc... and then see nearly nothing about how the sponsorship program can help the company or brand meet their business goals.

The sponsor is buying access to an audience or hosting opportunity that you (the property) can deliver. Period. Your job in the selling process is to define this audience (This may be consumers, b2b, employees, suppliers, whatever..) and outline the opportunities your event can provide that will help them meet their goals. (Which can be as diverse as hosting opportunities for key clients, employee motivation tools, connections you can provide among your other sponsors, etc..)

In my experience, sailing programs don't appear to be any better or worse than a lot of other sports, but those properties (even small yacht clubs and regattas) that understand this, and get it right, will always find willing and intersted sponsors looking to connect with a good business partner.

Even in this economy.

Bill Doyle
Performance Research

Michael Borga said...

Peter Harken and I agree with virtually everything you are stating. I hope Mr. Harken sees the humor in that comment.

see http://forum.sailingscuttlebutt.com/cgi-bin/gforum.cgi?post=7507#7507

for a discussion of sponsorship and why in particular American Regattas and some of the participants just don't seem to get it.

Matthew said...

I think David will, very much, enjoy my third post. He must have gotten a sneak peek at it, because he could not have set the stage for it any better...Thanks!

I want to make a strong disclaimer for exactly the topic that I am dissecting. I'm talking about fully commercialized sailing. This is mainly the VOR, and what will be hopefully be the AC when it gets back on track. I think that 'pro sailing' has many meanings and the term alone needs to be defined to have this discussion. I see sailing as three segments, based on the source of funding. 1) Hobby/passion sailing: This is what makes up 99.999% the entire sport. A guy buys a boat, collects his buddies and goes racing. This can range from a friday night beer-can program to a world championship campaign. The underlying driver is fun and competition. 2) Pro-sailing; This is exactly the same as hobby-passion sailing, but for a few people (crew) in the fleet they are making a living by working (and mainly coaching) a wealthy person that is sailing because of his/her love of the sport. This is akin to going to the country club for a round of golf and bringing the club's golf pro/coach with you to round out your foursome. 3) Commercialized sailing; This is the VOR and the AC. The teams are corporations that deliver a product to their customer...which is another corporation. This is a highly unique end of the sport. It is not driven by anything that drives the other two segments of the sport. It's customer-product driven. This is the topic of my blog series. Of course the VOR and AC come from a history of type 2 'funders'. By writing this blog I'm hoping to shed some light on the shift that is happening in this commercialized end of the sport (which is coincidentally being lead, strongly, by the VOR).

I can see why people might be 'put off' by the commercialization of this very small end of the sport. However, I don't think that these negative feelings are justified once the entire scenario is thought through; The more commercialized the VOR or AC becomes the better the fan experience will be for the audience of 'type 1' sailors. It's because of the commercialization of the VOR that the boats have 10 HD cameras onboard broadcasting through satelites and onto the internet every day, that there are TV shows about the race, and that there are pro-am races at the stopovers. Fundamentally, the sailing team is a platform for creating entertainment for fans. These fans, just so happen to be the customers of the corporations of the sponsors. Thus the more commercialized and less private the AC and VOR become the more accessible these events will be to the general public....pretty cool huh!

Benjamin Jarashow said...

So are you saying that Commercialized Sailing is only a corollary to the 'tops six clubs' from the article http://www.ft.com/cms/s/2/fd77a01c-aa07-11de-a3ce-00144feabdc0.html (as referenced from the yachtsponsorship website)?

The point of that article seems to be that the sponsorship financing model works for fewer teams than it might appear from the outside. Are we in sailing actually more in touch than most football clubs because we do not pretend that that model would work for most of our teams?