“How Do Sponsorships Work?”
by Barış Erman Depecik
Bilkent University, Faculty of Business Administration
Abstract:
Partnerships with major sports franchises have become an increasingly utilized marketing communications tool. Yet, progress in measuring and assessing sponsorship’s business impact has been marginal and there is an unmet need for more sophisticated measurement and valuation practices. To identify the various ways through which the sponsored brand may be affected in the long-run, we investigate how sales and market response parameters evolve over time in response to a partnership between a brand and a major sports franchise. A canonical form of hierarchical multivariate dynamic linear model is developed and applied to partnership deals of National Football League and Major League Baseball franchises. The model links partnerships to sales and market response parameters directly and indirectly through their impact on own and competitive mindset metrics. The model controls for competitive reactions and performance feedback in marketing and accommodates dynamic dependencies in mindset metrics. The results indicate that a sponsored brand experiences (i) a direct gain in baseline sales and (ii) indirect gains due to an increased effectiveness for its marketing mix instruments and a reduced cross-sensitivity to rival firms’ marketing activities. The magnitudes of the effects are contingent on team performance, star power of the roster, sponsorship type (title vs. team), and the level of categorical exclusivity. Our findings imply that any analysis of sponsorship return must account for indirect benefits of sponsorship on market response parameters and sponsors should carefully consider synergies between different promotional mix elements to maximize indirect benefits
