A couple of stories surrounding corporate sponsorship caught our attention this week, casting doubt over its benefits.  This should be encouraging to small businesses who cannot afford this sort of promotion, but even you need to trade on your relationships with other businesses.

Trading on the success of others

Small businesses, especially start-ups, do not usually have the funds to sponsor events in order to leverage off the reputation of those being sponsored.  Sponsorship can be both expensive and slow to have impact, and so is mainly the preserve of the big corporates in relation to major sporting events.

However, all loose associations you form with other entrepreneurs and businesses can help build the reputation of your business.

Simple examples include referring to existing customers when pitching for new work, carrying advertising or logos on your websites, or recommending suppliers or professional advisors.  While there are risks associated with this – a potential customer may have had a poor experience with someone you mention – these associations, and the references to them, are generally informal, and you can still distance yourselves using appropriate caveats.

Not so if extensive sponsorship campaigns are launched.

Controlling brand image

Picking the “wrong” partner, or one which is not aligned with your own brand values, can be potentially damaging.

This week Barclays Wealth allegedly removed their branding from sponsorship of a major show jumping event at Chester race course, although the wealth managers still honoured their financial commitment.  The reason?  The use by the British Show Jumping Association of provocative images of two female riders, in an attempt to promote the sport.  As this was “not in line with Barclays Wealth’s diversity principles”, the wealth managers had to take steps to disassociate themselves from the event.

Olympic sponsorships

Even avoiding potential embarrassments, is the return worth the cost?  Looking at sponsorship surrounding one of the biggest global events, the Olympics, seems to suggest that corporates may be beginning to think not.

BusinessWeek (www.businessweek.com) reckons that Bejing 2008 will see the peak of Olympic sponsorship, with Kodak being just one of the major global sponsors who will not be taking their Olympic sponsorship further.  This may be because in the global economic climate, companies are having to find cheaper or more innovative ways to reach audiences. 

Additionally, however, Bejing offers unique possibilities at these Olympics that will not be replicated at future games.  Sponsors have an unprecedented opportunity to inflitrate the massive Chinese market, and also seem to have exclusivity, not only in the Olympic venues themselves, but on outdoor advertising across the whole city.  This may mean that sponsorship revenues are unusually high for these Olympics ($866m for this and the Turin Games combined), and will fall off in future years if the returns are expected to be lower. 

Not worth The Business Lounge investing in London 2012 then.  Well, that’s our excuse.

As with all our information in The Business Lounge, this does not constitute comprehensive business advice; to discuss how these issues affect you contact your accountant or a PR professional.