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Mar 2021

Transactional vs Transformational – The Sponsorship Paradigm Shift in Post-Covid Economy

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There is no denying that the Covid-19 pandemic has irrevocably changed the proverbial playing field for several industries – and the sports and entertainment industry is no exception. With marketing budgets having been significantly reduced in most instances, the absence of live events and severe hospitality and tourism restrictions has meant fewer sponsorship opportunities to consider and even fewer resources with which to capitalise on them. But who is worse off in this scenario – the rights holder or the potential sponsors?

Debating that question furiously in-house has led us to the conclusion that in fact, that mentality is exactly the wrong approach to sponsorship agreements in the post-COVID economy. The relationship between rights holders and sponsors will have to become less transactional and more transformational to ensure adequate return and mutual benefit for both parties.

Transactional vs Transformational Relationships

Transactional relationships are by nature optimized around getting both parties the most they possibly can in exchange for as little as possible. It often resulted in a series of negotiation rounds until both parties felt they had secured maximum benefit for themselves, utilising the platform as the mechanism to achieve the desired return and commercial value. The sponsorship agreement became the checklist against which accountability was held for rights and objectives to be achieved and the basis upon which renewal was considered. Whilst effective from a corporate governance perspective, it lacked flexibility and room for adaptation which, as COVID-19 has shown us, has become paramount.

In the post-COVID economy, the new etiquette for successful sponsorships will be about creating partnerships and working collaboratively for the best interest of the sponsorship ‘trilogy’ – the rights holder, the sponsor, and the entity itself. When like-minded brands collaborate – knowing what they want, understanding what the other hopes to achieve, and working in partnership to achieve it – the IMPACT of the sponsorship will be that much greater. This relationship-based paradigm shift takes a more transformational approach with both parties acknowledging the value they bring to the partnership and that one is not considered “lesser” than the other.

This approach is likely to entail an overhaul of the traditional sponsorship model and instead, see brands developing sponsorship Requests For Proposal outlying their objectives and desired outcomes. It would become the responsibility of the rights holder to tailor the sponsorship offering accordingly to match and meet the sponsor requirements most effectively. Gone are the days of accepting (and paying for) rights which don’t benefit the brand or campaign objectives simply because they were pre-packaged with the rights which were desirable.

Relationship-based Sponsorships are Based on Delivery Mutual Outcomes, not Outputs.

Transformational-based sponsorship also enables both rights holder and sponsor to capitalise on societal changes which have already taken place. In an era where influence and authenticity have become important elements of the decision-making process, brands are more highly valued by their consumers and followers. This holds great appeal for the right sponsor and rights holder as both brands provide each other with access to relevant, desirable target audiences and more impactful outcomes in partnership. It also cements the importance of agencies to assist with rights holder and sponsor management to enable both parties to remain accountable to their responsibilities and ensure maximum return on desired outcomes.

So, to answer our initial question of who is worse off in the post-COVID economy…
Neither! Provided all parties remain committed to relevance, longevity, and the achievement of mutual outcomes.

With the proverbial playing field forever changed and major shifts in marketing, consumerism, and sponsorship taking centre stage, sponsors and rights holders have the opportunity to optimise their approach to sponsorship in its entirety for the benefit of not only one another but the industry as a whole.

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