1998a Meenaaghan, T. Current developments and future directions in commercial sponsorship

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International Journal of Advertising
The Quarterly Review of Marketing Communications
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Current developments & future directions in
sponsorship
Tony Meenaghan
To cite this article: Tony Meenaghan (1998) Current developments & future
directions in sponsorship, International Journal of Advertising, 17:1, 3-28, DOI:
10.1080/02650487.1998.11104703
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Current developments & future 
directions in sponsorship 
Tony Meenaghan 
University College Dublin 
Throughout its relatively brief history commercial sponsorship has changed in many 
fundamental ways. Most evident has been its development from small-scale activity to 
major global industry. In recent years the opportunities for sponsorship investment have 
expanded beyond the traditional options of sport and arts. New industries and companies 
continue to adopt sponsorship as a method of marketing communications. One of the 
most notable developments has been a change in corporate attitudes to managing 
sponsorship. Hitherto treated as 'something different', many sponsors today have in place 
sophisticated planning, selection and evaluation procedures for their sponsorship 
programmes. This desire for improved management has had a knock-on effect on a 
growing support industry, in particular on research companies as well as sponsorship 
consultants and advertising agencies. 
As an industry, sponsorship has settled down from the heady days of the 1960s and 1970s. 
In contrast to the dynamic and turbulent environment of that era, today sponsorship is an 
increasingly regulated and self-conscious industry. Its very success may herald some 
potentially negative omens as the increasing proliferation of sponsorship leads to a 
cluttered sponsorship environment, encouraging perhaps some degree of consumer 
cynicism. The performance of sponsorship vis-a-vis other methods of communication in 
recessionary times, is testimony to the regard in which sponsorship is now held as a 
legitimate mode of communication. 
INTRODUCTION 
Commercial sponsorship as a method of corporate communication is 
a relatively recent phenomenon. From relatively limited activity in the 
late 1960s and early 1970s this medium has grown substantially over 
the last three decades. As with all forms of marketing communication, 
sponsorship activity has been affected by a variety of changed 
conditions such as the client's desire for accountability, the impact of 
new technology, an increasingly literate consumer market and a 
International Journal of Advertising, 17, pp. 3-28 
© Advertising Association 
Published by NTC Publications Ltd, Farm Road, Henley-on-Thames, Oxon RG9 lEJ, UK 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
marketing services industry undergoing significant readjustment. 
Given the multiplicity of forces currently impacting on sponsorship 
the purpose of this paper is to examine current developments and 
future directions in commercial sponsorship. 
BACKGROUND 
The marketing communications industry in general is undergoing 
fundamental change. The consumer market, while undoubtedly more 
literate and sophisticated, is also highly fragmented and increasingly 
empowered by technology to control its consumption of a 
proliferation of media options. Corporate clients, under pressure 
from the demands of shareholders and a changing power balance in 
the value chain, seek accountability in all their expenditures, including 
- perhaps especially - their marketing communications expenditures. 
Technological change has led to an explosion of media possibilities 
with the attendant problem of clutter and cost-efficient access. These 
and other developments have wrought substantial change in the 
marketing communications industry. Sponsorship as a constituent of 
that industry is inevitably affected by both these altered conditions 
and the specific micro circumstances of its own industry. This paper 
seeks to examine the main developments currently emerging in the 
sponsorship industry and to indicate likely future directions for the 
medium. 
CURRENT DEVELOPMENTS IN SPONSORSHIP 
Increased investment in sponsorship 
Undoubtedly, one of the most significant developments in 
sponsorship has been the increased scale of investment. While the 
patrons of ancient Greece and Rome and those of the Renaissance 
period in Europe can be regarded as the forerunners of commercial 
sponsorship, their motivation was more philanthropic than 
commercial. Sponsorship as we know it today was evident over a 
hundred years ago in England and France and in the early decades of 
this century in the US, but the major growth in this medium has 
occurred over the last 30 years. The UK market provides a clear 
4 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
indication of the scale of increased investment in sponsorship. As can 
be seen from Table 1, the UK sponsorship market was valued at £4 
million in 1970 (Buckley, 1980) but by 1996 was estimated at £491 
million (Mintel, 1997). 
TABLE 1 THE SPONSORSHIP EXPLOSION 1970-1996 
Year 
1970 
1980 
1990 
1996 
Source: Buckley (1980), Mintel (1997). 
Value £rn 
4 
35 
281 
491 (est) 
Increased investment in sponsorship, while initially a feature of 
mature Western economies, is now evident on a global basis. The 
scale of worldwide growth in sponsorship can be seen from Table 2 
which shows that spending in this medium increased from $2 billion 
in 1984 to $16.6 billion in 1996. 
TABLE 2 WORLDWIDE SPONSORSHIP MARKET 
Year Value ($b) 
1984 2.0 
1987 4.1 
1989 4.5 
1990 5.2 
1991 8.3 
1992 9.4 
1993 10.8 
1994 13.0 
1995 15.1 
1996 16.6 
Source: SRI (1997). 
Europe and North America continue to dominate the world 
sponsorship market accounting in 1996 for 33.2 per cent and 33.3 per 
cent respectively, but other markets particularly in Australia and Asia 
have grown significantly. While Australian interest can perhaps be 
linked to the staging of the Olympic Games in Sydney in 2000, the 
development of sponsorship in Asia can be attributed to the ongoing 
evolution of countries such as Japan and Korea as major consumer 
economies as well as manufacturing bases for the supply of goods to 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
Western economies. Furthermore, Japanese and Korean companies 
became major users of sponsorship in developing modes of access to 
Western economies and the knowledge and confidence gained 
regarding this medium has obviously been repatriated. As can be seen 
from Table 3, Asia's share of the worldwide sponsorship market has 
grown from 13.3 per cent in 1987 to 20.5 per cent in 1996 
(Sponsorship Research International, 1997). 
TABLE 3 SPONSORSHIP IN THE ASIAN REGION 
Year Country Region, Total %of world 
Japan ($m) excl. Japan ($m) ($m) 
1987 420 128 548 13.3 
1988 
1989 460 154 614 13.6 
1990 600 175 775 14.9 
1991 1,500 350 1,850 22.2 
1992 1,550 510 2,060 21.9 
1993 
1994 1,750 900 2,650 20.4 
1995 
1996 2,200 1,200 3,400 20.5 
Source: SRI (1997). 
While investment in sponsorship has grown in all major markets, it 
still remains a relatively small percentage of total advertising 
expenditure. In 1987 worldwide sponsorship spending was estimated 
at between 2.5 per cent and 3.5 per cent of total advertising 
expenditure (Otker and Hayes, 1986). By 1996 this percentage hadrisen to 5. 7 per cent (Sponsorship Research International, 1997). 
However, sponsorship as a percentage of total advertising varies by 
country. As can be seen from Table 5 the 1996 figures for the UK, 
the US and Japan were 4.8 per cent, 5.5 per cent and 4.8 per cent, 
respectively, while in countries such as Italy and South Africa the 
figures were 13.6 per cent and 13.2 per cent, respectively. 
Despite its relatively small, but increasing scale compared to 
advertising, sponsorship as a medium continues to out-perform other 
methods of marketing communications in terms of annual growth. 
Table 4 shows that in the US market throughout the 1980s and 1990s 
year-on-year growth in sponsorship has outstripped that experienced 
in both advertising and sales promotion. While the large-scale annual 
increases which were evident in the late 1970s and early 1980s in the 
6 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
UK (Mintel, 1994) and US markets (fable 4) have abated, 
sponsorship as a medium continues to attract a still increasing share 
of total marketing communications spending in all major markets. 
TABLE 4 US SPONSORSHIP GROWTH COMPARED TO ADVERTISING 
AND PROMOTION 1985-1994 
Year Advertising Sales Promotion Sponsorship 
% % % 
1983 16.0 17.0 250 
1984 9.0 14.0 113 
1985 7.0 13.0 18 
1986 7.0 9.0 35 
1987 7.0 8.0 30 
1988 7.0 7.0 20 
1989 6.0 6.0 22 
1990 5.0 6.0 19 
1991 -1.5 8.0 11 
1992 4.0 10.0 13 
1993 5.2 7.0 17 
1994 6.3 5.2 15 
1995 7.7 4.6 11 
1996 7.6 4.6 15 
1997* 5.6 5.6 9 
* Projected. 
Source: lEG Sponsorship Report, Chicago (1997). 
The emergence of sponsorship as a global marketing medium can 
be attributed to a number of key factors. The events and activities 
that attract the greatest proportion of sponsorship investment are 
sports and the arts. These are activities that transcend national and 
cultural barriers as instanced by events such as the Olympic Games, 
sports such as soccer, and performers such as Michael Jackson, the 
European Youth Orchestra and the Bolshoi Ballet. While such 
activities always had the ability to attract audiences worldwide, 
changes wrought in the telecommunications and broadcast media 
have provided a global platform. For multinational companies such 
events, providing a universal language and an extended media 
platform, are an obvious access mode to desired markets. Table 5 
provides details of worldwide sponsorship expenditure. 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
TABLE 5 WORLDWIDE SPONSORSHIP EXPENDITURES 1996 
Sponsorship Sponsorship as 
rights Continent/ country % of advertising 
value 1996 as% of world expenditure 
$m sponsorship total continent/ country 
EUROPE 5,500 33.2 7.0 
Austria 95 0.6 6.0 
Belgium 97 0.6 6.0 
Denmark 80 0.5 6.1 
Finland 81 0.5 7.1 
France 630 3.8 6.0 
Germany 1,648 9.9 7.2 
Greece 110 0.7 8.0 
Ireland 28 0.2 6.0 
Italy 791 4.8 13.6 
Netherlands 213 1.3 6.0 
Portugal 89 0.5 8.0 
Spain 391 2.4 8.0 
Sweden 154 0.9 8.1 
UK 792 4.8 4.8 
Switzerland 187 1.1 6.0 
Others 114 0.7 5.8 
AMERICAS 6,600 39.8 5.2 
us 5,525 33.3 5.5 
Canada 375 2.3 5.3 
C&S America 700 4.2 3.7 
AFRICA 249 1.5 7.6 
South Africa 194 1.2 13.2 
Others 55 0.3 3.1 
ASIA 3,400 20.5 4.8 
Japan 2,200 13.3 4.8 
Korea Republic 400 2.4 5.7 
Other 800 4.8 4.3 
MIDDLE EAST 110 0.7 4.7 
PACIFIC 713 4.3 12.7 
Australia 650 3.9 13.8 
New Zealand 58 0.3 6.6 
Others 5 0.0 10.0 
WORLD TOTAL 16,572 100.0 5.7 
Source: SRI (1997). 
The figures in Table 5 clearly show that sponsorship is indeed a 
worldwide phenomenon in terms of the number of countries 
reporting substantial sponsorship activity. However, closer 
examination of these figures indicates that six countries (Germany, 
8 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
Italy, UK, US, Japan and Australia) account for 70 per cent of total 
global expenditure, a fact which clearly associates large-scale 
sponsorship activity with mature consumer economies. However, it is 
also important to note that even where sponsorship expenditure is 
minuscule in world terms, this medium still accounts for five to six 
per cent of advertising expenditure in the local domestic market. 
The estimates of sponsorship spending shown in this and previous 
tables do not include the expenditure which is necessary to ensure the 
proper exploitation of the chosen sponsorship. The acknowledged 
industry norm is that a figure at least equal to the direct costs of 
securing the property rights to an event is necessary for exploitation, 
although many sponsors spend several times the property rights fee in 
support of their initial investment. This exploitation usually takes the 
form of advertising and other promotional support. 
While the changing circumstances of the larger marketing 
communications industry impact on sponsorship's development, 
more specific factors have also had a bearing on industry changes. 
Government policy on the advertising of alcohol and tobacco 
products provided the initial impetus to expenditure in the medium. 
However, ongoing development can be attributed to changes in 
society at large and corporate perceptions regarding media 
efficiencies. The increased availability of leisure time and the 
consequent development of sports, arts and other activities in 
response to this availability has made more sponsorship opportunities 
available. In turn, technological development, while increasing the 
potential audience for such activities, has in itself created 
opportunities suitable for sponsorship such as interactive games 
(Bobroff, 1995) and the Internet (O'Leary, 1995). Alongside such 
developments, corporate disillusionment with traditional media 
advertising due to escalating costs and reduced efficiency caused by 
factors such as clutter and 'zapping' has fuelled growth in this 
medium. 
Changing perception of sponsorship 
A second major development in sponsorship is the changed 
perception of the medium. While commercial sponsorship may find 
its genesis in the philanthropic gestures of earlier societal patrons, the 
perception of sponsorship by consumers, event owners and sponsors 
alike has changed substantially over recent decades. This is inevitably 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
linked to the scale of investment in the medium. Earlier perceptions 
of sponsorship tended to regard it as in the donations category, with 
perhaps the primary beneficiary being the recipient. Commercialism 
in sponsorship exchanges was often lacking, with the sponsorship 
budget being administered in client companies by a public affairs or 
similar type of department which viewed such 'giving' as part of its 
societal responsibility. Recipients viewed such sponsorship in 
philanthropic terms with little requirement to return commercial 
value. The following definition is indicative of both this orientation 
and its time. 
Sponsorship is the donation or loan of resources (people, 
money, material, etc.) by private individuals or 
organisations to other individuals or organisations engaged 
in the provision of those goods and services designed to 
improve the quality of life. 
(Royal Philharmonic Orchestra, 197 4) 
The increased scale of investment, the global nature of the 
medium, and client concerns for value have radically altered the 
perception of sponsorship. A donation mentality has been replaced 
by hard-nosed commercialism that is indicated by the current 
obsession with legal agreements, discussions on property rights and a 
focus on the precise returns for such investment. This commercial 
thrust is evident in the following definition. 
Sponsorship is an investment, in cash or in kind, in an 
activity, in return for access to the exploitable commercial 
potential associated with that activity. 
(Meenaghan, 1991p. 36) 
While this and similar definitions clearly reflect the commercial 
tone of current sponsorship practice, there is evidence that 
sponsorship arrangements are increasingly seen as economic-based 
partnerships between mutually dependent organisations rather than in 
purely transactional terms. 
Changing patterns of expenditure 
While sport, and to a lesser extent arts, continue to be the primary 
locations for sponsorship investment, one of the major developments 
in recent years has been the expanding range of sponsorship media. 
10 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
These include the sponsorship of aspects of government health 
services, shopping malls, interactive games, etc. The continuing 
importance of sports and arts to sponsorship is indicated in Table 6 
which shows that sports and arts combined account for 84 per cent, 
73 per cent, 80 per cent and 72 per cent in Germany, Netherlands, 
Sweden and the UK respectively. 
TABLE 6 SPONSORSHIP EXPENDITURE BY CATEGORY 
Sector Denmark Germany Netherlands SouthMrica Sweden UK 
Sports >80 62 54 80 65 61 
Arts 80 22 19 7 15 11 
Others <80 12 11 26 15 8 
Broadcast 20 4 16 7 5 20 
Source: Sponsorship Research International (1997). 
The major categories of expenditure for sponsorship in the US 
market are indicated in Table 7. Again, the dominance of sports is 
manifest. While the categorisation of sponsorship varies by country 
and compilation source, three key areas of sponsorship expenditure 
merit further comment, namely broadcast sponsorship, popular 
music, and cause-related marketing. 
TABLE 7 SPONSORSHIP SPENDING($) IN NORTH AMERICA BY TYPE 
OF PROPERTY 
1997* 1996 1995 1994 
($m) ($m) ($m) ($m) 
Sports 2,840 (65%) 2,540 (66%) 3,050 (65%) 2,850 (67%) 
Entertainment 
tours & attractions 650 (11%) 566 (10%) 488 (10%) 425 (19%) 
Festivals, fairs, 
annual events 558 (9%) 485 (9%) 466 (10%) 382 (9%) 
Causes 535 (9%) 485 (9%) 423 (9%) 340 (8%) 
Arts 354 (6%) 323 (6%) 277 (6%) 255 (6%) 
TOTAL 5,900 5,400 4,700 4,250 
*Forecast. 
Source: lEG (1997). 
Broadcast sponsorship 
Sponsorship radio broadcasts were a central feature of the early days 
of the medium's development in markets such as the US and Italy but 
this method of financing operations largely gave way to spot 
11 
INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
advertising in Europe with the development of television. In more 
recent times broadcast sponsorship has again become a major feature 
of sponsorship's development, particularly in Europe. The scale of 
this development can be seen from the fact that broadcast 
sponsorship in the UK grew from £7 million in 1990 to an estimated 
£99 million in 1996 (Mintel, 1997). Similarly, Carat International 
reported that broadcast sponsorship in Europe in 1993 was $1.1 
billion with Spain, Italy and France accounting for 71 per cent of this 
total (Brinkman, 1994). In markets such as Denmark, the Netherlands 
and the UK, broadcast sponsorship now accounts for 20 per cent, 16 
per cent and 20 per cent respectively of total sponsorship expenditure 
(SRI, 1997). 
The growth of this outlet has been encouraged by several factors 
including: 
- the advent of satellite television; 
- the liberalisation of regulations in member states; 
- increased harmonisation of broadcast regulations in Europe; 
- and, the lure of additional revenue for broadcasters. 
The benefits to sponsors of broadcast sponsorship are largely 
achieved in terms of awareness and image building (Millman, 1995), 
though many broadcast sponsors attempt to gain a sales linkage to 
their investment (Fry, 1997). In the UK market (where the 
Independent Television Commission's regulatory framework was 
recently revised), the scale of expenditure and the diversity of 
programmes being sponsored has increased significantly. Examples 
are provided by Cad bury which has invested £10 million in 
sponsoring Coronation Street while Texaco is involved in a £12 million 
three-year sponsorship of lTV's Formula 1 racing coverage. On a 
lesser scale, Wella Consumer Products is involved in the sponsorship 
of lTV's transmission of Bqywatch and Channel 4's Friends for 
individual brands in its range (Fry, 1997). As a revenue source 
broadcast sponsorship is more important to satellite than to the more 
established terrestrial stations. In the UK, broadcast sponsorship as a 
percentage of advertising revenue is estimated at two per cent in the 
case of The Independent Television Network (lTV); eight per cent 
for Sky Television; and ten per cent for MTV; while for satellite 
channels such as Discovery, the relevant percentage is 15 per cent 
(Antenna, 1996). 
12 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
Popular music 
In the past, discussions on arts sponsorship usually suggested an 
elitist view on what constituted 'the Arts'. Such discussions worked 
on an implicit definition of art as 'high art' and therefore 
encompassed areas such as dance, drama, literature, museums, art 
exhibitions and classical music. In sponsorship terms, such activities 
facilitated access to carefully defined groups of people at the upper 
end of the social strata and key corporate decision-makers in 
particular. 
Marketing to mass audiences however required other access routes. 
Popular music, with its broad appeal to youth markets, its excitement 
and imagery, is a mass-marketer's dream. Along with sports it 
represents the only global mass medium and as such is attractive to 
multinational companies such as Coca-Cola, Pepsi and Philips. 
Popular music stars such as Michael Jackson, Prince, Dire Straits, the 
Spice Girls, etc. transcend national boundaries and connect with the 
youth audience on their own terms. 
It is estimated that some ten per cent of total sponsorship 
expenditure or approximately $650 million will be spent on popular 
music sponsorship in the US market in 1997 (lEG, 1997). Despite the 
growing importance of sponsorship there is considerable debate in 
popular music circles about sponsorship per se. In an industry that is 
grounded in the endorsement of anti-establishment values, many 
major performers such as U2, Bruce Springsteen and Neil Young are 
wary of sponsorship involvement lest it damage their credibility and 
leave them open to the charge of 'having sold out to Mammon'. Yet 
the realities of the modern day music industry, with escalating touring 
costs requiring a resource base, provide an increasing justification for 
sponsorship support. 
Cause-related marketing 
Business corporations may have a venerable history of corporate 
giving but in more recent times companies are seeking a commercial 
return from monies previously donated through charity and 
philanthropy. Cause-related marketing (CRM) refers to situations 
where companies derive benefit, either in sales or image terms, from 
their involvement with a particular social or charitable cause 
(Varadarajan and Menon, 1988). Whereas various types of 
arrangements between sponsor and recipient cause are possible 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
(Andreasen, 1996), the most common approach to CRM is 
transaction-based promotions. This occurs where a sponsor agrees to 
make a specific donation (usually in cash) to a non-profit 
organisation. The donation is usually in direct proportion to the sales 
revenue generated by the promotion and is usually time-limited. A 
notable example of CRM was American Express's involvement in the 
restoration of the Statue of Liberty project (in the US market). Amex 
had a number of key objectives for its involvement. Firstly, it sought 
to motivate Amex cardholders to increase card usage. Secondly, it 
wanted to encourage merchants to accept the card, and thirdly it 
sought to increase its profile and derive image benefits. Amexpromised to donate one cent for each US-based transaction and one 
dollar for each new card issued during the last quarter of the year. 
The campaign benefited both sponsor and cause. Some $1.7 million 
was raised for the renovation project and card usage increased 2.8 per 
cent compared to the previous year's figure, with greater acceptance 
by merchants also being reported. Furthermore, Amex was seen as 
responsible, public-spirited and patriotic. 
This form of sponsorship is increasingly popular in the US market 
with examples provided by McDonald's McHappy Day for 
disadvantaged children and Ronald McDonald houses for the 
homeless. This particular subset of sponsorship is forecast to reach 
$535 million or nine per cent of total US sponsorship expenditure for 
1997 (lEG, 1997). In Europe CRM as a form of sponsorship is still in 
its infancy but there has been a steady growth in such investments in 
recent years. Examples are provided by the Tesco 'computers for 
schools' programme in the UK and Andrex's sponsorship of guide 
dogs for the blind in the Republic of Ireland. A variation on this 
theme is provided by the Northern Ireland road safety campaign that 
is sponsored by the Winemark off-licence chain. 
The use of CRM allows sponsoring corporations to garner for 
themselves softer corporate values in terms of being seen as caring, 
benevolent, community-oriented and humane. In using CRM, 
sponsors need to be extremely careful in terms of how they manage 
their involvement as visible over-exploitation of such activities can 
quickly lead to a negative consumer reaction (Wagner and Thompson, 
1994). 
14 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
Expanding range of sponsors 
A further development in the field of sponsorship is the diffusion of 
sponsorship to new industrial sectors. Tobacco and alcohol 
companies and motor manufacturers were among the earliest 
sponsors. The success of their involvement encouraged other 
entrants. Banking groups were followed by other financial institutions 
such as merchant banks and building societies. Later, hi-tech 
companies from the computer industry and Japanese electronic firms 
came to use sponsorship as an essential element of their 
communications programmes. As the balance of power in the supply 
chain has shifted to the retail sector there has been increased 
involvement by that sector in sponsorship. Many fmcg companies 
have used sponsorship over the years but the arrival of the detergent 
manufacturers is interesting. While the major detergent companies 
were some of the earliest sponsors through the production of radio 
soap operas, more recently they have been known for their belief in 
power-advertising. Their recent re-adoption of sponsorship as a 
means of communication is tacit recognition of its increasing 
legitimacy and effectiveness (Reid, 1995). This diffusion of 
sponsorship as a corporate communication medium is reflected in 
Figure 1. 
Tobacco and alcohol 
t 
Banks and car manufacturers 
t 
Soft drinks companies 
t 
Building societies/merchant banks 
t 
Computer firms 
t 
Japanese electronic firms 
t 
Major retail groups 
t 
'The detergents' 
FIGURE 1 DIFFUSION OF SPONSORSHIP AMONG INDUSTRY TYPES 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
Increased sophistication of management practice 
A further major development has been an increasing sophistication in 
management practice with this medium. The early days of 
sponsorship were marked by low levels of corporate knowledge of a 
relatively new medium and sponsorship was often regarded as 
'something different', not amenable to conventional management 
principles (Meenaghan, 1983; Armstrong, 1988). The result was poor 
decision-making and often unprofitable investments. 
In more recent years, management understanding arising from 
experience has led to increased sophistication in all aspects of 
sponsorship management. Confused rationales for involvement have 
been replaced by strictly stated objectives. Many sponsors now have 
in place sophisticated selection models to guide their choices, a 
considerable improvement on the quick checklists of the 
not-too-distant past. Integration and exploitation of sponsorship 
programmes, often previously overlooked, are now essential 
components of overall marketing plans. Rigorous approaches to 
evaluation have replaced the 'gut-feel' factor of earlier practice. 
This increased understanding of sponsorship and sophistication in 
its use has placed demands on sponsorship support services. 
Sponsorship consultants have become more professional and 
specialised while advertising agencies, initially hostile to the medium, 
have now brought their abilities to bear and have either established 
their own sponsorship consultancy services or have acquired already 
established sponsorship consultancies. Research agencies have 
responded to the need for proper information to guide selection 
decisions and evaluate final results. For example, ESOMAR, the 
European Society for Marketing Research, has hosted several 
seminars on the topic of sponsorship research (ESOMAR, 1995, 
1997). 
While there are still many naive and unsophisticated users of the 
medium there can be no doubt about the distance which has been 
travelled by many major sponsors in terms of management 
sophistication. Strategic and operational competencies in this medium 
may still be considerably less than that attained in advertising but the 
sponsorship industry, while still having much to learn, has made 
considerable strides over its relatively brief history. 
16 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
An increasingly regulated industry 
The images conjured up by the early days of sponsorship are of 
swashbuckling personalities operating along dynamic new frontiers. 
The concurrence of factors such as the commercialisation and 
marketing of sports, the advent of sports celebrities, the rapid 
expansion of television and televised sport, corporate desire for 
alternative media, and key entrepreneurial figures led to a dynamic, 
turbulent and for some a highly profitable industry. Sponsorship has 
passed through that period of rapid change, not without some 
criticism. While change is obviously still occurring, it is doing so 
within an increasingly regulated framework. This regulation is derived 
from forces both internal and external to the industry. Voluntary 
regulation in all sectors of the industry is driven by a desire to 
establish some order on its affairs and to project an image of 
professionalism. Taking Europe as a case in point - sponsorship 
consultants, the recipients of some past criticism, established a 
European umbrella body, the European Sponsorship Consultants 
Association (ESCA), in 1990 to oversee their affairs. Various bodies 
representing client interests have developed guidelines for the 
conduct of sponsorship affairs, namely Incorporated Society of 
British Advertisers' Best Practice - Sponsorship (ISBA, 1993) and the 
Association of Advertisers in Ireland's Guidelines for Agreements between 
Sponsors and Sponsored Parties (AAI, 1994). On a pan-national level the 
International Chamber of Commerce (ICC) has published guidelines 
for the conduct of sponsorship affairs (ICC, 1993). 
While the sponsorship industry is subject to existing legislation as it 
affects all marketing communications activity, other regulatory forces 
are also shaping the specific industry at both a national and 
pan-national level. In France, sponsorship by tobacco companies has 
been banned and similar restrictions are being considered in the UK 
market. Such moves have significant consequences for the funding of 
particular sports, particularly Formula One racing (Parsons, 1997). In 
each individual market broadcast sponsorship is subjectto specific 
national guidelines (EBU /EGTA/EAO, 1993; Field Fisher 
Waterhouse, 1993). Similarly, overarching legislation from the 
European Community in the form of various directives provides 
another layer of regulation on an increasingly regulated industry 
(European Council, 1989; Conseil de L'Europe, 1991; Frohlinger, 
1996). 
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INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
The inevitable trend is towards greater order in the industry and 
this will be driven by external regulation at national and pan-national 
level and by the desire for self-regulation as the industry both reaches 
and exhibits maturity. 
The proliferation of sponsorship activity 
One of the major factors driving the initial development of 
sponsorship was the fact that it provided a relatively clutter-free 
environment, particularly compared to media advertising. As a 
medium it provided quality access to consumers at reasonable cost. 
Its very success has begun to erode this critical advantage in that 
increased levels of sponsorship activity have led to a more cluttered 
sponsorship environment. A number of factors have contributed to 
this situation. 
(1) INCREASING NUMBER OF CORPORATE SPONSORS 
The spread of sponsorship to different industrial sectors, as indicated 
in Figure 1, has been accompanied by horizontal diffusion within 
these sectors and the results of these developments is reflected in the 
increasing number of corporations seeking to exploit the sponsorship 
medium (fable 8). The result inevitably is an increasingly cluttered 
medium. Not only are more sponsors involved, but the scale of 
sponsorship expenditure by individual sponsors is also significant. In 
the US market major sponsors such as Philip Morris, 
Anheuser-Busch and Coca-Cola were reported in 1996 to have spent 
$125 million, $120 million and $95 million respectively in 1996 (Sports 
Business, 1997). 
(2) SHORTAGE OF QUALITY EVENTS 
Despite the creation of new events, for example, the Rugby World 
Cup, La Tournai (France), and so on, and the modification of other 
events, such as the European Champions League, there is still a 
shortage of quality events. These premier events are sought by greater 
numbers of sponsors, with inevitable consequences for sponsorship 
fees, clutter and ambush marketing. 
18 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
TABLE 8 US COMPANIES/BRANDS USING SPONSORSHIP 
Year Amount No. of companies/ Expenditure per 
($ millions) brands brand ($ thousands) 
1985 850 1,600 531 
1986 1,000 2,100 476 
1987 1,350 3,400 397 
1988 1,750 3,700 473 
1989 2,100 3,850 545 
1990 2,500 4,000 625 
1991 2,800 4,200 666 
1992 3,200 4,300 744 
1993 3,700 4,500 822 
1994 4,250 4,600 923 
1995 4,700 4,800 979 
1996 5,400 4,900 1,102 
1997* 5,900 5,000 1,180 
Source: lEG Sponsorship Report, Chicago (1997) * Projected 
(3) GREATER EXPLOITATION OF THEIR PROPERTIES BY EVENT OWNERS 
The inflow of revenue from sponsorship, television and advertising 
has significantly enhanced the commercial instincts of sports 
federations, arts administrators and other bodies overseeing events. 
At all levels from federation to club to player/ artist there is an 
increased awareness of the value of property rights. In the case of a 
major event this is evident in several ways. Firstly, there has been a 
substantial increase in the cost of sponsoring major events. In 1984 
the cost of a global sponsorship was $4 million (McGeehan, 1987), by 
1996 the equivalent cost was $40 million. The second way in which 
major event owners have exploited the value of their properties is to 
subdivide the event rights into various categories and/ or levels of 
sponsorship, thereby creating a greater revenue stream. For example, 
after the Los Angeles Olympic Games, the International Olympic 
Committee (IOC) introduced the concept of categories of 
sponsorship (for example, official snack food) under the TOP 1 
programme for the 1988 Seoul Games. In 1996, it introduced a new 
level of sponsorship, marketing partner, for the 1996 Atlantic Games. 
This categorisation of various sponsorship rights has been imitated by 
other major events. 
Individual clubs, team squads and individual players, all aware of 
the value of their rights, have also begun to exploit such rights, either 
through product endorsement, celebrity advertising and/ or 
sponsorship. The net result of this consciousness of value and 
19 
INTERNATIONALJOURNALOF ADVERTISING, 1998, 17(1) 
exploitation of rights is an increasingly cluttered environment. A 
further factor fuelling this clutter is the exploitation of rights by media 
owners, particularly broadcasters. Media owners now actively sell the 
sponsorship rights to their own broadcast output, for example, 
Midland Bank's sponsorship of lTV's drama series, and coverage of 
others events such as televised sport, for example, Texaco's 
sponsorship of Formula One racing. 
The net outcome of the increasing proliferation of sponsorship 
activity and related clutter is many-fold: 
- Sponsorship value is reducing as the cost of buying sponsorship 
rights and the number of sponsors trying to associate with 
major events both increase. Sponsors report declining recall 
rates from their sponsorship investments (Kraak and Olivier, 
1997). A related cost consequence is that the cost of leveraging 
the original rights investment must increase as sponsors find it 
more difficult to attract consumer attention in a cluttered 
environment. While declining value in sponsorship is a concern 
for decision-makers, some sponsors feel that it may still offer 
more cost-effective returns than mainstream advertising (Otker, 
1997). 
- Sponsorship proliferation must also reduce the capacity of 
consumers to clearly identify sponsors, thereby reducing the 
sponsors' capacity to influence awareness rates, improve image 
perceptions and affect sales consequences. As sponsors seek 
greater returns on their increased investments and therefore 
encroach further into events and programmes there is likely to 
be an adverse effect on consumer goodwill towards the medium 
in general and towards intrusive sponsors in particular 
(Marketing Week, 1995). 
Ambush marketing 
One of the most disquieting developments in sponsorship is ambush 
marketing. Essentially ambush marketing, or parasitic marketing, 
involves a company seeking to associate with an event without 
payment to the event owner and often in direct conflict with a 
competitor who is a legitimate and paying sponsor. Ambush 
marketing, if successful, enables the ambushing company to achieve 
the awareness and image benefits of sponsorship without paying the 
rights costs. By associating with an event the ambusher leads the 
20 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
public to believe that they are a sponsor and therefore worthy of the 
public goodwill that such investments generate. This practice, which 
began with the 1984 Los Angeles Olympic Games, has since become 
a major issue for the sponsorship industry. It undermines the integrity 
of major events if ambushing corporations can achieve the benefits of 
sponsorship without paying the cost of entry to the event. It may also 
reduce the efficiency of such events for official sponsors who achieve 
lower returns on their substantial investments due to the activities of 
ambushers. 
Ambushing companies use a variety of methods of associating with 
major events. These can involve sponsoring the media coverage of an 
event, sponsoring a sub-category within an event and overstating 
one's involvement through major promotion activity or by using 
themed advertising which implies sponsorship involvement 
(Meenaghan, 1996). Research shows that ambush marketing can be 
successfully employed (Shani and Sandler, 1992; Sandler and Shani, 
1989; McDanieland Kinney, 1996), and major event owners such as 
the IOC, FIF A, UEF A and others have devised strategies to counter 
the activities of ambush marketers (Meenaghan, 1994; Townley, 
1992). 
Both event owners and sponsors have a vested interest in negating 
the destructive effects of ambush marketing. Indeed, the lead in this 
regard has been taken by the IOC which has been the major victim of 
this phenomenon over many years. Its results achieved in minimising 
ambush marketing activity during the 1996 Olympic Games will 
become the industry standard for combating this potentially 
dangerous phenomenon. 
FUTURE PROSPECTS FOR SPONSORSHIP 
Future prospects for sponsorship will continue to be driven by the 
factors responsible for its recent development; however, other 
influences will further serve to shape industry directions. 
Relationship rather than transaction-based agreements 
One of the signal changes in the sponsorship field is that the 
corporate decision-maker now faces a richer vocabulary of 
possibilities in the task of sponsorship management. 
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INTERNATIONALJOURNALOF ADVERTISING, 1998, 17(1) 
Faced with escalating sponsorship costs, some sponsors are already 
adopting novel methods of reducing their financial exposure (Ukman, 
1997). Sell-through rights enable the major sponsor to sell off other 
sponsorship categories or promotional tie-ins, thereby offsetting the 
up-front cost to the event owner. A promotional partnership exists where 
the rights fee is determined by sales to the sponsors' customers. 
Instead of a straight cash transaction Mastercard International 
negotiated a deal for title sponsorship of Lola Cars Formula One 
racing team whereby the rights fee is based on sales of memberships 
of the Mastercard Lola Formula One race team to Mastercard 
customers. Under what is called 'reciprocal marketing Mastercard will 
sell three tiers of membership to its cardholders with the team 
keeping all revenues earned. Peiformance guarantees involve the event 
owner in sharing the risk in the effectiveness of the sponsorship to 
the sponsor. An example is where Shell's payment to Indy Car is 
related to the petrol sales. Other methods involve the sponsor acting 
as underwriting guarantor for an event. In some instances the event 
owner may accept a reduced fee in return for the sponsor's marketing 
of both the event and the sponsor's role therein. Overall, it is likely 
that innovate partnerships will replace purely econorruc 
transaction-based agreements. 
Hyper-dimensional sponsorship agreements 
The new reality of sponsorship will be driven by the demands of 
broadcasters, sponsors and entrepreneurial event owners. While such 
figures have always been to the fore in creating sponsorship 
opportunities it is already eVident that the scale and nature of future 
sponsorship practice will be different. The scale will be different in 
that events will increasingly be organised and financially justified in 
terms of extended and, in many instances, global audiences. Events 
will further be different in that both the owners and the nature of 
ownership will vary. Some examples reflecting both scale and nature 
may serve to indicate future patterns. Nike, through their sports 
promotion business, Nike Sports Entertainment, is producing and 
promoting global events that feature its contracted athletes. It 
recently paid $200 million to sponsor the Brazilian soccer team for 
ten years. Under the terms of the agreement Brazil will play up to five 
Nike-organised events a year (Himelstein, 1997). 'The first series of 
matches is likely to take the shape of a tournament featuring Brazil, 
22 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
Italy, Russia, Holland and the US - all of whom are also sponsored by 
Nike. Taken to its logical conclusion, the event is a mini world cup, 
owned by and providing a revenue stream for Nike' (Ukman, 1997). 
The revenue stream is likely to be provided by ticket sales, broadcast 
rights sales and sponsorship sales as well as the sales of Nike's own 
products. Similar events on a lesser scale are being produced by Nike 
featuring its athletes in basketball (Hoops Heroes in Japan) as well as 
track and field events in Japan and Australia. Indeed, Nike was 
reported to have sought to buy the Brazilian soccer player Ronaldo in 
1997 and lease him back to his then club, Barcelona, thereby making 
him the world's first non-club-owned player. Nike already had major 
contractual arrangements with the player through a 
one-million-pounds-a-year and boot endorsement contract and Nike's 
sponsorship of the Brazilian team (Hannigan, 1997). 
On a lesser scale a major sports goods supplier/ sponsor such as 
Umbro organises the Umbro Soccer Tournament in the UK while 
soccer clubs throughout Europe are increasingly owned by leisure and 
entertainment corporations and/ or by media companies. Indeed, 
event owners, media owners, athletes and sponsors collaborate for 
newly created sports events as in the case of the 'Challenge of 
Champions' meetings in athletics. 
While major sponsors such as Volvo and Budweiser have for many 
years operated separate event-management companies to manage 
their sponsorship programmes, future structures will be 
more complex. Globalisation in sport, business and 
broadcasting/ telecommunications will necessitate more integrated 
arrangements. For example, sponsors such as Nike will integrate 
backwards through arrangement with particular sports and athletes 
while integrating forwards with media outlets to ensure exposure. 
Sponsors such as Unilever, Proctor and Gamble, Coca-Cola and 
Pepsi have recently produced sponsored programming for exposure 
in television outlets in both the UK and US markets (Mitchell, 1994; 
Reid, 1995; Summers, 1994; Tomkins, 1995). Indeed some sponsors 
may seek to horizontally integrate with non-competing sponsors to 
maximise their global market power. 
Sponsored activities in broadcast-driven demand 
While the broadcast industry has always relied on the coverage of 
events, even to the extent of needing to create events, changes in 
23 
INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
technology will serve to greatly expand its appetite and therefore this 
reliance. Digital technology, facilitating multiple networks, will reach 
narrower audience segments, often on a pay-per-view basis. Indeed, 
one of the side-effects of Sky Television's coverage of FA 
Premiership football in England has been a reduction in the television 
audience and therefore the total event audience. The demand for 
programme material has created a highly competitive market for the 
broadcast rights to events with obvious knock-on effects in terms of 
prices of sponsorship rights being sought. Further technological 
developments will deliver to broadcasters the ability to superimpose 
advertising messages onto their output and to vary such messages 
from that being exposed in the live event setting and further to vary 
the relayed messages by market (Rubel, 1996). Over time this 
development will represent a major shift in control to broadcast 
networks with related consequences in terms of redistribution of 
sponsorship investment. 
Corporate perception of value 
Investment in the medium will continue to grow as long as sponsors 
are satisfied that they are deriving value. However, value is likely to 
diminish as the cost of major events escalate and event owners bring 
extra sponsors on board, as well as charge higher sponsorship fees in 
order to maximise the value of their properties. The net result is 
higher fees, greater clutter and inevitably reduced efficiency. 
Despite the likelihood of diminishing efficiency, the central role of 
sponsorship in the media event and corporate axis is highlighted by 
the scale of certain recent statistics. The1996 Atlanta Olympic 
Games received 32 per cent of its entire revenue from sponsorship 
(IOC, 1995). Umbro paid Manchester United £60 million for a 
six-year shirt sponsorship deal (Ball, 1996). Philip Morris spent $125 
million on sponsorship in 1996 (Sports Business, 1997). 
Essentially, the bottom line is that as long as investment in the 
medium continues to repay corporate investment its future is secure. 
The very fact that sponsorship has out-performed advertising 
generally even in the midst of a worldwide recession means that it is 
not longer seen as being at 'the luxury end of the budget'. This single 
fact represents a turning point in management attitudes to 
sponsorship and therein lies the key to the future of sponsorship. 
24 
CURRENT DEVELOPMENTS & FUTURE DIRECTIONS IN SPONSORSHIP 
SUMMARY 
Over its relatively brief commercial history sponsorship has altered in 
many and varied ways. From limited scale activity sponsorship, today 
represents a significant and increasingly global element of marketing 
communications expenditure. The increased scale of investment has 
led to several major developments. Sponsoring companies are taking 
a much more hard-nosed view of their sponsorship investments. This 
in turn has demanded greater levels of sophistication in sponsorship 
management and increased reliance on decision-making support in 
terms of research information and specialist consultancy advice. 
Increased investment and greater numbers of sponsors have led to 
major events being cluttered with consequent pressure to seek out 
new and exciting sponsorship media. 
Developments in broadcasting, particularly in cable and satellite 
television, as well as an expansion of funding options for terrestrial 
stations, allied to the advent of digital technology, favour the 
development of broadcast sponsorship. As in the recent past, 
sponsorship activity will take place in an increasingly regulated 
environment. Indeed the increasing commercial-mindedness of 
sponsors, property rights owners and broadcasters alike will 
encourage a more sophisticated and less romantic marketplace. 
There are inevitable downsides to these developments. Increasing 
levels of clutter and greater sponsor intrusion will heighten consumer 
cynicism. Such cynicism will be further fuelled by the industry's 
gluttonous appetite for sponsoring 'almost anything that moves', 
leading to an increasingly commercial all-pervasive medium rather 
than a societally supportive medium. 
From a corporate sponsor perspective, it is possible to identify 
three phases in the life of sponsorship as a medium. Stage one 
involved the sponsor as donor/patron with little commercial realism 
pervading the relationship. The second phase coincided with the 
large-scale inflow of money to the medium that necessitated a 
reorientation by the corporate decision-maker from donor to 
investor/ marketer. Phase three, which many large-scale corporations 
are now entering, involves the sponsor as impressario, seeking to 
control and stage-manage, sometimes through ownership, the 
activities and images chosen to reflect corporate brand values. This 
hunger to associate with desirable positioning values through clean, 
exclusive and cost-efficient access has always been the key driver in 
25 
INTERNATIONAL JOURNAL OF ADVERTISING, 1998, 17(1) 
the development of sponsorship as a medium. Clutter resulting from 
multi-level deals negotiated by event owners and the effects of 
ambush marketing inevitably wrecked the purity of the transfer to 
values between event and sponsor. Future corporate involvement will 
see the sponsor attempting to control and perhaps own activities and 
events with desirable association values. Such control will facilitate 
the clear transmission of chosen values to the corporate brand via 
integrated media outlets to audiences increasingly weaned on a diet of 
synthetic experiences. 
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ABOUT THE AUTHOR 
Tony Meenaghan is senior lecturer in marketing at The Graduate 
School of Business at University College Dublin, where he specialises 
in marketing communications and in prticular commercial 
sponsorship. He is the author of several books in these fields and his 
work has apperared in various international journals including Sloan 
Management Review, the International Journal rf Advertising, the Journal rf 
Advertising Research, the European Journal rf Marketing, and P!)lchology and 
Marketing, among others. 
28