Firms carefully track benefits of sponsored events

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In 1998, the LPGA tournament at Locust Hill Country Club was faltering. The purse was not keeping pace with most other LPGA events and the Monroe County Rotary Clubs, beneficiaries of the tournament’s profits, were in danger of losing their funding.
So, Wegmans Food Markets Inc. stepped in and became the primary sponsor. Now, the Rochester LPGA has the highest attendance of any venue on the LPGA Tour. The tournament has raised $5 million for the Monroe County Rotary Clubs, ensuring a summer camp experience for thousands of disabled and underprivileged children.
“Wegmans did that because the Rotary camps depend on that tournament,” Wegmans spokeswoman Jo Natale says. “We give back to the communities where we have stores, because that’s where our customers live and that’s where our employees live.”
Wegmans is not alone in this sentiment. In August, Xerox will sponsor a PGA Nationwide Tour event—the Xerox Classic—in Rochester. The event, which boasts $550,000 in prize money, will split the tournament’s profits among three local charities.
“We’ve got over 9,000 employees in Rochester, so we’re always trying to help out the community by donating to charitable organizations,” Xerox spokesman Carl Langsenkamp says.
Companies like Xerox and Wegmans regularly sponsor events. The benefits of sponsorship are many: It draws attention to a brand, generates goodwill for the sponsor and sometimes can offer companies tax breaks.
Some corporate sponsorships, however, cost millions. In order to justify committing a large amount of money to sponsor an event, companies conduct extensive research to ensure a return on investment.
For example, Eastman Kodak Co. sponsors NASCAR driver Travis Kvapil’s No.77 car. Kodak declines to discuss its investment but top NASCAR race cars can command over $20 million per year in sponsorships, reports show.
“In most cases, we work with the organization, and they help us determine the demographics of the audience and the value of the sponsorships,” Kodak spokes-man David Kassnoff says. “The data that NASCAR shares with us show that across the board, NASCAR fans are fiercely brand-loyal.”
NASCAR reports that 72 percent of its fans actively purchase sponsors’ products over similar products from a non-sponsor, while some 34 percent of fans of other sports say they “actively purchase” sponsors’ products over non-sponsor products.
Each NASCAR race car has the added benefit of showing up at every race, Kodak’s Kassnoff says.
Regardless of which driver a fan supports, they will see the No.77 Kodak race car competing each week. This is in contrast to a sport like basketball, where it is impossible for a fan to watch all 30 NBA teams and hence see every team’s sponsors in a given day.
“The true NASCAR enthusiast (will) spend hours in front of the television—34 or 35 times a year,” Kassnoff says.
Once a sponsorship is in place, the research continues. But it often becomes difficult for companies to measure the impact of their sponsorships.
“Assessing the effectiveness is, in general, poorly done,” says Hemant Sashittal, professor of marketing at the Bittner School of Business at St. John Fisher College. “There’s one very objective measure of success, and that’s profit (related to an event)—as long as that’s OK, everything else kind of slides off.”
Though research on sponsorship returns never can be exactly accurate, most companies do make efforts to gauge the effectiveness of their investment. Xerox plans to set up an extensive program at the Xerox Classic allowing clients to attend and participate in some events.
“It’s not just ‘OK, we’re sponsoring the Xerox Classic,’” Langsenkamp says. “We’re also bringing customers in.
“Some will play golf at the pro-am, and then they’ll test our demo equipment the next day.”
Pro-am, or “professional-amateur,” is an event where a professional and an amateur form a team and play a round of golf.
Xerox uses a system of “metrics” to determine the return on their investment. When the firm takes a client to a sponsored event, they first measure where they are with that customer in their usual business cycle.
By measuring how much faster this client is willing to do business with Xerox than an average customer, they are able to make a reasonable estimate on the return of their sponsorship, Xerox officials say.
This is common practice among most companies with a large customer base.
“You can’t just sponsor something without having metrics involved,” Langsen-kamp says.
A corporate sponsorship also provides the obvious benefit of visibility—getting a company’s name in a place where it will be viewed by many potential customers. Xerox also is sponsoring the International Women’s Conference in Stamford, Conn.
“It’s an opportunity to get our face out there and show that this is an audience that we care about,” Langsenkamp says.
The result is a group of consumers who are more likely to react positively to that company and its products in the future.
“What they really get is an audience that is passively learning and has switched off its cynic button,” Sashittal says. “You and I see a 30-second commercial, and our response is ‘Yeah, right.’
“But when we get these messages more passively, by association, our cynic button is turned off. It creates a positive association in the mind of the customer.”
And when sponsored events are nationally televised, the benefits only increase. A NASCAR race, for example, averages 9.6 million viewers.
But large-scale sponsorships generally should be left to widely known companies, Sashittal says.
“Unless you are dominant, you shouldn’t get into this,” he says. “If the local mom-and-pop grocery does it, it won’t work. People won’t remember.”
Smaller companies take other approaches to sponsorship. Harris Interactive Inc., a Brighton-based market research firm best known for the Harris Poll, was a sponsor of the Rochester International Jazz Festival in June.
Rather than contributing money, Harris Interactive surveyed patrons of the Festival, asking questions that would help promoters improve the festival in years to come. In exchange, Harris Interactive’s logo appeared in the festival’s promotional materials.
In most cases, with enough exposure, the right sponsorship can generate enough business to pay for itself.
“It’s priceless in that sense—if you can afford it,” Sashitall says.
(Sean Dobbin is a Rochester Business Journal intern.)
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07/29/05 (C) Rochester Business Journal