Abstract

This paper investigates whether or not the DNF’s (those who ‘did not finish the race’) due to early life critical part failures are higher than would be expected in NASCAR vehicles. The hypothesis is that
early life critical part failures are, in fact, higher than would be expected in NASCAR vehicles. This hypothesis is based on the fact that NASCAR teams
have sizeable budgets and use only highly specialized components. In addition,
the extensive mileage typically associated with commercial vehicles is
not required of these parts. This paper develops a reliability model to
test whether the average time of failure for these critical components
is higher than what would be expected of high performance critical components.

(more…)

Abstract

An important theme in sponsorship literature involves its definition and its place in marketing theory. With regards to the latter, differing opinion exists as to whether sponsorship is a subset of advertising or whether it is a distinct member of the promotional mix. This research adopts a case study approach to argue that sponsorship should be viewed – both in marketing theory and in business practice – as a distinct and legitimate member of the promotional mix. The subject of the case is KMAC, a sports marketing agency specializing in sponsorship. Results support sponsorship’s inclusion in the promotional mix and outline future research.

Introduction

Sponsorship is a promotional practice that has evolved from its roots as a tool for corporate donations (Wilkinson, 1993) to a highly-developed course of action by which both the sponsor (investor) and the sponsee (property) benefit in a marketing relationship (Polonsky & Speed, 2001). Its rapid adoption into practice by organizations is reflected by the huge growth of worldwide sponsorship investments, which went from US $500,000 in 1984 to what was expected to reach US $28 billion in 2004 (IEG, 2003). This impressive growth in practice, however, has not been matched by theory development. Although a difficult concept to define, the majority of the definitions in related literature are relatively similar (Olkkonen, 2001) but sponsorship’s role in relation to other resource and promotional generating strategies (i.e. philanthropy, advertising, cause-related marketing) remains unclear (e.g. Polansky & Speed, 2001). In particular, sponsorship’s position in marketing’s traditional promotional mix ranges from no inclusion at all (e.g. the vast majority of marketing and marketing communications texts) to recognition that it is an integral part of the communications mix – alongside publicity, public relations, sales promotions, personal selling, and advertising (Crimmins & Horn, 1996; Meenaghan, 2001; Tripodi, 2001; Crompton, 2004). This is supported by a number of studies suggesting that sponsorship plays an important role in supporting an organization’s attainment of its communications objectives (e.g. awareness, reach target markets).

The purpose of this research is to provide evidence to previous academic work (e.g. Meenaghan, 1991; Tripodi, 2001) arguing for sponsorship’s inclusion as a legitimate member of the promotional mix by presenting the case of a successful Canadian sport marketing firm.

Sponsorship and the Promotional Mix

Sponsorship growth is credited, in part, to the increased amount of clutter found in traditional media towards the end of 1970’s (Otker, 1988; Meenaghan, 1991; Sandler & Shani, 1993; Wilkinson, 1993). The increase in the number of television and radio networks available created added clutter in the marketplace and the competition between advertisers to attract consumers’ attention was fierce. As a result, the effectiveness of the ability of advertising to reach consumers was questioned (Howard & Crompton, 1993). For many, sponsorship became an effective and less costly alternative to break through the clutter in order to reach specific targets (Mullin, Hardy & Sutton, 2000). In this regard, a number of studies supporting sponsorship’s distinction from advertising have emerged in the literature emphasizing that it (i) functions differently, (ii) is perceived by audiences differently, and (iii) includes the ‘association’ element that advertising does not (see Javalgi, Traylor, Gross, & Lampman, 1994; Hoek, Gendall, Jeffcoat & Orsman, 1997; Bloxom, 1998).

Nevertheless, as companies’ investments in sport sponsorship increased, so did the need to justify its “Return-On-Investment” (ROI). Thus, the establishment of clear and measurable objectives was identified as important to sponsorship programmes. Irwin and Asimakopoulos (1992) suggest that corporations attempt to achieve objectives that are corporate in nature or specific product/brand related. Similarly, Sandler and Shani (1993) identify three groups of sponsorship objectives: broad corporate objectives (image related), marketing objectives (brand promotions, sales promotions), and media objectives (reach target markets, cost efficiency). Overall, much of the research on sponsorship objectives tends to be dominated by corporate image and/or public goodwill categories (Otker, 1988; Witcher, Craigen, Culligan, & Harvey, 1991; Kuzma, Shanklin, & McCally, 1993).

Berrett (1993) suggests that sponsorship is often used by corporations to achieve multiple objectives. While others, such as Irwin and Sutton (1994) and Crompton (2004), agree, Crompton (2004) proposes that enhancing profitability by generating additional sales remains the ultimate goal of a total communications strategy. Thus, it could be argued that sponsorship plays a strategic role in communicating an organization’s objectives.

The remarkable increase in the number of sport properties available and the number of sponsors investing in sport properties suggest that sponsorship is able to assist a company to achieve its corporate and marketing objectives. This, in turn, would lend support to Tripodi’s argument (2001) that sponsorship (as a promotional tool) has become one of the top promotional considerations for marketers. A well-planned and coordinated approach to communications appears essential if sponsorship is to be effectively integrated into other marketing activities. Keller (2003) suggests that event sponsorship provides an interesting communication option for a company, as the brand becomes engaged during a “special and relevant moment in consumers’ lives” (p.315). In this way, how is sponsorship different from advertising?

As noted by Brooks (1994), a key challenge for sponsorship is to provide evidence that it is more effective than advertising or sales promotion. According to Meenaghan (2001), advertising seeks to “exploit” emotion, while sponsorship strives to “connect” with the emotion inherent in the property (e.g. sport). The association between the two parties (sponsor and sponsee) is often felt to be the key differentiator from advertising as it enhances the relationship beyond a basic cash purchase of promotional value (e.g. McCarville & Copeland, 1994). For Crimmins and Horn (1996), sponsorship is a way to persuade consumers indirectly through an association with a property. If used strategically, it is suggested that a sponsorship programme can be developed into a distinctive competence, thus creating competitive advantage (Amis, Slack & Berrett, 1999).

Gaining a competitive advantage is becoming more of a challenge within a cluttered market place in which there are increased incidences of ambush marketing (Sandler and Shani, 1998; Hoek and Gendell, 2001; Crompton, 2004; Seguin, Teed & O’Reilly, 2005). This has led corporations to explore new ways to activate (leverage) their investments and maximize sponsorship return. Tripodi (2001) suggests that firms should employ an integrated approach and use sponsorship with other elements of the communications mix (publicity, advertising, sales promotion, personal sales). A synergetic effect will not only maximize communications effectiveness, but also contribute to building brand equity (Tripodi, 2001; Keller, 2003). The literature provides evidence that sponsorship’s membership in the promotional mix should be legitimate, however, uncertainty remains. The current research involves a case study designed to further support this literature.

Case Methodology

The case study presented in this paper was selected from a number of in-depth interviews conducted by the authors as part of a major research project currently underway in Canada. More than thirty-five sport properties, corporate sponsors, and sport marketing firms took part in this research, which examined a number of questions related to sponsorship acquisition, sponsorship objectives, sponsorship leveraging, and sponsorship evaluation. The case presented herein comes from a successful Canadian marketing firm called K.Mac & Associates (K.Mac) that specializes in sport sponsorship. The analysis of this case will shed some light on sponsorship’s true strategic position with respect to the promotional mix.

The data was collected through an in-depth semi-structured interview over two hours with Keith McIntyre, the founder and CEO of K.Mac & Associates, on January 26th, 2005. Scripted questions and open discussion took place, with the entirety of the conversation being recorded, transcribed, and analyzed. In addition, secondary data was obtained in the form of case studies, marketing strategies, and websites.

The Company: K.Mac & Associates

K.Mac & Associates (K.Mac) was founded in 1992, at a time when sponsorship in Canada experienced significant growth. For the first few years, K.Mac worked closely with a number of professional hockey players with the main objective of maximizing potential revenues from promotional activities. The firm quickly expended its services and has since worked with hundreds of Olympic and professional athletes, properties, sponsors, and events, including Major League Baseball, hockey superstar Mark Messier, Procter & Gamble (for eleven years), the National Football League, Pfizer (for five years), UPS, the Canadian Olympic Committee, General Mills (for seven years), and the National Hockey League. The founder attributes much of K.Mac’s success to being a “marketing resource company with sport as the playing field, and not a sport marketing firm” (McIntyre, personal communication, Jan. 26, 2005). Sponsorship “leveraging” comprises a significant portion of its business, driven by the firm’s focus on ‘superior execution’ and ‘measurable outcomes linked to objectives’ which K.Mac can perform at a level of detail and execution that a large agency cannot.

Specific to sponsorship, K.Mac follows a detailed, focused four-step process of ‘relevance, differentiation, integration, and activation’ in which the client’s objectives and motivations (either sponsor or sponsee) are researched in detail and followed through on each step. In implementing its process, K.Mac has assembled a tool box of key leveraging tactics that it customizes based on the situation. Further, it has developed its own evaluation methodology based on incremental sales: “we are tracked on incremental units…I can tell you the incremental sales we’ve provided to our clients” (McIntyre, personal communication, Jan 26th, 2005). Being able to track sales has been identified as a key factor by K.Mac, if sponsorship is to be taken as a serious component of the promotional mix. Shank (2005) noted that the eventual objective for nearly all organizations involved in sponsorship programmes is an increase in sales. This seems to be supporting Crompton’s (2004) argument, which suggested that enhancing profitability by generating additional sales remains the ultimate goal of sponsorship. However, measuring increases in sales that are directly linked to a sponsorship remains a challenge.

Results: ‘Sponsorship in the Trenches’

Given that the initial investment only buys the rights to an association, it has been suggested that sponsors “leverage” their sponsorship by spending resources into additional communications/promotional activities (Meenaghan, 1991, 1998, 2001; Sandler & Shani, 1993, 1998; Amis et al.; 1999; Tripodi, 2001; Crompton, 2004; and Seguin et al., 2005). This can be achieved by using a variety of marketing communications elements (Ludwig & Karabetsos, 1999; Meenaghan, 2001). By supporting sponsorship with other marketing components such as advertising, sales promotion, point-of-purchase, on-pack signage, and production of merchandise, a corporation may be in a better position to claim its space in an increasingly cluttered sponsorship environment (Séguin, 2003). It has been suggested that the sums required for successful leveraging may be up to three to five times the initial expenditure (Abratt & Grobler, 1989, Witcher et al., 1991; Shanklin & Kuzma, 1992). Such an approach to sponsorship was found to be embraced in practice by K.Mac: “sponsorship is not a money grab…it is about business, selling product. I work in the trenches and that is where it is” (McIntyre, personal communication, Jan. 26, 2005).

Given sponsorship’s varied roots in philanthropy and advertising, it is interesting to note that, according to K.Mac, sponsorship is still misunderstood within corporate Canada, especially within the advertising industry. For many, sponsorship is no different than advertising and, in fact, is treated as advertising:

I’ve got clients that disagree, one says ‘if I want foot-steps in my store I’ll put my most popular product on sale’…this is not helpful except for awareness building. We are interested in effecting consumer behaviour. What is the incremental [sales] volume? That is what we want…to drive business” (McIntyre, personal communication, Jan. 26, 2005).

While more research is needed to identify the reasons for this lack of differentiation between sponsorship and advertising, it is suggested that large advertising agencies understand advertising and public relations, but not necessarily the role of sponsorship. As a result, “they may fail to see that sponsorship meets the needs of sponsor and sponsee driven by the passion of both the property and the consumer, as opposed to an advertising deal which is one directional” (McIntyre, personal communication, Jan. 26, 2005). Accordingly, it is suggested that a number of marketing executives working for sport properties also have advertising backgrounds.

To further support this argument, K.Mac. provides an example of how sponsorship has been used to ‘ambush’ an advertising campaign from a competitor. While in the past, ambush marketing research has primarily examined the effects of ‘ambushers’ (eg. corporations not having official rights) over official sponsors, it is suggested that ambush may be examined from a different perspective. For example, a company that acquires the rights to sponsor a National Olympic Committee (General Mills in Canada), begins negotiation with the official broadcaster (CBC) to buy all advertising inventory within the specific product category. As the bidding with a competitor (Kellogg) intensifies, the company (General Mills) pulls out just prior to the deadline. While the competitor may have won the television advertising rights for Olympic coverage, the official sponsor has the opportunity to ‘ambush’ the advertiser by focusing its efforts at the retail: “let them [competitor] buy advertising and let sponsorship with its direct, authentic association ambush [the advertising]” (McIntyre, personal communication, Jan. 26, 2005). In this context, sponsorship is the only way to have “authentic” association and sponsors must be strategic in providing promotional programs that take advantage of this ‘authenticity’. This strategy was used by General Mills during the 2000 and 2002 Olympic Games. A Canadian Olympic Committee sponsor, General Mills leveraged its sponsorship by sponsoring “Team Cheerios” which consisted of a group of selected Olympians featured on cereal boxes (Cheerios). This included pictures, bios, and personal stories of the athletes. This was an excellent way for consumers to discover the athletes and ‘connect’ with them on a personal level. While competitor Kellogg’s cereal brand “Victor” secured television advertising rights for both Olympics, General Mills’ strategy was focused at the retail. “We worked closely at developing relationships with key accounts at the retail, making sure they understood that we held the authentic association with the Olympic rings, the Games and the athletes, we owned the space!” (McIntyre, personal communications, Jan.26, 2005). General Mills’ approach to Olympic sponsorship was fully integrated into the marketing and promotional mix. This included product packaging (integrating rings and athlete profiles on boxes), pricing (special pricing leading up to and during Olympics), distribution (working with key retail accounts, developing in-store positioning) and promotional mix (developing sales promotion campaigns, athletes’ appearances, personal selling programs, advertising, publicity). The promotional campaign provided something “meaningful” to consumers and received tremendous publicity. This approach to sponsorship enables associations linked to emotions and passion, as opposed to signage or rink boards. Meenaghan’s (2001) work on sponsorship effects on consumers supports the importance of the emotional connection in sponsorship. When asked to summarize his view on sponsorship in the promotional mix, K.Mac clarified:

I look at sponsorship as part of the promotional mix – and as one of the four or five components of how you build a communications program. Signage [advertising] used to be a big deal but that is now just wallpaper. Sponsorship now is about defining your consumer (demographics plus psychographics, what makes them tick). Then you know what they want and can identify a sponsorship that meets those criteria. Then, you build that link by telling them why it is important to them [consumer]. You also need to tell them [consumer] on their own terms. Get them excited and meet their needs and wants. It has to get really deep these days to really actually make it work (McIntyre, personal communication, Jan. 26, 2005).

Clearly, such an approach makes sponsorship, like advertising, as valid a promotional tool as any member of the promotional mix. In fact, the evidenced above is supporting that in some cases, it may be a superior communications choice when the objective is to drive sales. In this regard, K.Mac points out: “our Litmus test is [to ask] what will sponsorship do to effect consumer behaviour? What will it do to meet the client’s pillars [objectives] of evaluation?” (McIntyre, personal communication, Jan. 26, 2005).

The case of K.Mac provides additional support for sponsorship as a legitimate member of the promotional mix. First, as suggested in the literature, a key benefit associated with sponsorship is the ability to target specific markets (Sandler & Shani, 1993; Irwin & Sutton, 1994; Mullin et al., 2000; Shank, 2005). This is supported in this case, as K.Mac suggests “Sponsorship is very target driven…corporations want to communicate with their core targets” (McIntyre, personal communication, Jan. 26, 2005).

Second, sponsorship’s ability to focus on the exact objectives of the sponsor was highlighted. “Companies do not care about what is going on behind the scenes. They are very sophisticated. Signage…is not enough. Brand managers’ careers are on the line, they do not take big risks and throw up signs; they want return (McIntyre, personal communication, Jan. 26, 2005). A number of authors (e.g. Arthur, Scott, Woods, & Booker, 1998; Amis, Slack & Berrett, 1999; Fahy, Farrelly, & Quester, 2004) identify sponsorship’s ability to achieve specific objectives as an efficient way by which to differentiate a sponsor from competitors.

Third, the ability to build a promotional campaign around a sponsorship was highlighted and the need to leverage a sponsorship was strategically stressed by McIntyre: “a major threat to my business is when a sponsor occupies a category but does not leverage [that sponsorship]” (McIntyre, personal communication, Jan. 26, 2005). Further, he added that “my rule of thumb is that you must leverage at least 2:1. Tylenol [sponsor of Rowing Canada and Canadian Olympic Committee] leveraged 6:1 as a minimum, maybe even 8:1 with TV” (McIntyre, personal communication, Jan. 26, 2005). Leveraging is a topic that has been touched on by numerous authors in the literature. It provides ways to communicate with the consumers and has also been identified as an effective way to combat ambush marketing (Sandler & Shani, 1993; Meenaghan, 1998; Shani & Sandler, 1998; Crompton, 2004; Seguin et al., 2005).

Fourth, the need to evaluate sponsorship in a more sophisticated fashion than eyeballs reached was emphasized. “For the evaluation of my sponsorships, renewal is one thing but ‘up-ing’ [the value of the] sponsorship is another. [For the sponsor], evaluation is tracked on volume from incremental sales volume” (McIntyre, personal communication, Jan. 26, 2005). The evaluation of sponsorship has been a contentious point in the literature. In fact, Slack and Berrett (1995) suggest that evaluation is controversial and a challenging component of sponsorship. As companies seek different objectives from sponsorship, different types of measures and designs should be required for each objective (Crompton, 2004). Despite such planning, the plurality of objectives pursued by corporations and the use of other promotional tools for leveraging purposes makes sponsorship evaluation a complicated task (Meenaghan, 1983; Berrett, 1993, Crompton, 2004). This case suggests that perhaps the industry has found ways to measure sponsorship return that have yet to be tested or reported from academics (see Hoek & Gendell, 2001).

Finally, the case study provides that future trends may increase sponsorship’s effectiveness as compared to advertising:

…think about the playing field for a minute. TV is powerful, 700 channels. Mass advertising moves awareness of new products but it does not do the trick for sales. People can easily avoid commercials…so unless there is an inherent interest or association [in the product that] people have, it [the promotion] doesn’t work (McIntyre, personal communication, Jan. 26, 2005).

Table 1 below summarizes these six supporting points.

Table 1: Additional Support Points for Sponsorship in Promotional Mix

Conclusion

The significance of the K.Mac case to the sport industry is its demonstration that, in practice, sponsorship is used as part of the promotional mix of sponsors. In general, results strongly support that authors of journal articles and textbooks need to consider what is happening in practice in their future writings. This would, in turn, provide students and practitioners with the knowledge of the strategic potential that sponsorship possesses, “sponsorship will play an increased marketing role in the future. It gives you the platform of a unique association that allows you to get your message out to a targeted passionate and emotional group” (McIntyre, personal communication, Jan 26th, 2005). Industry trends and sponsorship spending trends support this continued growth of sponsorship in the future, further supporting the need to formalize its strategic place in marketing strategy classifications.

Although limited to a single case, current research provides an impetus for continued work in establishing sponsorship as a legitimate member of the promotional mix alongside advertising, public relations, publicity, sales promotion, and personal selling. In this regard, quantitative research on large samples of promotional activity is required to demonstrate sponsorship’s distinction from advertising and its important role in collaboration with the other established members of the promotional mix.

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