More and more nonprofit organizations are using corporate sponsorships to bring in additional income. And for good reason: According to IEG’s latest annual industry forecast, spending on sponsorship by North American companies was projected to increase by 5.5 percent in 2013 and globally by 4.2 percent–the equivalent of a projected $53 billion spent by companies worldwide.
Several factors account for this strong forecast, including an increase in nontraditional sponsorship opportunities and the consistent revenue growth companies and organizations that use sponsorships have seen from year to year. Despite this explosion in sponsorships, many executive directors, development staff and well-meaning board members still have an unrealistic understanding of what corporate sponsorship is and what it takes to attract those dollars. Too many think that sponsorship fees are similar to corporate contributions, but with a few more deliverables. In fact, from the perspective of the corporate decision-maker, there are few similarities between the two.
Here are six common myths about sponsorships that may be interfering with your organization’s efforts to secure corporate funding:
1. Sponsorship sales is fundraising.
Fundraising is about making the case for philanthropic support for your mission or cause; sponsorship is about marketing. In other words, sponsorship is about a company reaching and impacting potential customers through your organization and its constituents to achieve its marketing and communications goals. If you don’t intend to provide tangible rights and benefits to a sponsor (for example, on-site exhibits, use of mailing lists or ads in your event program), don’t go after sponsorships.
2. Sponsorship fees should equal the cost or expense of the asset.
Many nonprofits set the “fee” they are seeking based upon a fundraising goal or the cost to fund a particular program. However, with sponsorships, there is no correlation between the fee and the expense of the program being sponsored. Indeed, in most cases, the sponsorship fee is worth much more than the cost of the program. Instead, the fee should be based upon the value of the sponsorship rights and benefits package.
Generally, there are two valuations that go into determining a sponsorship fee: tangible and intangible values. The tangible value includes all benefits that can be quantified (e.g., advertising, mailing lists, event tickets). The intangible value is the worth to the corporation of being associated with your organization or event (e.g., prestige of organization, media interest, networking opportunities). Together, the two determine what a sponsorship opportunity is worth.
3. Sponsors are primarily interested in exposure.
Many nonprofits assume that the difference between fundraising and sponsorship is a banner—in other words, the corporate sponsor is really just looking for recognition. While recognition may be one of their objectives, the reasons for sponsorships are far more diverse. According to a recent sponsor survey conducted by IEG, a sponsorship consulting and research firm, the most common reasons for sponsorship are that companies want to:
Communicate their commitment to a particular profession or lifestyle;
Differentiate their product from the competitor’s;
Showcase product attributes;
Combat the larger ad budgets of competitors; and
4. Category exclusivity is generally not that important.
The issue of category exclusivity is where many nonprofits get stuck with sponsorships. Category exclusivity is the right to be the only company within its product or service category associated with the sponsored organization. Simply stated, if Coke is a sponsor, Pepsi is not allowed to be involved.
Sponsors demand category exclusivity because they want a marketplace free from “competitor noise.” Having more than one company from the same sponsorship category will greatly diminish the value of sponsorship and decrease the attractiveness of your event to a potential corporate sponsor.
5. Gold, silver and bronze are popular sponsor levels with corporations.
Contrary to popular belief, using sponsorship levels like gold, silver and bronze do not attract big sponsorships. As soon as a corporate sponsor sees a proposal with a precious metal designation, it assumes the request is just another fundraising appeal. Instead, the terms used for true sponsorship designations are “Title,” “Presenting,” “Associate” or “Official Supplier.”
6. Sponsorship sales is a loathsome responsibility.
Few really enjoy soliciting corporate sponsorships. The main reason is because oftentimes nonprofits don’t have a clear understanding of why a company would want to sponsor their program or event, or they simply don’t have the tools to effectively represent their organization.
Sponsorship sales is not rocket science. Know what you have to offer. Identify who you think might have an interest or need in what you have. Approach them about their needs, not yours. Present a clear, concise opportunity that is appropriately valued and priced. And once they say yes, take good care of them.
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