What is Sponsorship?

It is a normal occurrence in business for two companies to buy each other's products and/or services. For example, a motor car vendor may purchase services from an accounting firm, and the accounting firm may decide to purchase a car from the same motor car vendor.

This type of mutual trading relationship between two business entities, in which each provides value to the other for an agreed price, is very common but it is NOT sponsorship.

Sponsorship is also a type of mutual trading relationship but with some very important differences as listed:

  1. Sponsorship may be regarded as a partnership arrangement. The partners work together for common objectives.
  2. The relationship between the parties is formalized in an agreement or contract with terms and conditions that are quite specific.
  3. The relationship between the parties is officially recognised and acknowledged. This is evidenced by one partner using the name, logo, photos and other similar commercial properties of the other. This usage however may be strictly governed in accordance with conditions set by the sponsorship agreement

How does this work in a sport and recreation context?

The typical sponsorship agreement in sport is illustrated by the following:

simple illustration of how sponsorship works

The above figure indicates that the Sport Organisation provides promotion services to the Commercial Enterprise in exchange for cash. In the right circumstances, sport is an excellent medium for promoting goods and services. The powerful emotions associated with sport, for example when a gold medal is won at the Olympics, can be captured and used by commercial enterprises to help sell their products and services.

Therefore in the arrangement above, potentially, each party has something that the other party wants. The sport organisation needs cash and the commercial enterprise desires to use sport, particularly sporting superstars, to help sell their products and services. Together, in a partnership, these organisations can achieve their desired objectives. This is the basis of sponsorship.

The exchange of benefits however may take different forms. While cash is always desirable to obtain for the sport organisation, other benefits may be more feasible. The following table provides some typical examples of benefits that the sport organisation may seek to obtain:

Benefits supplied by commercial enterprise to sports organisation

In return for the above benefits given to the sports organisation, the commercial enterprise usually requires the sports organisation to provide a number of agreed services, Typically these may be as follows:

Benefits supplied by sports organisation to commercial enterprise

Points to Note

  1. Sponsorship should NOT be regarded therefore as a situation where a commercial enterprise gives to a sport organisation as if it were a charity.
  2. The exchange of benefits should be detailed in a document that is known as the sponsorship agreement. A failure to properly document what each party is to give and receive may result in a relationship that fails to work and may eventuate in legal action.
  3. Both parties to the sponsorship agreement need to work together, as partners, to ensure that each receives the best value out of the partnership. There should be regular dialogue between the parties.

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