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