Trade Promotions: Sponsorships & Reciprocity
- Dr. Luis De La Cruz
- Nov 24, 2023
- 11 min read
Sponsorship is now the fastest-growing marketing communication tool in terms of volume predicted to grow at 6% as of 2019 and in complexity becoming a general purpose tool used to attract benefits from a purely transactional activity. The worldwide-growth sponsorship investments reported neared US6bn in 2019 (Toscani & Pendergast, 2021). It seems from the stats that sponsorship opportunities abound for businesses of any size, small, medium, or large, today. However, the perceptions is that sponsorship promotions are often underutilized and underestimated marketing strategies, despite these sponsorships can help increase brand reach, boost business and brand reputation, and place the sponsor ahead of competitors (Toscani & Pendergast, 2021).
Let us explore the sponsorship process and its correlation to similar trade promotion practices within the context of reciprocity to establish situational distinctions with an optic difference for promotional trade choices. Reciprocity has been found to be a key factor in successful sponsorship relationships (Hesling, Asberg, & Roxenhall, 2018). Both reciprocity and reputation play a moderating role in transactional relations affecting sponsors’ benefits and sponsorship continuation. A commercial alignment through a sponsorship is expected to include opportunities to build mutual trust and a fair share of the sponsorship outcomes (Hesling,et al., 2018).
Trade Promotion Practices Trade promotions include trade shows, conventions, event marketing, trade allowances, training, and special incentives given to retailers to market particular products and services, such as extra money, in-store displays, and prizes. Trade shows are one of the most common types of sales promotions in B2B markets.Sponsors provide incentives to advertise their brand in events drivenby another for profit or non-profit businesses. A title sponsorship is about a brand promotion framed by a partial or total cost to own the event partially or wholly (Tandem, 2019). Title sponsorship occurs when a business decides it wants to promote itself at another business. Title sponsors expect to be entitled to plaster their name everywhere in the form of signage, marketing materials, free samples, etc. In order for this to be a successful trade promotion, the sponsoring brand signage must be colorful and memorable so it will stick with the event visitors long after the promotion ends (Tandem, 2019). In an advertisement, the brand ad speaks to a target audience, however, there may be a need to have someone that has used the brand to claim its benefits in communications to existing and potential users. This is an endorsement. The latter is generally a celebrity or influencer who endorses the branded product as a user and is paid by the title sponsor (Crown LLC, 2022). The latter arrangement is contractual and focuses on a consumer touch by a known trusted source who recommends the brand. A celebrity endorsement rather than a discount preserves the brand valueof a high-end product to new users (IniDia, 2020). Cause Related Marketing. A trade promotion can also be related to a familiar cause framed by cause-related marketing (CRM) where the selling organization connect with not-for-profit business and donate a percentage of its proceeds to the non-profit when a customer makes a purchase. This shows the good-willed nature of a corporate citizen behaving as a socially responsible entity, and not focused on a profit orientation. In practice, this is not that simple. Howie and Woodroof (2019) asserted "CRM campaigns are complex promotional tools that presentmanagers with a myriad of decisions to make, and they have been termed “profit- motivated giving” because of the link created between company sales and charitable donations" (p.1). It is a delicate balance maximizing short-term sales goals and the goodwill benefits of corporate social responsibility (CSR). Goodwill's short-term commitments project a sort of gaming act to yield sales. CRM must be a long-term partnering drive to optimize a business's ability to generate goodwill (Howie & Woodroof, 2019) CRM promotions are not a one-size-fits- all marketing strategy. Grand Opening. To establish some distinctions, let us recognize that an advertiser pays to have a product presented to the public in advertising form. Whereas, sponsorship pays the entire cost or contributes towards the cost of a marketing event. (Arthur, 2021; Schultz, 2021). In the case of grand openings, let's differentiate between sponsorship and grand openings. Sponsoring a grand opening is a B2B oriented event whereas a grand opening without sponsors is a B2C oriented event (Arthur, 2021). Trade promotions are targeted toward other business profit or non-profit based (B2B) while consumer promotions are targeted toward consumers (B2C) (Dilifulcrum, 2020).
Considering the retailer is a chain, a grand opening is a considerable expense. Promotional strategies are only about sales and for that promotional strategies give away something, whetherit is a free product, money, or other awards as a way to bring in consumers who may not be attracted to the product under normal circumstances (Hose, 2020). Some experts may not view grand opening events as a discount opportunity for high-end new products to avoid a lower quality brand impression to new users. Instead, a grand opening paves the way for a word of mouth (VOM) publicity to spread about your new business (Arthur, 2021).
Promotion vs. Advertising. Promotional strategies use pull demand (coupons, contests, samples/trials, etc., to attract attention and incentivize consumers to try a product with the intention they will buy it (Udemy, 2020). Whereas in advertising, sellers use push demand by paying to inform, persuadeand remind consumers of their brand presence (Udemy, 2020).
Conversely, promotional strategies are only about sales and for that promotional strategies give away a free product, money, or other awards, as a way to bring in consumers (Hose, 2020). Let us include that an advertiser pays to have a product presented to the public in advertising form. Whereas, sponsorship pays the entire cost or contributes towards the cost of an event. (Arthur, 2021; Schultz, 2021). Sponsorship is not advertising, although it may outwardly appear that way. Instead, it is a marketing technique. Let us recognize too, that in professional practices, brand building is a side effect of promotional strategies, but this is not their purpose (Hose, 2020). Au contraire, the selling of products and the building of brand names are the purpose of advertising.
Sponsorship Promotions:The Bottom Line
As a business for profit and non-profit organizations seeking new opportunities to get their brand noticed by a wider audience is an ongoing activity. The range of efforts from creating great content to generating leads to boosting up their digital marketing strategy demand diverse internalresources and funding,some to be found externally dependingon each business available time and resources. One opportunity business should not overlook is sponsorship.
Sponsorship opportunities abound for businesses of any size, small,medium, or large, today.However, often they are missing in underutilized and underestimated marketing strategies.
Sponsorships can help increase a brand’s reach, boost business/brand reputation, and place the business ahead of competitors. Moreover, sponsorship adds specificity to a marketing strategy where one entity aligns with another in some defined capacity for mutually beneficial reasons (Von der Osten, 2022).
There are four types of sponsorship to choosefrom, and all are effective in boosting your marketing strategy. 1. Financial Sponsorship 2. In-kind Sponsorship 3. Media Sponsorship 4. Promotional Partners Benefits Expected by Sponsors. Often title sponsors’ benefits include boosting brand awareness, improving reputation, increasing connections with event audiences, gainingbacklinks and social media exposure, and standing out from competitors. In sum, hoping the boost in brand awareness, reputation, and public image from a sponsorship investment could lead to an increase in sales. Types of Corporate Sponsorships. There are two: organization sponsors and fundraising sponsors. Organization sponsors support nonprofits year-round through regular giving and involvement. This includes Corporate Social Responsibility (CSR) campaigns, program sponsorships, in-kind gifts, pro-bono support, and more. Recognizing that in a title sponsorship, the sponsor pays for a part or for the entire cost of the event. The title sponsor purchases naming rights to a venue. This is usually part of a marketing strategy to increase a company's visibility or improve its reputation (Friedman, 2021). Sponsorships do not directly promote your company or products, instead, your company pays to support a specific event that your existing and potential customerscould care about (Friedman, 2021). Nonprofit Value Proposition. Finding corporate sponsors – or rather sponsors of any kind – can feeldaunting for nonprofits. After all, corporations might have dozens or even hundreds of
charitable organizations asking them for financial donations or other involvement. In exchange for corporate sponsor donations or in-kind support, nonprofits are expected to promote, advertise, and highlight their corporate partnerson all fundraising materials and communications. Today’s consumers are incredibly philanthropic-minded. In fact, consumers are more likely to be satisfied with a brand if they know the brand is socially oriented. This trend highlights great opportunities for nonprofits and charitable organizations, as they look to bring in more corporate sponsors. Keep in mind that one of the biggest mistakes nonprofits make with event sponsorships is not staying in touch with sponsors after an event. If you have them tagged, you can customize your communications throughout the year and increase your chances of a repeat gift for annual events.
Reciprocity, Reputation and Trust
Reciprocity was found to be the key factor in successful sponsorship relationships, but emotional reference to reputation was also found important. Together they link uncertainty in the complex sponsorship environment with an organization growth goals. Understanding the moderating roles of reciprocity and reputation in sponsorship relationships helps to explain key facets of such relationships, which can partially negate sponsor benefits and threaten a sponsorship’scontinuation (Toscani & Pendergast, 2021). Reciprocity marketing is providing value upfront to motivate customers or prospects to give you something in return. This marketing principle is based on ournatural tendency to return a favor.
Reciprocity Marketing (RM). RM benefits sponsors with an increase interest in their brand. Customers will be excited to engage when the value resonates with them. That’s not to mention the free word of mouth(WM) you’ll get online and offline. Over time, it leads to increased brand
authority, a positive brand perception, and repeat sales. The reciprocity process adds a touch of personalization and make initiatives associated with the brandmemorable as emboldened below. Spotify: Premium free trial to let users experience the product’s value. Amazon: Free trial for Amazon Prime, a similar strategyto Spotify. Userpilot: Educational resources to gather an audiencewell-educated on SaaS so they can understand the value of our products and use them. Reciprocal Marketing. This occurs when companies agree to market each other’s' products or services or when a company does something "free" for customers and a percentage of these customers reciprocate by buying from that company. The "Academy of Marketing Science Review" asserts that when customers receive something for free, many will feel that an inequity exists and respond with a purchase (Mooney, 2023). Small businesses in the local area are good choices for reciprocal marketing. This shows faith and commitment to your local business community. When you refer one of your customers to another party for services, you are, in a sense, vouching for the credibility and professionalism of that vendor. In doing so, your customer will associate you with that provider when judging service.This can be positiveif the service is good,but bad if the service is poor. Prior to asking a vendorto join your referral program,make sure you have a good understanding of his work ethic, performance levels, and reliability (Mooney, 2023). According to Iowa State University, businesses utilizing neighborhood reciprocity report themselves as being more successful than those that do not. These companies do not even need to be in complementary business lines because, in this instance, location is everything (Mooney, 2023). If your physical building is located in a strip mall or office park, you have neighbors that can provide advertising for you in exchange for you promoting them. Since there is no contractual agreement involved, all collaboration is based on mutual trust. That’s why all members shouldbe encouraged to focuson building mutuallybeneficial relationships, instead of looking for quick wins and not giving back to the community. Sponsorship Promotion Practices and Reciprocity A commercial alignment through a sponsorship is expected to include opportunities to build mutual trust and a fair share of the sponsorship outcomes (Hesling, et al., 2018). Starting with sponsorships, the tangible benefits to a sponsor are more easilyrealizable, and alone, these benefits can drive loyalty and engagement. Additionally, the publicity of sponsorships (most sponsors like to share what they are doing and the sponsorship recipient organization is likely highlighting the sponsor) can attract new supporters, sponsors, and donors alike. Finally, the transactional nature of sponsorships relationships often makes them easier to manage and maintain a traditional donor engagement. Reciprocity Complex Expectations. In donor engagement, the first benefit is that donors have fairlylow expectations for anything in return other than a thank you and possibly information/updates on the program (even if they don’t ask, this follow-up is great). When sponsors expect too much from a nonprofit recipient, this can be the end of an ongoingsponsorship relationship. Meanwhile, sponsorships are not alwaysdriven by supportfor the
sponsored organization mission, whereas charitable donations are almost always a sign that the donor believesin the sponsored organization work. Furthermore, sponsors can keep coming back due to the benefits whereas a donor could forget about your organization or feel like their donation went unnoticed or did not further the donor’s mission.
Despite the great benefits of using sponsorships to advance an organization development strategy, there are some complexities and drawbacks to consider. The first is that for many nonprofits, sponsorship is tied to events that are costly, time-consuming to plan, and often only occur a few times a year. The inconsistency of these events can make sponsorship difficult to rely on as a constant source of fundraising. Next, even though the transactional and benefit- driven natureof sponsorship is often positive, unrealistic expectations from donors can become a challenge. Occasionally, sponsors expect too much from the nonprofit and this can be the end of an ongoing sponsoring relationship. Staff Situational Environment. Most strong leaders of nonprofits organizations know their team is likely not be the best paid. They also may be overworked, undertrained, or lack the resources to do their job. In this day and age, that is a recipe for staff to move on. Yet, strong nonprofit leaders often keep their best staff for years beyond their for-profit peers. Quality nonprofit leaders build a strong relationship, stop to listen to staff problems, and have an open dialogue about what is going on within the organization. These conversations as well as the transparency of the organization builds commitment, understanding, and can lead to new ideas and opportunities. A Word of Advice: Not all sponsorships are createdequal. Using the test of reciprocity, donors and nonprofits alike can quickly and easily determine whether a sponsorship should qualify as charitable. The question to ask after giving is: did the donor request specific actions in exchange for their gift? Some examples of this are tickets, promotions, or referrals. If the nonprofit gave the donor anything more than a “thank you” and tax receipt, then the gift involved some degree of reciprocity. Now for sponsorships specifically, a general rule cannot be applied. When you sponsor a zoo animal or family,you are often giving
a gift and not receiving anythingin return. These gifts are more like a true donation, but because of the ongoingnature, are described as a sponsorship. Conversely, a business can be the title sponsor for a marketing event and receive benefits in return for their gift. Because both of these circumstances exists simultaneously, it is important to be specific when dealing with donors and internal projects and using language such as“sponsorship.” The IRS advices “If you receive a benefit in exchange for the contribution such as merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance, or marketing event, you can only deduct the amount that exceeds the fair market value of the benefit received or expected to be received.” Looking at fair market value versus the gifted amount can turn a simple consideration into alengthier consideration of what is deductible. It is far easier to consider “reciprocity.” Concluding Remarks In exploring the sponsorship process within the frame of assessed leading trade promotion practices in the context of reciprocal relationships, we have examined situational distinctions under the optics of title sponsorship and sponsoring donations for promotional trade choices. Indeed, reciprocity has been found to be a key factor in successful sponsorship relationships as a critical filter for trust development and reputational gains and risks Thus, concluding, that both reciprocity and reputation play a moderating role in transactional relations affecting sponsors’ benefitsand sponsorship continuation. Please, share your views on this subject for the benefits of readers and follow up. Your comments are welcome and greatly appreciated! For any inquiries or comments visit https://www.amasfl.org/ and reach Dr. Luis at education@amasfl.org or to DrLuisDeLaCruz@Inbox.com Reference Arthur, L. (2021). A description of a grand opening. A description of a grand opening https://smallbusiness.chron.com/marketing-ideas-pubs-54132.html Crown LLC. (2022, March 31). Sponsorship and endorsement deals. Sponsorship and Endorsement Deals | Crown, LLP (crownllp.com) Dilifulcum. (2020, July 9). Differentiate between trade and consumer promotions relative to a product’s marketing mix. Differentiate between trade and consumer promotions relative to a product’s marketing mix - Brand Activation Agency (societyactivation.in) Friedman,S. (2021, January). Sponsorship is a key to powerful marketing. https://www.thebalancesmb.com/sponsorship-a-key-to-powerful-marketing-2295276
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