Level Based Sponsorship (Tiered Sponsorship)

In the previous articles, we have already seen what sponsorship is and what are the various advantages and disadvantages which are associated with sponsorship. However, up until now, we have been assuming a one-to-one relationship between sponsors and the sporting league.

However, it is possible to have multiple sponsors which sponsor the same league. This is generally made possible by having a tiered or layered approach to sponsorship.

Most large events across the world follow this approach. This is because of the fact that sporting events nowadays require large sums of money and it is not possible for a single sponsor to be able to bear the expenses.

In this article, we will have a closer look at how tiered or layered sponsorship works and what are the benefits that result from implementing such sponsorship levels.

What are Sponsorship Levels?

Traditionally, one sporting event was associated with a single brand. However, over the course of time, the budgets required to conduct sporting events have gone through the roof. As a result, it is no longer possible for a single brand to be able to meet all the expenses required by the league.

As a result, sporting leagues have now come up with tiered arrangements which allow them to take money from various sponsors.

Instead of committing to one sponsor, the management of the sporting league creates various categories of sponsorships. Each of these categories provides a differentiated value proposition as compared to the other.

Hence, it becomes possible for multiple brands to be associated with the same event. Sporting leagues have to plan the event in such a manner that the benefits provided to the different sponsors of the league do not overshadow each other.

In short, layered sponsorship is the process of breaking down the spectrum of economic benefits which can be derived from a sporting league and selling them bundled as packages to different organizations instead of selling all the rights to a single partner.

Prerequisites for Tiered Sponsorship

It is important to realize that not every event is suitable for tiered sponsorship. There are some kinds of events wherein both the sponsor and the sponsored entity are worse off if they use tiered sponsorship arrangements.

The common characteristics of events where tiered sponsorship can be used have been listed below:

• Large events which cater to a large as well as diverse viewership are more suitable for tiered sponsorship.

• The audience which the event attracts must be diverse in the sense that they should form a part of the target market of many different types of product and service marketers.

• The management of the sporting league must have a large team. This is because the management of events with different sponsorship levels can become quite complex.

Why are Sponsorship Levels Important?

Sporting events across the world have started adopting sponsorship levels. This is because of the fact that this arrangement provides several advantages Some of the advantages related to this model have been mentioned below:

1. Ability to Raise More Funds: The first and most important benefit of having different sponsorship layers is the fact that it allows the sponsored entity to raise more funds. This is because there are limitations to the amount of money that a single company can provide as sponsorship. Hence, if the management of the sporting league is able to obtain sponsorship from different sponsors while selling them different aspects of the sponsorship, they are likely to be able to generate more money from the league.

2. Better ROI: It needs to be kept in mind that sponsors have to invest huge sums of money in order to obtain an uncertain and intangible benefit in return.

   Having multiple levels of sponsorship leads to a reduction in the ticket size of the sponsorship agreement. This means that a larger number of corporate entities can now afford to sponsor the event. This also means that sponsors are now able to derive similar benefits with a smaller investment. This means a higher return on investment for the sponsors as well.

3. Increased Competition: As mentioned earlier, a tiered approach to sponsorship lowers the ticket size and hence introduces more prospective advertisers. This leads to competition among advertisers. The competition amongst the advertisers leads to increased revenue for the sporting league.

4. Higher Engagement: A large number of co-sponsors means more advertisements and publicity for the league as a whole. This is because each sponsor has their own marketing budget which they use in addition to the sponsorship money. This is done by the sponsors to create awareness for their own brand. However, in the process of doing so, they also end up creating awareness for the sports league as a while. Hence, sports leagues across the world are said to benefit from higher engagement if they use a level-based sponsorship approach.

The bottom line is that a level based or a tiered approach to sponsorship can be very useful for certain specific types of sports events. Hence, the management of the sports league should introspect about their capabilities as well as requirements before rushing to implement this system.