This article examines sponsorships and advertising as methods for making cost breakthroughs and generating extra revenues. Let's start with sponsorships.
What do I mean by a sponsorship? It is any way to combine recognition with providing access to desirable prospects and customers for someone who, or an organization that, makes a payment or otherwise subsidizes an activity. Sponsorships are more important than ever because they help marketers avoid being lost in advertising clutter by providing higher visibility and prestige to the sponsor. When a sponsor pays you, that's income to offset costs you cannot otherwise reduce. The effect is similar to simply reducing costs.
As the primary benefit, sponsors are usually looking for access to attractive prospects for their offerings. In many cases, your prospects and customers are also highly appealing for other companies and nonprofit organizations, making them interested in sponsoring your activities.
You may have observed some of the ways such access is provided while attending a sponsored conference or seminar. Typically, the sponsors have a chance to speak briefly to the assembled group and to have lots of marketing people present for mingling during meals and breaks. There may also be banners on the walls and notices in the printed program carrying sponsors' names and logos. On the event invitations, there are probably mentions of the sponsors. Publicity for the activity probably includes listing sponsors by name, as well.
Under such circumstances, it's not unusual for the sponsors' fees to cover more than the total costs of the conference or seminar so that all attendance fees contribute profits for the conference or seminar organizer.
You may not be holding conferences or seminars. How, then, can sponsorships cover some or all of your costs? Well, you can provide online services or material that can be downloaded for little or no cost from the Internet. Such an online site can also have sponsors whose identities are prominently displayed.
You can also develop offerings that sponsors purchase. As an example, a sponsor might provide your offering as a gift to those who buy their products or services. During times of high gasoline prices, for instance, some dealers in the United States have offered hundreds of gallons of free gas for people who bought new vehicles that didn't get very good mileage.
A sponsor might also provide marketing access for other organizations. In our community, some charities play this role by selling inexpensive books of discount coupons. The charities keep the proceeds from the book sales, after obtaining the books for free from the publishers. The companies providing the coupons pay the publisher to appear in the book. Those who buy the books save lots of money by using the discount coupons. Through the coupons, coupon providers introduce new prospects to their offerings and bring some customers back more often.
In other cases, almost all offerings will be sold to sponsors who, in turn, directly provide the offerings to their prospects and customers. For instance, golf tournaments are often staged to provide funds for charity. Sponsors are given access to special venues at the tournaments and provided with most of the tickets for the events to distribute to customers and prospects. Sponsors also receive lots of visibility in the event's promotions. The prestige of sponsorship is increased over the company conducting such an event just for itself by improving the quality of the competing golfers, the amount of media coverage, and the number of attendees.
In another variation, a sponsor may be a supplier seeking recognition that provides a lower price for its offerings in exchange for the sponsorship. An example can be found on the computer I am using to prepare this lesson. The machine has a seal on it that says "Intel Core™ Duo inside™," indicating what brand and kind of microprocessor I have. In exchange for this recognition, Intel slices its microprocessor prices by about 5 percent to its computer-manufacturer customers.
Another way sponsorships are structured is through paying for "objective" measurements and rankings. Those who want to be evaluated pay a fee, which pays for the ranking process. The organization making the rankings distributes awards among those who sponsored the contest. The winners use the results to tout their superiority over competitors in press releases, interviews, and advertising.
You may not have thought much about how your marketing activities and offerings could benefit from encouraging sponsorships. Now is a good time to remove such blinders. Companies are more interested than ever before in sponsorships to replace more expensive and less productive marketing programs. You can cash in to make cost breakthroughs when you help such organizations to meet their needs through helpful sponsorships of your high-quality activities and offerings.
Now, how is advertising different from a sponsorship? Where a sponsor obtains recognition for making an activity or offering possible along with privileged access to prospects and customers in exchange for a payment, advertisers are solely purchasing the right to put their commercial messages in front of prospects through some form of media that you provide.
We've all seen television advertising. At regular intervals in the regular programming, short commercial messages are inserted. Companies pay large fees for such time slots in addition to covering their own costs for producing the messages. The fee paid relates to the number of people who will see the message and their potential value as customers for the advertiser.
The same concept generally applies to magazines and newspapers. All or part of a printed page offers the opportunity to attract the eyes of readers. Because the whole publication may not be read, the assumed benefit is considered to be less than the overall readership. In addition, television advertising provides the opportunity to create more emotion... which, in turn, can be translated into making a bigger and more lasting impression with more people.
Advertising is also sold for placement on commercial vehicles such as taxis and trucks. More recently, some companies have been paying to display advertising on personal vehicles. Such exposure is often cheaper than renting billboard space and may offend fewer people who are concerned about cluttering the sides of roads.
With the advent of the Internet, advertising possibilities expanded. Initially, advertisers were encouraged to buy so-called banner ads that took up a big space near the top of the screen and said little. Most advertisers found that such ads weren't worth much in terms of adding profitable sales.
Yahoo, Google, and others found that carrying commercial messages with some relevance to those reading the online page worked better for encouraging purchases from advertisers. Rather than advertisers paying to reach people who merely see the ad, payments for such ads are tied to how many people click on the ad to reach a site where there is a more extensive commercial message or an offering can be purchased. This media approach was intended to be similar to paying for attracting someone to a store where he or she could buy an offering. Accomplishing the latter was worth quite a lot more than simply exposing the name and offering of the advertiser to more eyeballs.
Through Web 2.0, Web sites can become communities where people spend many hours a day. On such sites, the advertising revenues can be a vast multiple of the cost of providing the site... assuming that enough visitors are attracted who post and view videos and photos, exchange opinions, share ideas, and interact in other ways. As an example, a student of mine developed a very sophisticated social networking site of this sort for families at a software cost of less than $3,000, yet the advertising potential of her site was several million dollars a year.
If you don't have such a site now, you can inexpensively develop one that can become a major source of cost-reducing advertising revenue by using software designers and programmers who are based where pay rates are inexpensive. While working on the site, you can speak with your developers at no cost over Skype or another Voice-over-Internet-Protocol service. Naturally, you can have as many sites as you want... as long as each one serves a different purpose and attracts enough visitors to more than cover its costs through advertising revenues.
If you hold gatherings of customers and prospects and don't have sponsors for such gatherings, you can also sell advertising to place on the materials that you share with attendees. In many cases, your advertisers will also market your gathering to their prospects and customers, and you may attract a lot more potential customers to attend. When that happens, you gain direct cost savings for your marketing in addition to the advertising subsidy.
You can provide videos on your Web site as well and sell time slots on such videos to advertisers. Such online advertising opportunities have become popular with truck and automobile manufacturers.
You can also put advertising on your buildings, your packages, and anyplace else where customers and prospects may see the messages. Your suppliers, for instance, may want to be recognized on your final offering in some way (even placing their logos on a Web page may be of interest) as Intel does with its "Intel inside™" stickers on personal computers and laptops.
The sky's the limit for attracting advertisers. You should realize that when print media were more popular, publishers regularly earned a profit on their entire operations just from the advertising revenues. The subscription revenues, by comparison, were usually quite small... just a tiny fraction of total profits.
Can you provide both sponsorships and advertising? Yes, as long as you keep them separate. A sponsored event usually shouldn't include advertising from those who aren't sponsors, but Web sites can offer a combination of sponsor recognition and pay-per-click ads from organizations that don't compete with sponsors. Some magazines have been following this dual course for a long time. Fortune, BusinessWeek, and Forbes, for instance, carry lots of ads for offerings and sell sponsorships to gatherings that senior executives pay to attend. Such gatherings are potentially quite profitable.
What's the key cost-reducing point about sponsorships and advertising? You can use zero-based analysis to create 2,000 percent cost-reduction solutions that allow you to gain new sources of revenue from sponsorships and advertising to support the minimum core offering by offsetting costs for you and your stakeholders in ways that will almost instantly expand profits after implementation to help reduce costs by more than 96 percent or increase social benefits by more than twenty times what you will be spending.
Donald Mitchell is the author of Business Basics which provides 52 lessons in how to create a new enterprise that will have 400 times more profit and 8,000 times more cash flow and value. To learn more, you can read excerpts from the book at: http://www.amazon.com/Business-Basics-Customers-Investments-Stakeholders...