Companies that sponsor outperform those that don’t
Companies that invest in sponsorship outperform those that don't according to new research published by the International Journal of Sports Marketing & Sponsorship.
Does sponsorship pay off? An examination of the relationship between investment in sponsorship and business performance also shows that spend at above average rates on sponsorship (so called 'super sponsors') also outperform those that spend at below average rates.
The research, led by Professor Jonathan A. Jensen of Columbia College Chicago, analysed 50 major US corporations including NIKE, AT&T, Coca-Cola, VISA, McDonald's and Ford over a five-year period. The researchers analysed key performance indicators such as stock price appreciation, total revenue, net income and earnings per share. To adjust for company size, annual compound growth rates (CAGR) and percentage changes for stock price were also factored.
During the five year period between 2005/09, the super sponsors outperformed other S&P companies in three of the four key performance indicators.
The super sponsors who had the highest net income growth over the five-year period were General Motors (107.9%), Anheuser-Busch (35%), Ford (26.0%), AT&T (19.7%) and Procter & Gamble (13.5%). All but three of the super sponsors (Bank of America, Verizon and FedEx) posted higher net income growth than the average of the Standard & Poor (S&P) 500 index (6.5%).
The top super sponsors in terms of growth in earnings per share were General Motors (111.8%), McDonald's (16.8%), AT&T (10.9%) and Nike (10.2%). All but two of the companies (Anheuser-Busch and Verizon) posted earnings per share growth rates that exceeded the S&P 500 index average of 6.97%.
In terms of stock price appreciation, the super sponsors declined by an average of 0.64%, compared to a decrease of 7.94% for the S&P 500 index. The super sponsors who realised the highest percentage increase in stock price were McDonald's (96.2%), Visa (66.7%), Nike (45.7%) and Coca-Cola (37.2%).
In addition to achieving higher than market averages, the super sponsors also outperformed the companies on the list who invested in sponsorship at a below-average level, in revenue growth, net income growth and earnings per share growth. As a group, the companies who invested an average of
US$33.7 million per year in sponsorship (versus an average of US$160 million per year by super sponsors) had an average revenue growth of 6.56%, average net income growth of 0.07% and average EPS growth of 3.03%. As a group, the 35 peer companies realised a mean stock price increase of 3.85%.
Professor Jensen explains "we do not suggest a causal relationship between investment in sponsorship and business performance, rather, it is our theory that these companies have consistently outperformed peer companies who spend less on sponsorship and due to the fact that they already enjoy the benefits of their brands being more established and valuable compared to their peers, which contributes to better company performance over time. Their consistent investment in sponsorship is reflective of their efforts to continue to nurture their brands, which, according to branding experts, are among some of the most valuable in the world."
The research's Executive Summary can be viewed by clicking here www.imrpublications.com/imr/login-table.aspx?sum=216&volno=L&no=L
For more information please contact Simon Rines, Publisher, International Journal of Sports Marketing & Sponsorship on +44 1364 642 224, E: srines@imrpublications.com,
6th November 2010 - INFLATED CROWD FIGURES SHORT-CHANGE SPONSORS
18th August 2010 - CHINESE COMPANIES SET TO SPONSOR MAJOR INTERNATIONAL SPORTS PROPERTIES
17th May 2010 - ARABIAN GULF APPROACH TO SPORT SPONSORSHIP ‘NEEDS TO CHANGE’
29th June 2009 - NUTRI-GRAIN AND BILLABONG MOST RECOGNISED SPORTS SPONSORS
17th February 2009 - SPORTS SPONSORSHIP IN DECLINE
