Commensurate with its exponential growth as a marketing communication vehicle, sponsorship has, in ... enables the sponsor to gain a competitive advantage (Amis et al., 1999). ..... maintenance and even media production facilities (as is the case for most broadcast ... all project an image in their function as social services.
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Competitive advantage through sponsorship A conceptual model and research propositions John Fahy University of Limerick, Limerick, Ireland
Francis Farrelly
Competitive advantage
1013 Received December 2001 Revised September 2002, December 2002
Department of Marketing, Monash University, Caulfield East, Australia, and
Pascale Quester School of Commerce, The University of Adelaide, Adelaide, Australia Keywords Sponsorship, Competitive advantage, Resource management Abstract The increasingly important role played by sponsorship in the marketing mix has given rise to the view that it should be considered a strategic activity with the potential to generate a sustainable competitive advantage in the marketplace. This paper extends that line of argument through the development of a conceptual model of the sponsorship – competitive advantage relationship. In particular, it argues that two levels of competitive advantage need to be considered, namely the competitive advantage of the sponsorship and competitive advantage in the market. Critical to attaining an advantage in the competitive world of sponsorship is the deployment of a range of organisational resources to support the sponsorship investment. A series of research propositions are advanced showing the relative importance of different organisational resources. Effectively resourced sponsorships generate a competitive advantage in the “market” for sponsorships, which in turns leads to competitive advantage and superior performance in product markets. The implications for research and practice are discussed and conclusions are drawn.
Introduction Commensurate with its exponential growth as a marketing communication vehicle, sponsorship has, in recent years, been the focus of intense academic interest. Defined as an investment in cash of kind in an event, team or person, in order to secure spoonsors’ access to the commercial potential associated with that event, team or person (Meenaghan, 1994), sponsorship has been viewed as an appealing communications tool, given the increasing clutter and fragmentation of the traditional mass media. However, the rapid growth of corporate sponsorship has, in turn, led to the emergence of “sponsorship clutter” and to the rise of “ambush” marketing, reflecting the intense competition for the sponsorship of certain events (Meenaghan, 1996; Payne, 1991). As the market for sponsorship itself becomes intensely competitive and challenging in order to attain a competitive advantage, it is essential that sponsorship investments be carefully managed in order to ensure their effectiveness. Yet, while a great deal has been written about the planning and evaluation of sponsorships, relatively little is known about how sponsorships are managed, despite the belief that implementation is a critical factor in determining sponsorship success or failure (Meenaghan, 1991).
European Journal of Marketing Vol. 38 No. 8, 2004 pp. 1013-1030 q Emerald Group Publishing Limited 0309-0566 DOI 10.1108/03090560410539140
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Figure 1. A model of sponsorship-based competitive advantage
Given the global success of some high profile sponsorships such as the Nike-Michael Jordan relationship, attention has moved away from sponsorship’s role in the communications mix to considering its strategic role and contribution to the attainment of superior performance in the market. For example, it has been argued that effectively managed sponsorships can be a distinctive competence which in turn enables the sponsor to gain a competitive advantage (Amis et al., 1999). The processes by which resources or competencies generate competitive advantages are complex and continue to attract the interest of scholars in fields like organisational economics, strategic management and marketing (Barney, 1991; Cockburn et al., 2000; Collis, 1994; Day, 1994; Priem and Butler, 2001). In recent years it has become conventional to label this line of work as the “resource-based view (RBV) of the firm”. In a similar fashion and despite many examples of successful sponsorships, the processes by which successful sponsorship is achieved are not well understood. Indeed, there have also been many cases, such as that of Credit Lyonnais in France or Ansett in Australia, where a very successful sponsorship did not translate into competitive advantage for the sponsor in the marketplace. In the case of Credit Lyonnais, the high profile sponsorship of the Tour de France did not prevent public outcry when financial problems required a government bail-out. Despite a long association and a good strategic fit (the winning yellow T-shirt a visual reminder of The Credit Lyonnais’ corporate livery), the most popular of all French sport events could not remedy the loss of public trust and tainted image which followed news of mis-management and financial losses. In the case of Ansett, the once second largest Australian Airline, a record investment of close to AUD50 million for the status of official sponsor of the highly successful Sydney 2000 Olympics gave little relief, and indeed may have contributed to, safety concerns and the ultimate financial demise of the airline. As in the case of Credit Lyonnais, investments in a high profile sponsorship offered no protection in terms of public image against excessive financial exposure and internal mis-management. This suggests that when considering the strategic role of sponsorship, two distinct levels of competitive advantage need to be identified (see Figure 1). First, there is the attainment of advantage in the competitive market for sponsorship, where the sponsorship must rise above the clutter and effectively resists the efforts of
competitors to ambush it. How to ensure that this happens has not been well dealt with in the sponsorship literature which has generally tended to note that for sponsorship to be effective, it should be accompanied by significant marketing communications expenditures (Cornwell, 1995; Meenaghan, 1991; Quester and Thompson, 2001). Others have argued that the resource-based view of the firm holds some promise in improving our understanding of this complex process (Amis et al., 1997; Amis et al., 1999; Farrelly et al., 2000). This paper builds on this conceptual basis to delineate the resources necessary to underpin an effective sponsorship initiative. At a second level, there is the issue of competitive advantage in product markets. While a sponsorship might be superior to that of competitors, it will only generate a competitive advantage in product markets if it provides value or enables the creation of value for customers (Barney, 1991). Despite ever increasing expenditures, the measurement of sponsorship effectiveness has, to date, proved problematic. A further aim of this paper is to contribute to our understanding of sponsorship effectiveness through the development of a model linking sponsorship-related resources and competitive advantage to performance. In doing so, it seeks to respond to calls in the literature for greater attention to the strategic role played by sponsorship (e.g. Cornwell and Maignan, 1998). The paper is organised as follows. The following section reviews some of the recent contributions in the sponsorship literature and, in particular, the emergence of the idea of “sponsorship-linked marketing”, where a sponsorship investment becomes the central plank of an organisation’s marketing strategy. This is followed by a brief review of the RBV of the firm outlining its principal insights into the nature of organisational resources and the relationships between resources and sustainable competitive advantage. The main body of the paper adopts the RBV framework as the basis for the development of a conceptual model and develops a series of research propositions regarding the role of resources in sponsorship effectiveness. The implications of the model for research and practice are discussed and some conclusions are drawn. The development of sponsorship-linked marketing The dramatic growth of sponsorship, well evidenced in the academic and professional literature (e.g. Cornwell et al., 2001; IEG, 2002), suggests that its use has become not only more widespread among firms, but also more intense within each sponsoring organisation. Indeed, so substantial have some sponsorship contracts become, that businesses have been forced to consider such decisions as more than just communication-related, instead associating themselves with key image-building events or sports seen as complementary to their own positioning. In such cases, sponsorship has moved from an ancillary role to become the keystone of the whole marketing strategy (Meenaghan, 1998), in what is termed “sponsorship-linked marketing” (Cornwell, 1995). This is evidenced by the fact that sponsorship decision makers are often senior managers, rather then product or brand managers (Burton et al., 1996) A number of reasons may explain this transition and increased status of sponsorship, from a tactical to a more purposeful strategic focus. First, sponsorship contracts provide an opportunity for exclusivity not often afforded by other means of communication (Amis et al., 1999). However, exclusivity acts both ways: it ties the sponsor to the sponsored property just as tightly as it makes the property dependent
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on the sponsor. The need is great, therefore, to ensure that such contracts are thought in terms of longer term contribution to both parties, a process eminently more strategic than the mere choice of a communication medium (Crimmins and Horn, 1996). Indeed, sponsorship contracts are typically three to five years of duration and are often expected to be renewed a number of times, in order to allow for sponsors to derive the benefits from a long-term association that can be meshed with the positioning of their brand. For example, the sponsorship an English Premier League soccer club typically involves a multiple year contract, as does the sponsorship of clubs of the Australian Football League. Second, sponsorship has the potential to transcend cultural boundaries and is thus potentially the tool of choice for global marketers (Cunningham et al., 1993; Miyazaki and Morgan, 2001). Despite the success of a few celebrated global advertising campaigns, it is usually difficult for multi-national corporations to target and arouse consumers from different countries with a truly similar copy strategy. As economies become increasingly intertwined, the appeal of any means thought to assist in global brand – or corporate-image-building is irresistible. Most international marketers are seeking to create icons which are recognised the world over and to which specific meanings are associated. Sponsorship exhibits many characteristics which would allow them to do just this. Associating such brands as Visa or Coca Cola with the Olympic Games, or Mastercard with World Cup soccer, for example, reflects as well as reinforces the global stature of these brands. The growing complexity of sponsorship relationships, and the potential conflicts that this harbours, have made marketers more aware of the need for clear strategic justification to underpin their choice of partner (Farrelly, 1999). Examples of contradictory and confusing messages abound: during the 1998 World Cup Soccer, Nike held a highly visible place as sponsor of two very popular teams. It had, however, refused to act as an official sponsor of the event, much as it had refused to sponsor the Atlanta Olympics, opting instead to purchase a building adjacent to the prime sporting facilities, in order to display its well-known logo. During the World Cup event, Nike also stole the headlines, opening a Soccer PR centre, overtly for the benefit of Paris Saint-Germain, one of its sponsored clubs, but more probably to boost its association with the World Cup event more generally. Typically, sponsors seek protection from such “ambush” practices and adopt instead highly planned strategies for harvesting maximum outcomes from their investments. Whether they succeed or not, we argue, may well be explained by the ability to capitalise on existing or developed internal resources, above and beyond the initial financial investment required by the sponsorship program. The RBV of the firm Since the phrase was first coined in the strategy literature by Wernerfelt (1984), there has been an extensive volume of contributions falling within the realm of the RBV of the firm (see Peteraf (1993) and Priem and Butler (2001) for reviews). The basic logic of the RBV is a relatively simple one. It starts with the assumption that the desired outcome of managerial effort within the firm is a sustainable competitive advantage (SCA) in the market. Achieving a SCA allows the firm to earn above-average returns measured in conventional terms such as market share and profitability. In turn, this focuses attention on how firms achieve and sustain these advantages. The RBV
contends that the answer to this question lies in the possession of certain key resources and that a SCA can be obtained if the firm effectively deploys these resources in its product markets. The characteristics of advantage-generating resources The list of resources in any given firm is likely to be a long one. One of the principal insights of the RBV is that not all resources are of equal importance or possess the potential to be a source of sustainable competitive advantage. Much attention has focused therefore, on the characteristics of advantage-creating resources. Barney (1991) proposes that advantage-creating resources must meet four conditions, namely: (1) Value; (2) Rareness; (3) Inimitability. (4) Non-substitutability. Grant (1991) argues that levels of durability, transparency, transferability and replicability are important determinants, while Collis and Montgomery (1995) suggest that they must meet: . inimitability; . durability; . appropriability; . substitutability; and . competitive superiority. Amit and Schoemaker (1993) go even further, producing a list of eight criteria: (1) Complementarity. (2) Scarcity. (3) Low tradability. (4) Inimitability. (5) Limited substitutability. (6) Appropriability. (7) Durability. (8) Overlap with strategic industry factors. In the interests of parsimony, these various conditions and characteristics are considered below under the headings of value, barriers to duplication and appropriability. Value to customers is an essential element of competitive advantage. Therefore, for a resource to be a potential source of competitive advantage, it must be valuable or enable the creation of value. In the words of Barney (1991), it must permit the firm to conceive of, or implement, strategies that improve its efficiency and effectiveness by meeting the needs of customers. This implies that though resources may meet other conditions, if they do not enable the creation of value, they are not a potential source of advantage. This problem is frequently described using the label “competency trap” (Teece et al., 1997) – where a firm possesses a unique advantage that is no longer
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relevant to the industry in which it operates. It also indicates a complementarity between the RBV and environmental models of competitive advantage (Barney, 1991; Collis and Montgomery, 1995; Henderson and Mitchell, 1997). The inability of competitors to duplicate resource endowments is a central element of the RBV. Barriers to duplication can be said to exist if the resource is inimitable, immobile and non-substitutable (Barney, 1991). A resource may be inimitable if it cannot be clearly identified or if its ability to generate superior performance is unclear. Such causal ambiguity exists where resources are highly tacit, highly complex or where they are the result of accumulated firm-specific activities (Reed and DeFillippi, 1990). Even in cases where advantage-creating resources are identifiable, they may be inimitable due to regulatory protection, as in the case of patents and copyright (Hall, 1992), or due to economic deterrents such as pre-emptive, large-scale investments (Collis and Montgomery, 1995). Resources must also be immobile. This is particularly true in the case of services industries such as investment banking and advertising where individuals or small groups may be the key advantage creating resource and may be hired away by competitors. Similarly, advantage-generating resources must not be easily substitutable (Grant, 1991). Finally, once value is derived from a resource, the key question becomes who appropriates it. Value is invariably subject to a host of potential claimants such as customers, suppliers, employees, shareholders and the government (Collis and Montgomery, 1995; Kay, 1993). Appropriation of value becomes a particular problem where property rights are not clearly defined. While the firm may be effective in appropriating value from its physical and financial assets, it may be less so in the case of intangible assets such as brand names and copyright (Grant, 1991). Of particular interest in recent years has been the appropriation of value by the firm’s human resources. Shortages and employee mobility have resulted in escalating salaries in, for example, the information technology, financial services and sports sectors where employee bargaining power enables individuals to appropriate a major portion of value added. Companies must therefore guard against the dissipation of value added and appropriability is the ability to turn value added into profit (Kay, 1993). As previously noted, the range of resources possessed by an organisation at any given time may well be extensive. However, distinctions are generally drawn in the literature between assets and capabilities (Mahoney, 1995) and, in turn, between tangible assets and intangible assets (Wernerfelt, 1989). Tangible assets refer to the organisational fixed and current assets which have a fixed long run capacity (Wernerfelt, 1989). Examples include plant, equipment, land, other capital goods and stocks, debtors and bank deposits. Tangible assets have the properties of ownership and their value is relatively easy to measure (Hall, 1989). The book value of these assets is assessed through conventional accounting mechanisms and is usually reflected in the balance sheet valuation of companies. The other defining characteristic of tangible assets is that they are transparent (Grant, 1991) and relatively weak at resisting duplication efforts by competitors. For example, though plant or land may be geographically immobile, they are relatively imitable and substitutable. Intangible assets include intellectual property such as trademarks and patents as well as brand and company reputation, company networks and databases (Hall, 1992; Williams, 1992). The presence of intangible assets account for the significant
differences which are observed between the balance sheet valuation and stock market valuation of publicly-quoted companies (Grant, 1991; Rumelt, 1987) such as in the pharmaceutical sector where patents are critical. Intangible assets have relatively unlimited capacity and firms can exploit their value by using them in-house, renting them (e.g. a license) or selling them (e.g. selling a brand) (Wernerfelt, 1989). They are relatively resistant to duplication efforts by competitors. Intellectual property is afforded regulatory protection (Hall, 1992) while databases, networks and reputation are examples of asset stocks (Dierickx and Cool, 1989) and the inherent complexity and specificity of their accumulation hinders imitability and substitutability in the short run. Capabilities have proved more difficult to delineate and are often described as invisible assets (Itami, 1987) or intermediate goods (Amit and Schoemaker, 1993). Essentially capabilities encompass the skills of individuals or groups as well as the organisational routines and interactions through which all the firm’s resources are coordinated (Grant, 1991). Typical of the latter, for example, are teamwork, organisational culture and trust between management and workers. Capabilities do not have clearly defined property rights as they are seldom the subject of a transaction (Hall, 1989), making their valuation problematic. They have limited capacity in the short run due to learning and change difficulties but have relatively unlimited capacity in the long run (Wernerfelt, 1989). Individual skills may be highly tacit and thus, inimitable and non-substitutable though, as noted earlier, they may be hired away by competitors. Where capabilities are interaction-based, they are even more difficult to duplicate due to causal ambiguity. As a result, the RBV literature has tended to favour capabilities as the most likely source of sustainable competitive advantage (Collis, 1994). The role of resources in driving organisational performance has been the focus of much debate in the past 20 years. The popularity of the RBV is evidenced not only in the frequency with which it is used in strategy and marketing research, but also in its adoption in fields like human resource management (Kamoche, 1996) and new product development (Verona, 1999). It is not without its critics however (e.g. Deligonul and Cavusgil, 1997), and contributions such as those by Priem and Butler (2001) and Rouse and Daellenbach (1999) have delineated some of its conceptual and empirical difficulties respectively. Conceptual model and research propositions The relationship between resources and competitive advantage has been typically depicted as a linear one (see for example, Bharadwaj et al. (1993); Day and Wensley (1988); Hunt and Morgan (1996)). The possession and deployment of idiosyncratic resources generates a competitive advantage in the marketplace which in turn leads to sustained superior performance in terms of sales and profitability. Models such as these generally contain feedback loops suggesting that re-investments in the resource base give rise to new advantages and allows the process to repeat itself continuously. The model of sponsorship-based competitive advantage presented in Figure 1 builds of the underlying logic of these frameworks. A sponsorship that is supported by the deployment of key resources leads to a sustainable competitive advantage in the sponsorship “market” – where it is clearly differentiated from competing sponsorships and capable of resisting the efforts of competitors to ambush it. Many sponsorship
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programs have failed because the sponsors have not realised that they involve more than simply paying a given up-front fee to the sponsored organisation. Where the sponsorship initiative then passes the further test of providing value for customers or contributing to the provision of value through, for example, enhancements to brand image, it will generate a competitive advantage in the marketplace. In Porter’s (1991) terms, competitive advantages generated through sponsorship are most likely to be differentiation-based such as improved image, improved relationships with stakeholders, etc. Like all the organisation’s resources, re-investment will ensure that accruing advantages are sustained over time (see Figure 1). Resources required for sponsorship Existing research in the field suggests that the resource-based approach holds promise in assisting our understanding of what sets successful sponsorships apart from those that are unsuccessful. For example, a study of the Adelaide Festival of the Arts demonstrated that three sponsors of the same event derived significantly different returns from their investment, depending on their ability to deploy the related resources necessary to exploit their sponsorship investment fully (Quester and Thompson, 2001). In any given company, the resource base is likely to be extensive, but we noted above that all these resources fall broadly into three categories, namely: (1) Tangible assets. (2) Intangible assets. (3) Capabilities. The roles played by each of these resources in ensuring that a sponsorship investment has a competitive advantage are described below. Tangible assets. Although not the only tangible assets relevant to sponsorship, financial resources are by far the most important tangible asset to consider when examining sponsorship activity. The basic premise underlying sponsorship-linked marketing is that sponsorship must be supported by additional marketing activity for it to achieve multiple corporate objectives including the necessary image association (Meenaghan, 1991; Crowley, 1991; Thwaites, 1995; Hoek et al., 1997; Meenaghan and Shipley, 1999). A key reason attributed to the failure of sponsorship investment is that companies do not support the investment with adequate advertising, public relations, point-of-purchase and other promotional expenditures (Copeland, 1991; Copeland et al., 1996; Erdogan and Kitchen, 1998; Farrelly et al., 1997). Unexpectedly high costs associated with sponsorship support transactions and the difficulty of assigning value to outcomes have been reported as a major reason for contract dissolution (Copeland, 1991). The level of financial resources necessary in addition to that outlaid for sponsorship rights can be significant. It has been estimated that between two or three times the cost of a sponsorship should be spent in promoting the sponsorship (Gilbert, 1988; Heffler, 1994; Meenaghan, 1994; Farrelly et al., 1997). Consequently, this level of resource requirement, particularly for large events such as the Olympics and soccer World Cup, acts as a barrier to potential sponsors, enabling those companies with “deep pockets” to enjoy an advantage. However, supporting a sponsorship with financial resources is unlikely to be enough. As noted earlier, financial assets are the most imitable of all the resources available to the organisation and should not be solely relied on to gain a
competitive advantage in the sponsorship market. In this case, the reason why the sponsorship is successful (e.g. access to finance) is not difficult to understand and it is relatively easy for competitors to generate the necessary funding in the short run. Therefore: P1.
Sponsorships supported primarily by financial resources will not gain a competitive advantage over competing sponsorships.
Other tangible assets which may be relevant to sponsorship but which will vary more greatly between different agreements, may include event infrastructure (a dedicated stadium or venue) as well as computer mainframes allowing database creation or maintenance and even media production facilities (as is the case for most broadcast sponsorship). Intangible assets. The key intangible assets that are relevant in the context of sponsorship are brand equity and brand building/marketing skills. To grasp the inherent value of sponsorship communication, it is necessary to understand the basis of the entertainment, its associated images, and to consider the rationale underlying sponsorship objectives. Sports leagues, sports stars or performing or visual arts events all project an image in their function as social services. The image that they project to the environment is ostensibly their “brand” and what they offer to sponsors as commercial property. This image is derived from a range of sources, such as the personality and skill of the exponents, the marketing of these attributes, and the importance placed on such factors by the consuming public. Sport for example, encompasses a rich range of values and symbols and all these aspects can be expressed in terms of “image” and represented to an audience. Former US network television president Neal Pilson (1996) provided an excellent quote which sums up the value as perceived by consumers. Pilson (1996) describes sports as “a treasured art form sought by millions worldwide every day . . . presenting dramatic moments valued by the masses.” Similarly, Cialdini et al. (1976) has noted the strong emotional ties between fans and their favourite teams and the desire to use personal expression (i.e. wearing a team’s hat) to reflect glories connected with a team or individual’s success. Clearly, consumers the world over use sport and art association as a form of self-expression. Consequently, many corporations have entered alliances with sponsorship properties (including leagues, teams, events, individuals) in order to use this association as an alignment tool in their marketing (Burton et al., 1996; Mullin et al., 1993). Corporate or brand positioning-related objectives are predominant goals in sponsorship arrangements because they directly relate to the alignment with the image of the sponsorship property. Meenaghan (1996), Hoek et al. (1997), Gwinner and Eaton (1999) and others, suggest that sponsorship is particularly useful in attaining brand awareness and brand attitude/image objectives. Many companies seeking commercial benefits from sponsorship hope that the property’s image will define, enhance, or even repair their own. Evidence of this “rub-off” or “halo” effect has been found to occur in a variety of types of sponsorship by many researchers (Olivier and Kraak, 1997; Meenaghan, 1991; Stipp and Schiavone, 1996; Stipp, 1998; Turco, 1995; Nebenzahl and Jaffe, 1991). However, the sponsorship landscape is also littered with numerous examples where the investment is not understood or used effectively (Crimmins and Horn, 1996). An example of a successful sponsorship investment includes Uncle
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Toby’s, an Australian company that markets health food products, and their extremely successful sponsorship of the national ironman competition, an event that fits the Australian cultural psyche which includes the outdoors (the bush, the beach etc), images of healthy people, and vigorous activity (Hirons, 1997). Another often cited worldwide example is Michael Jordan and Nike where the sponsorship has been described as the “commercial sponsorship match made in heaven” (Ring, 1998). While most authors identify the need for sponsors to have predefined sponsorship objectives (e.g. Irwin and Sutton, 1995), few recognise the essential role of the property in achieving these objectives, and even fewer consider the capabilities and processes necessary for that purpose. Understanding and then communicating this “perceptual match” between the brands so it is appealing in the mind of the consumer requires considerable aptitude and expertise in brand building and hence, marketing strategy (Cornwell et al., 2001). Fundamentally, there needs to be a strong understanding of both brands (i.e. the sponsor and property’s brands), the demographic and psychographic fit between existing or potential target markets of both parties, the values the brands represent to these target consumers, and how these values can be manipulated through a sponsorship-linked marketing strategy to achieve synergies. A core marketing competence revolves around the ability to design sponsorship communication programs that tap into the passion associated with the property and transfer it to the meaning attributed to the brand. Therefore: P2.
Sponsorships that gain a competitive advantage will be supported by high level brand building/marketing skills such as those necessary to achieve a perceptual match between the two brands.
Capabilities. The successful management of a sponsorship may also require the deployment of a range of organisational capabilities including experienced sponsorship managers, market orientation capabilities and organisational routines. The experience and seniority of the sponsorship manager is important as it will determine the internal perceptions of sponsorship and the ease with which co-operation will be achieved between the staff required to implement the range of tasks associated with sponsorship activation. Unlike traditional mass media or direct marketing, where objective measures (e.g. CPM, TARPS, defined reach/frequency) are successfully or easily employed to qualify performance, there is little evidence to suggest that objective quantitative measures exist to assess sponsorship as a medium. This may offer some explanation of why sponsorship decisions rely to a significant extent on the intuition or past experiences of the individual making them (Burbury, 2001). Such a commercial reality stresses the need to empower individuals to make important sponsorship decisions. This internal and self-generated resource may represent a significant source of competitive advantage, and experienced sponsors may attract the most promising sponsorship proposals, thus resulting in better potential strategic fit. Market orientation and market-oriented behaviours have been described as a critical firm resource (Hunt and Morgan, 1995). Yet such organisational capabilities have been largely ignored in the sponsorship literature even though they appear to be particularly relevant (Derrick, 1999; Fahy et al., 2000). Market-oriented behaviours such as those identified by Kohli and Jaworski (1990), i.e. gathering, disseminating, and responding to market intelligence, will assist in improving the effectiveness of sponsorship. On a general level, it could be expected that a sponsor or sponsored
property which has market-oriented capabilities would be better placed to understand the buying patterns and perceptions of their partner’s target consumers. A market-oriented firm involved in sponsorship would also be expected to integrate better with a corporate culture that is often quite different to its own, as would be the case, for example, if an arts property were sponsored by a multi-national finance corporation. The market learning processes derived from such an orientation would also benefit the sponsorship resource blending process generally, and facilitate open-minded inquiry of the opportunities that existed. It could also result in the development of mutually informed mental models that guide planning, management and execution of the sponsorship initiative. Lastly, it would enable sponsorship partners to anticipate change and furnish them with the tools necessary to maximise the opportunities it brings. Finally, there exists a valuable layer of organisational capabilities comprising primarily routines developed in the organisation over a period of time to execute sponsorship initiatives. Generally, the intangibility and ambiguity of these routines makes their identification difficult but it does not diminish their importance (Collis, 1994). Their importance is highlighted, for example, by the case of the Mars corporation. Mars has been singled out on more than one occasion in the academic literature for the effective way in which they implement their sponsorships (Parker and Etherington, 1989; Meenaghan, 1998). Mars pride themselves on the sponsorship management, execution and evaluation routines they have built over time. The company has sought to codify these routines by developing “internal sponsorship disciplines” which includes the recording and benchmarking of prior sponsorship programs. This discipline extends to routines involving evaluation measures such as tracking brand sales pre, during and post event, and the development of price and advertising elasticities which enables comparisons of sponsorship campaigns (Farrelly et al., 1997). Similarly, Visa has utilised sponsorship as the focus of its branding strategy and activated a broad spectrum of above and below the line initiatives in line with its sponsorship association. Having sponsored both the Summer and Winter Games Olympics since 1986, Visa has reported that the sponsorship-based marketing and management competencies developed over this period has been instrumental to its competitive advantage (Farrelly, 1999). Merging sponsorship into the organisational culture is difficult to attain for the novice sponsor but should be an essential incremental activity, as a sponsorship culture based on an internal set of values and beliefs is in itself an important organisational capability. Experienced sponsors should strive, as much as possible, to effectively blueprint the processes by which such competencies come to the fore (as demonstrated in the Mars example above) and should aim to develop this over time, therefore: P3.
Sponsorships that gain a competitive advantage will be supported by high level organisational capabilities.
Finally, causal ambiguity is a key factor underpinning sustainable competitive advantage (Reed and DeFillippi, 1990). It is particularly prevalent where the sources of advantage are so complex that it is difficult for competitors to understand them and consequently attempt to replicate them. Causal ambiguity is most likely to occur where multiple sources of advantage interact to generate a position of strength and the
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relative importance of each one is difficult to discern. This paper has identified that several distinct resources (financial, marketing or organisational) have the potential to play a key role in ensuring that sponsorship investments are not easily imitated. Where these resources are employed in combination, it is likely that the accruing advantage will resist erosion for a significant period of time better than if any one of these sources was used in isolation, therefore: P4.
Sustained sponsorship advantages will be attained through the simultaneous deployment of multiple sources of advantage.
Discussion and conclusions As sponsorship continues to assume a more strategic role in the firm’s marketing strategy, its potential as a source of sustainable competitive advantage is being recognised (Amis et al., 1999). For example, the sponsorship literature has highlighted that investments can generate customer value though the improvement of brand image (Gwinner and Eaton, 1999) by providing a range of associations – youthfulness, achievement, power, prestige etc. – that are potentially unique, especially when they involve exclusive rights to an athlete or an event. The specific characteristics of the event or the particular personality of the champion may be keys to a brand association. Similarily, it has been recognised that investments are likely to be ineffective unless they are accompanied by the commitment of significant additional resources such as marketing expenditure (Gilbert, 1988; Meenaghan, 1994), though as demonstrated above, the required resource set is much broader than just finance and may encompass marketing skills and experience as well as other organisational capabilities. This paper goes further by fully adopting an RBV of sponsorship to develop a formal model of the relationship between sponsorship and advantage creation. While it is recognised that sponsorship may be a source of advantage, this paper aims to show how it happens. It specifically identifies and describes the type of resources that must be deployed in conjunction with a sponsorship activity in order to ensure its success. And in keeping with the predictions of RBV, we argue that it is the use of inimitable resources, preferably in unique combinations, that is key to the attainment of advantage. However, the RBV is not without its critics (see for example, Priem and Butler, 2001) who highlight the limitations of focusing exclusively on internal resources. This re-raises the importance of interaction with the competitive environment, which tends to be ignored by much of the “resource-based” research. Early work in the field by Amit and Schoemaker (1993), Barney (1991) and Porter (1991) suggested that resources must fit with the competitive environment and that the challenge for management is to identify, develop and leverage these. This applies equally well to the management of sponsorship. The use of unique resources may enable the attainment of advantage over competing sponsorships, but if the sponsorship doesn’t translate into delivering value for a customer group, it will not lead to a competitive advantage in the market. A recognition of this “virtuous cycle” relationship between resources and environment suggests the need for a dynamic rather than static view of resource deployment (Dickson, 1996). The development of resources needs to be thought of more as a marathon rather than a series of short sprints. The challenge for managers is to identify the resources that are important given certain market conditions, and to envision the resources that are likely to be important in the future. These resources
then need to be treated as asset stocks (Dierickx and Cool, 1989) requiring continuous investment and replenishment, otherwise they will dissipate. Resource development is an evolutionary process and when it is fully tied to market changes, the company moves on a positive path trajectory (Teece et al., 1997). The traditional argument for maintaining a sponsorship investment over a period of time has been to build an association between the sponsor and the property in the minds of the consumer (Cornwell et al., 2001). But clearly this is just looking at one side of the issue. Continuous involvement in sponsorship activity is also essential to ensure that the complex and tacit routines central to sponsorship effectiveness are accumulated in the firm through experience and ongoing effort. Furthermore, the unique collaboration that the sponsor/property relationship entails can, through the interaction of both parties, be the source of new resources and skills generally. Marketers (and indeed performers) of sport or arts, rely continuously on their creative talents and sponsors can draw creative ideas from them in relation to branding and communication strategies including launches, new product or service design and development, and more generally, may devise more creative and flexible approaches toward out-manoeuvring the competition. The over-reliance on cognitive business models referred to in the literature for many years (e.g. Robinson et al., 1967; Williamson, 2001) suggests that such a resource could be highly valued. Inversely, properties may benefit from learning more about sophisticated business practices. The critical point is that parties to the sponsorship relationship need to recognise that critical resources will span firm boundaries and may quite often be embedded in inter-firm relationships and routines. The sponsor/property collaboration provides an excellent opportunity to tap into a reservoir of new human-based resources that can be most complimentary to those within the individual firms and because they are embedded in the network of relationships, they can be extremely difficult to duplicate. Implications for research and practice Using the resource-based framework to examine the management of sponsorship raises an number of interesting research issues. The paper identifies a number of key resources that need to be in place in order to maximise sponsorship effectiveness, including finance, brand building skills, managerial capability, market orientation and sponsorship-related organisational routines. This list is by no means exhaustive and further research might focus on the identification of other essential competencies. Second, there is a need to empirically test the propositions made in this paper in relation to the relative importance of different resources. To date, most scholarly work on the RBV has been of a conceptual nature and empirical work has been relatively selective and fragmented (Fahy, 2001). In part, this is due to the difficulty inherent in measuring complex resources and in determining their causal role in performance improvements. Effectively uncovering the impact of resources requires the adoption of longitudinal, fieldwork-based or ethnographic-type research methodologies (Rouse and Daellenbach, 1999). Therefore, studies of specific, long-term sponsorship investments seem to hold the most promise for the purpose of uncovering the nature and impact of sponsorship-related resources. Finally, and as noted above, there is increasing recognition of the relationships between resources and the competitive environments within which they are employed, leading increasingly to a contingency view of the RBV (Brush and Artz, 1999). A further fruitful line of research might involve the
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examination of the creation of value through sponsorship-related resources in different contexts. In terms of practice, there are also a number of important implications. The research again re-affirms the strategic role of sponsorship. Sponsorships, which are entered into in a piecemeal and uncoordinated way, are unlikely to be successful in the current competitive environment. Rather, sponsorship should be seen as an integral part of the company’s marketing strategy and must be resourced as such. Traditionally, the sponsorship literature has tended to focus on the financial resources needed to support the sponsorship effort. Important though financial support may be, it is clearly a minimum resource requirement and while it is necessary, it is seldom sufficient. As demonstrated above, financial resources are relatively transparent and easy to duplicate, making them an unlikely source of advantage or deterrent to ambush marketers. Sponsorship effectiveness is more likely to be related to the presence of intangible resources such as branding skills and sponsorship competencies built up over time by the sponsoring organisation. Furthermore, it is important to nurture and protect these intangible competencies since they would otherwise tend to dissipate. Management processes and routines need to be identified and integrated in order to develop a sponsorship culture that is reinforced and celebrated within the firm. Accumulated experience and knowledge should also be categorised and “blueprinted” where possible, as this will help to ensure the development of “internal disciplines”, which will outlast the departure from the firm of specific personnel. Concluding remarks Sponsorship has been an important field of study for the past two decades, commensurate with its increasingly major role in the field. The emerging strategic view of sponsorship sees it as a potential source of competitive advantage. This paper builds on that conceptual argument to develop more fully an RBV of sponsorship. It demonstrates the breadth of the resource mix that underpins successful sponsorships and delineates the nature of the relationship between sponsorship-related resources and superior performance in the marketplace. This is an important and significant contribution toward understanding the mechanics of sponsorship management and should be developed further and tested empirically in future research. References Amis, J., Pant, N. and Slack, T. (1997), “Achieving a sustainable competitive advantage; a resource-based view of sport sponsorship”, Journal of Sport Management, Vol. 11, pp. 80-96. Amis, J., Slack, T. and Berrett, T. (1999), “Sport sponsorship as distinctive competence”, European Journal of Marketing, Vol. 33, pp. 14-25. Amit, R. and Schoemaker, P.J. (1993), “Strategic assets and organisational rent”, Strategic Management Journal, Vol. 14, pp. 33-46. Barney, J.B. (1991), “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17, pp. 99-120. Bharadwaj, S., Varadarajan, P. and Fahy, J. (1993), “Sustainable competitive advantage in services industries: a conceptual model and research propositions”, Journal of Marketing, Vol. 57, pp. 83-99.
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