When entering into a sponsorship partnership, category exclusivity is often an essential consideration for sponsors. Category exclusivity dictates that the sponsor is the only company within its product or service category that has a relationship with the property or event. A guarantee of exclusivity is very appealing for potential sponsors because it serves to limit their competitors’ access to the consumer group affiliated with a certain property or event.
Sponsorship typically exists on a continuum however, from high level Naming Rights partnerships where the sponsor gains exclusivity that runs throughout a property or an event, to small scale sponsorship where the sponsor competes for consumer impressions alongside other sponsors that are from the same industry category such as is often the case with sporting events featuring multiple beverage and performance products. In practice, categorical exclusivity often exists on a middle plane that might include categorical exclusivity to a certain area, but not the entirety, of a property, for example the “Lexus Lounge” in Amalie Arena in Tampa, FL.
The ultimate value that a property or event can garner from a sponsorship partnership is often directly related to the level of categorical exclusivity offered. In most cases, a lack of categorical exclusivity can significantly lower the value of a sponsorship deal. An exception to this general rule is in the case of sponsorship deals for charities or non-profit organizations where a company may relinquish its requirements for exclusivity in the interest of boosting their Corporate Social Responsibility portfolio.
So the question is, when seeking high level sponsorship such as a Naming Rights partner, what industry category is more likely to pay for the privilege of being the exclusive category partner? While a company’s willingness to pay for category exclusivity is influenced by a number of market variables, there are two primary characteristics that are thematic of industry categories that most often purchase category exclusivity: 1) The product experiences high competition in the marketplace, meaning that there is high cross elasticity of demand between their product and a competitors’ as consumers are more prone to substitution, and 2) They exhibit a strong command of their product supply chain that allows the company in the industry category to keep production costs low and profits high.
According to the 2015 IEG Property Sponsorship Category Survey, these two characteristics are present in the top three Industry categories most likely to purchase exclusivity, starting with non-alcoholic beverages in first at 55%, the automotive industry coming second at 54%, and alcoholic beverages third at 53%. Rounding out the lower end of the scale is retail with 14% and restaurants at a low 13%, which both exhibit a lower elasticity of demand due to consumer’s diminished proclivity towards substitution, longer supply chains and, generally, lowered profit margins.
While these numbers are indicative of sponsorship trends overall, the tried and true method when searching for a sponsorship partnership that exhibits high categorical exclusivity such as naming rights is to look at the community where the property or event is based. Most often, high level sponsorship is derived from companies that have their headquarters or a large consumer base in the area and are interested in securing and growing that consumer base through an integrated community presence.
See the full table of industry categories that are most likely to purchase exclusivity here.
-----------------------------------------
-Erin Beaudoin