Sponsorship can play a part in leading sport out of recession and enter a golden age, according to the man who headed HSBC’s extensive global sponsorship operations for more than a decade.
But, says Giles Morgan, that will only happen when the focus of attention and validation switches from TV eyeballs to first-party fan data so that coherent and compelling business cases can be made for sponsorship spend.
And Morgan, currently executive vice-president of software company Pumpjack DataWorks, reflects that had he evaluated proposals through the prism of data during his time at the bank, the HSBC portfolio may have looked rather different.
“We are entering a period where the currency of sponsorship, the gold standard, changes and the cumulative number of eyeballs watching an event become secondary to the primary data owned by rights-holders. Those metrics form the basis of the business case which unlocks corporations’ war chests,” he says.
“During my time at the helm, I felt that HSBC had as advanced a mechanism for calculating return on investment (ROI) as any company out there and that is why they still continue to do great sponsorship work.
“But I now understand that what I offered up (to the board) was not a business case but an emotive justification of investment based on assumptive criteria like entertaining clients and achieving levels of media engagement. In today’s climate, if you can’t make and prove a solid business case you become susceptible when the knives come out and management seek to cut budgets,” he says.
Morgan sees the shift to a data-centric sales and valuation model as the most significant change in the three decades he has worked in the sector and believes it will finally enable sponsorship to shed its reputation as the ‘poor cousin’ of advertising.
“The reason it was bridesmaid not the bride was the way that sponsorship was measured. It was largely based on corporate hospitality and TV evaluation, which is not a criticism because there was no other way. But the entire industry was built on very static and approximate data,” he explains.
“That meant if you didn’t have TV in your inventory to sell, you were worth a whole lot less. But it is clear that with the old method it meant that some properties were being seriously undervalued. Take something like the Badminton Horse Trials which get 400,000 people from a very powerful demographic but not much TV coverage. If you are a marketer that is a formidable and valuable collection of people, but the valuation is skewed by the focus on TV.”
With the value of hospitality being hit by regulation in many territories, it is clear that another part of the business case for sponsorship is under pressure. And that is why Morgan sees a future in which data is at the very heart of the proposition – not an add-on.
“The value of sponsorship lies in the knowledge of the fan and the consumer…but in the old days there was no way of knowing who they were.
“Now we have the ability to say we know who the fan is. We seek information from them, and they will provide it voluntarily because they lean into their fan passion and want to be part of the community. It is that dynamic fan information, which can be owned by the rights-holders, which offers the true value to sponsors – not the eyeballs,” he says.
“In my time at HSBC I was never presented with a sponsorship proposal where data really featured on the first four pages. There were usually some social media numbers, but nobody sold the value of data.
“That allowed me to lowball rights-holders because I knew they couldn’t make a business case. But that in turn became a problem for me because if I couldn’t make a solid business case back to the business internally, they would restrict budgets.
“So, if the sports industry wants to harness the full power of sponsorship when the recession ends and sport starts trading again, the currency of value needs to be different.”
Passion
Morgan believes sport is perfectly positioned to trade on a rich seam of data because of the passion of its followers and their willingness to share, but that sport has been slow to realise the value it sits on.
“The single-most valuable commodity is the individual fan. Their information is what investors are interested in. As an example, currently Facebook have more (data about) Manchester United fans than Manchester United and know more about them than United do.
“That’s madness! Man U are the beating heart of their fans. Clubs and rights-holders need to understand that which also enables them to make better decisions about their marketing,” he says.
Morgan’s belief that putting data front and centre of a sponsorship proposition changes the game and gives him a fresh perspective on some of the work he did at HSBC.
“I have come to realise that many of the activation decisions I made and campaigns I ran were born out of assumptions and that there was value left out there because we didn’t demand data from governing bodies to find out about and connect with, for example, the golf consumer.
“Now, with more sponsorships being built from a foundation of data, I can predict that a new wave of sponsors will emerge, sponsors who want to go direct to consumers and fanbases.
“Inability to make a business case has been sponsorship’s biggest weakness. I didn’t want budgets to be cut, I wanted to prove it was the most valuable investment you could make. But I couldn’t do that and all too often budget was taken away.
“Sport needs to start speaking the language of the finance director and make a financial case rather than an emotional case. Emotion may get you through the doors but having a business case keeps you going. The sponsorship industry never really had a water-tight business case. That can be made by basing it on data.
“To date, data has been seen as a cost to bring in email addresses but in reality it needs to be seen as an asset like goodwill. If the industry starts to look at data as a commercial asset – sponsors and investors will look at investment in sport in a very different way.”
Ever since the early years of the postal system, when letters were routinely opened in transit, the information we communicate to others – and the way in which the recipients handle it – has posed a threat to individual privacy. The introduction of successive technologies, from the telegram and the telephone to e-mail and social media, has only created a whole new set of risks each time.
