Sometimes, it pays to do good.
Corporate Social Responsibility (CSR) has been on the rise in recent years. This is, in part, due to consumers’ shift in shopping habits. Today, more than ever, consumers are voting with their wallets by purchasing from businesses with beliefs and values that align with their own.
However, social responsibility isn’t just for the big dogs. Small businesses have been demonstrating social responsibility for a very long time—and for good reason. Local sponsorship is a powerful, affordable way for businesses big and small to gain community exposure while also supporting a good cause.
A recent study from the Harvard Business Review found that 72% of people believe locally-owned businesses are more likely to invest in their communities than large companies. This figure makes sense—small business leaders live in the communities they serve, meaning they have intimate connections that large companies struggle to foster.
But local sponsorship isn’t without its risks. Sponsor the wrong initiative, and you could paint your brand in an unalterable light. Politics, religion, and other sensitive topics can create some die-hard loyal customers while also dangerously alienating other segments of your market.
This guide will help you walk the sponsorship tightrope to identify and sponsor worthwhile brand-building causes while mitigating risk to your business. First, let’s look at why you should (and shouldn’t) consider sponsoring a local event or organization.
Pros and Cons of Local Sponsorship
When done right, local sponsorship can do a world of good for your brand. However, it’s not a smooth-sailing avenue to more awareness and sales—there are potential downsides to sponsoring the wrong cause or organization.
Pros of Local Sponsorship
1. Tax Write-offs
There are a couple of ways your business can enjoy tax deductions from local sponsorships. First, if you make a cash payment to an organization (charitable or not), you can deduct those payments as business expenses. If the payments are classified as “charitable contributions or gifts,” you can’t deduct them as a business expense—but you can potentially deduct them as a charitable contribution on your income tax returns.
You can also deduct most sponsorships as advertising expenses. For example, if you sponsor a local event or sports team, that sponsorship would be considered a form of advertisement—thus, it’s deductible.
2. Good Publicity
Sponsoring events or causes important to the community will generate goodwill in your customers’ minds. Consciously or subconsciously, they’ll form positive perceptions of your business in relation to whatever you’re sponsoring.
3. Brand Awareness
Sponsorship is a great way to expose your brand to new customers and audiences. For example, if you sponsor a local baseball team’s uniforms, every player, parent, coach, and fan will quickly become aware of your business.
Local sponsorship isn’t all sunshine and daisies, though. There are potential downsides to aligning yourself with specific organizations.
Cons of Local Sponsorship
1. Alienated Customers
According to a Harvard Business Review study, 40% of respondents said they are more likely to buy from a business when they agree with the CEO on an issue. However, a comparable segment (45%) said they’re less likely to buy if they disagree on a topic. A sponsorship may win you some fans, but it may earn you some enemies—while a neutral (non-sponsorship) stance may earn you both parties’ business.
2. Damaged Reputation
Align yourself with the wrong brand, and your business’s fate can get tied to theirs. Take Livestrong, for example. It started as Lance Armstrong’s personal brand, but it evolved into a larger, more comprehensive foundation. However, when Lance fell from grace after his drug scandal, Livestrong tanked overnight. The same can happen to your business if you become too associated with a risky brand.
Whether it’s cash, services, prizes, or time, sponsorship is an expense. No, it’s usually not as expensive as most advertising alternatives, but it still has a price. Plus, it’s tough to define the ROI of any sponsorship, making it hard to determine a sponsorship’s monetary worth.
It’s up to you to weigh the pros and cons and determine if sponsorship is right for your business. If you’re still leaning toward local sponsorship, then read the next section to learn how to vet your options and find the best opportunities.
Vet Your Options to Identify the Best Sponsorship Opportunities
There are limitless opportunities when it comes to sponsorship, but you can’t sponsor everything. You’ll need to narrow your options and identify the causes most important (and relevant) to you and your business. Here are a few common sponsorships to consider:
- Events: conferences, festivals, art fairs, walk-a-thons, concerts
- Sports: venues, teams, tournaments, jerseys, equipment
- Schools: programs, back-to-school drives, volunteer opportunities
- Business organizations: rotary clubs, chambers of commerce, youth development programs
And that’s just scratching the surface—hopefully this short list will get your creative juices flowing.
Get Creative With Your Sponsorships
Sponsorships come in all shapes and sizes—you don’t need to have tons of money or resources to get involved. Depending on your business and industry, it may make sense to offer your support in ways besides cash payments. Here are a few types of sponsorships to consider:
Cash donations are the most common (and simple) form of sponsorship. When an organization accepts multiple sponsors, they usually boost the level of publicity (with bigger and better logo placements, callouts, etc.) in relation to the amount of money each sponsor donates. If you have any extra marketing budget sitting around, experiment with bigger donations to bigger organizations. If your budget is tight, consider donating smaller sums to smaller organizations.
Pro Bono Services
Trade your services for publicity by doing your job free of charge. If you own a restaurant, for example, you may provide pre-game meals for a sports team. Or if you’re a smoothie shop, you could give away free smoothies at a local event.
If the cause you’re supporting isn’t relevant to your business, consider providing volunteer hours in exchange for sponsorship. If you’re sponsoring an event, your employees may staff the ticket booth, concessions, and clean-up duties.
If you sell products, donations are the perfect sponsorship type to build brand and product awareness at the same time. Consider donating a prize to a sporting tournament or a battle of the bands contest.
How to Choose the Right Sponsorship
Now that you know your sponsorship options, you’ll need to choose the right opportunity.
- Identify causes you care about: If possible, find causes that you’re passionate about. If you’re a hiker, it will feel more meaningful to help support local trails rather than donating to the local curling club.
- Measure the potential ROI: Different sponsorships will lead to varying levels of publicity. Sponsoring a local event along with 10 other brands may yield little impact, while becoming the sole sponsor of your little league baseball team may pack a bigger punch.
- Consider impacts to brand reputation: What are the pros and cons of aligning yourself with this organization? Will this sponsorship alienate you from any customers? How will it build brand awareness and brand reputation?
If the sponsorship you’re targeting has no red flags, then move forward with confidence. Most events, teams, and organizations require ongoing or recurring sponsorship, so make sure you measure your activities’ ROI to determine if it’s worth renewing the deal.
Like with any marketing strategy, if the results don’t yield the ROI you’re looking for, be ready to pivot. This may involve adjusting the sponsorship, backing out, or finding a new organization to sponsor.
However, depending on your sponsorships’ cost and reach, you may discover that it’s a more effective use of your marketing budget than other forms of traditional advertising. If so, look for ways to expand your sponsorship program to find more opportunities that align with your goals.
Make the World (and Your Business) a Better Place
For once, nice guys and girls don’t have to finish last. If you nail your local sponsorship strategy, you can do a lot of good in the community while also marketing your business. You can’t beat win-win scenarios like this.
Do your research, find a cause you care about, and give back in a meaningful way. While local sponsorship isn’t without risk, it’s well worth the investment of your time and energy when you get it right.
Before, during, and after your sponsorship, look at your financial reports to measure your sponsorships’ ROI. If it’s trending in the right direction, congratulations—you’re making the world and your business a better place. If not, then don’t beat yourself up—rest assured knowing that, while your business might not have benefitted from the sponsorship (yet), you still did good in the world.