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Sponsorship or Philanthropic Donation: Which is Right for You?

You’re a property, non-profit or otherwise, and you’ve identified an organization that may be interested in relationship with you. Do you ask for a philanthropic donation? Or do you send in your marketing team and pitch a sponsorship? It can be a tough decision, especially if the basic differences aren’t clear. What are the advantages and disadvantages? And, what if you want to pursue both opportunities?

If you’ve wondered about the differences between sponsorship and philanthropy you’re not alone. The two concepts that are often confused and misunderstood. Whichever one you choose depends on your goals and funding sources. Let’s shine a clarifying light on the principles involved so that expectations on all sides can be managed for mutual benefit.

Sponsorships are marketing tactics designed to increase public awareness and revenues for the sponsoring partner. It is a relationship based on reciprocity. With a sponsorship, a property forms a business relationship with a business or organization. The property agrees to include the business’s name, logo or other identification and/or messaging in advertising and collateral material and may allow the sponsor to do the same. These include signage, broadcast mentions, web presence, or any combination of the aforementioned. The property may also offer category exclusivity, hospitality benefits, tickets, sideline passes and other perks. Sometimes naming rights are a part of partnership agreements. In return the business or organization offers compensation. It agrees to furnish money, digital currency, goods or services to the property. The basic components of a sponsorship agreement include:

  • A contract. Sponsorships always include a written and signed contract that specifies the duties and obligations of all parties. It will also include remedies and penalties if either party defaults on the agreement.
  • A specified period. The sponsorship will define over what period the agreement will be in force.
  • Return on Investment. The sponsoring partner will expect a return on investment. It will employ metrics to measure ROI.
  • Source of funds. Sponsorships are generally funded from marketing budgets.
  • Accounting treatment. Sponsorship expenditures are recognized as expenses and treated as such in the sponsoring entity’s accounting. Properties recognize what it receives as revenue.

Philanthropic Gifts
Philanthropic gifts are private, personal or corporate gifts granted to a property without the promise or expectation of promotional or marketing benefits. Such donations are handed out by businesses or organizations for the greater good of a community or for a cause. The property may reciprocate by acknowledging the gift with some form of public recognition. Common forms of gift recognition include a mention via print or broadcast media, a plaque, inclusion of a logo on apparel or other form of one-time or short-term vehicle. Naming rights may be granted for substantial gifts. Elements of philanthropic gifts include:

  • No formal contract. Gifts are usually uncomplicated and straight forward with no contractional component. There are few if any strings attached.
  • No specified period. Gifts are usually one-time events with no time commitments made by the receiving property. The gift may include payment over time for the giver, but likely involves no corresponding obligation for ongoing recognition.
  • Limited control and benefit. Reciprocal benefits are limited. The gifting partner usually is given limited influence with the receiving property. The gift-giving organization may receive small, inconsequential gifts such as a plaque or other public acknowledgement from the property. Tickets, passes or memorabilia may also be offered. However, if the gift is substantial, naming rights may be granted.
  • Source of funds. Most organizations will source philanthropic funds from a connected foundation or corporate giving fund, community relations account or corporate responsibility department.
  • Accounting treatment. The giving organization will recognize the gift as a charitable donation with tax deduction implications. A tax deduction may be a major motivation for the gift. The property will recognize the gift as revenue.

The Difference
When all is said and done, the primary difference between a sponsorship and a philanthropic donation are the notions of promotional value and mutual benefit. Sponsorships offer both the property and the sponsor measurable benefits. By contrast, the benefits of philanthropic gifts are heavily weighted in favor of the property.

The principle of Win-Win is powerful. When both parties get what they want, the relationship is mutually beneficial and has a much better chance of continuing. There are three main advantages to sponsorship relationships:

  • The tangible benefits to a sponsor are more apparent and likely produce more engagement and loyalty toward the property.
  • The publicity the sponsor devotes to the property can attract new supporters for the property and even increase donations.
  • Because sponsorship relationships are transactional, they’re easier to maintain and manage. When there is no quid pro quo, interest in maintaining the relationship is one-sided on the part of the gift recipient.

Help Your Team & Sponsorships THRIVE
Caravel Marketing offers highly customized, comprehensive and purpose-focused training programs for sponsorship professionals. As a participant you’ll receive the tools you need to navigate the shifting landscape of sponsorship.

Caravel’s THRIVE program will help you build a culture of sponsorship support and improve your sales processes leading to increased closes. Together we can we’ll develop long-term strategies to promote growth and increase revenue. Learn more and connect with us today.