Category Exclusivity: Marketing Dinosaur or Essential Sponsorship Element?
Those who have been around since sports marketing’s early days can recall a time when category exclusivity was an untouchable element of sponsorship agreements.
But while most of today’s partnerships between brands and properties still bestow exclusivity, its days as a bastion of sponsorship may be numbered.
Whether you believe that is good or bad depends largely on what position your organization occupies in the sports marketplace.
Conventional wisdom has long held that exclusivity is important to most sponsors and downright essential for some. But over time, a number of factors have chipped away at its significance, including:
Price. Recognizing the value of exclusivity—especially in highly competitive categories—rightsholders have justifiably attached a premium to the right to be the sole player in an industry with a connection to their events, IP, etc. This has left brands to do the hard math of just how much the exclusivity they desire is worth and sometimes deciding they simply can’t afford it.
As BMO Financial Group head of corporate sponsorships Josh Epstein said in his All Access Interview Series podcast appearance, “Our choice would always be to be the category exclusive partner (but) it does boil down to price…There are different objectives and different tactics involved in a non-exclusive partnership versus exclusive, but both are workable.”
Blurred lines. Defining categories for the purposes of a sponsorship agreement has always been contentious, with sponsors understandably seeking the broadest definition possible—beverage vs. soft drink, financial/payment services vs. bank, etc.—while properties seek to slice those sectors as thinly as they can—luxury import SUV vs. vehicle.
Over time, technology and other developments have only created more category creep, with brands able to credibly claim residence in multiple, formerly distinct categories, e.g., Apple exists as a computer hardware, media, telecommunications, consumer electronics, fitness equipment and payment system provider, and that is not the complete list.
Brands have increasingly recognized that requiring a property to block out numerous categories to protect a single sponsor from bumping up against a competitor is unrealistic in that either the rights holder would have to sacrifice a great deal of revenue or the corporate partner would have to pay an enormous price.
Consumer friendliness. In some cases, exclusivity limits fan and consumer choice and has resulted in backlash, most famously Visa’s decades-long role as a TOP partner of the International Olympic Committee.
Built on the once powerful marketing platform that the “Olympics don’t take American Express,” the company’s status as “exclusive payment services partner and the only card accepted at the Olympic and Paralympic Games through 2032” has increasingly come under fire as overly restrictive in an era where consumers have grown accustomed to, and increasingly demand, options.
Creative alternatives. Brands and their partners have become incredibly adept at finding ways to carve out territory for multiple players in a category.
With the key being a brand’s ability to activate against its target audience while remaining physically and digitally apart from the competition, properties and sponsors have developed myriad ways for partners to accomplish their goals without being the sole sponsor. These include naming rights to proprietary programs and areas, as well as defining roles that allow individual sponsors to access distinct segments of a property’s audience (consumers vs. business customers) or access separate channels (on-site sales vs. retail partnerships).
While all of the above help make the case against category exclusive sponsorships, there are still some remining arguments for it. We will look at those in our next post.