A winning model for creating value

For many decades, the FMCG industry has enjoyed undeniable success. By 2010, the industry had created 23 of the world’s top 100 brands and had grown total return to shareholders (TRS) almost 15 percent a year for 45 years—performance second only to the materials industry.

The FMCG value-creation model

This success owed much to a widely used five-part model for creating value. Pioneered just after World War II, the model has seen little change since then. FMCG companies did the following:

• Perfected mass-market brand building and product innovation. This capability achieved reliable growth and gross margins that are typically 25 percent above nonbranded players.
• Built relationships with grocers and other mass retailers that provide advantaged access to consumers. By partnering on innovation and in-store execution and tightly aligning their supply chains, FMCG companies secured broad distribution as their partners grew. Small competitors lacked such access.

• Entered developing markets early and actively cultivated their categories as consumers became wealthier. This proved a tremendous source of growth—generating 75 percent of revenue growth in the sector over the past decade.
• Designed their operating models for consistent execution and cost reduction. Most have increased centralization in order to continue pushing costs down. This synergy-based model has kept general and administrative expenses at 4 to 6 percent of revenue.
• Used M&A to consolidate markets and create a basis for organic growth post acquisition. After updating their portfolios with new brands and categories, these companies applied their superior distribution and business practices to grow those brands and categories.

Why do brands invest in sports?

 

 

How brands are leveraging sports marketing to build a stronger consumer connect

What are the advantages and disadvantages of a sports sponsorship for brands?

Before mentioning the advantages and disadvantages of sports sponsorship, it should be noted that these sponsorships often cover both the sponsoring brand and the club or athlete on a bilateral basis.

Advantages of sports sponsorship for brands

The most notable advantage concerns the increased visibility. This may be higher depending on the modality chosen by the brand. Return on investment is another advantage, as sponsorship is often the best advertising option for brands.

In addition, viewers manage to familiarize the brand with their favorite team or athlete thanks to the permanence in time. There is a strategic relationship because not only the brand benefits but also the team or the athlete receive money to be able to finance the seasons.

The image on the shirts is important

The image on the shirts is an excellent sponsorship option , since it brings the advantage of increased purchases by fans of certain teams and athletes.

The benefits at the tax level

Brands can save money by sponsoring because these are linked to  special tax conditions . Therefore, it is possible to pay less taxes and take advantage of the benefits that this advertising option provides as it happens when applying digital marketing strategies .

Disadvantages of sports sponsorship for brands

Often, there are disadvantages of sponsorship for brands both externally and internally of companies, as we explain below.

Limits

Although the brand can enhance marketing thanks to actions related to athletes, teams and clubs, it is also true that it cannot control the entities it sponsor because they are independent elements.

Therefore, if an athlete has a behavior that does not meet the established standards, it could have a negative impact on the brand.

Knowing the return on investment

It is well known that high returns are obtained but it is not possible to accurately determine the measure of return on investment . This factor can be considered as a disadvantage if the company wishes to maintain full control of its monetary inflows and outflows.

The competitors

There is a large list of sponsoring brands in the world of sports. This factor increases business challenges that could prevent you from highlighting the visibility of a specific brand.

Brand marketing

The brand marketing can become a disadvantage if appropriate strategies are not used to increase exposure or if the company wasted large additional options such as advertising on social networks .

For this reason, it is essential to carry out an analysis of key aspects that are based on an adequate proposal in order to build a solid sponsorship strategy.