A Sponsorship Agreement is an important marketing strategy. It involves the payment of certain amount in return for the receipt of publicity-related benefits. These contracts may span across different time ranges depending on the nature of the sponsorship. For example, it may be a sponsorship of an event, a series of events, an individual or a location.
It is a business relationship between a provider of funds and an individual or organization which may offer some services that may promote the market standing of the former. It allows a business to showcase its connection to an individual, event or organization that it has chosen to be associated with. It is meant to develop strong relationships between the business and its customers due to their common ties with the sponsored individual, event, sport, or the organization.
Purpose of Sponsorship Agreement?
A sponsorship contract helps in wide-scale marketing of the event, company or individual being sponsored. It provides an opportunity to gain publicity in the news media. It popularises the sponsoring entity among people and makes it reach far-off areas. It is a mutual arrangement wherein the sponsoring entity earns from advertising and the sponsored entity benefits from financial support.
Inclusions in Sponsorship Agreement?
A sponsorship contract typically includes the names of the parties, the commencement date, the duration of the contract, the benefits which may accrue to the sponsor, the fee/payments due under the contract, intellectual property, termination and other such clauses. Apart from the above, it also includes, standard boiler plate clauses such as dispute resolution, waiver, notices, remedies and severability.
Key Terms in Sponsorship Agreement?
- Definition of the event to be sponsored: Every sponsorship agreement requires the definition of the event which is required to be sponsored.
- Payment: Typically, a sponsorship contract is grounded in financial support. Hence, the payment terms, timeline etc. need to be discussed in the document.
- Sponsor benefits: Tangible benefits, such as copies of a book, or the printing of your logo on their advertising material, this all needs to be set out clearly in the Sponsorship contract.
- Intellectual Property: Since the use of the intellectual symbols and logos of each other’s companies is inevitable, the agreement should have detailed intellectual property clauses dealing with who owns what intellectual property and the rights of one party to use the other party’s intellectual property.
- Intellectual Property indemnity: Intellectual Property indemnity clause is essential in a sponsorship contract as it would mitigate the risks arising out of wrongful use of sponsoring entity’s trademarks.
Drafting Of Sponsorship Agreement?
- Identification of parties in question – it is essential to note the full legal name of the entity involved along with the full description of the tax status of the company.
- Purpose of forming contract – It is considered ideal to have a goal as to why a sponsorship has been established. This must be explicitly mentioned.
- Rights, duties and responsibilities of the sponsor and sponsored– It must explicitly mention what is expected of both the parties and their rights.
- Exclusivity on use of intellectual property – If either party is allowing use of trademarked logos or other intellectual property in pursuance of the sponsorship contract, permitted usage of the same must be included in the agreement.
- Risk mitigation clauses such as indemnity and limitation of liability must be included.
- Provisions for renewal of the same, may be included.
Types of Sponsorship Agreement?
A sponsorship agreement is typically entered into for the following purposes:
- Organization of conferences.
- Organization of workshops.
- Organization of events.
- For sponsoring employees of a company.
Benefits of Sponsorship Agreement?
A sponsorship contract has the following benefits:
- raising brand awareness and create preference
- creating positive PR and raise awareness of the organisation as a whole
- providing attractive content for a range of products and services
- building brand positioning through associative imagery
- supporting a sales promotion campaign
- creating internal emotional commitment to the brand
- acting as corporate hospitality that promotes good relations with clients.
Cons of Sponsorship Agreement?
Following are the cons of sponsorship agreement:
- Improper usage of intellectual property which is depicted at the concerned event.
- Low turnout may affect the gains which one envisaged from the publicity.
- Co-sponsorship may adversely affect the gains.
- The benefits may not be proportional to the funds being provided.
Although a prevalent mode of advertisement in the recent market scenario, it is essential to carefully evaluate your options of potential sponsors. It is of utmost importance for a business to invest in a more flexible and crowd dominating source so as to ensure that the outreach is up to the mark for the price being paid for it. Companies must carefully negotiate the terms and conditions of the contract so as to control how this publicity is undertaken and therefore maintain the long-term interest of the business.