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The golden rules of sponsorship.

Succeed with superior affinity products by defining the sponsor-supplier partnership first.

"Hey, you: Sponsor our product--we'll handle everything. Protect your mailing list? No problem. Percentage of gross? I personally guarantee that your outfit will make a bundle on this. Oh, we'll need the home phone numbers of all your members. Let's do lunch; I'll buy."

This entertaining conversation actually took place. Most of us in association work have heard it: Sponsor an insurance program or a platinum, zinc, or titanium credit card, and your organization will be rolling in megabucks.

But wait. Sponsorships based on hype are not in our members' best interests. Imagine overzealous telemarketers hounding your members at the dinner hour. Now imagine the membership cancellation threats.

Associations use sponsorships to attract and retain members and to generate income. That's serious business. Product or service sponsorships can be a big plus if you take a planned approach. After 20 years in the business, I have a list of 14 golden rules. Following them will save you time and trouble.

Membership organizations sponsor products like these:

* financial programs: tax deferred annuities, money market funds, mutual funds, certificates of deposit, and credit cards;

* insurance programs: life, accidental death and dismemberment, mortgage, and casualty;

* supplemental health coverage: in-hospital, long- and short-term disability, home care, and dread disease; and

* discount programs: mail order pharmaceuticals, magazine subscriptions, travel, travel clubs, hotel and motel discounts, books, records, and tapes.

The National Education Association, Washington, D.C., sponsors a home computer system designed for classroom teachers. The United Services Automobile Association, San Antonio, Texas, sponsors a discount long distance telephone service. The Aircraft Owners and Pilots Association, Frederick, Maryland, sponsors a legal services plan. Many organizations sponsor credit unions that, in turn, offer benefit programs screened by their parent organizations.

Rule 1

Define sponsorship. Sponsorship has no universally accepted meaning. Here's my suggestion: the process used to award an association's quality assurance seal in support of an outstanding product or service. Sponsorship brings attractively priced or enhanced products or services to members--and places the association's reputation on the line--in exchange for product design and marketing partnership agreements.

Sponsorship negotiation uses the buying power of the membership, and the results are usually above average or superior to similar programs marketed to the general public. The ease of marketing to an affinity group--and savings that result--are association negotiating levers.

The National Education Association and the Aircraft Owners and Pilots Association publish comprehensive sponsorship guidelines used during initial conversations with potential suppliers. NEA and AOPA emphasize that sponsorship will not result in the sale or unsupervised use of their mailing lists.

Rule 2

Sponsor a specific product or service. Sponsorship should never be awarded to a company but to a specific product. This rule minimizes possible member confusion, especially when a company is known to provide an array of products or services to the general public--for example, insurance or financial services. It also minimizes sponsorship misuse, when one product is sponsored but other products are sold to members by the offending company.

At the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), Washington D.C., a subsidiary responsible for voluntary member services, Union Privilege, awards business on a product by product basis. Union Privilege enters into comprehensive agreements with each supplier and specifies product, marketing, promotion, and administrative responsibilities for the supplier within each business agreement.

Rule 3

Control marketing. Each vendor solicitation and subsequent service response will affect your reputation. NEA's Member Benefits Corporation, a wholly owned marketing company, requires that a comprehensive marketing plan be part of each master agreement and that officers of the supplying organization sign the final contract. This assures topdown support for all marketing, jointly conducted research, customer surveys, commercial exhibiting support, and other activities.

AOPA believes that the supplier's role is to be fully supportive of the association. After receiving a business award, the supplier is required to support the association's annual goals for marketing and quality control of each program. The supplier is to provide all relevant marketing information requested by AOPA.

Don't automatically accept a company's marketing department. You need to consider

* the association's financial resources;

* the style and degree of customizing you want in a promotion; and

* the supplier's ability to satisfy your requirements.

With few resources, you have less flexibility. But choosing standard company copy, publication schedules, and ad formats usually means the only unique element in promotional materials is the name of your organization. If you use an outside advertising or marketing agency, make that clear to the supplier before signing a contract.

Protect the association's right to all information. Sales and service data are the property of the sponsor; the supplier is a caretaker of organizational information. Before settling a contract, spell out how and when data will be delivered to you; if you have a marketing data base, for example, the supplier can periodically download data. You should also receive all copies of member information when you end your relationship with the supplier.

Rule 4

Explain the sponsor's role to the supplier. Members look to the association for guidance and protection; as a sponsor, you also have to look out for the reputation of the organization. That means you must have substantial knowledge of the sponsored product and its marketing. Explain that to the supplier.

For years, company sales people have beaten on association doors for business and then taken charge of product, marketing, and management services. In some cases, a take-charge attitude and your own business plan may be the only practical ways to control a paternalistic company. Failing to control the plan can bring on two headaches.

First, companies keep records of business transactions and specific records about customers. If you decide to withdraw sponsorship, you may suddenly hear startling language: "This is really our book of business," or "information about your people is proprietary to us," or "why should we turn over our records to you and the potential competition?"

Second, if the supplier fails to perform or its industry begins to crumble the way the savings and loan, insurance, and banking industries have, you need to know. Master agreements should stipulate that the supplier is to help the sponsor understand special challenges they will face if the membership is exposed to unforeseen risks.

Rule 5

Member attraction and retention have priority over revenue generation. It's perfectly legitimate to sponsor products and services to create additional revenue. That helps hold dues at attractive levels. On the other hand, many associations believe that commissions or fees received for sponsorships should be passed back to members in the form of lower prices and better services.

Recovering the cost of risk management, marketing, and administration is legitimate, but as a member once told me, "I don't want my organization making money on my insurance program--my dues are supposed to support the association."

Rule 6

Select products and services that you can control. The combination of complex products--like certain insurance programs--and a diverse market such as a national membership requires full-time staff and other resources. If that's feasible, you can control the product.

If your professional and legal staff has limited time for sponsorship work, then I recommend products like life insurance--less complex and volatile. It's easy to get into trouble with your entire membership over products like a national hotel discount program when that industry is subject to so many forces outside of reasonable control.

Be cautious about medical insurance programs. Some coverages--for example, for dread disease--may be redundant because members are covered under an employer-paid major medical program. Spiraling medical costs can also bring untimely premium increases or even arbitrary cancellation of group policies. Members may blame it on mismanagement by the sponsoring organization.

The 1990s bring new debates and issues, too. Should insurance programs have specific provisions for blood diseases and should groups suffer the consequences of HIV/AIDS loss experiences? How should sponsors deal with the price volatility of products like major appliances, computers, and electronic paraphernalia?

Rule 7

Develop requests for proposal. You can't talk to an insurance company without knowing something about risk management and adverse selection; to a bank without grasping basis points and yield spreads; or to a computer manufacturer without knowing about architecture and interactive software. In preparing request for proposal at NEA, we learn industry language, and that goes a long way to establish our team's credentials in negotiations.

The magic of requests for proposal is their flexibility. Tell bidders the RFP is a foundation: Responses received from all bidders will lead to adjustments in basic criteria. Company dependability, creativity, and attitude are also assessed during the response period. If a proposal doesn't measure up, don't waste time listening to a marketing presentation. We anger some companies with this approach because they mistakenly believe their marketing arm is in business to sell us, whether the product meets our standards or not.

Be fair to all potential suppliers. Follow precise interview procedures with each. Even though each bid response is confidential, suppliers talk to each other. If you are inconsistent or change the rules of the interview or business award process midstream, you'll imperil the business community's respect for your organization and others.

Rule 8

As you develop and maintain a program, assess member needs. First, build product lines for the entire membership. Do the greatest good for the greatest number. Then attend to interest groups. Do not rely on suppliers to do your market research; if possible, hire your own firm.

Segment needs wherever practical. What about members with children in college? New homeowners, the pre-retired, those raising infants, people in rural areas? Facts about your membership are important during supplier negotiations, but more important is that companies have more respect when they know that you fully understand member needs.

Rule 9

Build a sponsorship award team. If you don't have your own staff, borrow. Include legal counsel, use consultants as required for technically oriented products like mutual funds or annuities, and ask committee members who have business experience. Marketing or advertising counsel may be added.

Rule 10

Never announce a new product until a formal agreement or contract has been signed. To sign, you need proper authority from a governing body or the executive director. Keep the pending sponsorship confidential until both parties have signed a contract and agreed to an announcement procedure. I broke this rule twice in 20 years, relying on company integrity, and learned two solid lessons.

Rule 11

Jointly develop a job description for the company representative. You and the supplier need to understand what the latter will do. My greatest successes have come when a company representative with some authority was assigned to work with me as a real partner. Asking for that tells the company you mean business.

Rule 12

Gather business intelligence. Part of sponsorship work is gathering intelligence on the supplying company, its competitors and industry, and your own competitors. A business driven by member complaints has lost the business edge, or its supplier has not regularly updated product features or services. Your members won't complain if they see product changes keeping pace with similar products offered to the general public.

Agree with the supplier to reopen negotiations in case the product needs attention. And keep track of the company and the market by speaking with other sponsoring associations, reading the business press, and subscribing to a computer-based business news service such as those of The Wall Street Journal and Dow Jones and Company, both in New York City.

Rule 13

Budget to recover costs. Before negotiating your deal, work up a budget that includes projected management and administrative expenses, marketing, research, evaluation, and potential legal, risk management, and intelligence-gathering work. If sponsorhips are a revenue source, take into account applicable unrelated business income tax. (See "Legal," September 1991, for more on royalties.)

Use this projected budget to agree on financial arrangements with a supplier. Negotiate for the best reasonable return through royalty payments, and bargain with every strength at your association's disposal: membership enrollment figures, organizational growth curves, staff expertise, low complaint rates achieved with other sponsorships, internal market research, potential expansion of product line, strong organizational infrastructure, full support of the association's elected officers, and so forth.

There are two schools of thought on sponsorship income. Some organizations secure up to 30 percent of their income from sponsorships; they usually turn over substantial product and marketing control to the supplier, put profits into the general fund, and pay unrelated business income tax.

NEA and others cover their program overhead and use "extra" amounts from fees or royalty payments to reduce the price of their products or improve member services--for example, by adding a telephone order desk. These amounts are not unrelated business income: Funds are earned and spent in the same fiscal year and used for necessary member services.

Rule 14

The master contract describes an equal partnership. Both sponsor and supplier are responsible for marketing and service goals, and the master contract should say so. As in any partnership, when one partner has an edge over the other, trust breaks down. You don't need a legal partnership; rather, you need parity in decisions that affect the company's bottom line and the association's reputation.

So here's your answer to the knock on the door: "Sure, we'll sponsor your product. Sign a partnership agreement making us both responsible for member needs assessment, marketing, sales, and advertising. Assign a professional to work with us as product and service evolve. Help us recover our legitimate costs, warn us of potential industry failings or pricing fluctuations that will hurt us, and we'll guarantee a lasting partnership. And we'll buy lunch."

Supplier's Side

What does a successful affinity program look like? Daniel W. Bicker, president of Classic World Travel, Inc., Englewood, Colorado, says, "Most attempts to serve association travel needs fail because the supplier doesn't understand the association's needs." Bicker designed an integrated program to serve association staff--individual business and personal travel, meetings, and board travel--and association members.

Classic World Travel has sponsor partnerships with 50 associations. Some of their results are

* more than $30,000 in cash, savings, and free tickets for the Society for Preservation and Encouragement of Barbershop Quartet Singing in America, Kenosha, Wisconsin, in the past 6 months;

* more than $40,000 for the Billiard Congress of America, Iowa City, Iowa, in the last 12 months; and

* more than $60,000 for the Association for Supervision and Curriculum Development, Alexandria, Virginia, in the past 12 months.

Bicker says three qualities in a partner make the travel program fly:

1. National trade or professional membership. "The program works best with organizations whose members purchase their own travel, so the association can pass on value and savings directly to its members. It also provides value for the association because we return a portion of our commission," he explains.

2. Individual rather than corporate members. "The same reasoning applies. It doesn't work well if a company buys the travel."

3. A medium for the message. "We need a good medium to get the message to the membership. We'll advertise in the weekly newsletter or monthly magazine, and the most important thing about advertising is frequency. We have stock ads in all sizes ready to slide in information specific to the association."

Classic World Travel uses an agreement letter developed by a banking association. "Once that's signed, it's terrifically simple," Bicker says. "The association and its members have no obligation and no liability."

Arleigh Greenblat is chief executive officer of the National Education Association's Member Benefits Corporation and president of the management consulting firm Second Executive, Inc., both in Washington, D.C. Additional guidance on awarding and managing sponsorships is available in ASAE's executive briefing Responsibilities of Association Sponsorship. To order, call (202) 626-2748. Members pay $5; nonmember price is $7.
COPYRIGHT 1991 American Society of Association Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:sponsor-supplier partnership; includes related article
Author:Greenblat, Arleigh
Publication:Association Management
Date:Dec 1, 1991
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