Sponsorship Relationships As Strategic Alliances: a Life Cycle Model Approach Lourdes Urriolagoitia ⁎, Marcel Planellas

Business Horizons (2007) 50, 157—166

www.elsevier.com/locate/bushor

Sponsorship relationships as strategic alliances: A life cycle model approach Lourdes Urriolagoitia ⁎, Marcel Planellas

ESADE Business School, Ramon Llull University, Av. Pedralbes 60–62, 08034, Barcelona, Spain

KEYWORDS Abstract In recent years, academics and practitioners have recognized that Sponsorship relationship; sponsorship relationships operate as strategic alliances. Additionally, they have Strategic alliance; emphasized the lack of analytical approaches which allow an understanding of the Life cycle model; developmental process of such alliances. In an attempt to fill this gap, we Relational view examine how key sponsorship characteristics change over different stages of the life cycle (formation, operation, and outcome) to determine the success or failure of the relationship. Specifically, we propose a life cycle model that articulates general paths in sponsorship relationship developmental stages and the behavior pattern of sponsorship characteristics. Throughout this framework, we illustrate our reasoning with examples drawn from the UBS/Team Alinghi sponsorship relationship. © 2006 Kelley School of Business, Indiana University. All rights reserved.

1. Sponsorship relationships: In search of corporation's approach to sponsorship, as expressed a new perspective on its website: “ In today's ultra-competitive and complicated busi- Volvo recognizes the potential of sponsorship, the ness environment, an increasing number of spon- power of partnership established and developed … sors and sponsored parties refer to one another as with care and through co-operation .Our strategy partners, thus reflecting the complexity of spon- of longevity and loyalty provides the stable plat- sorship relationships. Rejecting the conventional form major sponsorships require in order to ” view of sponsorship as a short-term transaction and germinate, mature, and progress. (Volvo, n.d.). marketing communication tactic, modern sponsors In his article on the development of sponsorship now recognize the strategic role of sponsorship and understanding, Meenaghan (1999) highlighted the great potential for creating value from a the need for new perspectives to examine sponsor- longer-term relationship. Such perspective is ship relationships in a more appropriate way. evidenced by Volvo's statement regarding the Farrelly and Quester (2003) concurred with this, confirming a notable lack of both analytical and empirical studies of the mechanisms of sponsorship ⁎ Corresponding author. relationships. Two years later, the authors explored E-mail addresses: [email protected] the subject from a strategic point of view and found (L. Urriolagoitia), [email protected] (M. Planellas). that a sponsorship relationship has the potential to

0007-6813/$ - see front matter © 2006 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2006.10.001 158 L. Urriolagoitia, M. Planellas operate as a strategic alliance, unveiling opportu- 2. Sponsorship relationships from the nities for both parties to invest jointly in order to relational view of the firm achieve their own strategic goals (Farrelly & Quester, 2005). Dyer and Singh (1998) argue that an increasingly A key limitation of this study, however, stems important unit of analysis for understanding com- from its static perspective. Indeed, an under- petitive advantage is the relationship between standing of long-term sponsorship relationships firms. Consequently, they identify four potential demands a dynamic perspective. As Wolfe, Mee- sources of inter-organizational competitive advan- naghan, and O'Sullivan (2002) noted, a sponsorship tage: specific relational investments, knowledge- relationship is dynamic, like any long-term inter- sharing routines, complementary resources/capa- organizational relationship that adapts and devel- bilities, and effective governance. ops over time. In the sponsorship context, Amis, Slack, and According to the strategic management litera- Berret (1999) found that companies whose sponsor- ture, a strategic alliance is a close, long-term, ship initiatives were successful approached their mutually beneficial agreement in which resources, sponsorship agreement as a strategic resource, knowledge, and skills are shared with the objective which they developed into a distinctive competence of enhancing the competitive position of each which in turn contributed to achieving a position of partner. The authors of this definition, Spekman, sustainable competitive advantage. As mentioned, Forbes, Isabella, and MacAvoy (1998), went on to it has been recognized that creating and maintain- point out that the literature on strategic alliances ing a successful sponsorship requires the involve- has paid little attention to issues related to the ment of both the sponsor and the sponsored from a alliance developmental process. strategic alliance approach. Therefore, the four Only in recent years has this process been subject sources of inter-organizational competitive advan- to scrutiny by a select few authors, such as Ring and tage classified by Dyer and Singh (1998) could be key Van de Ven (1994), adding a temporal dimension determinants in a sponsorship relationship. Next, which affects how alliance partners negotiate, we explore in greater detail each of these four execute, and evaluate over time. Moreover, notable sources. researchers have begun to analyze the alliance over its life cycle stages, through which relation- 2.1. Specific relational investments ships emerge, grow, and dissolve. In reviewing the literature on developmental stages of strategic Investments of time, money, and effort must be alliances, Das and Teng (2002) concluded that all undertaken to build strong and lasting relation- models contained: ships. Madhok and Tallman (1998) argue that expenditures and activities dedicated toward the • A formation stage, in which the partners are relationship acquire the properties of a specific identified, negotiations are carried out, and relational investment (i.e., they are specialized in the alliance's strategy is formulated and set the particular application and not transferable to up; alternate uses). • An operation stage, in which the partners start Sponsorship researchers such as Quester and to operate the alliance and implement the Thompson (2001) found that rights fees are likely agreements; and to be ineffective unless they are accompanied by • An outcome stage, in which the alliance either the commitment of significant additional resources becomes mature and stabilizes or continues to beyond those that can be classified as strictly change and reform. financial. These additional resources have to be Extending this line of thought, our aim is to allocated to leveraging activities, which typically determine how sponsorship relationships as partic- involve promotion of the association between ular strategic alliances evolve through different sponsors and sponsored parties, in order to developmental stages over time, and to explain how achieve any real degree of success. In this respect, the key characteristics of sponsorship relationships Amis, Pant, and Slack (1997) studied the agree- change over these different stages. To this end, we ment between Canadian firm Owens–Corning and propose a life cycle model of the sponsorship the Canadian freestyle skiing team, signed in 1986 relationship which we develop from an integrative and then extended until 1998. The authors approach. Specifically, we combine the relational describe how Owens–Corning worked hard to view of the firm developed by Dyer and Singh (1998) ensure that freestyle skiing gained Olympic sport and the alliance developmental process theories status, realizing that the company's profile would studied by Das and Teng (2002). rise higher from supporting an Olympic (as Sponsorship relationships as strategic alliances: A life cycle model approach 159 opposed to a non-Olympic) sport. With Olympic individual endowments of each partner” (p. 666). status attained, Owens–Corning made great efforts The researchers note, however, that benefits from to foster the development of freestyle skiing; for combining complementary resources can only be example, it supported the creation of a national realized if the parties develop the complementary training center. At the same time, the firm organizational mechanisms necessary to facilitate promoted its association with the sponsored coordinated action. organization by featuring freestyle skiing in many Referring again to the Nortel Networks/Galway different marketing initiatives. Through such Arts Festival sponsorship, the relationship exhib- leveraging activities, the firm delivered a clear ited a complex combination of resources as an and positive image association to consumers and outcome of the positive interactions between the conveyed to the sports organization its commit- participants. The sharing of Nortel Networks' ment to forge a long-term and mutually beneficial financial management expertise enabled the ex- sponsorship relationship. pansion of the Galway Arts Festival, which in turn facilitated the involvement of Nortel Networks 2.2. Knowledge-sharing routines employees in artistic activities. As a result, a heightened sense of community developed within Dyer and Singh (1998) define knowledge-sharing the Nortel plant and Nortel Networks Galway came routines as “inter-firm interactions that permit the to be viewed as an even more attractive place to transfer, recombination, or creation of specialized work. The company experienced a marked in- knowledge” (p. 665). The authors stress that the crease in its recruitment and retention rates. At success of such transfers depends on whether the same time, the Galway Arts Festival saw a personnel from the two organizations have face to great increase in its audience, as Nortel Networks face interactions. A case study by Ryan and Fahy (2003) on the employees and their extended families joined the ranks of the event's loyal audience base. sponsorship of the Galway Arts Festival by Nortel Networks illustrates how knowledge-sharing routines can be developed in a sponsorship relation- 2.4. Effective governance ship. As described by the authors, local Nortel Dyer and Singh (1998) use the term effective Networks employees were highly involved in the governance to underline formal and informal self- sponsorship and had the opportunity to closely enforcing agreements “as the most effective and interact with the Galway Arts Festival staff, acting as festival stewards and serving on festival commit- least costly means of safeguarding specialized investments and facilitating complex exchange” tees. As these interactions succeeded, effective (p. 669). Formal self-enforcing agreements are communication and information-sharing grew incre- symmetric investments that align the economic mentally, as did the capacity to internalize learning incentives of partners. Informal self-enforcing and apply it to their own needs. For example, Nortel agreements rely on personal trust relationships. Networks provided financial management expertise Trust as an informal self-enforcing mechanism has to the Galway Arts Festival which enabled the great potential to generate competitive advantage organization to develop financial management systems, professionalism, and management confi- since it is more difficult to imitate, being socially complex and idiosyncratic to the relationship. dence that contributed to its continued expansion. Examined by Meenaghan (2002) from 1995 to The Galway Arts Festival also shared expertise with 2002, the Guinness sponsorship of the GAA all- Nortel Networks, infusing its know-how and creativ- Ireland hurling championship is an interesting ity into organization of staff and corporate events. example of the role of trust in sponsorship re- This allowed Nortel Networks employees to “think lationships. In 1995, hurling (a major Irish sport) was outside the box” (Ryan & Fahy, 2003, p. 37) and be in a state of some decline. From the outset, it was more creative at work. Such intensive interactions enabled the two parties to discover ways to both evident to Guinness that substantial support would be required to develop the profile of hurling and strengthen the sponsorship relationship and satisfy their association with this sport. While the sponsor- their own organizational needs. ship has been immensely successful for both parties, 2.3. Complementary resources/capabilities criticism and pressure (largely related to the linkage and association of hurling with an alcohol brand) According to Dyer and Singh (1998), complementary have plagued the relationship throughout its exis- strategic resources are “distinctive resources of tence. Under such circumstances, the development alliance partners that collectively generate greater of trust between the parties was particularly rents than the sum of those obtained from the important. 160 L. Urriolagoitia, M. Planellas

Figure 1 The sponsorship relationship life cycle.

This environment of trust was based on mutual 3. The life cycle of a particular strategic respect for, and understanding of, the positions and alliance: The sponsorship relationship needs of the respective parties to the relationship. From the Guinness side, the scale of leveraging As illustrated by the life cycle model represented activities and expenditures was significant, and in Fig. 1, sponsorship relationships go through undertaken with the view that a beneficial long- three developmental stages: formation, operation, term association would continue. For its part, the and outcome. We argue that each stage has its own GAA, as a property owner and an amateur sports necessary characteristics and that a sponsorship organization, was reliant on the marketing capabil- relationship cannot move to the next stage unless ities of Guinness to promote the game of hurling, certain characteristics are present. As previously and its ability and willingness to undertake such highlighted, specific relational investments, knowl- activities in a sensitive and mature manner. Sus- edge-sharing routines, complementary resources taining this environment of trust and mutual and capabilities, and effective governance capture dependence required continuous attention to the the key aspects of sponsorship relationship char- dynamics of interactions between the parties, acteristics. Therefore, we maintain that these including changes in personnel representing the variables evolve dynamically over time, signifi- parties, reaction to external media attention and cantly influencing the developmental process of criticism, and the renewal of rights. sponsorship relationships. Table 1 summarizes the

Table 1 Characteristics of the sponsorship relationship in its life cycle Formation stage Operation stage Outcome stage Specific relational investments High level of leveraging activities High level of leveraging activities Necessity for investments slows down

Knowledge exchange routines Interactions start Increase and intensify Intense and stable

Complementary resources Complementary strategy is Organizational complement is A unique and valuable defined created synergy is achieved

Governance structure: Fragile Strengthening Strong and stable

Formal mechanisms Outlined Developing Balance between formal Informal mechanisms Negligible Taking shape and informal Sponsorship relationships as strategic alliances: A life cycle model approach 161 characteristics the relationship presents when it strategy are to create awareness and familiarity proceeds successfully and thereby completes its with the brand and to leverage key associations. The life cycle. key associations leveraged for Alinghi were passion, drive to succeed, teamwork, expertise, and leader- 3.1. Formation stage ship. The sponsorship objectives linked to the business group are to contribute to client acquisition In the formation stage of the sponsorship relation- and client retention. As regards the sponsored party, ship life cycle, parties negotiate the terms of the one of the main priorities of Team Alinghi was to agreement that will govern their sponsorship rela- build a brand that would outlast any temporary tionship, implement the agreement, and then sports achievement, basing this concept on the word establish the alliance. This relationship, however, Alinghi. A term created by team founder Ernesto will be formed only under certain conditions. These Bertarelli to represent joy,dreams, lightness, speed, conditions include a high level of specific invest- and action, Team Alinghi wanted UBS to exploit this ments, which are necessary to lay the foundations word and what they, as a team, had created. of the alliance. As mentioned earlier, the greater As mentioned, the exchange of knowledge is the volume and the scope of these specific invest- nascent in the formation stage of the sponsorship ments, the greater the benefits that will be relationship life cycle. Similarly, the combination of obtained in the long-term. Most of the expenditures complementary resources has not yet begun, since (not only money, but also managerial time, effort, efforts are focused on building the foundations of and energy) are especially high at this stage and the relationship within a framework of organiza- tend to be very specific, since they will be tional compatibility, which is essential for the specialized in this particular use and not transfer- development of complementary resources and able to other uses. skills. The sponsorship relationship between UBS and Image transfer is regarded as one of the Team Alinghi, often cited as an innovative model, is particular capabilities of sponsorship. Via sponsor- a good example that illustrates our reasoning. In ship association, a transfer of image values from the January 2001, UBS, a leading global financial firm sponsored party to the sponsoring brand occurs. In based in Switzerland, and Team Alinghi, the Swiss the case of the UBS/Team Alinghi relationship, it challenger for the 2003 America's Cup, entered into was believed that the brand values of Alinghi would a sponsorship agreement. In order to activate the underpin the brand values of UBS. UBS decided to partnership and demonstrate its commitment to the sponsor Team Alinghi as a result of the great synergy sport, UBS undertook specific relational invest- between its brand values and attributes and those of ments in sponsoring several sailing events. In August sailing and Team Alinghi, in particular; in the 2001, for example, the firm sponsored the UBS company's view, all shared the concepts of leader- Jubilee Race around the Island in celebration of the ship, teamwork, strategy, skill, and cutting-edge first America's Cup race, held in 1851. Participating technology. Further, UBS recognized considerable were teams from around the world and previous symmetry between the two parties on an organiza- entrants in the America's Cup. The following year, in tional level. Created through mergers and acquisi- April 2002, UBS announced that it would sponsor the tions that introduced cultural variety, knowledge, UBS Challenge in Newport, a sailing tournament for and experience, UBS decided to transform this America's Cup contenders. Through these two diversity into a key organizational strength that events, UBS sought to build enthusiasm for, and can be appreciated in the creative and innovative awareness of, sailing and to strengthen its relation- workings of its employees. For its part, Team Alinghi ship with Team Alinghi. was formed from professional sailing's international While specific investments are numerous in the cream-of-the-crop. Team Alinghi founder and nav- formation stage of the sponsorship relationship life igator Ernesto Bertarelli stressed that when the cycle, exchange of knowledge is still incipient. original crew was assembled, desired personal During this time, parties focus their efforts on characteristics included experience, compatibility, formulating objectives and establishing norms that and the ability to accept team culture. The ultimate will govern the relationship. As such, knowledge challenge was to get this group to work together exchange routines have not yet been developed. under a common vision. Toward that end, Team For its part, UBS formulated its sponsorship Alinghi emphasized values to which everyone could objectives from a strategic perspective, as the subscribe, including determination, a free spirit, company sought to align these with its brand and passion, and openness to the public. business strategy. Under the strategic perspective, In the formation stage of the sponsorship rela- the sponsorship objectives derived from the brand tionship life cycle, the governance structure starts 162 L. Urriolagoitia, M. Planellas to take shape through formal mechanisms. Partners in the operation stage, the level of interdependence are aware that the risk of falling into opportunistic between the parties will increase as they execute behavior (breaking off the agreement) increases commitments that reduce uncertainty and make with the degree of specialization of relationship- interactions predictable. As interactions continue, building investments. Parties attempt to control parties may also become more familiar with one opportunism, but also to maximize incentives for another, which generates interpersonal trust. Thus, value creation, by aligning economic incentives parties begin to rely on trust as a form of gov- through formal self-enforcing safeguards. While ernance, and informal mechanisms begin to com- also vital to sponsorship relationships, informal plement the formal mechanisms. mechanisms do not play a large role in this stage In the sponsorship relationship between UBS and of the life cycle, as they require a history of in- Team Alinghi, core objectives and expectations teractions and personal ties which, of course, take were clearly specified during the formation stage considerable time to develop. As such, in the of the life cycle, creating the foundational princi- formation stage, parties rely on a formal agreement ples of the relationship. Consequently, there was no to define the relationship. As a starting point, they difficulty during the crossroads period and transi- sign a long-term contract (three to five years, tion to the operation stage was automatic. The renewable) containing the rights fees the sponsor operation stage of the UBS/Team Alinghi relation- provides in exchange for formally associating itself ship was dedicated to preparation for and partici- with the sponsored party. This formal agreement pation in the Louis Vuitton Cup (the pre-requisite to constitutes an incentive for both parties to actively the America's Cup race) and the America's Cup, engage in leveraging activities to increase the itself. At this juncture, good personal relationships sponsorship effectiveness. started to develop and allow people from both the As a condition of their formal agreement, when UBS sponsorship unit and the Team Alinghi manage- UBS and Team Alinghi signed the document that ment unit to discuss things at a very informal level. established the former as the latter's partner in Although great expenditures are characteristic of competition for the 2003 America's Cup, UBS the formation stage of the sponsorship relationship explicitly asked to be part of a small group of life cycle, specific investments continue to be very sponsors. This was agreeable to Team Alinghi; in line large during the operation stage. Indeed, parties with its image strategy, it decided not to try to should persist in investing management effort and maximize space on the sail or the hull, but rather time to develop the co-specialization that accumu- choose a “maximum impact approach” (Lanning & lates as they work together, and is necessary to Jeannet, 2004, p. 19). For that reason, Team Alinghi generate significant value. had fewer sponsors than some of its competitors. To this end, UBS continued to make specific relational investments in its sponsorship of Team 3.2. Operation stage Alinghi, leveraging the relationship through sponsorship of the 2002–2003 Louis Vuitton Cup. This act According to Das and Teng (2002), in the operation highlighted the firm's ongoing commitment to stage of the sponsorship relationship life cycle, sailing and its support of the America's Cup. parties collaborate and implement the terms upon The increasingly intense interactions experi- which they've agreed. The relationship grows enced during the operation stage also contain an rapidly, somewhat akin to the growth stage of element of education. This educational element organizational life cycles. There is, however, a allows the parties to understand one another better transition period between the formation and oper- and to receive and process the contributions each ation stages which the authors refer to as the makes. Thus, knowledge-sharing routines are estab- crossroads period. During this period, alliance lished and nurtured continually during the operation conditions can fluctuate significantly and lead the stage. relationship to a rapid termination or a step At this point in the life cycle of their relationship, backward as reformulation occurs and the relation- UBS and Team Alinghi were increasingly interactive. ship beings again. Recent empirical research has There was a high level of employee involvement noted that conflicts, misunderstandings, and rene- during many internal activities organized for this gotiations are inevitable. Therefore, if movement purpose, such as visits to the team base in Auckland, beyond this crossroads toward the operation stage is seminars, and talks on leadership or technology. In desired, involved parties must resolve any pro- this way, UBS could convey to its employees the blems, initial incompatibilities, and conflicts of importance of leadership, teamwork, expertise, interest that arise when working interactions start. passion, mastery of state of the art technology, If the relationship proceeds normally toward growth and innovation. At the same time, UBS involved its Sponsorship relationships as strategic alliances: A life cycle model approach 163 employees in external activities (such as regattas of the art technology. These key factors, imple- featuring Team Alinghi) through which they could mented by a highly motivated team, are what carry meet and interact with UBS clients. As expressed by a racing yacht to success. In the global finance Georges Gagnebin, Chairman of UBS Wealth Man- business, they also decide who can sail harder to agement and Business Banking: “The atmosphere the wind” (UBS AG, 2003c). during the America's Cup in Auckland was simply electrifying, and the skills and teamwork demon- 3.3. Outcome stage strated on both boats were a great inspiration” (UBS AG, 2003a). The third, and final, phase of the sponsorship In a similar way, specific relational investments relationship life cycle is the outcome stage.As and interactions are also devoted to building occurs between the formation and operation stages, organizational complementarity, the organizational there exists also a crossroads between the forma- mechanisms necessary to access the benefits of tion and outcome stages whereby sponsorship combining complementary strategic resources. relationship conditions may change, thus altering Parties gradually find the best way to coordinate the path of the life cycle. Instead of becoming their strengths, and the decision-making processes stable, the relationship can reform, terminate, or and the culture of each individual party will be gradually deteriorate. The initial match between integrated with those of the other. the partner firms may no longer be sustainable. The This was experienced by UBS via its great decision to reform or terminate the relationship involvement in the various events and competitions does not necessarily entail the failure of the during the Louis Vuitton and America's Cups, which relationship; on the contrary, these may represent enabled UBS to identify, register, and integrate the the best options when parties consider pre-set capacity to organize events. Indeed, UBS highlights alliance objectives as having been achieved. If the nine key areas in which employees can offer the relationship proceeds normally, however, the syn- UBS brand experience to its clients (see Table 2). ergistic potential attainable through a sponsorship The company's involvement also had a positive relationship is realized during the outcome stage. impact on the sponsorship, itself, as both parties Indeed, goal congruence and synergistic benefits actively sought to make the relationship more can effectively be generated since sponsor and successful. UBS built up a global sponsorship sponsored organizations have learnt how to interact portfolio that embraced all aspects upon which and apply their know-how mutually. Thus, the the Alinghi project touched. In explaining UBS's sponsorship relationship stabilizes and becomes connection with sailing, Marcel Ospel, UBS Chair- mature, adapting to changes on a continuous basis. man of the Board, said: Transition of the UBS/Team Alinghi sponsorship relationship from operation stage to outcome stage “Sailing calls for perfect interplay between strat- was marked by UBS's dilemma regarding the renewal egy, tactics, stamina, speed, and mastery of state of its partnership with Team Alinghi, which arose as

Table 2 Identifying key touch points at events Brand–client relationship Pre-event experience Event experience Post-event experience 1. Invitation 2. Welcome/Registration 9. Follow-Up • Physical invite • Greeting process at arrival • Client-advisor follow-up • Gift-teaser • Handover to client-advisor • Thank you note • Process of delivery/follow-up 3. Advisor/Client Interaction • Gift • Greeting process • One-on-one client interaction 4. Speech/Senior Management 5. Event Program 6. Event Environment/Ambience • Location • Hardware •Communications •Event staff 7. Catering 8. Farewell/Gift Source: Branson, Eggli, and Marti (2005). 164 L. Urriolagoitia, M. Planellas a consequence of a shift in the company's compet- tion, and inter-organizational learning remain high itive strategy from mergers and acquisitions to and stable. A unique and valuable synergy crystal- organic growth. Coherently with this strategic shift, lizes, as the combination of complementary UBS decided to collapse its multiple brands and resources achieves a high degree of complexity. move to a single global brand, “UBS”, in attempt to Finally, informal mechanisms develop through inter- reflect that, despite the company's global scale and actions that have become socially embedded in an power, it could still have personal relationships with incremental progression of socialization during the its clients. Building the new brand image was previous stages. Thus, in the outcome stage, a neither quick nor easy. According to Mark Branson, balance is achieved between the formal and UBS Chief Communication Officer, months of con- informal mechanisms. As long as the relationship sideration and market research suggested the continues to operate over time and is maintained in company “had two, apparently conflicting, priori- this third stage, the informal mechanisms will ties. Emphasizing the size and power of UBS as a continue to strengthen. global institution, and showing the intimacy of [its] Demonstrating the importance of continued com- client relationship” (Simonian, 2005, p. 12). Hence, mitment, in this case toward the America's Cup, the new global brand positioning was key and, sailing, and its sponsorship of Team Alinghi, UBS in within it, sponsorship played an important role. In June 2004 sponsored the UBS Trophy at Newport. this context, UBS had to decide whether Alinghi Hosted by Team Alinghi, the event was the official would continue to fit the brand's objectives. launch of Team Alinghi's campaign for the 2007 After a thorough analysis and conclusion that America's Cup, but was also an organizational chal- Team Alinghi's image values would underpin the lenge for a team committed to running a major event company's new, intimate approach, UBS decided to that was to be accessible to the public in all respects. continue with the sponsorship of the Alinghi Further, underscoring the fact that interactions and platform. While UBS previously made large invest- different activities happen continually during the ments to transfer leadership, excellence, global outcome stage of the sponsorship relationship life diversity, and technology, the new sponsorship cycle, in February 2004, the Wealth Management and campaign would highlight that these attributes are Business Banking Unit organized a marketing event at feasible thanks to intimacy in teamwork. Also which Jochen Schuemann, Sports Director of Team notable to global sponsorship and brand manage- Alinghi, was invited to explain Alinghi's proposed new ment executives was the realization that people program for the America's Cup. from both UBS and Team Alinghi had worked in At this point in their relationship, both UBS and different events and developed an inter-organiza- Team Alinghi experienced a high level of goal tional capacity from which they could benefit. In congruence as objectives and expectations grew November 2004, Peter Wuffli, CEO of UBS, and and developed through interactions between the Russell Coutts, CEO of Team Alinghi, renewed their two companies during the formation and operation partnership for another four years until 2007, when stages. This common vision was exemplified by the Alinghi will participate in the America's Cup finals to UBS Alinghi Swiss Tour of 2005, the official Swiss defend its title. Summing up the spirit of the match racing championship, for which UBS was the alliance, Russell Coutts stated: main sponsor. Included in the Tour were five qualification events held on Swiss lakes and a final “UBS had confidence in Team Alinghi from the very race conducted at Alinghi's base in Valencia, Spain. beginning of our project in 2000. Today, we feel “The UBS Alinghi Swiss Tour should help promote extremely privileged to have their continued trust match racing as an attractive form of the sport in and cooperation for our new campaign. Their Switzerland and provide encouragement for young commitment to remain one of our main partners sailors,” commented Alinghi Sports Director Jochen for the next four years is an excellent illustration Shuemann (UBS AG, 2005a). At the same time, the of our very successful cooperation” (UBS AG, sailing event helped UBS promote its association 2003b). with Team Alinghi, conveying the idea that close In the outcome stage of the sponsorship relation- collaboration enables high performance. ship life cycle, the characteristics of the relation- The most foreseeable impact of the sponsorship ship show a stabilized pattern. Necessity for specific of Team Alinghi was its effect on the UBS brand. relational investments is still high, although the Although it is difficult to isolate and identify specific pace slows down since the relationship has reached benefits as arising solely from the UBS/Team Alinghi a level of operations that is sustained over time. association, there is information confirming its Knowledge exchange routines have been devel- contribution to the positioning of the brand. UBS oped; therefore, interactions, level of communica- uses standard series of metrics, including media Sponsorship relationships as strategic alliances: A life cycle model approach 165 exposure assessment, client-advisor feedback, and The alliance development literature suggests account tracking, to measure the impact of each that, when moving forward to the next stage in event; the company also conducts hospitality guest the sponsorship relationship life cycle, conflicts of surveys. At the global campaign level, results were interest may arise that lead to the termination of “very encouraging”, commented Mark Branson. As the relationship. UBS and Team Alinghi did not reported in the Financial Times, data “showed suffer any conflict or misunderstanding at the first awareness of UBS in the all-important category of crossroads they encountered. The probability and affluent and high net worth US citizens had risen to scope of potential conflicts were eliminated by the 63 percent. Among US corporations and institutions partners' willingness and commitment, as well as by it was 94 percent” (Simonian, 2005, p. 12). strategic and organizational compatibility. In this Furthermore, according to a December 2003 light, firms must develop the capacity to identify survey by Swiss business monthly Bilan, UBS is the and evaluate possible synergies. best-managed corporate brand in Switzerland. The During the operation stage, intensive interac- following year, in August 2004, UBS reached 45th tions are key to building a compatible environment, place in the Business Week listing of the world's top which must be established in order for realization of 100 brands. In November 2005, UBS moved up to the true value offered by the relationship. As noted, 44th place, representing a 16% increase in the value UBS employee involvement was central to the of the firm's brand in comparison with the previous company's sponsorship of Team Alinghi, and both year (UBS AG, 2005b). parties were highly interactive during diverse In sum, and as illustrated by examples from the activities. Interactions were also crucial in devel- UBS sponsorship of Team Alinghi, as a sponsorship oping trust, which is essential for functioning and relationship proceeds from the formation stage to longevity of the sponsorship relationship. the operation stage to the outcome stage, relation- Also important to sponsorship relationship man- ship conditions have a significant influence on the agement is the capacity to adapt to changes faced path of its developmental process. Next, we suggest by the firm. UBS showed such capability when it ways in which sponsorship relationships may be most renewed its agreement with Team Alinghi and effectively managed. allowed the relationship to continue to grow incrementally while it fulfilled its own needs. In order to enter the outcome stage (i.e., 4. A framework for strategic management institutionalize the sponsorship relationship and of sponsorship relationships increase the value added to both parties on a continuous basis), firms have to look for a high level In undertaking a sponsorship relationship, the of goal congruence with the development of managerial challenge lies in building strong founda- creative and innovative leveraging activities. At tional principles and adapting to the sponsor's own UBS, creative leveraging activities emerged over needs, as well as the needs of the sponsored party. time, based on previous success and the maturing of Recognizing the potential of sponsorship to fulfill a the relationship. Expertise and resources were much greater and more powerful strategic role, combined; thus, for example, UBS took care of firms need to formulate sponsorship objectives event organization and client profiles, while spe- aligned with their competitive strategy and engage cific knowledge about sailing, regattas, and the in an explicit dialogue about their expectations and characteristics of the sailing public was provided by willingness to nurture a productive working rela- Team Alinghi. tionship. For example, in order to establish the In sum, parties may develop a sponsorship into a foundational principles of its relationship with Team distinctive competence that contributes toward Alinghi, it was essential for UBS to derive the achieving a position of sustainable competitive sponsorship objectives from the brand and business advantage, if they fulfill the four sponsorship strategies. conditions required at each stage of the sponsorship Critical is the sponsor's commitment to make relationship life cycle. The most commonly cited large investments in leveraging the association, benefit that sponsors expect to attain is the with expectations of obtaining benefits from the enhancement or change of corporate image and relationship in the long-term. In the case of UBS's reputation. In pursuing this benefit, the more the sponsorship of Team Alinghi, initial investments by sponsor and the sponsored become intertwined UBS were particularly high and extended over a through relational investments and interactions, substantial period of time before generating major the more likely it is that they will be able to benefits, which materialized in the form of brand combine complementary resources to build up a presence and recognition. unique, valuable, and coherent corporate image 166 L. Urriolagoitia, M. Planellas and reputation that crystallizes during the outcome Farrelly, F., & Quester, P. (2003). What drives renewal of stage as a differentiated positioning in the industry. sponsorship principal/agent relationships? Journal of Adver- tising Research, 43(4), 353−361. This is the most valuable longer-term source of Farrelly, F., & Quester, P. (2005). Investigating large-scale competitive advantage. sponsorship relationships as co-marketing alliances. Business Moreover, the sponsored organization will benefit Horizons, 48(1), 55−62. as much as the sponsor, itself. In addition to Lanning, M., & Jeannet, J. P. (2004). Alinghi and the 2003 acquiring rights fees, which likely represent a America's Cup: Strategy to win. Babson Park, MA: William F. Glavin Center for Global Management, Babson College. large percentage of its budget (e.g., 40% of Alinghi's Madhok, A., & Tallman, B. (1998). Resources, transactions, and budget comes from sponsors), the sponsored orga- rents: Managing value through inter-firm collaborative nization will see its own brand image promoted and relationships. Organization Science, 9(3), 326−339. enhanced in the eyes of future sponsors and media Meenaghan, T. (1999). Commercial sponsorship: The develop- outlets, which provide broadcast fees. ment of understanding. International Journal of Sports Marketing, 1(1), 19−32. Furthermore, during the operation stage, major Meenaghan, T. (2002). From sponsorship to marketing partner- benefits (for both the sponsor and the sponsored ship: The Guinness sponsorship of the GAA all-Ireland hurling party) may arise which are capable of having an championship. Irish Marketing Review, 15(1), 3−23. impact on sponsorship relationship performance. As Quester, P., & Thompson, B. (2001). Advertising and promotion evidenced by the UBS/Team Alinghi relationship, leverage on arts sponsorship effectiveness. Journal of Advertising Research, 41(1), 33−47. direct contact between people from both organiza- Ring, P., & Van de Ven, A. (1994). Developmental processes of tions in different activities, such as internal cooperative inter-organizational relationships. Academy of seminars or external events, allows sharing of the Management Review, 19(1), 90−118. know-how available within each party organization. Ryan, A. M., & Fahy, J. (2003). A relationship marketing While the sponsored organization obtains manage- perspective on the sponsorship of the arts in Ireland: A Galway Arts Festival-Nortel Networks case study. Irish rial insights, the sponsoring organization learns new Marketing Review, 16(1), 31−42. skills (e.g., creativity). Moreover, the level of Simonian, H. (2005, April 18). Three letters gain a personality: interactions may markedly shape the sponsor's UBS, Europe's biggest bank, has collapsed its multiple brands corporate culture. For example, under the influ- to focus on a single global name. Haig Simonian asks, has the ence of the Alinghi platform, UBS increased em- strategy worked? Financial Times, 12. Spekman, R., Forbes, T., Isabella, L., & MacAvoy, T. (1998). ployee motivation and commitment, and provided Alliance management: A view from the past and a look to the employees with a clear indication of the direction in future. Journal of Management Studies, 35(6), 747−772. which the company is headed. UBS AG (2003a, March 2). UBS congratulates Alinghi on winning It is critical that sponsors and sponsored parties the America's Cup. Retrieved from http://www.ubs.com/1/ recognize the organizational dynamics that spon- e/about/sponsor/alinghi_uebersicht/sailing_news? newsId=58160 sorship relationships entail, and the complexity UBS AG (2003b, November 24). UBS and Alinghi continue their involved in leveraging and adapting the value successful partnership. Retrieved from http://www.ubs. adding associations. Only in this way can the parties com/1/e/media_overview/media_asiapacific/mediare- realize the true value of sponsorship. leases?newsId=59073 UBS AG (2003a, November 24). UBS's support of and connection to sailing. Retrieved from http://www.ubs.com/1/e/about/ References sponsor/alinghi_uebersicht/sailing_news?newsId=58153 UBS AG (2005a, February 1). UBS is main sponsor of UBS Alinghi Amis, J., Pant, N., & Slack, T. (1997). Achieving a sustainable Swiss Tour. 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