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What Is a Sponsorship Agreement?
A sponsorship agreement is a business contract that lays out terms and conditions between a business and any brand, event, or individual promoting the company.
A sponsorship contract can also serve as a marketing agreement or brand ambassador agreement between a company and a celebrity or social media influencer.
A sponsorship agreement is legally binding between a company/brand and an individual or other company. It ensures fair and equitable transactions, which means both parties benefit equally from the collaboration.
In most cases, fair and equitable sponsorships ensure that any events or individuals promoting the company do so in exchange for monetary compensation. Their return transaction is publicity through their medium, bringing greater awareness and business to the company paying them.
Here is an article where you can learn more about corporate sponsorship.
4 Types of Sponsorships
Sponsorships can be broken down into four main categories. The legal contracts may differ slightly between each, but the general premise remains the same; a business is paying a company or individual in exchange for public affiliation and, by extension, greater brand awareness.
Below are the four main types of sponsorships in greater detail.
1. Media Sponsorships
In this type of sponsorship, the business pays a blogger, TV channel, radio station, or other media platform money in exchange for advertised publicity. The sponsor pays for advertising space to gain greater visibility and awareness.
Usually, media sponsorships are used in conjunction with in-house marketing efforts to expand the reach of a business’s audience drastically. These types of sponsorships are important in attracting a large audience for companies hoping to recoup money through an event.
2. In-Kind Sponsorships
In some brand ambassador contracts, you may receive goods or services for free in lieu of monetary payment. However, the company expects you to promote its products or services online.
In-kind sponsorships can also take place in clubs and events with deliberate product placement. Rather than pay for marketing services, the company provides its goods directly to the sponsored party.
3. Promotional Sponsorships or Partnerships
Businesses enter a promotional partnership agreement when they partner with an influential figure on social media. This type of sponsorship can be in-kind or include financial payments as well. The exact nature of the contract will vary between the company and the influencer.
Some businesses will pay over six figures per social media post to reach an influencer’s audience. Others may agree to pay a lump sum for a fixed number of posts.
The company may also provide social media captions, hashtags, and content requirements that the influencer must follow as part of their partnership agreement.
4. Financial Sponsorships
A financial sponsorship directly pays a company or individual money to fund events. Many clubs, for example, look for financial sponsors to launch their venues and attract a large number of attendees.
Financial sponsorships also benefit large-scale corporations seeking to become affiliated with particular brands or markets.
Here is an article that covers these four sponsorship types in more detail.
What’s Included in a Sponsorship Agreement?
A sponsorship agreement includes an outline of the agreement, including any requirements made by the company of the sponsored party. The exact contract will vary by contract type and organization, but every sponsorship agreement form should have the following elements.
1. Length of Agreement
It should be made clear how long this sponsorship will take place. The exact start and end date should be printed, including the day, month, and year. In addition, it is important to state any relevant time frames that the sponsored party must follow.
2. Exclusivity Clause
If your organization is funding an event, such as a club opening, fair, or convention, then you may want to establish an exclusivity agreement with the sponsored party.
Under an exclusivity clause, the sponsored party agrees not to include products, services, or promotional material from the sponsor’s competitors.
It may be important to specify what constitutes competition in your event. For example, a fitness apparel company may not want its products to be placed alongside its competitors’ merchandise at an event.
Likewise, a cosmetics company paying an influencer for social media promotion may require them not to post competing products from their competitors for a certain period. However, other products may not be considered competitive so that they can be posted simultaneously with your partnership.
3. Payment Agreement
The sponsor should clearly state how, when, and how much they will pay the sponsored party. For example, the lump-sum amount should be stated if the money is to be paid upfront. In addition, any obligations of the sponsored party to receive compensation must be included.
Suppose the sponsor decides to pay in installments. In that case, they must clearly define how they will calculate fees, what criteria will determine their installment schedule, and under what conditions they may stop paying installments before the total agreed amount is reached.
Any type of compensation must be listed in the executed contract, including products or services offered in an in-kind sponsorship.
4. Intellectual Property Rights
The sponsor should specify their ownership over any intellectual property that the sponsored party will feature under their agreement. In addition, the agreement should clarify that the promotion and use of any products do not grant the sponsored party any ownership or right to profits of products during or after the sponsorship period.
The outline for termination of the sponsorship agreement should include:
- Criteria for either party to terminate the agreement
- Consequences of terminating the agreement
- A notice requirement in calendar days for both parties, e.g., no later than 30 days before an event.
- Actions parties must follow after termination, such as a venue no longer promoting your products.
Image via Pexels by Mykola Volkov
What Is the Purpose of a Sponsorship Agreement?
The main purpose of a sponsorship agreement is to secure a marketing partnership while protecting intellectual property.
The sponsorship agreement lays out the terms and conditions of a paid partnership between a company and individual or business. Without a legally binding contract, the sponsored party would have no legal obligation to promote the sponsor after receiving goods or payment.
Using a sponsorship agreement, both the sponsor and sponsored party can negotiate fair and equitable terms for their partnership.
Here is an article about negotiating a sponsorship.
What Are the Benefits of Using a Sponsorship Agreement?
Being a sponsor provides numerous benefits to a company; it grants them the opportunity to build brand awareness, break into new markets, expand their reach, and increase their profitability.
Sponsorship agreements also have benefits. These include:
- Setting clear expectations and obligations for both parties.
- Negotiating fair terms for the sponsor and sponsored party.
- Build better business relationships.
- Protect intellectual rights.
- Ensure sponsored parties fulfill their end of the agreement.
Here is an article that reviews sponsorship benefits sample clauses for your own agreement.
Can You Negotiate a Sponsorship Agreement?
Yes, you can freely negotiate a sponsorship agreement as a potential sponsored party. Likewise, the sponsor may negotiate with the sponsored party or potential partners in order to reach a mutual agreement.
Negotiating sponsorships is especially common and beneficial in the corporate world. It allows both parties to compromise and receive the greatest possible benefit from their collaboration.
Here is an article where you can learn more about corporate sponsorship negotiation.
How to Draft a Sponsorship Agreement
You can use a free sponsorship agreement template online and edit it to suit your needs. When drafting a sponsorship agreement, be sure to list all of the requirements:
- The name of all involved parties
- The nature and length of the sponsorship
- Payment agreements
- Exclusivity clauses
- Conditions of termination
After you draft your own agreement, you may find it beneficial to consult with an attorney. They can ensure that all the necessary details are included and that there are no loopholes or legal oversights that could potentially harm your company.
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