OVERCOMING THE CHALLENGES OF
BUILDING VALUABLE RELATIONSHIPS
MANAGING THE RELATIONSHIP BETWEEN MUSIC FESTIVALS AND THEIR CORPORATE SPONSORS
MSC BUSINESS ADMINISTRATION,
BY: LENA HOOGSTADT
UNIVERSITY OF AMSTERDAM
STUDENT ID: 11920459
THESIS SUPERVISOR: DHR. J. F. E. DE GROOT
DATE:22-06-2018
SECOND READER: DR. M
.KACKOVIC
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Statement of originality
This document is written by Lena Hoogstadt, who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
2
“IF PEOPLE LIKE YOU THEY’LL
LISTEN TO YOU BUT IF THEY
TRUST YOU THEY’LL DO
BUSINESS WITH YOU.”
3
Table of Contents
Abstract
P. 4
Introduction
P. 5
Literature review
P. 8
Why invest in relationships
P. 8
Who to build relationships with
P. 9
The sponsorship relationship
P. 9
Negotiation power
P. 12
Conceptual framework
P. 14
Method
P. 16
Results
P. 21
Phase 1: Getting to know a new partner
P. 22
Phase 2: Getting to an agreement
P. 28
Phase 3: Evaluating the partnership
P. 36
Discussion
P. 41
Managerial implications
P. 46
Limitations & Future research
P. 48
Conclusion
P. 50
References
P. 53
4
Abstract
The Dutch festival market shows signs of saturation, which makes festivals in need of finding a sustainable competitive advantage. One way of doing this is by building stronger relationships with the festival’s stakeholders, and more specifically with the corporate sponsors. Previous research has shown that certain factors influence a relationship, however, it has not shown how these factors affect the actions of the actors involved. Therefore, this research uses a qualitative multiple case approach, whereby 17 individuals took part in semi-structured interviews to understand which challenges they were facing concerning building a qualitative relationship and how these challenges were approached. Results have shown that to build a qualitative relationship, it is important to signal trustworthiness and manage these expectations accordingly. Furthermore, the notion of fit is important, not solely for the two parties directly involved, but also for the collection of sponsors as a whole. Reaching a new partner is mostly done by using (in)direct network connections. This method also helps in signalling trustworthiness, since the reputation of the connector is in a way transferred to this new partner. Sponsors use a combination of criteria to determine if a festival is a suitable partner, hereby they use factors related to the reputation of the festival itself, but also factors related to the character of the manager.
5
Introduction
The number of festivals in the Netherlands has increased from 150 to over 934 between 1980 and 2017, which is an increase of over 500% and is expected to keep increasing in the following years (Respons, 2017a). This increased competition makes it hard for festivals to survive, which has led multiple organisers to cancel their festivals. Both new festivals (Camp moonrise) and older festivals (Extrema Outdoor) are struggling to sell enough tickets (Vrieze, 2018). Furthermore, festivals are struggling to please their sponsors. As the organisers of the Gathering realised, where the sponsors dropped out of the agreement when the organiser could not meet the expectations (Vos, 2017). Hereby showing that festivals have a hard time acquiring enough financial resources to survive, both because of the low number of tickets sold, as due to the loss in funds provided by sponsors. This stresses the importance of festival organisers to find a competitive advantage to remain standing against the strong competition. From the resource-based view, it is argued that this competitive advantage can be created by owning the right resources, which includes having the right relationships. A festival’s financial resources are the results of these relationships, both with their visitors as with their sponsors, showing the importance of strong relationship management. Given that the total amount of sponsorship investments decreased from 845 million to 772 million euros between 2010 and 2016, having relationships with these funders has become even more important (Respons, 2017b). Hereby it is proposed that building a strong relationship especially with these sponsors, could be the source of this competitive advantage. Therefore, this research will look specifically at how this sponsorship relationship can be managed.
While sponsorship has been a popular subject in marketing research of the past years, many issues are still overlooked. In general, most scholars take the perspective from the sponsor when analysing the effect on brand awareness (Cornwell, Humphrey, Maguire, & Clinton S., 2006), purchase activation (Tsiotsou & Alexandris, 2009), brand loyalty (Sirgy, Lee, J.S.Johar, & Tidwell, 2008) and brand affect (Mazodier & Merunka, 2012) of the brand. While these scholars show many benefits of sponsorship, it tends to neglect the role the relationship and the management of the sponsored party
6 plays in this. Which is surprising since Johnston & Paulsen (2014) show that the quality of the partner relationship is the third most important factor in assessing the different sponsorship criteria by the sponsor. Therefore, this research will take a closer look at the relationship between a sponsor and the sponsored organization. And more specifically towards the side of the sponsored organization, since this tends to be neglected in the general sponsorship research. Hereby it will be of interest to understand how this party could influence being perceived as a capable partner to build sustainable relationships. This has led to the formulation of the following research question:
Which challenges do the managers of Dutch music festivals face during the course of the relationship they maintain with their corporate sponsor and how are these challenges approached?
This research aims at understanding the process of attracting a new partner, getting to an agreement with this partner and building long-lasting relationship with this partner during which the managers face different challenges. To overcome these challenges, the managers will take certain actions and this research will focus on the motivations behind these actions. Since relationships and agreements are the results of the relative negotiation power of the different parties, it has been decided to take a closer look at different types of organizations, both festivals and sponsor organizations, to see how their actions differ. To formulate an answer to this research question, a qualitative, explorative approach was used whereby 17 individuals took part in semi-structured interviews to understand their actions and motivations. A multiple case approach was used to understand how the different organizations within the network approached these challenges, which allowed the researcher to compare certain actions and motivations.
This paper will continue with a literature review showing the reasoning behind this research. It will show why it is important to invest in relationships and who to build relationships with. Furthermore, previous literature will be used to explain how sponsorship agreements could be the source of a valuable relationship and which challenges a festival could face in reaching such an agreement. Lastly, as any agreement is the results of the relative negotiation power of the two parties,
7 a closer look will be taken at what is already known about this matter. Previous conclusions were mostly the result of quantitative methods. Therefore, it remains unknown how the different factors affect the actions of managers and what motivated these managers to do so. Therefore, a qualitative approach is needed to get a deeper understanding of the challenges managers face and how these challenges are approached. In the method section, a more detailed description will be given for the reasons of choosing this qualitative method. This section is followed by the results section, whereby the different challenges a festival manager faced during the course of the relationship will be explained. Furthermore, the actions to overcome these challenges are explained, whereby the different cases will be compared. This research will end with a discussion whereby the results will be compared to previous literature to show the contributions of this research. This section will also
8
Literature review:
Why invest in relationships?
A sustainable competitive advantage is one of the most important objectives of any strategic management orientation. What is considered to be part of a sustainable competitive advantage differs, but an important condition is that it makes an organization different from its competitors in the long run. When sustainable competitive advantage takes the perspective from the resource-based view, the main objective for an organization is to have the right resources. These resources must generate value, must be rare and cannot be easily imitable (Barney, 1991). Dyer and Singh (1998) argue that relationships can be the source of this sustainable competitive advantage since these relationships can be important resources for an organization. These relationships allow the organization access to relation-specific assets, it could result in complementary capabilities and it allows for knowledge-sharing routines and effective governance. Therefore, relationship building could be a strategy to improve the organization’s sustainable competitive advantage. This view is shared by Morgan and Hunt (1999), who state that firms should only engage in relationship marketing when it leads to the organization’s competitive advantage. Which would, in the best-case, lead to a sustainable one.
Besides the importance of the different relationships in itself, the network of all the relationships together is an important resource as well. Cousens, Babiak and Bradish (2006) argue that a network of relationships can be a strategic asset and resource for the sports entity, or in this case the festival, since it would allow them to attract new corporate partners. Cobbs (2011) agrees by stressing the importance of the relationship from the network point of view. He argues that a strong relationship can be used to signal trustworthiness to future relationships. Furthermore, the building of strong and trustworthy relationships allows access to the knowledge and resources of the exchange partners’ network. Berrett & Sleck (1999) furthermore argue that social networks reduce the long-term cost of the relationship since it enhances trust.
Therefore, building strong relationships could be a source of multiple benefits for the festival, but who can they build relationships with?
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Who to build relationships with?
Any firm or organization, just like a festival, builds relationships with different parties, more commonly referred to as stakeholders. The basis of each of these relationships lays in the fact that both parties benefit from collaborating (Pfeffer & Salancik, 1978). The different stakeholders can be divided into two categories, namely the ones who can affect the firm’s performance, so-called strategic stakeholders, and the ones who are affected by the performance of the firm, so-called moral stakeholders. Festivals built relationships with many different parties including the visitors, the performers, the suppliers and the funders of the festival (Mossberg & Getz, 2006). Presenza & Iocca‘s (2012) analysis of Italian festivals shows that festival organisers put a higher weight on stakeholders who provide funds than on those who provide logistics and facilities. They furthermore show that sponsorship makes up the highest percentage of these funds. Hereby, the dependence on sponsorships for festival organisers is implicitly stressed. Mossberg & Getz (2006) agree by furthermore stating that maintaining control over the festival is one of the most important objectives of festival managers, but in some instances, the need of financial resources led them to seek out co-branding and co-production with corporate sponsors. This interdependence of partners is especially important for private-sector festivals since collaboration is needed in these relationships to lead to efficient relationships (Kerr & May, 2011)
As is shown, festivals can build multiple relationships with different stakeholder and each should be managed with care. Especially the relationships with their corporate sponsors, since these sponsors directly impact the financial resources of the festival. Therefore, it has been decided to take a closer look at this specific stakeholder relationship.
The sponsorship relationship
Even though many scholars have written about sponsorship, no generally accepted definition seems to have emerged. Different definitions have been used in different time periods and even different countries. While a general definition is lacking, most scholars do agree on a few basic points that have
10 to be present in every sponsorship definition. A sponsorship must be (a) an agreement between a sponsor and the sponsored party, it must (b) pursue marketing or communication objectives by (c) exploiting an association between the two parties (Walliser, 2003).
Cousens, Babiak and Bradish (2006) proposed a framework in which the value of relationship marketing in sports sponsorship is highlighted. Cousens et al. argue that both the sponsored party and the sponsor offer value to each other. The sponsored party offers exposure, leveraging of the image, expertise and resource generation to the corporate partner. The corporate partner, on the other hand, provides visibility, networking and resource generation possibilities to the sponsored party. Thompson (2005) agrees by stating that the relationship between sponsor and sponsee in the arts sector is a bilateral relationship with mutual benefits, which could benefit from a stronger management of the relationship. Sponsorship is an investment and therefore needs to show that it is worthy of the time, care and money invested. This risk can be mediated through trust and commitment to nurture and harvest the relationship. However, Thompson also states that a stronger relationship could face other risks for the arts organisation when business principles are taking over the artistic process. According to Thompson, the artistic stance is necessary for long-term survival, while the sponsoring is only of short-term financial survival. Hereby showing that sponsorship in the creative industries might face different challenges than the sponsorship of sports games.
While it is shown that sponsorship relationships can benefit both parties, it is not true that any combination will give the same results. Therefore, sponsors use different criteria to decide if a festival would be a suitable partner. The most important criteria used by the sponsors is the extent of fit between the sponsor and the sponsored organization (Woisetschläger, Eiting, Haselhoff, & Michaelis, 2010). While scholars, in general, propose that a higher degree of fit has the most positive effect, some scholars argue that incongruent partners are better remembered by the customers. This would be due to the fact that in those cases more mental models are activated to understand the partnership (Rifon, Choi, Trimble, & Li, 2004). Besides the fact if a brand is congruent with an event, an important factor is also if the brand and event are being perceived as positive or negative before the alliance. Kelly,
11 Ireland, Mangan and Williamson (2016) show that when a positively imaged sports team was matched with a positive or neutral sponsor the attitudes were not affected, but when it was matched to a negative sponsor the attitudes became more negative. Turgeon & Colbert (1992) furthermore indicate over 40 other factors influencing the sponsor’s decision. These factors were later grouped into five different categories; event-related, sponsored-organization related, market-related, sponsor-organization related and effect-related. As a festival manager it is hard to influence most of these criteria, however, some of the sponsored-organization related factors do fall within the direct responsibility of the festival’s manager. The most important factor is to show a sponsor you can deliver what they are looking for, therefore being perceived as a capable partner should be of high interest to the festival. This view is shared by Johnston & Paulsen (2014), who show that the quality of the partner relationship is the third most important factor in assessing the different sponsorship criteria by the sponsor. Relationship quality is a combination of trust, satisfaction, commitment, coordination and communication. While it is known that these factors are important in any relationship, no research has shown how these factors affect the actions of the managers.
While sponsors look at the match between the festival and themselves to decide if sponsoring would be a good idea, sponsors also tend to look at the actions of their competitors. Sponsors tend to follow their competitors and copy their actions. Furthermore, it is shown that there is evidence of a first-mover advantage in sponsorship, since it possess unique attributes that limit potential followers to take advantage of the first mover’s mistakes (Berrett & Slack, 1999). This relates back to Cobbs’ (2011) argument regarding the importance of current sponsorship relationships could have on potential future relationships. Since the sponsors follow their competitors, it would be important to show you have already had contracts with other sponsors or show them they can be the first and thereby limit their competitors from doing so. Hereby, showing that the competitive environment is an important factor as well in determining the benefits of a relationship.
This research will take a closer look at the different criteria sponsors use to determine if a festival is a suitable partner and what festival are doing to influence the decision of their partner.
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Negotiation power
Once two parties engage in a partnership, these partners need to get to an agreement. This agreement is the results of the relative negotiation power of both parties. Negotiation power is the extent to which an actor is able to influence the actions of the other party. This negotiation power can be the result of different factors, which is of importance for this research to understand what the cause of certain challenges might be. Power can be created through (resource) dependency, network position and the relative reputation of the two brands.
Dependence and power have been used in combination by multiple scholars. In some instance dependence and power were even used as one, however, care needs to be taken in putting these two factors together. Most conceptions of power are founded on Weber’s (1947) classic definition of power as the probability that a person can carry out his or her own will despite resistance (Kim, Pinkley, & Fragale, 2005). Definitions of dependence mostly build upon Emerson’s (1962) definition of dependence, which states the following: “the dependence of actor A upon actor B is (1) directly proportional to A’s motivational investment in goals mediated by B, and (2) inversely proportional to the availability of those goals to A outside of the A-B relationship”. Dependence is in most cases caused by the resources needed and owned by both parties. In general, the party in need of the resources another party owns, is more dependent on that party. In 1979 Pfeffer and Salancik were the first to mention the concept of resource dependency theory. The fundamental foundation of this theory is the fact that the dependence on certain resources influences the actions and decisions of organizations (Werner, 2008). Contrary to what is first expected, is that the party seeking power is not the one holding the resources, but the party who is in need of these resources. It tries to control, influence or exert power over the supplier to become more powerful in comparison to competitors who are in need of the same resources (Oliver, 1990). Hereby strong relationships could provide power to the sponsored party. The extent to which a party feels dependent on the resources of the other party is dependent on the switching cost a party may incur when the relationship is terminated. Therefore, the higher the investments made and the harder it is to switch this investment to another relationship, the
13 higher the dependence on the relationship (Heide & John, 1988). This power imbalance is enhanced by a function of both rewards and substitutes. A sponsor who values the rewards and knows there are no substitute events may feel dependent on the festival. A festival organizer may be dependent on a sponsor if the rewards offered by the sponsor are of great value and cannot be found through other sponsors (McCarville & Copeland, 1994). The risk of this dependence can cause financial difficulties for the festival if the funding party has a stronger bargaining power. This power structure causes issues since the festival has less power to influence the costs and revenues. It is shown that the costs associated with strong stakeholders are higher relative to the those of which arise from weak stakeholders (Andersson & Getz, 2007). Therefore, negotiation power can have a direct impact on the financial situation of a festival.
A second factor influencing the negotiation power of a party is the position this party holds within a network. In most industries, a network exists of different organizations and different suppliers who are all connected, either directly or indirectly. Gaining power within a network can be based on the type of relationships an organization maintains. Similarly to people, organizations can become more interesting if they either have many relationships within the network or if they have relationships with actors outside of the network (Perry-Smith & Shalley, 2003). Either could provide a potential partner access to these other actors. Hereby relating back to McCarville & Copeland’s (1994) argument concerning rewards. The potential to acquire new relationships through a partner organization could be viewed as rewards for this new partner. Furthermore, having relationships with other actors in the network could attract new ones, since it signals trustworthiness (Cousens, Babiak and Bradish, 2006). Therefore, the party holding many relationships or relationship with actors who are harder to reach could exert more power over the other party, because it increases their popularity and therefore increases the number of alternatives.
A final factor influencing the negotiation power of a party is the reputation of a party, or so-called brand strength of a party. Whereas the position within the network mostly stresses the reputation among the actors within this network, brand strength is more related to the reputation in
14 the eyes of the customers. Brand strength is the results of the brand’s equity, which is defined as the effect of brand knowledge on consumers’ response to a brand (Washburn, Till, & Priluck, 2000). While one might expect that a strong brand benefits most in asymmetrical alliances, it is the weak brand that benefits most, but it is a win-win situation regardless of the original brand equity before the collaboration (Washburn, Till & Priluchk, 2000; Remizova, Riley & Singh, 2012). The weak brand gains most on brand awareness and gains greater sales potential. Since the stronger brand already occupies a strong financial position and already has a strong brand awareness, it is shown that a strong brand benefits most from functional resources. The power structure based upon the relative strength of both brands determines which party is in need more of the relationship. As is shown by Washburn, Till, & Priluck (2000) both brands will benefit, however the weaker brand benefits most and is therefore in need of the relationship more. This provides a stronger brand with more alternatives and hereby increases their negotiation power.
While negotiation power can provide an organization with the opportunity to form the agreements towards their liking, Morgan and Hunt (1994) also argue that this does not always have a positive effect on the relationship. They argue that power has a negative effect on trust and commitment, which can have a negative impact on the relationship. When this is related back to the argument of Johnston & Paulsen (2014) who state that relationship quality is determined by trust, satisfaction, commitment, coordination and communication, this power would have a negative effect on the relationship’s quality. Therefore, parties should find ways how to use this power without sacrificing trust and commitment in order to build qualitative relationships.
Conceptual framework
Previous literature has shown that building of strong relationships could lead to a sustainable competitive advantage. Festivals are involved with many stakeholders, however, for this research the focus is on one specific stakeholder, namely, the relationships festivals maintain with their corporate sponsors. Corporate sponsors have a direct impact on the financial resources of a festival and therefore it is proposed that managing these relationships in the right manner is of great importance.
15 Furthermore, most current sponsorship research has shown factors influencing the sponsors’ decision in selecting the right partner. However, most of these scholars have used quantitative methods. Therefore, it is still unknown how these different factors affect the actions these managers undertake and how a festival could influence the sponsor’s decision. While it is known that the agreements of these partnerships are the results of the relative negotiation power of both parties, it is unknown how the parties approach this. Furthermore, it remains unknown which challenges the festivals are facing concerning this and which actions they undertake to overcome these challenges. As literature shows, negation power is a result of dependence, network position and reputation. Therefore, the sample will consist of different parties within the network to see how these characteristics affect their actions. As was shown by Johnston & Paulsen (2014), the quality of the relationship is an important criterion for sponsors and an important factor that the sponsored party could influence. Therefore, the interviews will take a closer look at how managers try to approach this. Johnston et.al. showed that relationship quality was influenced by trust, commitment, satisfaction, coordination and communication. The importance of trust and commitment was also stressed by Farrelly & Quester (2005), Thompson (2005), Morgan & Hunt (1994), Cobbs (2011) and Berrett & Sleck (1999). Since most scholars mention the importance of trust and commitment as a source of qualitative relationships, these factors will play an important role as well in assessing the actions the managers undertake. Furthermore, Morgan and Hunt (1994) show that power could have a negative effect on the relationship. Therefore, it is important to show to what extent the festival uses power and to what extent this impacts their actions. Furthermore, it is important to show how festivals try to balance the relationship between power and trust.
16
Method
To show how festival managers manage the relationship with their corporate sponsors it was decided to use a qualitative and explorative approach since this method is particularly suited to understand dynamic and interactive processes like this case of relationship building (Lee, 1999). Furthermore, this qualitative method was chosen due to its flexibility and richness in data, which is especially suited when little is known about a phenomenon to discover the underlying nature of this phenomenon (Strauss & Corbin, 1990). Furthermore, a multiple case approach was adapted for this research. This approach increases the validity and generalizability of the results, due to the use of different sources of evidence (Eisenhardt, 1989).
To assess qualitative research different criteria are used. This research uses the criteria proposed in Guba’s model. First, the research must be credible, which means that the results show the human experience as they are lived by the respondents. This was established by using multiple cases, including both festivals and sponsors, as a form of triangulation. Furthermore, different types of relationships were discussed, to be able to generalize the results. The second criterion is transferability, which shows if the results are applicable to contexts outside of the research setting. This was established by including a dense description of the respondents and research setting. Thirdly, dependability is an important criterion used, whereby the methods are intensively explained, and the variability can be linked to identified sources. The last criterion looks at the confirmability, which is achieved when applicability and truth value are established. The form of triangulation used in this research, whereby different actor types were interviewed, was used to establish a form of conformability (Krefting, 1990).
Sampling
Participants were identified through a combination of purposive and snowball sampling. The purposive sampling allowed the researcher to hand pick certain participants based upon certain characteristics. Since this research was aimed at understanding the relationship between a festival manager and a sponsor, it was important to find the people who were in direct contact with one another. Therefore,
17 participants were chosen based upon their job responsibilities, and more specifically the fact if they had direct contact with these partners. This was important because in multiple organizations multiple employees were (in)directly related to the sponsorship deals, however, since the goal of this research was to understand the direct relationship characteristics it was of high importance to speak to the individuals who had direct contact with these partners. Therefore, in most cases, the account managers of the festivals and the brand managers of the sponsors were asked to take part in this research. Furthermore, to understand the difference between larger and smaller organizations a balanced sample needed to be created. Therefore, the different cases were selected based upon their relative size. Furthermore, the snowball sampling technique was used to find the partners of the participants. Hereby the participants were asked to identify another individual who might be willing to take part in this research. Since the goal of this research was to understand the network dynamics, this method allowed to find different actors who belonged to this network. Furthermore, the snowball technique allowed the researcher to get access to certain parts of this unknown network. The relationships between the sponsors and sponsored party act in a sense as a so-called hidden population. The exact number of relationships and connections is hard to see for outstanders; therefore, it was beneficial to find these actors with the use of snowball sampling (Etikan, Alkassim, & Abubakar, 2015). Both respondents that were selected based upon purposive sampling and through snowball sampling were mostly approached with the use of a common connection to the researcher. The difference in the positive response rate between the participants who were approached with a common connection and the participant who were not, respectively 95 percent and 20 percent, stresses the importance of this method.
This sampling method resulted in 17 individuals who took part in this research. These individuals belonged to fifteen different organisations. From these organisation, seven consisted of festival organisers and the other eight from organisations that sponsored these festivals. Half of the cases represented a large organisation and the other half consisted of small sized organisations. By having a variety of cases based upon their size, position and goals it was possible to find a balance
18 between similarities and differences, whereby the similarities would be used for comparison and replications and the differences were used to secure validity and generalizability (Yin, 2003). Table 1 provides an overview of the different cases. The relationships between the different cases can be found in appendix 1.
Table 1:
Case descriptions
Case Organization Size Organisation type (Independent brand or collection of brands) Brand age in years N Position of respondents Number of people working on event sponsoring 1 Festival Large Independent 20-30 1 Commercial director 1
2 Festival Large Collective >30 2 Account manager partnerships
6 3 Festival Large Collective >30 1 Head commercial 12 4 Festival Small Independent 10-20 1 Account manager
Partnerships
1
5 Festival Small Independent 0-10 2 Account manager Partnerships
2
6 Festival Small Independent 0-10 1 Treasurer 2 7 Festival Small Collective 0-10 1 Founder & Chief
Festival Officer
1 8 Sponsor Large Collective >30 1 Brand manager
national events
5 9 Sponsor Large Collective >30 1 Brand manager out
of home
No one full time 10 Sponsor Large Collective >30 1 Event manager 2
11 Sponsor Small Independent 0-10 1 Programming & Production
1
12 Sponsor Small Independent 0-10 1 Programmer No one full time 13 Sponsor Small Independent 0-10 1 Owner No one full time 14 Sponsor Small Independent 0-10 1 Marketing Manager No one full time 15 Sponsor Large Independent 0-10 1 PR &
Communication manager
1
Data collection
Data was collected from semi-structured interviews to understand the actions the participant undertook in establishing a relationship. The interview questions were based upon the method proposed by Leech (2002) on how to design semi-structured interviews. Hereby respondents were asked to give “the grand tour” on the steps they undertake during the development of the relationship and were asked to provide examples. Furthermore, the participants were asked which challenges they
19 were facing and which actions they undertook to overcome these challenges. The respondents were asked to indicate how the process differs if their alliance partner was a larger or smaller organisation and which combination was preferred. The participants were specifically asked to explain what motivated them to so and how they felt about their actions and those of others. This helped in identifying emergent patterns of reasoning from the data. A pilot study was performed to see if there were any flaws in the design before the case study was started. This pilot study indicated that most partnerships were based on certain phases that all partners went through. Therefore, the following interviews were based upon these phases and let the participants walk the researcher through these different phases. Furthermore, all transcripts were recorded with the permission of the participants and saved in a so-called interview database as proposed by Yin (1994).
This data collection method is characterised by certain strengths and limitations. To limit the number of limitations, suggestions by prior researchers were used to limit these factors. Firstly, the same questions were asked to multiple people from different organisations to increase triangulation. By having a combination of both festival organisers and brand managers it was possible to approach the matter from both perspectives, to create a form of triangulation. Furthermore, no direct questions about certain processes were asked, instead of indirect questions, triggers or probes were used, or it was inferred from how they explained their personal actions. Hereby the respondents were not directed towards a certain answer. Lastly, respondents were given the opportunity not to answer a question if they did not know the answer or if they were not comfortable with sharing certain information. Hereby providing the researcher with solely trustworthy answers (Calabretta, Gemser, & Wijnberg, 2017). While these actions provide substantial support for the strengths of using this method, this method was characterized by certain limitations as well. While it was decided to use multiple cases to secure external validity, the small number of respondents could still cause risks concerning this validity. Especially due to the variance in cases, which makes it hard to make conclusions about the different subgroups. But since these difference in participants also created a form of triangulation, this strengthens the method at the same time. Furthermore, these cases were
20 selected based upon purposive and snowball sampling, which could lead to biased results when these respondents were too similar, or when certain organisations were excluded by this method. But due to the lack of information on the actors of this network and the expected low response rate when they are approached without an (in)direct contact, this method shows to be the most suitable.
Data analysis
The research resulted in seventeen interviews that lasted between 25 and 65 minutes, with an average time of 45 minutes. All interviews were recorded with the permission of the participants and later transcribed verbatim. The data analysis followed a qualitative, inductive constant comparative analysis approach (Harding, 2003). Hereby all datasets were constantly compared to detect similarities and differences among the different cases. The transcribed textual data was interpreted using a systemic process during which certain themes and patterns were identified. This process followed the cross-case analysis as was proposed by Yin (2009), whereby tables were created to analyse the different cases based on certain characteristics. Due to the inductive character of this research, the first step of the coding process consisted of open coding, whereby all statements were coded using a relevant corresponding description. The open codes were later grouped based on certain similarities or connections between the different codes. Hereby the open codes were linked to so-called axial codes. The analysis of the different axial codes ultimately led to the formation of a couple of themes, based on certain similarities and patterns in the data (Miles & Huberman,1994). The codes were linked to either being a challenge or a solution and furthermore linked towards the different phases of the relationship. The full list of codes can be found in appendix 2.
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Results
The pilot study indicated that the partnership between a festival and a sponsor moves through different phases. The results have furthermore shown that festivals encounter different challenges during each of these phases. Therefore, it has been decided to divide the result section based upon the following phases: (1) how do festivals get to know a new partner, (2) how do the festival and the sponsor get to an agreement and (3) how do the partners evaluate the relationship after the festival and how do they continue. During all phases, the actions of the festivals’ managers were analysed and compared to the perception the sponsors had of these actions. Results furthermore indicated that the challenges the festival face are similar for the larger and the smaller festivals, however, the extent to which these challenges affect the festivals differs. Because the different festivals face the same challenges, the results section will discuss each phase with its corresponding challenges instead of dividing the results section per festival type. In explaining each of the challenges an explanation will be given about the difference in approach by the larger and smaller festivals. The results are summarized in figure 1.
Figure 1:
22
Phase 1: Getting to know a new partner
During this first phase, a festival needs to find an organization that could be a potential partner. Hereby two main objectives are of importance. First, this manager needs to signal trustworthiness towards the new partner for this partner to be open to discuss possibilities. Hereby it is important to be noticed and to show why your festival should matter, whereby it is important that this new partner trusts you. Secondly, the matter of fit is of high importance during this phase. The festival manager needs to show the sponsor where a match can be created between the two brands. These two objectives are met with different challenges, which are further explained below.
Knowing who to reach
The first challenge any festival was facing was determining who to reach. Festivals needed to determine which organizations could be a potential match for their festival. Once an organization was selected, it was important to see which person was responsible for sponsoring within the organization.
“We put a lot of time in the relationship, because we find it important that the activation fits with the brand, but also with the festival” (respondent 4). Contact information of potential sponsors was not
publicly available, which made it difficult to know who was responsible and thereby who to reach. Therefore, most festivals tended to look within their personal network first to see if anyone might be of interest to the festival. These could be direct contacts, but also indirect contact who would be able to form a bridge between the festival and the potential sponsor. Respondent 17 furthermore explained that this is especially hard for new actors who do not have the right connections yet: “If you cannot
make anything work within your network, it becomes very hard to reach these people. Once you are in this circle it becomes easier, then you’ll see that they come to you too”. This approach was not exclusive
to the festivals. Especially the smaller actors in the network relied on this method. Another solution mainly used by the larger actors, both the festivals’ account managers as the sponsors’ brand managers, was visiting network events. This allowed them to get in touch with new partners who they did not have a connection with yet. This provided them with information about potential partners and
23 gave them the opportunity to immediately reach out to them. The most important events mentioned by many respondents were the Amsterdam Dance Event (ADE) and Eurosonic Noorderslag. As respondent 13 mentioned: “such music events are the ideal place to browse through the people who
are coming and check who you want to work with and who you want meet at the event”. This
respondent planned his visits thoroughly and checked beforehand who he wanted to connect with and tried to approach these people during these events. He explained that this informal setting made it easier to approach people who he did not have a direct connection to yet and made it possible to pitch his ideas in an informal manner. He explained that this way was way more efficient than sending this person an email, because he was able to immediately discuss different possibilities. The same was explained by respondent 5 who said that “When you meet someone at an event and drink a beer
together communication is a lot easier than when you have to get to know each other through email”.
This option was not always available for the managers of the smaller festivals given that many had different responsibilities, or it was even a voluntary position they fulfilled next to their regular job. Therefore, these managers simply did not have the time to attend these events. Furthermore, the larger festivals generally had more employees which opened up more possibilities to different actors within the network.
Being noticed by the sponsor
Given the large number of festivals in the Netherlands, the second challenge all festivals were facing was standing out against all other festivals. Sponsors received multiple proposals and therefore being noticed by these sponsors was extremely difficult. While all festivals seemed to struggle with this matter, it were especially the newer and smaller festivals that had a harder time concerning this. Given the reputation of the larger festivals, most sponsors had already heard of them and therefore already had an idea what those festivals would entail. However, many of the smaller festivals were unknown to these sponsors, which made it harder to be noticed. To overcome this challenge, all participants mentioned that using a common connection was the most efficient method to stand out against
24 others. Once an actor was introduced by this common connection, it already provided them with a head start against others, as was explained by respondent 6 “If someone reaches me through a
connection I am at least prepared to listen, but I mean look you do still have to show a good proposal for it all to work out“. As is shown it does not provide any guarantees concerning forming an actual
partnership, but at least this actor was being noticed by the potential partner due to the direct introduction by this connector. One of the sponsors (respondent 11) mentioned this as well by stating that “of course you will use your network, but it does not allow you to do more with them then by the
others”. Interestingly though, some participants explained that this method was the most efficient,
because it signalled trustworthiness about this unknown actor. Because this common connection was willing to introduce this unknown actor, it would mean that this was someone worthy of your time. As respondent 2 explained “if you use a connection this person has usually had a good experience with us
or knows us better and therefore acts in a way as our ambassador”. Furthermore, some participants
explained that it was automatically expected that the character of this unknown actor would be similar to that of the common connector. Therefore, the reputation of the common connection was in a way directly transferred towards this new actor. Hereby stressing the importance of using the right the connector. This method was used by all participants that took part in this research, both the festivals as the sponsors.
Having a degree of fit in the eyes of the sponsor
Once the festival was noticed by a potential partner, it was important that this partner saw a degree of fit between the festival and himself. The importance of fit was mentioned by all respondents. Hereby all respondents agreed that in order to form a beneficial partnership for both parties, there needed to be a degree fit between the two parties. While at first, this degree of fit might seem as a given, there were methods that festivals could use to mediate this challenge. Multiple sponsors indicated that they wanted to know everything about a festival before they could decide. This information included the line-up and atmosphere of the festival, but more importantly a detailed description of the intended
25 visitors. All participants explained that while a match in character between the two brands was important, the most important factor influencing the degree of fit was a match in target audience. As respondent 2 mentioned: “We selected those smaller brands too, because we see that there is a good
match with our target audience”. Therefore, sponsors generally preferred the festival to provide them
with detailed information about the target audience and to show how the festival would fit with their brand, as respondent 10 mentioned: “Well I prefer the festival to know well what they want. That they
would not just knock on our door and ask if we have anything to offer them”. This was expressed by
multiple sponsors, who explained that they did not want to feel as if the festival was only after their money. “For some it is a bit too obvious that they mainly do it for the money, and well I do not really
like that, it is nicer if someone wants to work with you because they like your brand and see the befits of a cooperation” (respondent 11). While most festivals indicated that they presented the same
information to all sponsors, one of the account managers of a smaller festival explained that she put a different emphasis concerning her target audience for each sponsor. Hereby she explained that while her general target audience were students, she would present them as specifically art students to a sponsor that invested more in cultural initiatives, while as mostly business students to sponsors in the business industry. Hereby she did not change her target audience, nor did she lie about her target audience. However, she was still able to slightly change her target audience to present it in a way that was suitable for each sponsor specifically. In order to do so, she spend quite some time in understanding the character and history of each sponsor. Sponsors tended to appreciate this effort. All sponsors explained that they preferred the manager to be fully prepared in showing where the match would be between the two brands and how they could benefit from each other. Hereby stressing the importance of well preparing before approaching a potential partner.
26 Table 2:
Getting to know a new partner
Challenge (C) or Solution (S) Festival N (%) Sponsor N (%) Sample comments * Signalling trustworthiness (C) Being noticed by the partner
7 (88%) 2 (25%) F: [through a connection] I am at least prepared to listen
(S) Using your network
8 (100%) 7 (88%) S: Reaching a festival is quite hard, but eventually it all about your network […] you become more reliable, because if someone is willing to risk his trustworthiness for you… by introducing… well… than this person gives up a piece of reliability and if that person is trusted by that festival than it will go a lot faster
(C) Convincing the sponsor of the power of sponsoring in general
2 (25%) 1 (13%) F: For parties that have never done anything with sponsoring it is hard to imagine what a powerful instrument it can be
(S) Being mentioned in marketing journals (Won awards)
1 (13%) 1 (13%) F: We realise that for some of our festivals organizations approach us, because they have seen articles about us in some journals.
(S) Showing previous performances
1 (13%) 5 (63%) F: I do say to them that the contact with [similar sponsor] went really well last year, but it the two are not directly related than I do not think it is necessary to mention it.
(S) Work with different marketing agencies who have connections to brands
2 (25%) 1 (13%) F: Sometimes we will be introduced by a person in between, like a marketing agency
(S) Talk at conferences
1 (13%) 1 (13%) F: Besides that, we are thinking about education brands and to speech at conferences to the marketeers for whom this world is still invisible… that is also a way to get attention.
S: Or that your speech at an event, last year we went there, and it was so successful that we were interview a lot and new partners approached us because they had read those articles.
Fit (C) Knowing which person you can reach
3 (38%) 3 (38%) F: Cold contacts, we never really use, it is more about someone who knows someone and that person approaches that person, or someone says … you should give that person a call
(C) Having a degree of fit in the eyes of the sponsor
8 (100%) 8 (100%) S: well we have look if the festivals has certain characteristics that we are looking for: approachability, kind of music, kind of people, that will eventually make us look like each other
F: Yes ofcrouse [fit] is the first question, we never do it for the money or materials, we do always do it when there is a match
(S) Showing all information tailored for each sponsor
5 (63%) 2 (25 %) S: If festivals approach us we find it important that the festivals know well what they want, that they could immediately share all information, as much information as possible, the more the better F: Well entering well prepared, knowing who you are talking too, get to know the history of the organization, what their values are, their target audience […] I have made a personal letter for each sponsor, including a common core message, but personal to each sponsor.
27
Convincing the sponsor of the power of sponsoring in general
While all festivals agreed upon the difficulties of convincing a potential sponsor about the worth of their festival, some of the larger festivals indicated that there was an issue sometimes even harder than that. These managers explained that some of the potential sponsors did not immediately see the benefit of sponsoring in general: “For parties that have never done anything with sponsoring it is hard
to imagine what a powerful instrument it can be” (respondent 1). To them, it was an unknown area
and since sponsoring activities are hard to measure it was difficult to convince these organizations of the power of sponsoring in general. These festivals, therefore, had to spend quite some time convincing these sponsors about the power of sponsoring, before they were able to explain how their festival was a good match. On the other hand, some of the brand managers of the larger sponsors explained that while they saw the benefits of sponsoring, it was usually upper management that was not easily convinced.
Therefore, these festivals’ managers preferred sponsors that were introduced by a common connection, since these sponsors generally already knew something about sponsoring through this connector. The same accounts for sponsors that approached them instead. Because it was not possible to only work with these kind of sponsors, these festival managers used some methods to convince the sponsors of the benefits of sponsoring. The most common method was by explaining their previous partnerships and how those brands experienced the partnership. While it was possible to showcase their previous performances themselves directly, it was more common to showcase them indirectly. One way was when a festival was mentioned in a marketing journal discussing their success. This was usually the result of winning a certain award concerning a specific marketing activity. While this might be hard to manage, it did show that it attracted multiple new sponsors to these festivals. Another way that the managers could more easily influence was explaining their successes during different marketing conferences. These speeches provided access to multiple new partners who could be listing to their view on sponsoring. One of the sponsors also used this way to reach out to new partners, he mentioned that “it was the right place where you, as an organization, want to show what cool things
28
you were doing, so that afterwards you could work with these people”. The last method used, was to
work together with different marketing agencies. These agencies had different connections with different brands and could hereby act as a common connection to match a festival to one of the brands they worked with. The previous experience of the festivals is hereby showing to be extremely important, not solely in showing the potential of their festivals, but also about the power of sponsoring in general.
Phase 2: Getting to an agreement
Once the two managers have gotten to know each other and have established a sense of fit, the two managers must get to an agreement that pleases both. While signalling trustworthiness was mainly important during the first phase, it is still of some importance during this second phase. The difference is mostly shown in the source of this trustworthiness, whereby trustworthiness in this phase is signalled by the character of the manager, instead of the character of the festival. The degree of fit is also of importance during this second phase. However, here the degree of fit moves beyond the two partners and looks at all the different sponsors, and how this new partner fits in with those others. The matter of power and budget constraints is added to this second phase. The challenges the managers face concerning signalling trustworthiness, fit, power and budget constraints are explained below.
Difference in negotiation power
Interestingly the difference in negotiation power was generally not mentioned by the larger actors but was mentioned by the smaller actors extensively. While some of the larger festivals did agree that working with smaller actors gave them more power, most simply did not mention that they felt as if they were able to force more on the smaller party. This could be due to the fact that these larger festivals mostly worked with other large sponsors, where there was not such a difference in size nor power. All the smaller actors did, however, mention this difference. Especially the smaller sponsors
29 explained that for them it was hard to get in touch with a larger festival, and once this contact was made they were willing to do a lot to please this festival. As respondent 17 mentioned: “As a starting
party, everything needs to come from you, you just need to pull harder to impress them and make sure you are noticed, otherwise the partnership is soon over. Unless you offer them something they really need to have, but if you don’t, they have 10 others lining up right behind you. They have a good position, and the sponsors not that much”. The same was explained by the smaller festivals, who were sooner
willing to accept proposals of larger sponsors if more money was offered: “Well we decide what we
put on our festival, but if they want something ugly but offer us 50.000 euros then hmm…” (respondent 9). Another festival respondent (5) explained that “our power position is of course very different [than that of a large festival], I have to rely on my target audience and my creative content, and their goodwill, those things”. While most participants explained that in some cases, one of the parties was
able to force more on the other, they all agreed that it was ultimately the festival that decided what was going to be on the festival. This was harder for the smaller festivals, but all in all each festival was able to use some form of criticism towards the proposals, as one of the sponsors (10) explained: “An
organisation is in control over their own festival, we come to an agreement together about certain element we will deliver or fund, but eventually it is the organisation who is responsible for their festival”. However, while the festival had the final say about most of the agreements, it should also be
mentioned that this sponsor was their client and the festivals treated them in the best way possible:
“The sponsor is sort of our client and in that sense sort of the king, therefore they will have the last say. We do try to get them to understand what would fit within our values, so that they would not come up with an activity that does not fit with us at all” (respondent 6). In general, however, most participants
saw the partnerships as a true collaboration during which each partner gave something to the other to also get something back, as was mentioned by respondent 7 “I mean look, it is not just fruitful for
them, but also for us. It is truly an interplay; if we get something from them, they should also get something from us”. Hereby, the results show that even though some of the larger partners could exert
30 almost automatically do more to please the larger sponsors, without them having to directly enforce their power on them.
Branch exclusivity
One of the main things the more powerful sponsors force on the festival is the so-called branch exclusivity. “No a [large competitor] would never say oh nice another beer bar” (respondent 15). This means that no other competitor within a certain branch is allowed to be at the festival as well. This is one of the most valuable aspects of the agreement, since it provided the sponsor with exclusive access to that target audience. While at first this might seem to benefit the sponsor more than the festival, this is not fully the case. Most festival managers have mentioned that they preferred a diverse mix of sponsors to provide the visitors with a diverse experience. Hereby it would be beneficial to the festival to solely have one brand for each branch. On the other hand, it also excludes potential sponsors who were able to provide large funds. Overall it were mostly the larger, stronger sponsors who are able to receive this branch exclusivity. These sponsors would either pay extra for this benefit or receive this as a bonus from the festival. Overall the participants explained that the larger festivals generally asked a fee for this branch exclusivity, which was their main source of income. The small festivals, however, generally selected just one brand automatically since it would otherwise harm the atmosphere of their festival.
Hereby it shows that is not solely the festivals who are competing for a select group of sponsors, but the sponsors also compete for the exclusive access to certain festivals. This is mainly a problem for the smaller sponsors, who are not able to pay the fees for the exclusivity and are thereby almost automatically excluded from the festival. However, also the larger sponsors face difficulties. Once a brand within a branch was able to form multiple partnerships with the largest festivals, this excluded the others. One of the larger sponsors mentioned that “it is all about who offers the most
money, and for us that is just not profitable”. Hereby some of the larger brands have decided not to
31
Being fair against sponsors
While branch exclusivity caused festivals to exclude certain sponsors, other reasons were given as well. Especially the larger festivals explained that to remain fair against all sponsors, it was almost impossible to have both smaller and larger sponsors at the festival. This was due to the fact that all sponsors of the festival were able to communicate through the same communication channels and would interact with the same amount of people. Therefore, according to these managers, it was not possible to ask a different fee from the different sponsors. Respondent 1 explained that “Yes you have to be able to
explain why another brand would be paying less for the same exposure and saying that a party simply had more money and therefore has to pay more is simply not possible”. This led them to mostly exclude
the smaller sponsors, given that their budgets were too small for these festivals.
The sponsors’ budgets
As was mentioned before, the budgets of the sponsors are a big challenge for the festivals. “For smaller
brands it is just hard to acquire those budgets, so we eventually select the larger brands who are able to invest an extensive amount” (respondent 9). While at first you would expect that these budget
constraints are mostly present at the smaller sponsors, this is not the case. The brand managers of the larger sponsors explained that they had to work on strict budgets as well, which would not allow them to be present at each festival. However, it is true that the larger sponsors have larger budgets and are therefore able to spend more on each festival. But some of the larger sponsors explained that once their main competitors had larger budgets, this almost automatically drove them out of the market. Some of the festivals explained that to remain fair against all sponsors, they were not able to have smaller sponsors present, but this was not the case for all festivals.
The simplest solution provided to offer a smaller sponsor with smaller budgets a place on the festivals was by working on a commission basis. Hereby the sponsors did not have a large initial investment. The festival and the sponsor hereby shared the risk, since the festival would not earn
32 money if the sponsor would not. Therefore, this would not be a possibility for all festivals. Another option for the smaller sponsors was to form a collective. As a collective it was possible to come up with enough money to compete against the larger sponsors. However, to do so the brands had to form a new brand name together that was used through the different communication channels. Hereby forming this collective would be at the cost of gaining extensive brand awareness. Even though direct brand awareness was not possible, it could still be beneficial to your brand, since the visitors were able to experience your products. It was also beneficial to the festivals, since their offerings increased, which benefited their visitors. One of the festivals managers explained that one year they had a whiskey bar selling different brands of whisky. This enriched the experience of the customer, since the whisky bar became more interesting due to the diversity in offerings. It was also possible for larger sponsors to form partnerships during the festivals, whereby they could enlarge their presence together.
Lack of time of sponsor
While budget constraints are a major challenge, the lack of time of the sponsors is almost as important. Investment in festivals are risky and time consuming. Therefore, a sponsor preferred a festival to know well wanted they wanted and have the meetings as efficient as possible to not spend too much time on this. The sponsor furthermore explained that the time spend on a small festival and a large festival was almost the same. Therefore, the return of investment of a larger festival tended to be larger, making these festivals more interesting. Some of the sponsors furthermore explained that they preferred partnerships with organizations that owned multiple festivals, since this could save on time. It was not directly the case that these sponsors wanted one deal for all festivals, even though they would appreciate this. It was rather the case that it went faster, since the meeting were with one person, whereby it was easier to move from one agreement to the other. Respondent 12 explained this as follows: “It is just easier to switch, because you meet the same person 13 times and by then you
know from each other what you want”. Furthermore, the participants explained that getting to an
33 Table 3: Getting to an agreement Challenge (C) or Solution (S) Festival N (%) Sponsor N (%) Sample comments * Power (C) Difference in negotiation power 6 (75%) 4 (50%)
F: We have a sponsor and they want a certain space at a certain floor and they ask this and that concerning food. They have a certain power over us, because they offer us a lot.
S: As a new partner you are completely… everything need to come from you, you just need to pull harder to impress them
F: The smaller the organizations, the easier they are to influence, then it might go more in the direction of the sponsor… they are less dependent, those large organizations…
(C) Dependence 4 (50%) 2 (25%) S: Unless you offer them something they really need to have, but if you don’t, they have 10 others lining up right behind you. They have a good position, and the sponsors not that much
S: We are dependent of them, there is a mutual dependence. They need our money and we need their stage to build our brand. It is mutual, a different dependence, but I twill cancel each other out, which is why you can get to an agreement
(C) Branch exclusivity 7 (88%) 7 (88%) F: Well look of course the brands cannot be competitors. if we work with a party that sells cloths than we cannot work with another cloths brand, that is just competition, or because of the exclusivity that they demand.
(S) Asking a fee for
branch exclusivity 3 (38%) 3 (38%)
F: Yes, with our large partners [branch exclusivity] is part of the agreement, and that is also a really valuable part of the agreement
Portfolio management
(C) Conflicts among
sponsors 4 (50%) 4 (50%)
F: You want to please everyone so if you expect a conflict than we want to discuss that beforehand and point the parties to the choices they have.
F: There are no conflict, you just need to make good agreements
(C) Being fair against
sponsors 2 (25%) 2 (25%)
F: Of course, there are nice smaller brands who want to work with us. But … uh yeah that is simply not possible, eventually we must make sure that each partner is in balance towards the agreements of the others.
(C) Managing the combination of different sponsors
5 (63%) 3 (38%) F: A beer should not get in the way of another beer, so the brands need to fit, so we should add a liquor brand, so that you know that it adds to each other and does not get in each other’s way.
(S) Asking the same fee to large and small sponsors
2 (25%) 0 (0%) F: You must be able to explain to a large brand why they would be paying more than a small one, that is of course not possible, you cannot say you simple have more money, so you should pay more, that wouldn’t last
(C) An activation that fits with the festival as a whole
6 (75%) 5 (63%) F: We say no to things that do not fit with us, it is also the best for that brand, if it would not fit than they would be gone after 1 year.
(S) Not having too similar sponsors to provide a difference in offering to the visitor
6 (75%) 3 (38%) F: We will never ask two loudspeaker brands, or uh… that a beer brand should not get in the way of another, so yes it all must fit
