Dec 02, 2009 at 07:06 PM
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First Mover (Dis)Advantage Applied to Sponsorship

Wikipedia: First-mover advantage or FMA is the advantage gained by the initial occupant of a market segment. This advantage may stem from the fact that the first entrant can gain control of resources that followers may not be able to match.[1] Sometimes the first mover is not able to capitalise on its advantage, leaving the opportunity for another firm to gain second-mover advantage.

What does this general business principle have to do with sponsorship you ask?

Here's the good news. When you are the first in your category to align with a property, you generally have negotiating power and more importantly, a good percentage of the time you may scare off your competitors from sponsoring the same property simply by being first. The traditional thinking is that you won't get the same value for your money, if a competitor already "owns" the space (if only in the minds of the consumers). If you believe that this is the case (and believe your competitor will too), then why should you pay a premium to your sponsorship deal for category exclusivity? Exclusive relationships sound great on paper, but does it always make sense to pay for them? Like a prospective franchisee examining the territorial rights of a new store, you should ask yourself if this a scare tactic by the seller or a legitimate way to mitigate risk. Does it always make since to automatically pay a premium for a low probability event?

Now, here are some downsides to negotiating deals with first mover advantage in mind.

First, as this example illustrates, a preferred relationship does not necessarily mean an exclusive one. Just because you're first, doesn't mean you'll be the only, especially when competitors offer a distinct price or product advantage to the property. In such a case, your competitor might not even seek out the property, it might find them.

Secondly, when you are the first to sign a major deal you put a big target on your back. Don't think your competitors won't be looking for creative ways to ambush your new relationship - whether it's exclusive or not. To see ambush in all of its glory, look no further than the Olympics.

Finally, it's not unheard of to see competitors come in and sponsor a property that does not have an exclusive, simply as a defensive measure. If everyone's there, the value of anyone being there goes down.

How valuable do you consider exclusive relationships and do you see being 'first' as an advantage or a disadvantage in sponsorship?