This article by Tom Demerly was linked by BRAIN earlier this week. Whether you're making frames or operating an LBS I think this is worth the read.
Poorly administered sponsorships are like showing too much cleavage at a dinner party. They attract plenty of attention, but not the right kind of attention.
I've had some first-hand experiences with sponsorships which have worked extremely well but also a couple which ended up as the "sponsored consumers” Demerly talks about. I'd had the concious awareness that some of my sponsorships were not working but this article really highlighted why and gave me a lot to think about. Revoking such privileges once handed out is messy at best.
Waltworks had a very similar article a few years ago: Waltworks Bicycles: Sunday Rant: Sponsorships which struck a few chords with me as I'd always selected who I supported based on their personality rather than results.
I think what both Walt and Dermerly observe is that what works for Specialized and Trek doesn't/won't work for a small business with limited resources.
I've been planning on running and sponsoring some events so this article came at a good time. I do fear that event sponsorship is a flash in the pan and that once the event is over that it will be forgotten, and with a business as small as mine I can't afford to continually sponsor event after event. Is that a valid fear? At least with sponsoring an athlete they'll be around for the whole year.
(this is an attempt to spark some inter-industry discussion which I feel has been lacking of late. Plus an excuse to post a cleavage-shot)