Motorists using busy major roads in Melbourne and Brisbane have recently noticed large billboards advertising a $5000 grant from Woolworths to the Somerton Park Sea Scouts.

Some, not recognising the name Somerton Park, have eventually found that it is neither in Queensland nor Victoria but in South Australia. It’s likely that the same ad is gracing billboards around the country.

And there’s a TV commercial too, featuring the Sea Scouts carrying canoes and other equipment funded by the grant through the bush in awkward and comical fashion, to the sound of the Woolies’ banjo and harmonica-tinged jingle.

So why is Woolworths undertaking a national campaign to promote a small grant to a local South Australian community group?

Somerton Park Sea Scouts are just one of 1900 community organisations that have received grants of up to $5000 — to a total of around $2 million — in the 2009 Woolworths Fresh Food Kids Community Grants program.

But, perhaps unaware of the size of the overall grants program, some consumers have observed that the $5000 given to the Sea Scouts must compare very unfavourably with the amount spent on just a single billboard supersite.

And this highlights a classic dilemma for any marketer that undertakes sponsorship of community programs — how much should they spend telling people how much they have spent?

Woolworths have been coy about exactly how much they are spending to advertise the awarding of the community grants. They declined to answer specific questions about the number of billboards, the reach and frequency of TV ads, production budgets and overall media spend on the campaign.

Media Relations Manager Benedict Brook would say only that “a limited amount of our marketing mix has been used to publicise winners” and that “in terms of our overall spend on community projects, any marketing costs are both necessary and negligible”.

Large billboard posters cost up to $5000 each to print and renting space on a “supersite” can cost between $10,000 and $20,000 per month. Even assuming a conservative 10 sites nationally, that’s $150,000 on outdoor alone, not counting the initial costs of photography and design.

A 30-second TV commercial involving a full-day location shoot on high-quality media generally carries a production budget of $100,000. And there is a second TVC for the 2009 grants, featuring the Picton Magpies Junior Cricket Club, southwest of Sydney. So add perhaps another $100,000. It would be most unusual to spend $200,000 on production of two TVCs and then not spend at least that much buying media time to show them.

Ad industry people with whom I have canvassed the issue this week agree that, even on very conservative estimates, the total cost of the outdoor and TV campaigns to promote the grants must therefore be in excess of $500,000, and probably much more. But is this what Woolworths has actually paid?

“Much of our community support marketing utilises media partnerships and free advertising space given to us” by major media organizations, said Mr Brook. This “massively reduces the cost”, he claimed, but he could not provide further details. “How we use our media spend is commercially sensitive information,” he told us.

Just like the proverbial lunch, “free media” is never really free to an organisation like Woolworths. It is based on their total spend and has an opportunity cost, as Mr Brook acknowledged: “We could have used this space to advertise products.”

When you look at the big picture, Woolworths is spending at least $500,000 to tell us about the $2 million they have spent. This is not at all out of line with what experts tell us sponsors should spend to promote or “activate” the value of a sponsorship. And Woolworths says feedback from its customers “has told us that they are keen to know what support we give to the wider community”.

However, while styled as a community support program, ad industry observers see the Fresh Food Kids Community Grants Program — which is explicitly linked by name to the supermarket chain’s broader advertising (as the “fresh food people”) — as being more about brand positioning than it is about philanthropy.

Stephen Downes is a market researcher and lectures in marketing and advertising.