Five Key Elements to Valuing a Sponsorship.
Of course the big question here is, “What’s a sponsorship worth ANYWHERE?” One of the hardest things to do in marketing is place a tangible, measurable value on a high-profile sponsorship opportunity. Whether you’re talking a single event, seasonal series, fixed venue, even spokesperson or celebrity visit, the variables and intangibles make pricing and measuring return on sponsorship extremely squishy.
“The fact that there is not one standard measuring stick across our industry nationally is very frustrating,” says Chuck Gray, general manager of ODU Sports Properties. Gray works with sponsors at every level for ODU Athletics opportunities. “You can find three or four models” used in various places he added. “We look for ways to create value multiples, as much as 2-1, for the dollars invested in a sponsorship.”
Velvet Marshall is sales director for IMG in Hampton Roads, handling sponsorships for the nTelos Wireless Pavilion in Portsmouth and Beachevents at the Virginia Beach Oceanfront. “Every package we put together is customized based on the sponsor’s budget and needs,” she says. According to Marshall, ”We always meet and exceed what is required by the city of Va. Beach for the Beachevents program. And while a good portion of revenue generated does go back into the program, we always maintain the quality of the acts we have regardless of sponsorship revenue.”
Fine. But when you’re faced with the decision of committing six-or maybe even seven-figure line items in your marketing budget to a major sponsorship as opposed to increasing your online or offline media weight, how do you decide? Sarah Marshall Elliott, director of marketing and brand strategy for Virginia Farm Bureau, says the company looks for several key elements, including audience compatibility and fit, statewide reach, strong digital/social media aspects, and category exclusivity.
“When the Farm Bureau Live sponsorship was created four years ago”, Elliott says, “the company’s marketing strategy was largely built around raising general awareness for the bran d.” It was important to capture the loud promotional voice and leverage digital as well as traditional reach and frequency to bolster Farm Bureau name recognition. “Today,” she says, “we develop consumer-facing promotions which drive prospects into our local county offices for an insurance quote. We have also ramped up our digital marketing efforts via our sponsorships which provide real-time data.”
A Little Structure, Please.
As a corporate marketer and as a consultant I’ve had to find ways to help make sponsorship investment decisions. The challenge led me to develop a model of my own that has proven successful over time. One major caveat; the key steps below assume that you have already done your homework and determined that the audience you will be positioning your brand or product in front of is a good “fit” for your brand and overall strategy. Here are the five key elements of the model:
1) Discovery. Put boots on the ground. You’ve got to attend the venue, see the audience, see how they move and act.
2) Measured Media Analysis. Calculate the real value of the impressions based on a valuation for your market. In my model I’ve created a valuation based on several local-market, multi-media CPM figures. Add in frequency based on number of events, attendance at events, media coverage, insertions and reach of paid spots inserted in broadcast or exposed on websites. After that, add a quality score to each component of the package; for instance, a :30 TV spot or feature position on a home page is a much more valuable impression than a static sign in a concourse. The grand total of this analysis gives you a real-dollar value.
3) Qualitative Analysis. What is the emotional value to your company or brand? Rarely will the quantitative, real-dollar value reach the actual cost of the package. In every case you will have to assign a value or multiple to your analysis that attaches a value for associating your brand with the promoter, event or product. Expect the real-dollar value to equal at least 50-75% of the asking price for the package. The subjective value has to get you the rest of the way.
4) Negotiation. Once you know the value to your marketing plan, you’re ready to negotiate a fair value price. Two choices here: Present the venue, promoter, or agent with your price based on the package as it exists, or (usually more successful) negotiate for additional value in either reach or frequency elements.
5) Activation. This may be the most critical element, and it cannot be an afterthought. The whole purpose here is to promote your brand and engage with the audience. Plan for and budget to leverage your sponsorship. Invest in creative concepts to make your signage stand out. Plan to staff events and make personal connections through creative promotions. Brainstorm and identify unique ways to present your brand to make you stand out from the sea of other sponsors.
ODU’s Gray says he values inventory and packages based on three key elements; attendance, location and availability. Scarcity and demand of particular inventory will drive the price up, as with any other product. The key is to understand the value, budget for it appropriately, and activate in unique and engaging ways.
Seem like a lot of work? Well it is. You can do most of it in your head if you’re talking a $2,000 golf tournament sponsorship. But when you’re looking at a six-figure naming-rights or premier sponsorship that may span 3-5 years, you need to know what to expect.
Elliott councils others to carefully consider the term of the contract, as strategies can shift over time. “It wouldn’t surprise me at all if more ‘mature’ companies, those who already have relatively high brand awareness, are looking for a more traditional return on their investment these days,” she adds. Velvet Marshall is faced with that kind of big hole right now, filling the name and title slot for the American Music Festival at the beach, vacated when Verizon Wireless decided to pull all of its event sponsorships.
Bottom line on sponsorship evaluations? When the money is big, there’s no such thing as a no-brainer. Find a way to engage the quantitative structure and measure it against your primary business objectives. It can be done.