On one hand, a precious tool in the sponsorship arsenal; on the other hand, a fundamental—and sometimes harsh—element of the reality of supply and demand.
In fact, sponsorship valuation is key to establishing a pricing strategy, estimating market value and managing your sponsorship portfolio.
Why do I need to evaluate sponsorship proposals?
As each new proposal you build is customized to the sponsor’s specific objectives, you need the sounding board of evaluation every time. First, you do not want to put yourself in a bad place pitching a ridiculous amount to a brand: they will evaluate the true value of your sponsorship (read further)! Moreover, each package being different, you don’t want sponsors with similar levels to have a disproportionate amount of assets for the same rights fee. It’s a tool that will keep fairness, and maintain harmony between sponsors. As a general rule of thumb, you want the value of the proposal to be at least at par with the asking price. Sponsors are looking at a 2 to 1 or even 3 to 1 ratio, due to the uncertain nature of sponsorship. Evaluating your proposals will ensure that you get the right value for your proposal.
Sponsorship valuation is an essential part of acquiring a new property. In this day and age, all marketing expenses can be under scrutiny. This is especially true for sponsorship because of its very nature: the presence of hospitality and the entertainment aspect attached to it might raise suspicions that the decision to sponsor was motivated by top managers’ appreciation of a particular sport more than by sound market insight. John Kerry, secretary of state, raised the issue in his now infamous quote about sponsorship being wasteful. He tried, to no avail, banning companies that received bailout money to pursue such a marketing strategy. In other words, the process of sponsorship selection and evaluation must be extremely thorough. A strong business case must be put in place because folks from the finance department, external controllers, or even stockholders will ask questions about the sponsorship value and how the decision to sponsor was made. After all, sponsorship is a marketing investment, not a donation; thus you need to assess the value of your buy as you would do with any media campaign.