Sponsorship budgets are under pressure and are often the first to go.
Why? Upper management perceives sponsorship budgets as a long-term branding investment rather than a promotional spend that can render results in a shorter time frame.
That perception is not totally incorrect, but it is incomplete and short-sighted.
You may or may not be surprised by the number of brands that spend a significant amount of money on sponsorship with no reliable data to back up the performance of their marketing investments.
Marketing professionals often lack the data to show direct positive returns, which would help build a solid business case for sponsorship investment. As the perception of sponsorship in large organizations is often distorted, the right metrics are key to changing the narrative.
At Elevent we are working with a consortium of financial institutions to pool research resources. We aim to create a common research fund and build an index specific to the financial sector showing the impacts of sponsorship investment on client retention and lifetime consumer value. We feel strongly that we can measure the impacts of sponsorship and work with businesses in innovative ways to achieve results.
3 Sponsorship questions
But let’s get back to the basics. What three things can help communication and marketing professionals better position their sponsorship investment?
1. Why sponsorship?
Generally speaking, sponsorship is expensive and more complex than a typical advertising campaign. You are trying to mesh two brands together to generate positive brand equity—often within three short years. Investing in sponsorship without careful planning or a clear vision of the purpose of the partnership is a waste of time and resources.
The first question that brands need to ask themselves clearly is this: what can sponsorship achieve for corporate, marketing, communication, or even human resources objectives that other communication tools cannot achieve or, at the very least, not as effectively?
The short answer to this question is not always clear. It is critical to first identify the two or three key objectives that sponsorship needs to achieve for your organization. This will allow you to properly measure the impact of your program.
2. Do sponsorship programs work?
As with any other communication tools, the challenge lies in linking a result to a specific effect. But there is a lack of understanding of what that specific effect may be.
Sponsorship can be used to achieve multiple results, from visibility and brand awareness to brand image, brand affinity and sales. These work in a funnel, with building brand awareness at the top and sales (and repeat business) as the ultimate goal.
Unfortunately, the vanity metrics used in the industry won’t tell you what sponsorship has done for your brand or business. For example, if you look solely at output or impressions, you’ll find no information about the performance of the partnership on desired outcomes like, for instance, purchase intention.
Data collection must therefore focus on the desired outcomes or variables that you want to test, such as brand recognition, brand sentiment, purchase intention, and so forth.
Control group: correlation vs. causation
To zero in on sponsorship effectiveness, an audience that has been made aware of and exposed to sponsorship must be compared to a control group that has not been made aware of or exposed to the partnership. Other than their level of exposure, these groups must be similar in almost every way. The two groups must then be tested for the desired sponsorship outcomes. Any differences between the groups will help assess the effectiveness of the sponsorship.
With improved metrics, professionals would be better equipped to refine their activation campaigns and sell sponsorship internally.
Sponsorship effectiveness from a business perspective
Besides value, what does sponsorship actually achieve for your business (e.g., image, client retention, sales, etc.)? While sponsorship is generally considered a matter of marketing or communications, it has the potential to tie into larger issues for an organization, and conversations around sponsorship can make their way to upper management or even the board. Thus, sponsorship should not be considered a niche tool, but should be used more broadly within companies.
3. What will the return on our investment (if any) be?
While many firms now claim that they can measure sponsorship impact and even ROI, they are mostly looking at social media, which often only represents a tiny portion of the sponsorship value. Linear TV and on-site assets still represent the lion’s share of that value.
So how do you measure true sponsorship ROI?
It’s simple: value minus cost.
Here are the metrics that we think you should take into consideration and measure:
- Sponsorship contractual assets, including on-site visibility and the property’s media placement carrying the sponsor’s logo
- Sponsorship-specific qualitative value
- Brand visibility from linear broadcasts or webcasts
- Value of hospitality, food, drinks and tickets
- Direct revenues and estimated increases in sales or direct cost savings
- Sponsorship rights fee
- Production costs
- Costs of managing the sponsorship (internal and external)
Gathering this data is not an easy task. There is no silver bullet for calculating sponsorship ROI. It requires an investment of time and money. Data must be gathered from various sources and best guesses may have to be made to fill in some information gaps.
Regardless of possible roadblocks, any efforts towards a gaining a better understanding of the effects of sponsorship investment will help your business make more informed decisions about single sponsorships and the portfolio as a whole.
Deciding whether or not to embark on a sponsorship program also comes down to the cost of sponsorship when compared with other communication platforms that can achieve your desired objective.
Measuring actual ROI may be too complex, due to environmental factors, a lack of metrics, or the difficulty of singling out the sponsorship impact among a range of communication strategies. However, calculating the opportunity cost of sponsorship can be a good benchmark to support decision making.
In a B2B environment, the value of a lead can be easily calculated. For example, if a company has established a $100,000 partnership for a business event involving FaceTime interactions with 1,000 qualified professionals, then the value of a lead in that sponsorship context would be $100. What could your marketing or sales team achieve with a similar amount? The same can be said in a B2C context when looking at other communication channels and their effects compared to the sponsorship investment.
Evaluating sponsorship opportunities against what can be done with a similar budget is an interesting proxy to justify sponsorship value.
What we’re doing to solve the problem
When Elevent was founded in 2013, our goal was to bring a more structured and objective approach to sponsorship measurement. We scanned more than twenty years of academic research on sponsorship to build a foundation for our tools. Our vision was to create an algorithm that automated the sponsorship valuation process, and, in so doing, we made the process not only more efficient, but far more reliable. Later, we put hundreds of sponsorship valuations through their paces to perfect our algorithm.
An algorithm like this opens up a new world of possibilities for benchmarking and qualitative KPIs, which we hope will change the conversation around sponsorship valuation and measurement.
We now have more than 125 clients in three countries, but our original mission is still at the heart of everything we do involving sponsorship consulting and performance measurement.