If your brand invests over a million dollars in sponsorship, CSR, influencer marketing, or donation programs, and you lack a valuation and performance measurement process, your budget and team could be vulnerable to cuts.
Sponsorships and brand partnerships, though on the rise, are often misconstrued and frequently among the first marketing budgets to face reductions. To counter this trend, sponsorship and marketing executives need to utilize KPIs and metrics to construct a business case and justify the investment.
Here are the most commonly asked questions about sponsorship valuation:
- Does sponsorship marketing work?
- Why do brands invest in sponsorship marketing?
- What are the various types of sponsorship valuation services?
- How do you choose the appropriate sponsorship opportunities?
- How do leading sponsors measure the performance of their sponsorship programs?
- How much should we allocate for sponsorship valuation and measurement?
- Cultural sponsorship: How do you accurately value sponsorship assets?
- Sports sponsorship: How do you assess the value of broadcast visibility?
Our experience spanning various industries with prominent sponsors sheds light on top practices in this field.
Does Sponsorship Marketing Work?
Yes, but as a brand, it’s crucial to understand which brand Key Performance Indicators (KPIs) you’re aiming to influence. While having clear objectives might seem obvious, we’ve collaborated with numerous large corporations boasting sponsorship budgets exceeding $10 million, yet lacking well-defined goals.
Effectively activating and measuring such partnerships becomes very challenging without a guiding focus. Even if you work with the world’s best creative agencies, showcasing a return on your investment becomes difficult. (Research has linked sponsorship announcements to share price increases in publicly traded corporations.) Therefore, these discussions must occur before an agreement is signed. Throughout the company, a consistent approach to evaluating and measuring success is helpful to compare investments in the portfolio.
When contrasted with advertising, sponsors’ presence is generally well-received by the public. Nearly 80% of individuals agree that sponsors play a critical role in funding cultural and sporting events.
Within the context of sponsorship, event attendees and fans tend to be more open to engaging with brands than the general population. This favorable context often translates into positive outcomes with clients for whom we assess sponsorship performance across their portfolios.
With many sponsors, we’ve been able to demonstrate that sponsorship positively influences key performance indicators such as brand recall, brand sentiment, and purchase intent.
To illustrate, in recent measurement projects, we showcased an average brand lift of +10% for audiences exposed to and aware of a sponsorship, compared to a control group.
This boost can lead to heightened product consideration and increased revenues for corporate sponsors.
Why Do Brands Invest in Sponsorship Marketing?
Sponsorship marketing isn’t just about building brand awareness in the upper-funnel; it goes beyond that! One of the major misconceptions about sponsorship is that it doesn’t impact sales. However, that’s far from the truth—it indeed can and does. In fact, it has been shown to have a positive influence on the value of publicly traded companies.
Prominent and highly sophisticated brands across various sectors, including retail, telecommunications, aviation, automotive, finance, insurance, and large B2B enterprises, are among the biggest spenders in the sponsorship arena. When executed effectively, sponsorship yields remarkable brand outcomes and creates numerous touchpoints for brands to engage with consumers at various stages of the funnel. This enables them to break through the noise and connect with hard-to-reach audiences.
While establishing objectives, it’s vital to determine the role of sponsorship within the organization and the broader marketing mix. Whether through donations, sponsorships, or corporate social responsibility (CSR) initiatives, brand positioning comes alive by leveraging touchpoints and a level of proximity that mass and digital advertising simply can’t provide.
At the upper end of the funnel
A common goal is to enhance awareness among a specific audience (which in turn leads to other positive results) and to cultivate consideration for brands whose products or services might be slowly becoming commoditized or less differentiated in a maturing industry. While sponsorship tends to be more costly than mass advertising, it reaches a more focused audience and offers a more conducive context for delivering brand messages.
In the middle of the funnel
Companies can invest to generate interest in a brand or product through unique associations that competitors cannot replicate. These associations are then utilized to enhance brand image and ultimately influence purchase intent. Notable cases illustrating this can be found here (sport sponsorship) and here (activation examples).
Towards the lower end of the funnel
Sponsorship can be harnessed to engage with hard-to-reach consumers—imagine an industrial B2B brand sponsoring the industry’s largest trade show. Alternatively, it can involve directly sampling products to the target audience, such as a consumer packaged goods (CPG) brand introducing a new flavor at a festival.
How to Choose the Right Sponsorship Opportunities?
“But our VP really likes this proposal.”
We’ve encountered this situation before. Over a few years, your entire sponsorship budget can gradually become tied up. Opportunities become restricted as influential executives have already chosen partnerships, or you’re locked into long standing investments. Remember, the focus shouldn’t be solely on individual deals; new agreements should contribute to a well-crafted overall partnership strategy.
All of this circles back to having a well-defined sponsorship policy—the management tool that guides investment, portfolio management, and property selection.
The role of a sponsorship policy is threefold:
1. Outward Communication
It communicates to the public what your company cares about.
2. Internal Guidance
It assists in selecting partnerships aligned with your objectives.
3. Rejection Management
It empowers you to decline offers gracefully. Some brands must decline up to 95% of the sponsorship proposals they receive. As a responsible brand and corporate citizen, it’s important to manage expectations from all angles—from the public and colleagues to the board of directors.
The sponsorship policy outlines criteria properties must meet to align with your brand objectives. Research indicates that the attributes of a property’s brand extend to the sponsor’s brand, achieving one of the desired sponsorship outcomes (image transfer). For example, if your brand aims to resonate with young people, select properties reaching a younger demographic and reflecting trendy or rebellious brand attributes.
«A strong fit between your brand and the sponsor typically yields a more positive sponsorship outcome. »
For instance, a motor oil company sponsoring a racing team or a running shoe brand partnering with a marathon exhibits a fitting and natural sponsorship match. This alignment can influence recall, image transfer, and even purchase intent scores (any misalignment can be corrected through effective communication and activation strategies).
A comprehensive approach means conducting an audit of the company’s practices, challenges, corporate, marketing, and communication objectives. Engage with relevant stakeholders, from investors to front-line employees. Since many partnerships require category exclusivity, consider your competitors’ activities in the sponsorship landscape. This helps identify available spaces for your brand. For example, if hockey sponsorships are competitive, your brand could differentiate itself by aligning with music events.
You can use a simple checklist with desired attributes to evaluate properties. Some sponsors employ sponsorship management software to score and filter requests, automating tasks and communications. Over time, the evaluation process becomes smoother. You’ll develop an ability for discerning promising properties from the rest.
How Much Should We Allocate for Sponsorship Valuation and Measurement?
For sponsors of all sizes, including valuation in sponsorship agreements is swiftly becoming an essential element. It not only enables brands to compare reach with a similar ad spend but also guides pricing based on the assets provided by the property rights holder. This benefits both brands and properties by establishing a fair market value assessment.
Here are some budget breakdowns for valuation and measurement:
- Small sponsorship portfolios ($1-5 million): Allocate an average of 3-5%.
- Medium-sized portfolios ($5-10 million): Allocate around 3-4%.
- Large portfolios ($10 million+): Allocate roughly 2-3%.
Most successful sponsorship programs are backed by effective management and processes. While these percentages might seem minor in comparison to rights fees and activation budgets, they play a pivotal role in the success of a sponsorship program.
From a governance perspective, companies must establish a robust decision-making process, especially in a domain where accountability from executives, the board, and shareholders necessitates thorough scrutiny of multi-million dollar sponsorship investments.
How Do Top Sponsors Measure the Performance of Their Sponsorship Programs?
While the financial aspect plays a pivotal role in the initial deal-making, assessing sponsorship performance is distinct from the valuation.
While the majority of major sponsors have established methods for valuing sponsorships, only a few possess robust sponsorship measurement programs.
Since we can’t read minds (yet), sponsorship measurement largely involves conducting audience surveys to measure Key Performance Indicators (KPIs) and audience profiles. This approach enables sponsors to monitor objective progress and ensure they’re engaging with the right audience. These results are then compared to those of the general public to reveal uplift in KPIs among consumers exposed to and aware of the sponsorship association.
Forget about impressions—focus on impact! Sponsorship activation can be individually measured in terms of performance: Were people aware of the activation? Could they correctly identify the sponsor? Did they enjoy the activation? What were their takeaways? Crucially, how did interacting with the activation influence KPIs?
Leveraging technology can enhance these approaches and reduce the costs of measuring sponsorship effectiveness.
Valuation provides insights into the price versus value equation, while sponsorship measurement informs you if you actually achieved the initial objectives you set out to meet.
These objectives can evolve and shift over the course of a partnership’s lifespan.
Case Study: Cultural Sponsorship Valuation and Measurement
We were actively engaged in the strategy development, negotiation process, valuation, and performance measurement of a significant music venue on behalf of a national telecommunications company. Combining our consulting expertise with cutting-edge tools, we laid the foundation for bringing the partnership to life and ensuring that the asset fulfilled brand objectives.
Our client leveraged a sponsorship valuation software to steer asset selection, shape negotiation strategies, and establish fair pricing. By possessing valuation data during the negotiation phase, the brand managed to save over a million dollars in rights fees. This approach ensured that they paid an appropriate amount for marketing assets, based on the market’s media value, the property’s advertising investments, and venue attendance.
Through our annual measurement initiative, we discerned that the sponsor’s customers who attended the venue and were aware of the sponsorship exhibited a higher tendency to spend more on the brand’s products. Additionally, they held a more favorable opinion of the brand, were more likely to recommend its services, and displayed greater loyalty compared to clients not exposed to the sponsorship. This translated into tangible revenue growth and customer retention for the company.
Case Study: Sports Sponsorship Analytics
We have been supporting a major sports retailer in assessing the value of their sports sponsorship portfolio. Determining a genuine Return on Investment (ROI) for a sponsorship entailed evaluating the value of delivered assets across various communication channels.
The initial step involved quantifying the value of contractual assets to be provided by properties (in-venue visibility, advertising campaigns, owned media, social channels, tickets, and hospitality). This was facilitated by utilizing Elevent’s sponsorship valuation software, which offers unique access to an extensive range of market data points. Often overlooked, these sponsorship assets constitute a significant portion of the comprehensive marketing value within sponsorship agreements. Their values differ based on their quality, with items like stage banners and staff uniforms carrying higher value compared to a logo on a beach flag.
A broadcast analysis software was then employed to track brand impressions across TV, social media, news, and webcasts. Recognizing that each brand’s data requirements differ, the results are presented through a customized dashboard that can be updated in real-time.
Brands should be cautious in selecting service providers and methodologies to ensure accurate value assessment. It’s crucial to collaborate with providers using real media values sourced from broadcasters for an authentic measurement of sponsor value, avoiding inflated CPM rates and overly optimistic impressions.
The outcome is the ability to capture the FULL value associated with the deal. This empowers sponsorship managers to provide executives with a genuine value-to-cost ratio and a clear Return on Investment (ROI) for their investments.
While various methods exist to measure sponsorship value and performance, brand managers should explore different methodologies and the range of elements being assessed. Although we possess access to advanced artificial intelligence tools that proficiently track logos, the presence of real people overseeing and auditing the data for accuracy is crucial.
Here are some guiding questions for your decision-making process:
- Can the agency (media or sponsorship) transparently share their methodology, or is everything concealed in a black box? Beware of black-box approaches.
- Are automated tools genuinely automated, or do humans handle Excel sheets behind the scenes? Be cautious of excessive manual input and home-made tools.
- Conversely, is the process entirely automated? What precisely is tracked? How is the data cleaned? Is there human oversight? Be wary of seemingly magical AI tools.
- Does the value provided by your property partner appear unusually high? Be cautious of inflated figures.
And there you have it! You’re now familiar with most of the undisclosed techniques and how top sponsors choose, assess, and measure their sponsorship investments.
Get in touch if you’d like us to cover a topic in particular. Our goal in sharing these insights is to help both brands and rights holders gain a new competitive edge in the amazing world of sponsorships.
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