Throughout my career I have been involved in many sponsorship negotiations. These were either for actual properties such as sports or events, or on-air packages for said sports or events, or a combination of the two.
There is
serious money that goes around in sponsorship. And not all of it is measured, so the
true actual amount may be a bit of a mystery, as the rights fees are usually secret and individually negotiated. There usually aren't any ratecards either for sports media packages, and then there is all the money that flows into activation on the ground and through trade marketing.
In my roles at AB-InBev and Coca-Cola you will understand that the amounts were beyond just substantial. But even we struggled at times to determine how substantial they actually were...
Therefore it may surprise you that the following, conflicting facts are quite common when dealing with sponsorship negotiations and decision making:
1. What is seen as valuable by the seller (rights holder) is often of little value to the buyer (advertiser/sponsor)
I have sat through countless negotiations where the seller waxes lyrically about how many eyeballs the sport/event is generating, how many spectators attend, or how many minutes or hours the sport/event generates on TV. This is usually followed by some kind of value calculation on the exposure of the brand name through pitch side boards, logo's on cars or brand names on shirts or something like that.
And in my opinion, there is even less value in the teensy-weensie on-screen logo inclusions that the major sports broadcasters are typically selling as part of their sponsorship packages of major sports. Sometimes it is just gratuitously there, other times it is there because the show is called the XXX Half Time show. There are even, I kid you not, "this camera angle brought to you by" sponsors. Really? Go ahead and find the logo's on the following sample of screen grabs. Someone was paying for them...
What is the sponsor's expectation of this kind of inclusion? Some viewer sees the name of an insurance company with close to 100% awareness on a slick looking digital stadium board, and the advertiser expects people to stop watching, grab the phone or iPad and get a car insurance quote because their name is there? I am supposed to get thirsty from seeing a tiny logo in a corner of my TV screen, and grab a Coke, or run to the store to stock up then and there?
Obviously these type of sponsorship elements have so little value because a brand like Coca-Cola, Subway or Pizza Hut does not need awareness. There is truly no value in a big logo on a football pitch, sportsstar or fast moving race car for a well established brand. What they need is a steady and ideally growing marketshare, a healthy and ideally growing volume, and a healthy brand in the eyes of (potential) consumers. Can sponsorship in the forms mentioned above do that? I would venture "no". What should or could they pursue with a sponsorship deal? I will get back to that towards the end of this post.
If you do have a brand that could do with awareness, actually there is some value in some of this exposure. I have been involved in launching a new brand in a market that had some name recognition prior to the launch, and because of its exposure at the event managed to become an overnight nationally recognized player. But these are typically exceptions to the rule.
2. The only credible value/ROI calculation can be done by the buyer, and is impossible to do for the seller
So if we should measure volume/share and brand KPI (things like "favorite brand" or "brand love" indicators), it is clear that the only ones who can credibly do this are the brand owners themselves. Because a rights owner/seller will never have the access to the kind of business data that the advertiser/sponsor has.
If you are a big brand in a highly competitive field, size matters. So generating a big audience is important in that case. If you are a highly specialized brand, or operate in a very clearly defined niche, knowing if the sport/event delivers the audience relevant for you is crucial. This is data the seller usually can deliver.
But this is only the start. What is critical is to find a methodology to actually determine the ROI of your total investment. Not just what you paid for the rights, but also what you invested in media, activation on the ground and through sales promotions/trade marketing activities. So the ROI calculation should be the sum of the cost of the property and the investment to produce all that stuff for on the ground, trade marketing, TV spots, websites, etc. versus the results in volume, share and brand KPI's during and after the sponsorship period.
That, and only that, is a somewhat fair ROI calculation.
3. Defending the CEO's decision to sign on the dotted line
And the reason so few companies manage to look at ROI this way? Because sports/events are very often highly emotional decisions. See if you recognize any of the following statements:
- The reason we are sponsors of XXX is because the chairman/CEO/founder/retailer/wholesaler/wife of the CMO really likes XXX.
- We have renewed property YYY because we have been involved with them since 19forever.
- We can't give up sponsoring ZZZ because competitor ACME will take it the minute we let go.
None of these are valid reasons for sponsorship. And you know it. But many sponsor decisions are made on these.
Which is why a true calculation of ROI is often very difficult or impossible in many organizations. What if we can demonstrate that beloved property XXX, YYY or ZZZ actually costs way more than it delivers? Can we go to the CEO/CMO/wife of the CMO and tell them we should divest and redirect the funds elsewhere? In many organizations there are certain properties that have become or are deemed to be untouchable.
My advice? First of all, get serious about the ROI calculation, as outlined above. "Knowing" beats "assuming" every time. Facts over fiction, followed by rational decision making.
And for the "untouchables" where the facts point towards "perhaps we need to let go" but you know the organization would never do it, use the facts to renegotiate, expand or redirect the rights you have. Make the property work harder for your brands and your targets. Trade in worthless on-air mentions for marketable activation rights that you can offer retailers. Get rid of half of the stadium boards if your brand has more than 65% brand awareness, and add a new "sole and exclusive". Push the rights holders into better/deeper/any measurement that helps you in determining if the property does any better now versus the last time you owned it.
Difficult? Absolutely! Worth it? I can speak only from my own experience and reply with a powerful "absolutely!"
