Sponsorship Valuation: 5 Ways a Property Can Identify Intangible Benefits and Justify Greater Fees

On 7 February 2005, IEG, “the leading provider of consulting, valuation, measurement, research and training to the global sponsorship industry,” (http://www.sponsorship.com/About-IEG/Overview.aspx, accessed 5 March 2010) published a report on the steps a property can take to raise the value of intangible benefits when they approach a potential sponsor.  I will briefly discuss five of the benefits they presented in their document as seen in Professor Jeff Bail’s Fundamentals of Sports Marketing. Essentially, the property must create the need for the sponsorship.  According to Rob Prazmark, Senior Vice President of New Business Development with IMG (Mark McCormack’s International Marketing Group, the business that created the sports marketing industry) as cited in IEG’s document, “We live in an over-supply world, and sponsorships are not a commodity.”  He affirmed that if the property can prove ROI (Return On Investment), companies will be much more willing to find the necessary consideration to seal the deal.  Even though tangible benefits – those that can be measured in dollars and cents and could be standardized – provide important information on the value of media buys, ticket backs, on-field signage etc., once calculated they would only account for a small fraction of the final value of a sponsorship deal.  Valuation of intangible benefits is one of the most intriguing problems in sports marketing and is at the center of many a controversy in the industry.  The successful “sale” of intangible benefits requires certain creativity and a thorough knowledge of both the property and brand to increase its effectiveness.

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Number 1: a property’s prestige and the relevance of its sphere of influence.

Essentially, the property must demonstrate that it is relevant to the sponsor’s audience.  For example, if Lego feels that the property seeking their sponsorship appeals to football fans (i.e. the NFL) but does not necessarily mean much to people who would buy their toy sets, the value of such a partnership would certainly diminish.  However, if Gatorade is the brand in this case and not Lego, they stand to gain from a marquee sponsorship of the NFL because of the league’s prestige in professional football.  They would be wise to use their prestige to argue that theirs is the number one football league in the world and America’s true pastime since the late-1960’s; by partnering with them, Gatorade would enjoy a boost in fan perception by aligning themselves with the NFL and share in the property’s prestige among football fans.  By the way, this partnership already exists and stands as one of the most expensive sponsorship deals in all of sports.

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Number 2: a property’s recognizability and ability to convey messages that the sponsor values.

When a sponsor signs on, it shares the property’s voice.  Agreements that soar into the stratosphere in regards to price, such as the New York Mets’ stadium naming rights deal with Citigroup Inc. that will cost the bank $400,000,000 over 20 years, have much to do with the visibility of the property’s logo and name.  Promotions and media coverage that tie the sponsor with the property go a long way here.  For instance, when Jeff Gordon wins a race, he does not simply state that his team and car fared well; rather, he will always say “the Dupont Chevrolet Impala” was fast and handled like he wanted.  You cannot calculate the cost of this approach to increasing a property’s recognizability or awareness – it simply works.  This leads us to…

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Number 3: the audience’s loyalty to the property.

NASCAR fans’ loyalty to the league and its drivers has been well-documented for decades and is one of the greatest intangible benefits it pushes when securing a sponsorship deal.  The IEG report clearly states that “the theory is that the more loyal stakeholders are to a property, the more loyal they will be to a property’s sponsors.”  This is not an instant process, however, and requires that the property take additional creative steps to activate the sponsorship.  For instance, a property can use its own media or even in-game announcements to thank sponsors for their involvement and mention how they contribute to the property’s success.  The property must have tactics in place that makes its fans aware of how continued support from its sponsors makes the fan experience enjoyable and unique.

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Number 4: a property’s ability to ensure category exclusivity.

The property could offer a sponsor exclusivity in a certain category.  For instance, if the Cincinnati Bengals sought sponsorship from McDonald’s, they would be justified in asking for more consideration if they made McDonald’s their official QSR and did not entertain any offers from competitors.  Exclusive intellectual (i.e. website banners) and physical (i.e. signage) space guaranteed to a sponsor creates a stronger bond between the latter and the property and helps the sponsor communicate to an audience without the noise generated by a competitor.  A property must guard from closing out a category that could generate more revenue through the involvement of more sponsors.  If NASCAR gave Home Depot category exclusivity, 4-time NASCAR Sprint Cup champion Jimmy Johnson’s car would look very different from the one we are already so familiar with and Hendrick Motorsports would have needed to find another sponsor willing to pay the kind of money it costs to have its logo painted on the machine’s hood.  In that case, category exclusivity could hurt the property.  However, in such a case NASCAR could discount the price of Home Depot’s sponsorship since Lowe’s would be allowed into the NASCAR family of sponsors.

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Number 5: a property’s ability to activate.

The question here is whether or not the property can leverage a benefits package into tactics that can change buying behaviors in favor of the sponsor and drive sales.  Properties must go beyond such traditional marketing strategies as increasing signage and adding more advertisements in programs; in fact, it is imperative that they initiate turnkey programs such as connecting the sponsor with a retailer that would assist the sponsor in selling its products or services, for example.  In such a case, the effectiveness of a property’s business-to-business efforts become a key point of discussion when negotiations begin to focus on activation.  Also, implementation of promotions that are proven to resonate with the property’s fans help the brand blend smoothly into the fan experience and keeps it from interrupting an event with advertisements.

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Conclusion:

In the end, the property must know the brand well prior to solicitation in order to get the most out of its inclusion of intangible benefits in negotiations.  Marketers must understand their potential sponsor well enough to customize their packages to suit the sponsor’s needs and make the property’s intangible benefits applicable to the sponsor’s marketing and sales goals.  IEG’s points prove that marketing is a service performed for the benefit of both the property and the brand.  A property can maximize the value of its sponsorship deals if it identifies the intangible benefits it offers, commits to developing them over time, and customizes them to benefit potential sponsors.

One last note.  The sponsor itself must define its sponsorship criteria in order of importance using a rating matrix based on a scale from 0.1 to 1.0, with 1.0 being the highest on the list.  They are usually rated based on their importance and relative to other criteria the sponsor deems important.  This helps the sponsor stay focused on its needs and gives the property a chance to customize its benefits package to better assist the sponsor in reaching its goals.  Also, prior to working with a particular property, the brand/sponsor ought to apply a similar analysis of properties to identify which would better fit the strategies the former is currently executing.  Properties would be rated on a scale from 1 to 10 using the same criteria categories in the aforementioned analysis to better gauge their relevance.  Finally, the brand/sponsor would multiply the criteria score by the property’s ranking in that category and add them all up for a grand total that will range from 0-100.  This calculation helps a brand/sponsor determine a property’s relevance.  This valuation/appropriateness system, though not perfect, helps marketers break through the clutter of potential properties and save time in the search for the best sponsorship deal.  Properties would be wise to bear this brand-side process in mind when the time comes to decide which tangible and intangible benefits to enhance and develop since keen brands/sponsors are watching and measuring carefully.

Cam Suarez-Bitar.

As always, thank you for your readership.  Please feel free to add your own perspectives here.

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  1. Hey! This is my first comment here so I just wanted to give a quick shout out
    and tell you I really enjoy reading your articles. Can you suggest any other blogs/websites/forums that deal with the same subjects?
    Thank you!

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