- May 30, 2017
- Posted by: cbaylis
- Category: Sponsorship, Sponsorship Activation, Sponsorship Valuation
I’ve written a lot about sponsorship valuations lately and, while this is not a post about valuation, sponsorship ROI is a close cousin.
Before we get started, make sure you check out these two posts, which will be referenced throughout this article:
- Case Study: Sponsorship Valuation Best Practices
- The Essential Guide to Sponsorship Valuation: Learn How to Price Sponsorships Like a Pro
The second article is stuffed with great resources, including my valuation checklist and infographic. The first article listed above has a fascinating comment from a sponsor all about the concept of sponsorship return on investment (ROI)…and that’s what we are going to focus on today.
Laying the Groundwork for Measuring Sponsorship ROI
Before you can measure ROI you have to know what your sponsorship inventory is worth and the only way to do that is by performing a valuation on all of your assets. Valuations are no longer a “nice to have”, they are an essential component to the sponsorship game. Performing a valuation will help you with budgeting, prospecting, understanding your audience and building custom activations that solve real problems for your audience and for your sponsors.
It used to be true that simply completing a valuation put you ahead of the pack (which is still true, for the most part) but things are more complicated now. A valuation is not enough but still required.
Sponsors want more than just logo placement at market value. They now want to connect to your audience in meaningful ways and they want a measurable return on investment. Not just “brand awareness” but if they’ve come to you as a sponsor in order to find new customers, get email signups or host a private event with their most valuable prospects, they need proof that their sponsorship investment was responsible for that outcome. In other words, sponsors are measuring return on investment in increasing more complex ways.
From Informal to Formal: The Sponsorship ROI Evolution
What is new(er) and gaining traction fast among sponsors is that they want all of their assets and outcomes for cheaper than market rate and, what’s more, sponsors have developed their own internal ROI calculators to guide their buying decisions. Some sponsors are open about the ROI they are looking for, others are not, and so ROI strategies range. Some sponsors want a 2:1, 3:1 or even a 4:1 ROI ratio.
Here’s what this means in practical terms:
If you, the sponsorship sales person, have valued your opportunity at $30,000 and you sit down with your prospect to negotiate, they are going to want to pay you less…a lot less! A 2:1 ROI calculator means that they are not going to pay you more than $15,000 for your opportunity or you have to create a package worth $60,000 to justify the $30,000 spend.
Obviously, going in to a sponsorship sales meeting without having done a valuation puts you at a distinct disadvantage and without proving your value, you may never get a seat at the table to talk ROI. Not having done a valuation could mean that a sponsor, who knows the value of your assets, takes advantage and negotiates you (unknowingly to you) into a 4:1 ROI.
There are ways to protect yourself, but first I want to share a story with you, directly from a sponsor. You can see the comment in its entirety at the end of my post Sponsorship Valuation Best Practices but for the purpose of this post, I am going to pull out some quotes to from the sponsor specific to ROI.
From the mouth of sponsors:
“I’ve worked in sponsorship sales and now I work with a brand.
As a brand, I’m not going to pay $50,000 for a sign valued at $50,000! The ROI is $0.
Our brand strategy calls for a 3 to 1 ROI ratio to justify the buy. But that’s not the end of the story.
It’s my job to get the highest ROI possible, so spending $16K on a $50K sign is average job performance, the standard. I don’t want to be average, so I’m going to value that sign lower.”
In other words, this sponsor, and many others like him, have done their homework and are motivated to get the best deal possible.
How to Sell Sponsorship in an ROI Focused Industry
Based on the report above, sponsors start by reviewing your valuation and then, if they accept it, they move on to their own internal ROI practices. Clearly, the sponsor mentioned above (and virtually every other sponsor I’ve talked to) wants to do better than their basic ROI ratios.
So, what do you do with this information? First, make sure you know the market value of your assets as well as the value of your brand. Know your audience well and be able to articulate their needs and interests.
This will put you in a position to charge above average market rates since you are offering a better quality sponsorship opportunity and can deliver on your promises. The next step is to include an ROI ratio on the front end, as part of your valuation, giving you a range within which to negotiate with sponsors.
Once you’ve made the sale and delivered on your sponsorship opportunity, you absolutely must deliver a fulfillment report. In this fulfillment report you should include proof that you delivered but you should also include a new calculator, this one based on your valuation numbers and your actual deliverables.
In other words, if you promised an event with 500 people worth $X but you had 600 people show up, you recast your valuation based on actual numbers. If you promised one eblast with a coupon attached at $X but you actually did four eblasts, show your sponsor the actual value of what you delivered. The same is true for every on of the assets you sold to your sponsor.
After your event or campaign has wrapped up, you can report back to your sponsor proving that you delivered what you said you would. This puts you in a position to show them the true ROI of their investment. If you over delivered in terms of ROI then you most definitely have earned the right to ask for their continued sponsorship and you are now in the perfect position to ask them for a multi-year agreement.
Chris Baylis is an expert in sponsorship valuation and sponsorship strategy. Chris works with brands and sponsorship properties to define their sponsorship goals, determine market value of their sponsorship assets and create strategies that work.
Chris is the President and CEO of The Sponsorship Collective, a board member of the Association of Fundraising Professionals and an international speaker and consultant on all things sponsorship marketing.