Sponsorship During Times of Crisis: Cancelled Events, Postponing and Refunds
I have been getting questions from clients, readers, social media connections and just about everyone involved in sponsorship, asking me to share my thoughts on how to handle sponsorship during a crisis like COVID-19, which threatens our events and sponsorship plans in general.
I am sharing a decision making process that my business partner and I recently used to determine to postpone The Partnership Conference until later in 2020. It is very important to note that this is not legal or accounting advice. You absolutely must consult your professional service providers and follow their advice. Before we made any decisions, we consulted our lawyers, accountant and the venue, and you should start there before you make any decisions. Nevertheless, I thought this might be helpful in making your decisions.
Three Options: Cancel, Postpone, Move Forward
Broadly speaking, there are three options if you are running an event that is threatened by the current crisis:
- Move forward
It cannot be overstated that any of the options you are considering require legal and accounting advice. Even the decision to move forward and change nothing is a decision with consequences and must be fully considered.
You also MUST talk to your sponsors. There is no way around it. Talk now and talk often, keeping the lines of communication open. If your sponsors hear your plans for the first time through an update sent on social media or to your database, you’ve made a very serious error.
Cancelling an Event: Sponsorship, Activation and Refunds
If you choose to outright cancel your event, you should expect to issue a refund to your sponsors. In some cases, a partial refund may be warranted based on how much you have delivered on your sponsorship assets and activations. Expect your sponsors to understand, assuming the crisis was unavoidable and not the result of negligence or some other foreseeable reason. Please note, your sponsors should understand your choice but that does not mean that you get to keep the money.
How Much of a Refund to Offer Sponsors if you Cancel an Event?
If you have sold a stock “gold, silver, bronze” package that has nothing more than logos on signs, I think your chances of a partial refund are near zero. Why? Because this likely means that you didn’t do a valuation and have no idea how much value you have delivered to date. It also means that most of your assets will be delivered at the event, which you have just cancelled. These types of packages rarely take into account the outcomes your sponsors are trying to achieve, instead focusing on vanity metrics.
If, on the other hand, you have done a valuation and understand your sponsor’s goals, then you will be able to determine how much of your contract you have delivered. It could be that most of the value of the agreement was related to pre-event activities and your sponsor will agree to a partial refund.
Before you begin this negotiation, talk to your lawyer, accountant and review your valuation.
What Options Are There Aside from a Refund?
First of all, just because you are legally entitled to keeping all or some of the sponsorship dollars does not mean it is the right call. Taking a transactional approach with a sponsor today could cost you the relationship and future revenue. In other words, a legal solution may not line up with a customer service solution. Am I suggesting that you ignore your lawyers? Absolutely not! What I am suggesting is that thinking long term about a sponsor might mean some short term sacrifice.
Instead of a refund, you may be able to offer your sponsor credit for next year’s event or some other properties that serve the same audience.
If your sponsor had sales goals tied to sponsoring your event during a specific time, then you will have to offer something that achieves the same outcome in the same timeframe if you have a chance at shifting the dollars to another opportunity.
The reality is, cancelling an event is a major decision and could be costly. Does that mean you should avoid cancelling? Not necessarily.
What Happens if You Choose to Move Forward?
The decision to change nothing and move forward as planned seems like the path of least resistance. It isn’t. It is a decision, like the other options, and requires careful consideration. If you opt not to cancel or reschedule now, the choice may be made for you later. If that happens, you may lose the choice to postpone as other events who proactively rescheduled will have had first choice of dates, leaving you with few, if any, options.
Any of the following could come to pass if you move forward:
- Your event is cancelled last minute
- Your attendance is poor
- Web traffic will take a hit
- Hotel room blocks may not be full, meaning you could be on the hook to pay for them out of pocket
- Media partners will not cover your event
In other words, moving forward could cost you money anyway, could result in a cancelled event and, if you don’t deliver the assets, audience and activations promised, you could still have to issue refunds to sponsors and/or damage the relationship long-term.
Sponsorship Refunds and Postponing Your Event
This is the choice we made and for us, it was the right choice. Before we made a decision, we consulted our lawyer, we consulted our accountant and we consulted the venue. I want to be very clear, the choice to postpone was not inexpensive! There were fees for lawyers and accountants and there were fees to the venue and activations we had booked that couldn’t be postponed.
In other words, in this scenario, we realized that every choice would cost money. We made peace with this and then asked the following questions:
- What is best for the sector and the industry?
- What is best for the attendees?
- If it were us, or those we cared about, attending, how would we want to be treated?
- In five years from now, which choice will we look back on as the best possible choice?
When considered in this way, the choice was simple. We chose to postpone.
Things to Consider When Postponing an Event
By going through the above process, we were a few days later in communicating with our sponsors than we would have liked. To be clear, we were communicating with sponsors, we just didn’t have a solution as early as we wanted. When we were ready with a solution, we were able to reach out with concrete answers and a solid plan. We then reached out to each sponsor individually, letting them know what we were planning and asked for feedback.
Every single sponsor immediately responded that they thought this was the right decision, offered their full support and thanked us for not moving forward with the event. Not one sponsor asked for a refund or was critical in the least. We were honest and clear about the decision, asked for feedback and presented some of the benefits of postponing (like more time to promote, digital activations etc.).
We are now in talks with our sponsors to do some more promotion and some digital activations to ensure that our sponsors get the outcomes they paid for. In this case, the new activations are outside the scope of the original agreement. Are we charging our sponsors for those benefits?
We want our partners to look back next year and see this as the most valuable marketing investment they made all year, even in a time of crisis. If we expect our sponsors to be flexible and understanding, then we must do the same.
This is how real partnerships are built.
Sponsorship During Times of Crisis, Lessons Learned
One of the most valuable lessons in all of this is that the way to handle a crisis starts long before the crisis is on the horizon. In other words, if you are practicing sponsorship according to current best practice, working together through a crisis is fairly straightforward. The best way to prepare for a crisis is to use the following formula with every sponsorship sale:
Know your audience!
If you have to offer new activations to your sponsors, you need to be sure that you can deliver the same audience at other events or digitally. Sponsorship is about audience and access to that audience.
Know your value!
Without a valuation, the conversation around refunds is virtually impossible. It’s hard to prove value to your sponsors and harder still to determine how much money you owe them as a refund or future credit if you are simply guessing at what your opportunities are worth.
Know your sponsor’s goals!
When you sell sponsorship, selling a stock package is a terrible idea, even in the best of times. Use a good discovery process to understand what your sponsors are trying to achieve and how they plan to measure success. Focus on delivering outcomes (not outputs, like logo placement) to your sponsors, then if something happens that changes your plans, you can work with your sponsors to deliver their goal outcomes in other ways.
In situations like this, we need to act quickly and know our options. I hold the belief that you can’t over-communicate and giving your sponsors more information is better than waiting and hoping the problem will go away. When making a major decision, you need to be aware of your legal options, financial obligations and venue options. In times of crisis, it’s unlikely that the decision you make will be easy or without financial loss. Take the time to make the right decision for your sector, your audience, your organization and your event. Most importantly, talk to your sponsors and involve them in the decision making process.
About the Author
Chris Baylis is the President and CEO of The Sponsorship Collective and a self-confessed sponsorship geek.
After several years as a sponsor (that’s right, the one investing the money!) Chris decided to cross over to the sponsorship sales side where he has personally closed tens of millions of dollars in sponsorship deals. Chris has been on the front lines of multi-million dollar sponsorship agreements and has built and coached teams to do the same.
Chris now spends his time working with clients to value their assets and build strategies that drive sales. An accomplished speaker and international consultant, Chris has helped his clients raise millions in sponsorship dollars.