Case Study: Sponsorship Valuation Best Practices

Sponsorship valuation is complicated and technical…but it is an essential piece of the sponsorship puzzle. In fact, I would argue that it is THE most important part of the technical side of sponsorship sales (with relationship building being the most important part of the soft side of sponsorship sales).

Let’s explore a case study of two properties and their experience with sponsorship valuation.

The Sponsorship Properties Defined

I want to paint the picture for you. Two identical properties, with an identical audience, in similar sized cities, with the same assets for sale working with the exact same sponsor. How’s that for a sample? Basically, these two properties are mirrors of each other and are both sports events (the same sport).

Property A currently allows their “sponsor” to give away product to their crowd. The justification is that the product is a value add to the attendees of the event. They have never charged for this asset and told me that if they tried to charge for this asset that their “sponsor” would walk, take their product with them and their event would suffer as a result.

I was brought in to do an inventory analysis and asset valuation of the property and was introduced to Property A by Property B.

Property B was my client six years prior. We went through a full inventory building process and asset valuation and flagged the giving out of samples as a highly valuable asset. Property B took my advice, began selling the opportunity immediately and made significant revenue from the opportunity ($50,000/year in fact).

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Sponsorship Valuation: The $300,000 Mistake

Remember, in this case the sponsor is exactly the same company and the same contact! Why is it that when Property A works with the sponsor, they value the assets at $0 and when Property B works with the sponsor they value the same assets at 50K?

Simple: the sponsor’s sole purpose is to sell the most product to the most people for the most profit possible. Because Property A placed no value on their assets, the sponsor didn’t either!

Here’s the worst part. The sponsor knew full well that the assets were worth $50,000 but they gladly took the opportunity for free for six years. This means that Property A missed out on $300,000 in revenue purely because they didn’t do a valuation.

Making the “Sale” on the First Meeting

As sponsorship sales professionals, we sometimes forget that making the sale in the first meeting is not the goal. In fact, it can be damaging to make the sale on the first meeting! If the sponsor says yes too quickly and without any negotiations, you probably left money on the table.

Property A made the “sale” in the first meeting with the sponsor…for a net loss of 300K. Property B went through multiple rounds of negotiations and had to revisit their valuation several times before the sponsor signed on for a multi-year agreement at 50K/year.

Remember, the ONLY goal of the first meeting is to get the second meeting and not to make the sale.

Asset Valuation Basics

There are multiple styles of asset valuation out there. The one I favour is referred to as a market valuation and, as it turns out, this is the approach favoured by most brands and sponsors.

The method is simple in concept, here’s what to do:

• Make a list of every single asset you have to sell for each property
• Now double the list of assets! Talk to your staff, your colleagues, your customers and most importantly, your sponsors to build the biggest list possible
• Segment your audience. The goal is not to define your audience as the “general population” but in fact to create as niche of an audience as possible
• Identify exactly what your sponsors would pay for the equivalent exposure and access to your audience if they went elsewhere. You may want to charge 10K for logo placement on your website but if your sponsors can get the same exposure to the same group for less…they will
• Once you’ve identified all of your tangible assets identify your intangible assets and research the market value for those assets as well
• Make sure you add an increase in the value of your tangible assets based on the power that your brand has over your audience

When you meet a prospect who wants to give you free product, say a few words and supply the staff to hand out that product, look to your valuation calculator to determine exactly what to charge them.

Do you have to determine the value of your assets? Of course not! But in the absence of a real valuation, your prospects will gladly determine the value for you. In the case of Property A, that value cost them $300,000. Who would you rather be in this scenario?

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Chris Baylis is a corporate sponsorship and cause marketing expert. Chris has managed the entire spectrum of the sponsorship process, raising millions of dollars for charities, associations and not for profits and is a board member of the Association of Fundraising Professionals. Connect with Chris via: The Sponsorship Collective | Twitter | LinkedIn | Google+



3 Comments

  • Ryan

    What are some ways you have gone about finding what a sponsor has paid for an asset in the past and what tools do you use to find the market value of your assets?

    • Chris Baylis

      Hi Ryan,

      Great question! First, I should say that what a sponsor has paid for an asset in the past is only valid if you have the exact same audience, the exact same activation, the same brand value of the property (the intangible value) and the exact same conditions exist now as they have in the past. As you can guess, this is rare. That said, when you are talking naming rights look for old media releases to see what they paid.

      “Beauty is in the eye of the beholder” and value is in the eye of the sponsors…so basing value purely on what someone paid in the past is not the best approach and can trip you up.

      If instead you are trying to determine what to charge for specific assets then my favourite sources are this:

      – Newspapers and magazines that target the same audience and demographic
      – Social media ad rates
      – Looking at other properties that target the same demographic but broad (not just competitor properties)

      You can pull together a ton of information by looking at rates for earned and paid media as well as a broad cross section of other properties. The intangible value of your brand? Well, that’s more complicated! Keep an eye on future posts for some ideas there.

      Chris

  • Dustin

    I’ve worked in sponsorship sales and now I work with a brand. The one constant I’ve learned is that asset values are never the same between properties. As a brand manager an asset’s value has everything to do with impressions. I can put a unique value to an impression, therefore I can give an asset a value. For ex: If I value one (1) impression at $0.10 and there is a sign asset visible by all attendees, then I can multiply $0.10 x # of impressions/attendees to get a value for that sign. Let’s say that over a season, there are 500,000 attendees. That prominent sign is valued at $50,000.

    But that’s not the end of the story, because 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. In this case, I’d value that sign at $16,666.66.

    But that’s also not the end of the story. It’s my job to get the highest ROI possible, so spending $16,666.66 on a $50,000 sign is average job performance, the standard. I don’t want to be average, so I’m going to value that sign lower.

    On the property side, that’s STILL not the end of the story because you haven’t truly figured out the market value of that sign asset yet. Just because I’m not willing to pay more than my 3 to 1 / 4 to 1 ROI, doesn’t mean there’s not another brand that values that asset higher. Now you have to find them.

    As a sales person, you want your brand manager to be successful, build that relationship, show the ROI and you will have a long lasting partnership making more money for your property!

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