BITS & BOBS : Sponsorship Rights

In the last part of 2007 Johnnie Walker entered into a sponsorship deal with McLaren for US$100 million, Nike did a deal with the Korean Football Association for US$27 million, Bridgestone bought the rights to be the official tyre of the NFL for US$10 million, and a Dutch Insurance company signed

Sponsorship has become a fundamental part of a corporation's marketing mix; costs for rights purchase are expanding, budgets for the leveraging of sponsorships are forced to grow. So why then is the valuing of a sponsorship and the understanding of the return on investment to a business largely ignored or at best measured by the number of times your logo is viewed on a screen?

We all now understand that sponsorship is both a critical communications tool for sponsors as well as a fundamental revenue stream for rights owners. We acknowledge that market leaders use sponsorship widely and arguably more successfully than any other communications tool to achieve competitive advantage whilst events of all sizes depend on sponsorship just to exist.

As the importance of sponsorship has increased the demands have risen too. Surely now sponsors are seeking a measurable return on their investment? Surely now rights owners completely understand the value of their property and its potential to deliver a return on investment before going out to seek funding from the corporate market place?

The other day I had a phone call from a company that was selling the rights to an event in Australia. They had lots of different things on offer and wanted to see if we could help them. I asked the first question that anyone would ask "How much?" I was given the answer and when I queried the director of this business as to how he justified that price he said "because I sold the rights to a different event that was kind of the same size a couple of years ago for that much".

That is not a valuation. That is not understanding the value of a sponsorship. That barely makes sense.

The other really common one I hear a lot of, especially in New Zealand, is "the price is dictated by the market place". Again, that is at best, a guess.

Whether you are selling rights or looking to sponsor something, if you are not measuring the sponsorship and developing a real valuation based off the tangible and intangible assets that make up the sponsorship then you are taking a huge risk and as a rights seller you may sell your property for a lot less than it is worth or never ever sell your property because it is so over priced.

Or as a company purchasing a sponsorship you may pay too much, pay for something that you don't need or enter into a relationship that will not deliver against your business objectives.

Therefore the answer is, before you do anything - whether it is selling rights or purchasing rights - understand completely what the value of the property is. Give yourself every opportunity to maximise your sponsorship opportunity.

There is no better feeling in the sponsorship world than having a complete, robust, auditable knowledge of what your sponsorship property return on investment really is, before entering into a rights fee conversation or negotiation and if/when you are challenged, being able to drop onto the table a sponsorship valuation that delivers a real figure.

So next time you get what I had the other day, "we sold an event that was similar to this for about the same money once" or, "that's what the market has said", tell that person to politely go away and come back with something that shows a real and intelligent value based on all aspects of the sponsorship.

Good luck.

Bob Gill is ceo of BrandAdvantage. bobgill@brandadvantage.com