Sports Management & Marketing

What’s your sports sponsorship worth?

youngsports 2014. 5. 13. 18:39

Five metrics you need to have to see if your sports sponsorships are paying off.

 

Dan SingerDirector

 

How much is it worth to sponsor Tiger Woods or Lionel Messi or Rafael Nadal? What’s the payoff for being a sponsor of the Olympic Games or the World Cup? Considering the huge amounts being spent on sponsorships, companies have surprising difficulty answering these questions.

Corporate spending on sponsorships in the United States is expected to grow to $20 billion in 2013—equal to one-third of total US television advertising and one-half of digital advertising. Yet industry research reveals that about one-third to one-half of US companies don’t have a system in place to measure sponsorship ROI comprehensively. In our experience, executives who implement a comprehensive approach to gauge the impact of their sponsorships can increase returns by as much as 30 percent.


US companies that don’t have a system in place to measure sponsorship ROI comprehensively


To manage sponsorship spending effectively, advertisers need to first articulate a clear sponsorship strategy―the overall objective of their portfolio, the target demographic, and which stages in the consumer decision journey (awareness, consideration, purchase, loyalty) sponsorships can support. Companies should then implement a complete Marketing ROI program based on five metrics to measure the performance of sponsorship spending:


1. Cost per reach. Marketing executives should evaluate cost per reach on a quarterly basis using data from internal sources or the sponsorship agency. Costs include not only rights fees but also activation costs (e.g. promotional booths and merchandise) and advertising. Reach is based on the number of people exposed to the sponsorship in-person as well as through media such as TV, radio, and print. Reach calculations should favor exposure to your target demographic over total numbers.


To monitor worldwide sponsorships using cost per reach, one retailer built a database using cost and reach data from its agency, the sponsors, and publicly available sources. Analysis revealed that 15 percent of its properties were twice the average cost per reach as others. Some sponsorships (such as a premier sports team) had high costs while others (a music concert, for instance) delivered low reach. The database also identified the sponsorships that did not reach the advertiser’s target demographic. With these insights, the company reallocated its sponsorship dollars to better vehicles that increased overall reach by 20% at the same cost.


2. Unaided awareness per reach. We find that companies often spend a lot of money to acquire sponsorship rights but very little on activation—that is, the marketing activities (such as promotional booths and merchandise) to promote the sponsorship. IEG research from 2011, and our experience across clients, indicates that for every $1 spent on sponsorship rights, companies typically devote an additional $0.50 to $1.60 to activation. But, many corporations skimp on activation, thereby missing huge opportunities to magnify a sponsorship’s impact on sales or awareness. one US consumer-packaged-goods company, for example, allocated 80 percent of its sponsorship budget to rights fees and only 20 percent to activation. After analysis, it found that increased activation resulted in greater unaided awareness and higher brand recall. With this insight, the company shifted resources from its low-performing properties to increase activation for its standout sponsorships, increasing unaided awareness of them by 15 percent.


3. Sales/margin per dollar spent. Linking sales directly to sponsorships is typically challenging, but two approaches can help to quantify it. The first method is a two-step approach that ties spending on sponsorships to key qualitative marketing measures such as unaided awareness, propensity to buy, and willingness to consider. It then tracks the impact of each variable on short- and long-term sales. The second approach, based on econometrics, uses data over an extended period of time on spending and reach (among a host of other media variables) to establish links between sponsorships and sales to isolate the impact of sponsorships from other marketing and sales activities.


A handset manufacturer, for example, followed the first method, setting up a quarterly consumer survey to measure the impact of sponsorship on sales. By conducting advanced analysis on the dataset, the company was able to identify the sponsorships that were truly driving willingness to consider, which it then linked to sales. The analysis showed a 10X ROI difference between the top quartile and bottom quartile sponsorships. The company now uses this method to help with negotiations during yearly reviews with its sponsorships.


4. Long-term brand attributes. Sponsorships have the potential to reach beyond short-term sales to build a brand’s identity. Given brand strength contributes 60 – 80 percent to overall sales , this benefit is critical for sustained, long-term sales growth. A qualitative assessment or survey can help companies identify the brand attributes that each sponsorship property supports. Analysis of those results help marketers determine which sponsorships are reinforcing a common brand theme. The handset manufacturer from the example above used surveys to determine that a handful of its sponsorship properties were misaligned with the brand attributes it wanted to convey; some had a negative ROI. The advertiser shed the sponsorships with low ROI and developed new messaging and an activation plan for the successful sponsorships.


5. Indirect benefits. Sponsorships may stimulate indirect sales—for instance, when advertisers host executives at sponsored events or when they’re part of a balance of trade commitment. Therefore, any analysis of sponsorships must also account for these indirect benefits. Companies often either neglect or overestimate these sources of revenue when calculating ROI. A financial institution, for example, used its sponsorship of a golf tournament to host clients for its wealth management business. Analysis revealed that the impact of the tournament on indirect sales covered the sponsorship costs, making it one of the most effective sponsorships in the portfolio.


Sponsorships have become an integral component of marketing strategy. Yet many companies still do not effectively quantify the impact of these expenditures. But a systematic commitment to a menu of analytics approaches can executives can identify sponsorships that create value and those that just don’t live up to their names.