One of the biggest breakthrough’s in sponsorship management, over the past 20 years, has been sponsorship valuation tools – the ability to validate a brand’s spend on a rights holder in a widely recognized and accepted way.
Valuation tools are great for measuring the effectiveness of sponsorship objectives of Brand Awareness and Brand Positioning, however, I am often asked by clients “How do I value my assets?”
As a rights holder, you are in a weirdly unique commercial disadvantage. By that I mean you aren’t like most other businesses and can easily conduct research to compare your pricing against your competitors. A car manufacturer easily knows how much other car manufacturers are charging and can price and position their offering accordingly. You don’t have that luxury not least of which for the reason that your organisation is often unique in that you may be the only one in the geographical market or region and/or have differing audience demographics to other rights holders (both direct and indirectly competitors).
Additionally, as a rights holder, you don’t normally sell individual inventory – you rarely sell one sign, or one activation. Instead, you package a bunch of assets up, often as a unique offering to help achieve a sponsor’s objectives within a certain budget and time-frame i.e. you offer value over and above the cash and contra that the sponsor provides you.All of that comes together to make valuing your assets a bit of a challenge.
So, how can you value your assets?
To answer this question, I thought back throughout my career and to what I did in order to value my assets and provide a tangible ROI to my sponsors. In doing so, I have come up with three common approaches.
1. USE A VALUATION COMPANY
The first port of call, if you can afford it, is to use a media valuation company. These guys have the resources, tools, formulas and, more importantly, the scope across the market to compare apples with apples and come back with a genuinely grounded value on your assets.
The world’s most renowned is, of course, Repucom who are now Nielson Sports after their recent acquisition. However, a new player in town, and one that a lot of our Australian clients are using, is Futures Sport.
Both of these organisations, and the many more that exist globally, are really focused on valuing assets which have a public facing presence – a media value if you like. But what if you don’t have a media presence OR what if you want to provide a tangible ROI to your partners across ALL assets you deliver to them?
Some of our clients are facing this question because SponServe helps to provide a holistic and tangible ROI across all elements; something which they often haven’t been faced with before.
That’s where a more internal and common sense approach can help and there are two options for you.
2. SIMPLE MARK-UP
This one is obvious and already widely used both in the industry and more widely in business world.
This is simply taking your hard costs (what it costs you to deliver a benefit) and add a desired profit margin to it. Items that this approach can easily be applied to include benefits such as ticketing, hospitality, merchandise or memorabilia.
For example, if you have a private hospitality suite, and it costs you $500 to service it (food and beverage, dedicated staff, etc), and you add a margin of 700%, you would value that benefit at $4,000.
This approach can also work for benefits such as advertising, activation spaces and non-event based signage as well, but mostly as a starting point.
3. WHAT WOULD THE MARKET PAY?
This is the loosest approach, however, probably the most accurate method an experienced sponsorship or commercial manager can use. That’s because, those who have been in the industry for a while have a great feel for what someone would pay for an asset. For example, most commercial directors I know, on a stress test, would all answer within $1,000 of each other around what a line of LED signage is worth. That’s simply a result of their accumulated knowledge of the market and knowing what is too cheap and what is too expensive for an asset.
This same logic can be applied to your un-priced assets – again as a starting point.
After all, at some stage, someone has decided that a total list of benefits is worth $X to a sponsor. As such, they have already sub-consciously valued them.
WHERE SHOULD YOU START?
My approach would be to take your biggest few partners, price out the elements you know such as ticketing, hospitality etc and value them using the simple mark-up method. If you have valuation reports, use a baseline value for the actual branding elements and apply those numbers to those assets.
You will then be left with a handful of un-priced assets. You can then reverse engineer those assets against what is left of what these partners pay and come out with a starting point price for each asset.
If an asset is priced at a point where you think “I couldn’t sell that for that” then it is over-priced. Conversely if you think “That’s a steal!” then it’s probably under-priced. This is where the common sense approach and knowledge of an experienced sponsorship professional comes to the fore.
Remember, however, you often won’t be sharing the individual line item costings of all benefits you offer to a sponsors. Instead, you are using individual prices to build a total portfolio and ROI. As such, it doesn’t need to be an exact science so don’t get too hung up on it.
HOW TO BRING IT ALL TOGETHER
Ultimately, the best way will be to have your assets properly valued. Our clients who make the most out of their sponsorship programs are the ones who have invested time and money into having their assets professionally valued. It is a worthwhile investment, however, it can also take time to complete the project.
My thoughts are that I would start with the basic 2 ways of valuing and, over time, value your other assets. At least then you can provide a quantifiable ROI figure to your sponsors which takes into account all elements of their package and not just those for the big guys who get better brand reach. This approach positions you well to be able to provide real value to any sponsor who has objectives outside of Brand Awareness and Brand Positioning.
Mark Thompson // Managing Director
Mark specializes in sponsorship and diversified income strategies and has used this expertise across the Community, Semi-Professional and Professional Sports sectors. He combines hands-on experience in managing the expectations and obligations of sponsors with marketing and stakeholder engagement to deliver outstanding results.
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