Latest Thinking from IEG
IEG’s sponsorship experts provide unique perspective on the latest industry developments, news and trends. These posts will make you think, challenge conventional wisdom, give you new ideas, and spark discussion.
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Sponsorship Valuation and Fair Market Value, Evaluation and ROI Demystified
The distinction between sponsorship evaluation, valuation and return on investment is often an area of confusion for my clients.
Evaluation is a continual and important part of any sponsorship. From a sponsor’s perspective, a partnership should initially be evaluated against other opportunities and should consider—among many factors—the sponsor’s objectives, audience, budget, geography, timing, fit with messaging, etc. Ongoing evaluation of the relationship should be done on a regular basis to ensure it continues to fit with a sponsor’s objectives, budget, etc. Evaluation is generally done on the sponsor side with information provided by the property in order to properly evaluate the opportunity.
Filed under: sponsorship measurement, sponsorship ROI, valuation, evaluation
What Should Free Stuff Be Worth?
A marketer calls up the rep from a concert series he’s sponsoring and says he has a great opportunity for her. His company is launching a new product, and he’d like to distribute a FREE sample to all attendees for the next concert. However, this “generous” sponsor doesn’t have sampling rights built into his contract. What should the rep do?
A marketer calls up the rep from a nonprofit her company both sponsors and donates to and says she’d like to hold a one-day volunteer event for 200 employees. The nonprofit usually accepts only volunteers who make a six-month commitment to volunteering, due to the training involved. The nonprofit rep wants to provide a quality volunteer experience—including breakfast, lunch and a volunteer T-shirt—but isn’t sure she wants to deploy the dollars and additional staff if most of those volunteers won’t be returning. What should the rep do?
I have some thoughts, but would be interested to hear from you first.
Filed under: negotiating, selling, servicing, valuation, in-kind
See a Penny, Pick It Up....
Man walks into a bar, hands the bartender a penny and asks for a beer. The bartender throws the man and his penny out on the street.
Man walks into a bar, hands the bartender two pennies and asks for a beer. The bartender throws the man and his pennies out on the street.
Man walks into a bar, hands the owner three pennies and asks to buy the bar. The owner shakes his hand and runs out the door with his three pennies. The man fires the bartender and pours himself a beer.
Filed under: valuation, negotiating
The Digital Achilles Heel
Ever found yourself in a relationship where the person you’re seeing has a wonderful quality you adore and over time you come to find that very same quality is what drives you insane about them? Well this seems to be the song and dance digital media properties and sponsors find themselves in when trying to strike common ground and get a deal done.
Those of us digital nerds who keep up with the trials and tribulations of the digital frontier know that monetization models are lagging well behind the technological developments of this space. What we see more often than not is a digital property trying to communicate its value out in the marketplace with little more than media equivalencies to rely on. That said, when a digital property tries to sell “sponsorship” of its platform, the story becomes even more convoluted as sponsors don’t know entirely how to view the opportunity. The drill usually goes something like this:
Filed under: new media, packaging, selling, valuation, digital media
Was This Property Too Flexible?
We hear that a major sports property granted its longtime official airline partner a free sponsorship recently, when faced with the prospect of losing the sponsor. This news leaves us conflicted.
We have just heard from sponsor participants at an IEG round table that they don’t believe properties are being flexible in helping sponsors adjust to difficult times. We also have been reporting in IEG Sponsorship Report on ways for rightsholders to help their partners reduce cash commitments. So wasn’t the property in this case following the spirit of what we recommend? Perhaps.
Our concern is twofold: First, indications are the gratis deal was prompted mostly by the desire to save face and maintain a full sponsor roster for a property known as a smart seller—not a justifiable reason in our book. Second, a completely free sponsorship represents excessive “flexibility” that could impact other properties. Not that we anticipate giving away sponsorship to become the standard expected by sponsors, but having it out there puts further pressure on properties at a time when they are struggling mightily themselves.
Filed under: selling, valuation, negotiating
Kindergarten for Sponsorship Pros: Sharing Is Good
In my previous blog post, I discussed why it would be a good thing for sponsorship buyers and sellers to be more open about what is paid for deals—specifically that it would provide the industry with guideposts to determine the relative health of properties, property segments and the overall medium.
But there is a bigger reason why transparency—to the extent it doesn’t divulge proprietary, competitive information—would be extremely beneficial. And this is not just the opinion of a sponsorship journalist with a need to know. I first heard this argument espoused by Stuart Schwartz, a Coca-Cola executive in the ’90s who was heading up the company’s early efforts at establishing a model to measure value and return on investment.
Here is the argument: For sponsorship to benefit both parties, it should be an “efficient market,” which is defined as a market where purchases and sales result in even exchanges of value. One of the four characteristics of an efficient market is: Price information is widely and cheaply available to buyers. The sponsorship marketplace does not have that characteristic, and thus is not efficient.
Filed under: evaluation, sponsorship ROI, valuation, contracts
“Terms Of The Deal Were Not Disclosed”
Those seven words have been a frustration for everyone in sponsorship for a long time.
While recognizing the need for specific deal terms to be kept confidential for competitive reasons, the lack of transparency when it comes to what was paid for a sponsorship—even in general “ballpark range” terms—has been a roadblock to furthering the interests of both sponsors and properties for decades, primarily in establishing what economists refer to as an “efficient market.”
Filed under: valuation, negotiating