Sponsorship Valuation and Fair Market Value, Evaluation and ROI Demystified
Posted: 6/15/2009 2:41:25 PM by
Carrie Urban Kapraun | with 1 comments
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.
The fair market value of a sponsorship, as generally determined by a valuation, is the market value of the rights and benefits provided by the property, including the value of the association with the property, the reach of the association, and other intangible and tangible benefits the sponsor receives. The fair market value is what a property or sponsor should expect to receive or pay in terms of rights fees. Both a property and a sponsor can determine a fair market value through a valuation. A valuation could be part of a sponsorship evaluation or ROI analysis.
Finally, sponsorship ROI is based on a clear set of up-front objectives and the measured results against those objectives. ROI is usually analyzed by the sponsor, again using information provided by the property. ROI is often tied to sales, but it should also measure return as it relates to awareness, loyalty, enhanced imagery and other non-sales focused objectives as determined by the sponsor. ROI factors in both the rights fee of a sponsorship and the activation spending. A sponsor could have a positive ROI, but still be paying too much in terms of a rights fee for a sponsorship.
With every marketing dollar being scrutinized, in-depth measurement and analysis at all levels and on both sides is the key to the success of a sponsorship.
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Filed under: sponsorship measurement, sponsorship ROI, valuation, evaluation