Is A Sponsorship Sales Agency Working Entirely On Commission A Good Idea?
Posted: 10/13/2009 10:09:21 AM by
Jim Andrews | with 0 comments
The City of Indianapolis recently jumped on the municipal marketing bandwagon, hiring agency Third Street Partners to develop a sponsorship plan and broker deals with prospective sponsors.
The five-month old firm was able to beat out more established agencies for the business, and we’re guessing a big reason for that—in addition to Third Street’s local roots—was its willingness to work entirely on commission, with no retainer or expense coverage.
According to the city’s Web site, the agency will take a 15 percent commission on deals it lands during the first two years of the contract and 10 percent on sponsorships signed during the final five months of the agreement, which expires at the end of 2011.
The municipal marketing space may see more of these types of arrangements because they give government and political leaders cover to say they are testing the sponsorship waters at no risk to taxpayers. If an all-commission agency doesn’t land any deals, the government entity isn’t out five or six figures in retainer and other fees, and avoids looking wasteful in a time of deep budget cutting.
Other properties looking for sponsorship sales help may also be tempted to contract with a commission-only agency. The downside for cities and others choosing the no-cost route is that it most likely rules out working with a larger agency with more experience, as established sponsorship firms traditionally do not work on a commission-only basis unless the property is of such a stature that significant sales are almost guaranteed. Most municipal bodies and smaller properties won’t fall in that category for a large firm with overhead and other costs to consider.
For municipalities, it’s not because they don’t have compelling benefits to offer, but rather because their deals usually take a long time to develop and more importantly, can face numerous obstacles from public opinion to bureaucratic inertia that may prevent them from getting done in the end.
A smaller, leaner agency is in a better position to work without a retainer/expense net because it may be able to make a profit strictly off of the “low-hanging fruit” of city deals—pouring, vending and other sales rights. It will be interesting to follow Third Street’s and Indy’s progress in this area and to see if some of the other municipalities with current RFPs choose to follow suit.
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Filed under: government/municipal, selling, agency