Sponsorship Valuation: 4 Challenges Facing the Industry Today
It’s 8am. Coffee in hand, a CMO commences her Monday morning inbox clear-out when an enthused Head of Marketing Strategy appears, asking for a budget boost to accommodate a new sponsorship opportunity. The CMO makes clear that she’ll give approval upon proof that it’ll drive "measurable profitable growth".

So what now? How does one prove the potential for “measurable profitable growth”? And what challenges might be faced along the way?

The good news is that measurement is a hot topic, with the Synergy Decisions white paper the latest piece of literature to put sponsorship valuation under the microscope. It appears that the challenges in sponsorship valuation are better understood today than ever before.

Since an ANA survey revealed 65% of client-side marketers are not taking the necessary steps to determine the results of sponsorship and event marketing programs, the ‘holy grail’ that is sponsorship measurement has been in the spotlight. McKinsey & Company, the management consultancy, outlined five metrics crucial to scoring sponsorship in any marketing ROI program. Self-proclaimed “industry leaders” have gone one step further with the launch of evaluative measurement tools which are starting to plug the measurement deficit. Indeed, over the past year, Synergy has been implementing this approach with clients to drive quantifiably better outcomes, in one case saving a client around £400k during negotiations for a new property by identifying which rights would (and would not) drive maximum value.

However, the headroom for improvement is vast. In the aforementioned article, McKinsey & Company also highlight that executives who implement a comprehensive approach to gauge the impact of their sponsorship can increase returns by as much as 30%.

To do so, sponsors need to apply a rigorous and credible measurement system which answers the (largely unaddressed) challenges facing the industry today:

1. Making Measurement Value-Based

Using cost-based measures like media exposure equivalency, most tools on the market today only hint at understanding sponsorship value. Calculating equivalent advertising spend for elements such as hospitality, access to talent, the use of a logo and exhibition space is a cost – not value – based approach.

Effective sponsorship measurement cannot use cost-based measures to calculate value. Instead, models must isolate the value of incremental sales, profitability and overall net present sponsorship value.

2. Understanding Sponsorship Value is Contextual

A sponsorship property's value is entirely contextual; not inherent or intrinsic. Most people are asking the wrong question. For them, it’s about "What is this sponsorship property worth?" rather than "What is this sponsorship property worth to my business if I use it in this way?". The fact is, the exact same property would be worth £A to Aviva, £B to Budweiser and £C to Cisco. And it goes without saying that the exact same property would be worth a lot less if you did nothing with it, as opposed to if you activated it heavily through all available channels.

Effective sponsorship measurement cannot value a menu of “stuff” including IP, naming, branding and hospitality. To truly understand the value of rights on offer brands must understand how those rights enhance their ability to create a brilliant campaign and tell their brand story through all available Pathways to Value (the different ways that a company is using sponsorship to create value).

3. Capturing and Comparing the Ways Sponsorship Creates Value 

Sponsorship is not a channel in its own right, like advertising, PR, digital, mobile or experiential; rather, sponsorship is an asset that is used to make all those channels more effective. It creates value across a multitude of channels for which there is no common measurement mechanism. This is a challenge, since not all Pathways to Value are obvious and different channels have different accepted principles and measurement metrics.

Effective sponsorship measurement cannot compare and aggregate the value of sponsorship based on different channel metrics. To reach an apples to apples comparison across different channels requires knowledge of the key channel KPIs (e.g. accounting for the impact of passion and engagement, identifying true awareness uplift in the target audience as opposed to general population) and a sophisticated approach to bringing them together in a single value-based metric.

4. Focusing on the Process and Not Just a Number

There is no magic number or foolproof formula which can, with certainty, tell a brand whether to invest in a sponsorship asset or not, yet the market approach to sponsorship measurement today is more ‘black box’ than ‘open book’.

Effective sponsorship measurement cannot take place in a ‘black box’. It must instead be used to stimulate strategic discussion with flexible inputs and assumptions displayed in a user-friendly way.

The race is on to close the measurement gap. Industry challenges are being addressed and deals are being done with a better understanding of sponsorship effectiveness than ever before. That said, a material measurement gap remains.

Watch this space.