The Field of Research
Mon, 10/29/2012 - 17:40 — AJ Maestas
By AJ Maestas
If you’ve seen “Field of Dreams” even once, you know the scene. Terence Mann, the reclusive author modeled after J.D. Salinger, attempts to convince the owner of a magical farm-turned-baseball-field not to sell his property. “Ray, people will come Ray,” says Mann, played by James Earl Jones. “They'll come to Iowa for reasons they can't even fathom. They'll turn up your driveway not knowing for sure why they're doing it. They'll arrive at your door as innocent as children, longing for the past. Of course, we won't mind if you look around, you'll say. It's only $20 per person. They'll pass over the money without even thinking about it: for it is money they have and peace they lack.” Mann’s monologue continues for a bit, and finally ends with the indelible line, “Oh... people will come Ray. People will most definitely come.”
Wonderful as it may be in the movies, the entire thought process behind that speech is about as antiquated as a four-man rotation. It used to be acceptable in sports marketing to develop what seems like a great idea, arbitrarily assign a price and some numerical expectations to it, and then have faith that the entire concept will be embraced and succeed. Unfortunately, what works so well in the movies doesn’t necessarily work in real life, and as such, the sports marketing field has had to adapt. It has done so, especially in recent years, by embracing research.
If we strip away the mysticism and romance from “Field of Dreams” and place the story in the context of a modern reality, Ray Kinsella would now do research to determine whether people actually will come to his field. He would do research on price elasticity to analyze how much attendees will be willing to pay ($20 to see legendary – and deceased – baseball players come walking out of a cornfield seems a little low). He would examine the demographics of his potential attendees to determine the best ways to reach them. With research, Ray Kinsella would rely on actual data, instead of blind faith, to determine how he could keep ownership of the field and pay off the bank. Research would keep his Field of Dreams alive.
Sure, that’s not quite as inspiring as Terence Mann’s message, but research is being utilized across the sports landscape. Brands, properties and agencies alike are all hiring companies like Navigate and our competitors to help inform their decisions. Some need valuations, which are essentially akin to a real estate appraiser assigning a value to a house, except of course we’re determining the fair market value of sponsorships. These are being used to sell, to buy, to recap, and renew. Others are conducting custom market research to better understand fan bases and to get a better grasp on how sponsorships are moving the needle on the metrics that are important to brands. Are fans who are aware of a sponsorship more likely to purchase the sponsor’s products? Are they more likely to recommend the sponsor? Are their views of the sponsor’s brand more positive than those held by unaware fans or the general population? These and many more questions are being examined, up to and including the holy grail of research – ROI. Is there a return on investment? The answers to these questions are driving the decisions behind six- and seven-figure deals that have a demonstrable impact on brand budgets and property revenues. For those of us in the sports industry, the results are often fascinating.
In the coming months, we at Navigate will share some of our case studies and examine some of the more topical sponsorship-related issues as they arise. Our hope is to provide insights that are both interesting and informative, whether that comes from our past experience, our proprietary methodology or our normative database. We also hope our contributions will generate discussions among the readership of the Migala Report, which we know extends far and wide.
One quick example to conclude this first installment is a nugget from our normative database. When examining all of our valuation work, we see that the average difference between the fair market value of sponsorships and the fees of those sponsorships is plus-20 percent. Or in other words, brands tend to get a good deal. Keep in mind, our methodology is designed to produce fair market value, meaning that if the value of a sponsorship matches the fee, it is a fair deal and both parties should be satisfied. The fact that there is an average lift of 20 percent makes us wonder: Is this because properties are simply not pricing their inventory accurately? Is it because properties feel the need to over-deliver to attain and then retain sponsors? Does this mean brands should be unhappy if they’re not getting 20 percent more value than the fee? Our answer to the last question would be an unequivocal no; as long as the value matches the fee, both sides should be happy. But as for others, we’re as curious to discuss the answers as we hope you are.