Price is Right: How to Better Justify to Companies the Price of a Sponsorship
Tue, 11/02/2004 - 14:09 — Dan Migala
The crossroads of virtually every sponsorship negotiation is when the cost of the package is introduced into the negotiations.
Whether this is done during the initial meeting or towards the end of the process, introduction of price is often a difficult process.
It doesn’t have to be.
The aim of this Report is to showcase insights from leading sponsorship executives in their own words on how to more effectively introduce pricing into negotiations and ultimately improve the chances of securing a signed contract.
Sports Marketing Consultant and Former Coca-Cola Sports Marketing Director
“The first thing I would point out is that nine times out of 10 the rate card is a joke. Properties need to understand that pricing isn’t always the same and it depends on whom you are selling to.
For example, signage to Coca-Cola is worth nothing but signage to a local business is worth a ton.
People see the Coca-Cola logo a number of times a day and don’t need to see it again at the game that night so the last thing Coca-Cola wants or would pay for is more signage. It is important for the Coca-Cola brand to be there but you don’t need to see it again in the same format. This is huge part of understanding pricing because it is simply understanding what the client needs and what their value system is.
If properties understand I’m not interested in signage and assign some price to it anyway it is ridiculous and a great sign to the sponsor that the team is putting their needs ahead of the sponsor’s.
My advice to properties is to understand what sponsors want to accomplish and suggest ways to be more valuable. I like to see when price is introduced as more of a discussion of hypothetical examples and not just ‘here’s another sign we can put your logo on and here’s the rate card price.’
Sometimes on this side of the table, a property can box in a sponsor to saying “no” a lot more quickly if they introduce price before truly listening to the client and their objectives.
The bottom line is something is worth what somebody is willing to pay for it. Anything is worth one thing to one person and another value to someone else. It’s that simple but properties, even though I believe they understand this, don’t always show us they do through their actions.
A static piece of inventory might cost $100,000 but it will cost the sponsor another $150,000 to activate it so the true cost on this end is really $250,000. The problem is that I know that many teams know this but tend to forget it when they start talking dollars.
It is almost a joke sometimes the way teams present the value of a deal with a generic powerpoint presentation that doesn’t speak to the needs of anyone.
In a perfect world, I would like to see a team say to me that instead of wasting time for both of us with a generic powerpoint deck that is going to be changed anyway, why don’t we spend a day talking about this deal and put a customized program together that makes sense for both of us? Is it that hard to do? No, but it speaks volumes on this side of the table and it really creates an environment where price is almost secondary to the ideas and now you’re got me engaged and vested in the creative process which is not always easy to do.”
Vice President of Sponsorship
Relay Sports & Event Marketing
“Many executives might argue that you should introduce price first to qualify someone but I would beg to differ. A property’s true role to a sponsor is to serve as a solutions provider. If a property can deliver solutions, the dollars become secondary.
We hear from our clients all the time that if you bring me a good idea, I’ll find you dollars. It doesn’t always mean there will be the same amount of dollars but it is a case of justifying dollars and it will be that much easier to get a deal done.
Price should be introduced after the solution has been provided. The value of the sponsorship is really in the solution provided to the sponsor and not just what the property thinks it is worth.
In a perfect world, we sit down for a few hours to talk about needs in advance but we don’t have time for that. I would prefer that a property send me a basic overview of the basic packages available and what conceptually they can do for us. If I’m interested, then it behooves us to have the property provide an overview and have a meeting to talk about issues that the property can provide solutions for.
The beautiful thing about being a sponsor is we have more than one place to spend money to reach a target audience in any market. Our final decision is to pursue what is the best delivery of objectives for the best price.
If I were working for a property, I would think of sponsorship executives as investment bankers. They have dollars to invest but they also have thousands of places to put their money. They will put those dollars where they are convinced they will find the best value. All the property has to do is provide them the best solutions and best value for their investment.
The way we determine the value of a sponsorship is really two-fold.
First, there is the menu price of a sponsorship or the rate card that represents the value a property is placing on the package.
Secondly, there is the marketplace value or a comparison of what similar inventory is being sold at in the marketplace.
Somewhere in between these two figures is where we price the sponsorship and place a number on s what we are prepared to pay for it. We’ll often say in a negotiation that ‘I can’t tell you what you should sell this for but here’s what I can pay for it.’ A property has to make the decision to sell this to someone else and gamble that they can find someone to sell it for a higher price or have me buy it.
There is no right or wrong decision here for the property because pricing of sponsorships is a lot like airline seats. There is no true reality on pricing.”
Senior Vice President of Sports Marketing
"The business climate has changed over the last 10 years as more companies have become involved in sports sponsorship but the price has increased and with it, expectations from the sponsors have changed dramatically. Just 10 years ago, if a company had a deal with a team, it was exciting and thrilling. Now it's under more scrutiny to prove value for the investment and this change directly correlates to the changes in how sponsors value a sports sponsorship.
We may see a day where companies send out request-for-proposals to properties saying here's what we need from you if we are going to do something with you. The important thing for properties to remember is it doesn't have to just about sales. Everyone is looking for sales but properties need to be aware of branding and other assets available to activate a relationship. When they understand this, the challenge is to justify and be flexible with branding components based on what the sponsor needs and establish a value that is consistent with the offering.
Properties need to understand that each market and each category is different and the bottom line is a sponsorship is worth what a sponsor will pay for it and not what the team wants to sell it for. This is a tough lesson for the property because it forces them to truly understand their position in the market and the category's position in the landscape.
The bottom line is that if teams deliver solutions then we'll spend money. We're looking for solutions and that's what properties need to understand. Sponsors want properties to talk solutions first and then price.
Properties need to understand the category and be prepared on the in-depth business
issues of the client and not just do some basic Internet searches. Properties should come in with a package and a budget to show flexibility that meets a need for us. If a property can do this effectively, they can change the mood of a room instantly. This shows us that you are willing to treat us like a business partner.
Price is very easy when I'm buying what I need.”
This story was originally published on Aug 1, 2004.
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