THROW YOUR "RATE CARD" IN THE GARBAGE
Fri, 05/30/2014 - 08:43 — Steve DeLay
If you negotiate by rate card, you are sure to lose.
The definition of rate card from www.businessdictionary.com is:
Printed list of advertising rates charged by print and broadcast media. Rate cards, usually, are for guidance only because the actual charges vary greatly according to the bargaining power of the advertiser.
Radio stations, TV stations, outdoor companies and now even on-line advertisers are famous for negotiating their rate card. It seems logical. If an advertiser buys more time, they get a better rate. That's because these advertising mediums have thousands, and, in the case of online ads, hundreds of thousands of spots/spaces to sell.
I've worked with teams who have set 'rate cards' for their various sponsorship inventory pieces. They will set a price for TV spots based on TV ratings. They will set a price for arena/ballpark signage based on attendance or it's location in the building and how often it gets on TV.
Pricing to an extreme
A few years ago, I talked with an MLB team who had recently opened a new stadium. They priced their left field wall signage higher than their right field wall signage because their team had more right-handed hitters and figured more balls would be hit to left field which would in-turn have more eyeballs following the ball and seeing the sign and the more balls hit off the left field wall, the more times that sign would be on TV highlights.
I asked what would happen if those right-handed hitters were traded in mid-season or if they would give the sponsor a discount in year two or three if the right-handed hitters were traded in the off-season. The Sponsorship Sales Manager stuttered and sheepishly mumbled, Hmm, never thought of that. It seemed logical when we did it.
Ironically, that team's attendance dropped dramatically after the first year of their new ballpark. Their TV ratings also dropped. When the initial sponsorships came up for renewal, because they had sold based on eyeballs and ratings, they had to drop their price dramatically anyway just to keep the sponsor. Their sponsorship dollars dropped by 20-30% after the initial three year deals.
SPORT SPONSORSHIP vs. REGULAR ADVERTISING
Most teams price their sponsorship elements based on a rate card, just like radio, TV and outdoor. That's backwards. Why in your right mind would you want to put yourself in a position to be compared to these other advertising options?
Even worse, I've seen many teams with a 'rate card' and a 'must-get' rate. Let's compare that to buying a car. There is a MSRP on the window sticker of a new car. Anyone who's ever bought a car knows that's the starting HIGH point for the negotiation. If you paid MSRP for a car, you'd be looked at as a fool. You negotiate hard, the dealer offers rebates, you dicker some more, threaten to walk out and buy from the competition or just not buy at all. I don't know a soul who really enjoys the process of buying a car.
By a team establishing a rate card and then a 'must-get' price, you're no different. Like the car salesperson, the sponsorship salesperson views the 'rate card' as the HIGH point of what the team would like to get. They know the 'must-get' rate in their mind and know that if they get close to that, they can go back to their Sponsorship Sales Manager and try to talk them in to accepting the price the advertiser is offering. Unless your team is winning titles, 95 out of 100 times, the team accepts the lower price.
I've consulted with teams where I heard the salesperson tell a propsect, "To make this deal work, I gave you a 50% discount on our rate card." and the sponsor respond "Oh, it wasn't really worth what you were trying to charge anyway." I almost strangled the salesperson right there in the meeting.
This process is pure lunacy and virtually guarantees the team not maximizing sponsorship revenue.
Teams have three distinct differences from regular advertising.
- Advertisers are buying an association with the team and a connection to the team's fans. Ideally, if the team is popular, that allows for the opportunity to charge a healthy premium over the typical advertising market rates. There is no such thing as a 'connection' to a radio station's listeners or car drivers who commute on a certain highway every day.
- Teams have the ability to effectively use their assets to help the sponsor accomplish their goals. This could mean traffic driving promotions to retail, B2B relationship strengthening, highly visible community programs or employee rewards. Short of putting an employee's picture on a highway billboard and thanking them or sending their most popular DJ to a local store every day for a month to sign autographs, other advertising mediums are only about brand awareness.
- There are a limited number of team sponsors. Radio and TV stations have thousands of ads to sell. There may be millions of on-line banner ads. Those mediums are selling space, not sponsorships. They need thousands of advertisers to fill all that space so have to negotiate. With the right packages, a team should have 50-75 sponsors, at a variety of different levels, and at much higher prices. Limited means more demand and naturally higher prices. Will you have to make more sales calls, certainly but you'll generate more revenue and because of fewer sponsors, be able to spend more time with each, helping them improve their bottom line.
DO YOU HAVE THE GUTS?
Your first question might be, "If I toss out my 'rate card', how will I know what to charge?" Fair question. It starts with planning and some guts. Let me give you an example.
When I was CMO at Mandalay Baseball Properties, we bought a AAA team in Oklahoma City, OK. The team was playing in a 15 year old stadium and drawing about 30% capacity. For us to make the purchase price make sense, we had to dramatically ramp up sponsorship revenue and ramp it up fast. We couldn't wait a year for our ticket sales and marketing efforts to kick in. We had to do something now.
The previous ownership of course had been selling via 'rate-card'. They had 100+ sponsors at all different levels with signs everywhere. We knew we couldn't just raise prices by 25% and make sales calls. We'd be laughed out of offices all over town.
We took three key steps:
- We added new inventory. We launched a new style of game program and also invested in a new LED signage system, a 10'x 185' LED board in left field. These new elements had never been seen before in the market so nobody had a pre-conceived notion of what they were worth.
- We packaged inventory. We no longer sold off a menu and let sponsors pick elements. In order to reduce the number of sponsors, we packaged other smaller signage with the game program advertising or LED board. We combined signage elements with other advertising, employee impact elements, tickets and business driving promotions. Prospective sponsors couldn't pick and choose what they wanted. They got all of the elements. This way, when someone asked us to break out the price of each element, we simply said, 'We can't. You can't buy them individually.'
- We stuck to the package price. There was no negotiating on price. Every sponsor in the 'Signature Package' got the same elements and paid the same price. How they used each element might be different but they all received the same stuff. This eliminated negotiation from the sales process. Oklahoma City was a small enough town that all the key business leaders talked to each other. We didn't want them asking each other what they paid for their sponsorship with the team. Go back to the car buying example. If you felt really good about buying your new car and then found out your neighbor bought the exact same car but paid 10% less, all of a sudden, you no longer feel good about your car and you're pretty upset at the car dealer. Why would you want a sponsor to no longer feel good about their sponsorship purchase and be mad at the team?
We of course, also had to tell a story about our successes at other Mandalay teams, how we were going to sell a boatload more tickets to games (which we did) and how we were going to execute and deliver on the sponsors' objectives.
Did it work? You better believe it did. Before we threw a pitch the next season, we had 17 sponsors spending $60,000+ and more than doubled sponsorship revenue while reducing the number of sponsors to 26. I left Mandalay after that first year but the team went on to increase sponsorship revenue by another 40% in the second year. Don't just think, 'that's just minor league baseball.' This approach has set records for sponsorship revenue, not only in MiLB but in the NHL, NBA and even in a basketball recreational facility where I helped a friend do $1M+ in sponsorship revenue when he had expected $200,000.
It took guts to price the sponsorships the way we did but we believed in the impact they could have. There were plenty of nerve-racking days during that selling season as we had plenty of people say no to us. However, we knew we didn't need a lot of yes answers and we got them.
Your 'rate card' is frivolous. Your prospect has their own perceived value for your inventory if you set yourself up to be compared to other advertising mediums. Don't let it happen. Package your inventory so it can't be compared. Present it in a way that tells a story and go make sales call after sales call. You'll get the right buyers at the right price and see astronomical growth in sponsorship revenue.
Steve DeLay has spent more than 20 years helping teams in MLB, MiLB, NBA and NHL sell tickets and sponsorships. He is co-author of The Ultimate Toolkit to Sell the Last Seat in the House with Jon Spoelstra, a complete ticket sales, marketing and training system for teams and colleges. He can be reached at firstname.lastname@example.org or follow him on Twitter @SteveDeLay2.