5 Sponsorship Negotiation Mistakes that Hurt Your Bottom Line (and Make You Look Dumb)

Tug o WarYou’ve got a sponsor interested in your property. You must have done a few things right, and congratulations for that. Unfortunately, “interested” does not equal “contract”, and the path from one to the other can be anything but a straight line.

It’s pretty typical that there is a bit of back and forth. Can we do this? Can you offer that? On and on. You just keep beavering through it until you’ve got a deal you can both live with and then formalise it.

There are, however, a few mistakes you can make that can make you look like you really don’t know what you’re doing, and others that will undermine your financial success. These are the five mistakes I see over and over.

Agreeing to exclusivity too low

You’ve got a good little festival, and a potential sponsors who wants to come on board. You’d like them as a mid-level sponsor, but they want to come in right at the bottom, with all the other rats-and-mice sponsors. And they’re demanding category exclusivity. Or maybe your senior executive has done some handshake deal with a buddy for a much-too-small sponsorship, and they’re expecting exclusivity along with it.

Either way, don’t do it.

Category exclusivity stops you from selling to other sponsors in that category. Period. You might be happy to get $4,000 from that local community credit union, but that happiness will disappear quick-smart when you realise you could have sold major sponsorship to a national bank for many times that. This mistake has costs sponsorship seekers around the world millions upon millions of dollars.

To avoid this issue, you need to decide two things before you start selling sponsorship:

  • At what dollar value will you confer category exclusivity – eg, you won’t provide exclusivity for any sponsorship valued at less than $X per annum. This threshold should be set around your mid-range of pricing. So, if you’ve got rats-and-mice down to around $5k and your biggest sponsors are at $100k, you might make that threshold around $50k.
  • Which categories you simply won’t sell for less than that threshold. For instance, if you’re running a renovation expo, you could decide that you won’t sell to a hardware chain or financial services company for less than $X per annum, and that will get them category exclusivity.

The competition ploy

“If you don’t commit to this sponsorship today, we’ll be selling it to your competition.” 

With all of that choice, do you really think a sponsor is going to want to enter into a contract and have to do business with someone who starts the relationship with an ultimatum?

You might as well tell them you’re going to hold your breath until they commit, because you’ll get the same result.

Bonus points for…

“We met with them last week, but held them off pending your decision.”

If the sponsor doesn’t respond to that with a visible eyeroll, you can be assured they’re doing one on the inside.

Do you know how many sponsorship opportunities sponsors have? Literally millions. Many sponsors having thousands of unsolicited proposals sent to them every single month. 99.99% of the time, whatever you’re offering could be easily replaced by something else in their inbox.

And with all of that choice, do you really think a sponsor is going to want to enter into a contract and have to do business with someone who starts the relationship with an ultimatum? You might as well tell them you’re going to hold your breath until they commit, because you’ll get the same result.

How much do you think it’s worth?

What’s the most difficult, tedious, and crappy part of sponsorship? Pricing. No question about it.

Some sponsorship seekers have decided that the way around it is to do their pitch, and when the sponsor says, “What’s the bottom line?”, they reply, “How much do you think it’s worth?”

At this point, the sponsor will be trying to work out if you’re inexperienced, lazy, or just not very bright. If you’re lucky, an interested sponsor will tell you to go away, come up with a price, and get back to them. Others will take advantage and low-ball you.

Tedious and crappy as it may be, you have to put a price out there. You can find the whole process in The Sponsorship Seeker’s Toolkit 4th Edition, or get a good running start by reading “Sponsorship Pricing Basics”.

Discounting

Once you’ve put a price on your offer, never EVER discount. Negotiate, sure… but don’t discount.

Negotiating assumes that the price was fair for what you offered. If they want a lower price, you can negotiate to a commensurately smaller package of benefits. Or you might negotiate a somewhat lower price per annum for a longer contract. Either approach is completely fair.

Discounting is simply lowering the price for the same offer. It starts from the premise that you are either overpriced for what you’re offering, or so desperate you’ll take anything. Neither perception is productive, and you will be setting yourself up for a difficult relationship.

One-year contracts

The sponsor is a great match, your offer is compelling, and you really want them on board for the long haul. Your starting point in the negotiation should be a multi-year deal – three years is typical – and you should do what you can to keep it a multi-year deal as you negotiate.

Multi-year deals are strategically better for the sponsor, as they’re able to plan across multiple years, building on and fine-tuning their leverage programs from one year to the next. It’s better for you, both strategically and financially, as you can plan ahead. Plus, you really don’t want to have to justify your existence like this every single year with the same sponsor, do you?

Your negotiations may result in a one-year deal to start, but if they do, you need to be very clear that you’re making that offer as an introduction for a new sponsor, and future sponsorship contracts will be for three years or more.

On a related note, negotiating for a three-year deal with the option to exit every year isn’t a three-year deal. It’s a one-year deal. Don’t kid yourself.

The upshot

Sponsorship negotiation isn’t for the faint-hearted and does require some specialised skills. If you’re inexperienced, I can promise that it will get easier with practice. And it will get a lot easier as soon as you stop making the mistakes I’ve outlined above.

Need more assistance?

For all you need to know about sponsorship sales, negotiation, and servicing, you may want to get a copy of The Sponsorship Seeker’s Toolkit 4th Edition.

If you could use some additional support, I provide sponsorship coaching, sponsorship consulting, sponsorship training, and if you need a fast, cost-effective start, the Jump Start program. If you’re interested in any of these services, please review the materials and drop me a line to discuss:

Kim Skildum-Reid
admin@powersponsorship.com
AU: +61 2 9559 6444
US: +1 612 326 5265

 

Photo credit: ComedyNose

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One response to “5 Sponsorship Negotiation Mistakes that Hurt Your Bottom Line (and Make You Look Dumb)”

  1. […] *5 Sponsorship Negotiation Mistakes that Hurt Your Bottom Line (and Make You Look Dumb) – Don’t make these mistakes when working with sponsors or as a sponsor. […]