I get this question a lot. There are a lot of people out there who really don’t understand pricing, and plenty of others trying to sell them some formula-based valuation service.
If you’re wondering whether a valuation service is worth the investment, my opinion is that you should save your money. Don’t spend anything on a valuation service, as it doesn’t actually capture the value of what you’re offering. It’s like trying to encapsulate the value of owning a car by adding up the value of each part individually. It’s the cohesive opportunity that has the value, not the bits and pieces that go into it.
Anecdotally, sponsors really don’t have a lot of time for that approach either and I’ve seen more than one roll their eyes at the mention of a “certified valuation”. They know, as I do and you should, that anything that uses a rate card approach will have to be a) arbitrary; and b) based on stock standard, non-creative benefits. I also know of a few sponsees who have contacted me saying that they have had certified valuations done, but it really wasn’t working for them – it didn’t allow for the high degrees of customisation their sponsors were after and sponsors they were approaching weren’t putting much stock in the figures provided.
What a sponsor wants is a highly customised and creative offer that gives them immense opportunity for leverage. Developing those opportunities requires doing your homework on their needs and customers and some creative brainstorming. It’s more work up front, but it is worth it. Seriously, imagine having fewer, larger sponsors who are really into it and helping you to build your event and your audience – that’s what you will get!
As for pricing a creative, best-practice offer, you can be assured that the value of that will be substantially higher than an uncustomised, standard package, but no rate card-style valuation will capture the value accurately.
There are some great techniques both for building the offer and pricing it right. The basic steps I recommend are below.
Establishing a baseline figure
Add up all of the costs of selling the sponsorship, delivering the benefits, and adding value to the sponsorship as it goes forward. From that figure, you
- Red Zone Number – Double your costs. If you are selling sponsorship for less than 50% profit, it may not be worth it. At this price point or below, take a very hard look before committing.
- Baseline Number – Triple your costs.
This exercise does NOT get you to the figure you should ask. It simply ensures that you know your bottom line – the point at which it is not worth your while to pursue the sponsorship – because if you’re not going to make some profit that you can put back into your event or organisation, why bother with the headaches of sponsorship? It also gives you a starting figure – your baseline figure – that you can adjust with marketer influencers.
Adding market influencers
This is where it get tricky. You want to take into account a number of factors that will influence what you can ask for a given sponsorship:
- Other major sponsorship activity in the marketplace – If the Olympics or a World Cup are coming to your region, the likelihood is that it will temporarily depress the value of other types of sponsorships.
- The amount of lead time before the event – The longer the lead time, the more fully the sponsor can leverage the investment. A very short lead time means the sponsor will get a lower result and the sponsorship is worth less. This timeframe varies from one type/size of sponsorship to another, but a general guideline is that if you are between 3-6 months out from an event (season, whatever), you will be diminishing the leverage time and it will probably drop the price. Within 2-3 months of the event, you are most likely at fire sale pricing, which will not only damage your bottom line, but your credibility. It’s not worth it.
- Demand trends – What are the hot topics, social concerns, sports, fads, or trends of the day? They will attract more sponsorship. On the other hand, if a type of sport, event, or organisation has been hit by controversy, it may depress pricing.
- Portfolio fit – If the sponsorship is a natural portfolio fit for the sponsor, without duplicating something they already have, you may be able to charge more, as it already fits with their direction. You could get bonus points by getting more creative than any of their other partners and positioning yourself as a testing ground for new ideas that could be rolled out portfolio-wide
- Equivalent Opportunity Cost – What would they be able to buy in main media that would do a similar job. If the answer is “nothing can do what this can do”, ensure your price reflects that. If you’re offering basic exposure and tickets (and I hope you’re not), you are competing directly with media, which will offer more bang for almost any buck
Ask trusted colleagues
This is the most important part of this process, but the one most seekers baulk at.
Here’s the deal… you need to get over yourself and realise that no two sponsorship seekers are offering the exact same thing. Once you realise that, you open yourself up to non-competitive relationships with like-minded sponsees. Send your proposal, with draft pricing, to a couple of non-competitive colleagues for their opinions. If you really must, refer to the sponsor as Company X.
The input you will get will go miles toward giving you a firm price.
Is it worth all the effort to price it like this? When it comes right down to it, you don’t have a lot of choice. Eventually, you will get a strong feel for pricing based on true value, but until you do, this is really your best option.
What you never, ever want to do is go in high and then discount. That doesn’t get you to the right price, it puts you in the position of looking like an idiot who doesn’t know the true worth of a sponsorship. You also look weak when you have to knock down a price.
If you do everything right and the sponsor comes back to you and says, “We don’t have the budget. Can you do it for 30% less?”, you have to say no. Be prepared to negotiate to a lower price for a lesser package, or incorporate contra or in-kind, but never, ever do a straight discount.
You may want to consider getting your hands onto a copy of The Sponsorship Seeker’s Toolkit 3rd Edition. It goes through the whole process step-by-step.