Sponsees Charging Sponsorship Leverage Fees? It’s All Smoke and Mirrors!

Stack of MoneyI think this industry has definitely arrived at the point where sponsors know it is their responsibility – not the sponsee’s – to leverage their investments. Sponsors, for the most part, understand that when they invest in sponsorship, they are investing in opportunity, not results, and that they need to leverage the opportunity to get result

So, what is with so many sponsorship seekers – big sponsorship seekers who should be sophisticated enough to know better – charging “leverage fees” or “activation fees” on top of the cost of sponsorship? What exactly is that for? And how is it not just a way to inflate the fee while deluding the sponsor into thinking they’re getting something extra? How is this not, essentially, a bait and switch? “Yes, the sponsorship fee is $750,000, but you also need to pay a leverage fee of $150,000 as part of the contract.”s. Check. Check. Check.

It is greed, pure and simple.

For all you sponsors out there, do three things:

  • Ask them exactly what that leverage fee is going to pay for. Chances are, they will say it will be for the production of signage or some other cost of providing benefits that really should have been incorporated into the fee. In other words, it is extra revenue for them and no extra benefit to you.
  • Think about the amount of strategic, effective leverage you could do with that amount of money. Could that pay for an app? Staff program? Development of (hopefully) viral content? On-pack promotion? Some other key leverage component? Probably.
  • Don’t agree to “leverage fees” for sponsees. Tell them you’ll handle your own leverage strategy, thank you very much. Tell them to go back to the drawing board and name their actual fee, and that you will make your decision based on the final figure.

There is no downside from bluntly calling this the money grab it is. They’ll either come back with the real, final figure, or they won’t and you’ll know exactly the type of organisation you’re dealing with. Either way, the charade will be over.

For all of you sponsorship seekers who charge these leverage or activation fees, it’s time to knock it off. Sponsors see right through what you’re doing, and most are offended that you seem to think they’re stupid. Price your offer to include all of the costs for delivery, put one figure on it, and give it your best shot. Act like a professional.

© Kim Skildum-Reid. All rights reserved. For republishing information see Blog and White Paper Reprints.

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