How Much Should You Budget for Sponsorship Leverage?

How much should you budget for sponsorship leverageThis is a big rewrite of one of my most popular blogs for sponsors. It’s actually the second full rewrite, since I first wrote it years ago. Why? Because how much to budget for sponsorship leverage is a perennial question.

And the thing is, that’s not the right question. I mean, sure… you eventually have to put a line item on a budget. But the bigger question – the one that drives that figure – is how efficient, resourceful, and creative you’re willing to be. Because if you can commit to that, you leverage figure will be dramatically lower.

The one-to-one rule, and why it sucks

Back when I first got into this industry, the big new thing for sponsors was the one-to-one rule. This rule stated that for every one dollar a sponsor spends on a rights fee, they should spend another dollar leveraging. This was both a revelation and a rod for our industry’s back that we’re still struggling with.

It was a relevaltion, because prior to the one-to-one rule, most sponsors didn’t leverage at all. Sponsorship was ruled by visibility, with exposure being its own reward. The new rule took us from the pointlessness of first generation sponsorship into second generation sponsorship. It wasn’t sophisticated, but leverage was actually happening, and it completely changed the game.

At the same time, this ratio made a rod for our backs, because it was all about how much you spent, not how smart or strategic or creative you were. It also assumed that all of your leverage was going to be initiated by the sponsorship team, rather than being integrated into existing marketing channels, so it was really inefficient.

Then, sponsorship started to grow… a lot. Properties got cluttered, and sponsors grew preoccupied with “breaking through the clutter”, so they spent more. The one-to-one rule became the two-to-one rule, and I’ve lost count of the number of conferences I’ve attended where at least one speaker was congratulating themselves for spending three- or four-to-one. Our industry media haven’t been much help, either, often hailing big leverage spenders as being at the vanguard of sponsorship, whether they’re actually leveraging well or not.

As a result, many leverage budgets have become ridiculously and unnecessarily fat, and sponsors with modest leverage budgets lament that they just don’t have enough money to leverage well, when in fact, they’re both wrong.

Doing more with less

Thinking you need to spend that much on leverage, in order to be successful, flies in the face of everything that makes sponsorship so powerful.

  • It’s meaningful and resonant to your target markets.
  • It is supremely flexible – like sculpture, you can make sponsorship into anything you want and out of anything you want, so long as it is structurally sound.
  • It’s integrateable across all other marketing media.

Even if you’re only spending one-to-one, you’re spending too much, and you’re probably doing too little.

The best sponsors now spend the least amount on leverage, incrementally – 10-35%, not 100%, 200%, or more. This is because they…

  • Centralise sponsorship in their portfolios. It’s no longer a piece of the pie, but a catalyst that makes already budgeted marketing activities more effective
  • Work cross-departmentally, getting input and buy-in from across the company before negotiation, ensuring that every department gets the benefits they need to have an appropriate platform for leverage
  • Start by integrating sponsorship across those existing activities, or replacing already budgeted activities that won’t be as effective

If this approach is taken, the incremental funding required will drop considerably –although the effective value of the marketing impacted by the sponsorship may be many times the sponsorship fee – and your results will skyrocket, as you wring every last drop of value out of the investment.

You can also structure your sponsorship portfolio, so leverage is more efficient. For instance, if you have a vertically-integrated or umbrella portfolio, you’re leveraging collections of related sponsorship as if they were one sponsorship. For more on this, see How to Structure a Sponsorship Portfolio.

Two exceptions

One of the exceptions is sponsorship of big, quadrennial-style events (eg, Olympics, World Cup). This is because the leverageable platform for deepening relevance and relationships often outstrips the amount of existing marketing activities. In other words, even if those sponsors integrated it across everything they do – which they should – they still wouldn’t have exhausted the potential. In that case, war-chesting some money and spending up incrementally is entirely appropriate.

The other exception is when a larger, incremental leverage budget will provide the framework for leverage, or a bank of durable, leverageable content, that will serve brand and fan needs for a long time – ideally years.

Even then, incremental budgets don’t necessarily have to be huge. You can be both efficient and effective with a well-chosen sponsorship, if you’re scrappy and resourceful, and I’ve taught countless sponsors to do just that. And, if you can significantly expand the small, meaningful wins for more fans, customers, and staff, better demonstrate alignment to fans, and more effectively achieve brand objectives, over a longer period of time, by raising your incremental leverage budget from 25% to 45 or 50%, for instance, then it’s definitely worth considering.

The upshot

If you take on board a best practice approach and moved sponsorship out of the sponsorship “box” and into the realm of “marketing catalyst”, you will get much better returns at a much lower cost.

For most sponsors, an overall leverage budget of around 25-30% is usually plenty, although the percentages allocated to specific sponsorships will vary. With creative, resourceful, cross-departmental leverage, some sponsorships will need very little incremental leverage budget to really perform. Others might benefit from a significantly larger investment.

And if you are going to make a major investment in a quadrennial-type event, work with stakeholders across the organisation to create your leverage plan before you negotiate the sponsorship. That way, you will know what to negotiate for, and you’ll be able to set the overall budget for the rights fee and leverage, before you commit.

Need more assistance?

You may also be interested in my white papers,  “Last Generation Sponsorship Redux” and “Disruptive Sponsorship: Like Disruptive Marketing, Only Better“.

If you need additional assistance with your sponsorship portfolio, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive sponsorship capacity-building service for large and/or diverse organisations. Please feel free to drop me a line to discuss.

© Kim Skildum-Reid. All rights reserved. To enquire about republishing or distribution, please see the blog and white paper reprints page.

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