If the Answer is a Sponsorship Formula, You’re Asking the Wrong Question

Asking the Wrong Questions: Sponsorship by the Numbers“What proportion of our sponsorship portfolio should be made up of sports, arts, community events, etc?”

“How much should we spend on leverage for an $X sponsorship?”

“What should our target ROI be for this sponsorship?”

I get questions like this all the time. In fact, I’ve had every one of these exact questions in the past month.

On the surface, they seem perfectly reasonable. The problem is that each and every one of these assumes that there is a “right” answer – some formula that will distil the complexities of modern sponsorship into a neat, little number. There is no such thing. Modern sponsorship is complex. That doesn’t mean it is difficult to understand, but you have to be prepared to ask different questions and be prepared for multifaceted and nuanced answers.

The above questions aren’t useful to you, and the answers will take you further away from best practice and your maximal results. It’s like using a meat grinder to tenderise a steak, or as Oliver Wendell Holmes put it much more eloquently…

Life is painting a picture, not doing a sum.

Below, I’ve addressed these questions, and discussed the alternatives.

What proportion of the sponsorship portfolio should be made up of different categories of sponsorship?

That is like asking how much flour to put in the bowl without telling me what you’re making!

A sponsor’s job is to achieve objectives. The sponsorship portfolio should be made up of exactly the sponsorships that will provide the raw materials for a sponsor to leverage to meet those objectives. Instead of trying to achieve some mythical balance, you should be seeking out sponsorships that:

  • Are relevant to your target markets.
  • Help you to achieve at least five overall objectives for your brand.
  • Show some understanding of your needs, some creativity, and are professionally presented.
  • Have internal buy-in.
  • Are feasible – within budget, enough lead-time, enough human resources, etc.

A tool you can use: Sponsorship Guidelines. This template will help you create an external document that will help sponsorship seekers create strong, creative proposals for you, while keeping them on a firm strategic track.

How much should we spend on leverage?

You’ve heard the formulas – we all have – the ones where you are supposed to spend a set percentage of the amount spent on the sponsorship fee (aka, the rights fee) to leverage the sponsorship. Some believe dollar-for-dollar is the right proportion. Some believe you should spend more – two or three dollars on leverage for every dollar on sponsorship.

I have to tell you, most of them could spend less and get more for their sponsorships, if they were to take a holistic approach, get buy-in early in the process, integrate the sponsorship across many already budgeted activities, and get creative. Some of the best sponsors in the world are spending 10-30% incrementally, not 100-200%.

Of course, there are exceptions. If a sponsor makes a major investment – such as a quadrennial event (World Cup, Olympics, etc) – there is every chance the opportunity for achieving objectives will outstrip the currently budgeted activities. That is, even if they integrate it across every single thing they have budgeted, there will still be unexploited opportunity. In those cases, it is entirely appropriate to war-chest some budget and extend the spend substantially.

The upshot is that there is no formula. Most sponsorships can be very well leveraged at 25% or less, but not all. Sometimes, investing in a piece if infrastructure, such as an app or roadshow, will cost more in the first year, but create enormous value over the course of several years. Stop looking for a set number.

What should our target ROI be?

You want a ratio. I know you do. You (or your bosses) want to know how much money you’ve made vs how much you’ve spent, and you want to know what that ratio should be. Wanting that is fair enough. Unfortunately, it’s unrealistic.

You are trying to achieve objectives, all of which fall into one of the following three categories:

  • Changing or reinforcing people’s perceptions
  • Changing or reinforcing people’s behaviours
  • Building target market alignment

How do you reflect the objective of increasing trust in dollars? How do you reflect the objective of increasing loyalty or evoking advocacy in dollars? You can’t, unless you just throw an arbitrary number on it – which plenty of sponsors try, but is hardly accurate.

So, what is the answer? First step, accept that you will never be able to reflect a multi-faceted, multi-objective sponsorship in terms of one, neat ratio. Second, figure out ways to measure against the objectives you’ve set. In fact, many sponsorship pros are now relating results using the term ROO – Return-on-Objectives.

Yes, some things are measurable in dollars, some in percentages, others in sheer numbers, and there are a few (only a few) things that rely on more subjective measures. In the end, you’ll end up with many measures and a complete picture.

Need more assistance?

You may 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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