Sponsorship Pricing Basics

Sponsorship Pricing BasicsI get more questions about sponsorship pricing than any other aspect of sponsorship. I wish there were an easy answer – a magic wand I could wave that would make the right number appear out of thin air – but I’m afraid it’s just not that simple.

That said, it’s not rocket science, either, and there are some definite rights and wrongs.

Getting sponsorship pricing wrong

First off, don’t try to add up the value of each of the benefits, as sponsorship really is a case of the whole being worth more than the sum of the parts. You’re not selling benefits, you’re selling marketing opportunity, and a comprehensive opportunity is going to provide a valuable platform for sponsors – much more valuable than the sum of the benefits a la carte. Plus, you’d just be guessing on the value of many of the benefits you offer, making whatever figure you come up with arbitrary, at best.

In addition, the same complement of benefits will be worth different amounts for different sponsors, because the real value is in its leverageability. So a package for a local grocery chain is going to be worth less than selling a similar package to a regional or national chain, as long as your property is leverageable outside of the local area (and there are almost always ways to make that work). And in most cases, the value to a brand with both B2B and B2C markets will be higher than for a brand that is exclusively B2B, even if the benefits are similar.

Trying to price as some derivative of the potential equivalent media value of the logo exposure is also not going to work. Equivalent media valuation was debunked 30 years ago, and only the industry’s dinosaurs put any stock in that as a evaluation tool. Given its lack of credibility, basing your pricing on media equivalencies is building a house on very shaky foundations.

Finally, if you’re looking for some kind of formula, you can stop now. There is no formula for pricing. Anyone who says there is a formula is trying to sell you a formula.

Getting sponsorship pricing right

There is no formula, but there is a methodology, and here are the basics.

Calculate your baseline fee

First, calculate your baseline fee. This is NOT what you’d charge for a sponsorship, but the keep-your-arse-out-of-a-sling number – the number that keeps you from selling too low for it to be worth it. This is the number for everyone who has ever sold a sponsorship for less than it cost to deliver, or not enough more that it was worth the headaches – and we’ve all been there.

The starting figure I like to work with is:

3 x (cost to deliver benefits + cost of sale + cost of servicing) = baseline fee

This is roughly in line with many rightsholders’ sponsorship policies, which state that they will limit costs associated with a sponsorship to 30-35% of the sponsorship fee.

I generally also do the red line fee, which is the fee at which you may be getting into the not-worth-it territory:

2 x (cost to deliver benefits + cost of sale + cost of servicing) = red line fee

For both of these, the “cost of servicing” is your budget for adding value to the relationship – providing extra benefits, sponsor training or networking, or other extras. Best practice is to budget at least 10% of the gross value of the sponsorship – including any in-kind – for servicing. For this exercise, put your starting cost of servicing at 10% of the cost to deliver benefits plus the cost of sale, as it will grow appropriately as you multiply your baseline fee. If required, you can make minor adjustments later.

Apply market influencers

Then you apply market influencers to your baseline fee. These include:

  • What the market will bear – You need to do some research, use your network, and if you are inexperienced, get feedback from trusted colleagues outside of your organisation
  • Lead time before the event – Short lead time doesn’t give the sponsor long enough to implement the leverage plan that will turn the opportunity you’re selling into the results they need
  • Other activities in your marketplace that may be sucking up sponsorship money (ie, Olympics, World Cup)
  • Uniqueness of what you offer and its position in the marketplace
  • Issues or trends that make what you do more or less appealing – eg, if there has been a string of scandals in a particular league, the price you can charge for a team sponsorship may be lowered as a result of the perceived risk
  • Economic situation and trend

Ideally, your price would now be more than the baseline fee. Sometimes what you can legitimately charge is way, way above the baseline fee. But it doesn’t always work that way, so…

Rework, if necessary

If the market influencers are pushing your market value down toward your red line fee, you have a few options:

  • Rework the sponsorship benefits, so it’s cheaper to deliver. Download my Generic Inventory for a big list of possible benefits you can sell
  • Consider whether it’s worth it to sell at that level, if the sponsor commits to a multi-year deal
  • Put more time and effort to ensure you’re including a strong complement of creative leverage ideas in your proposal. Showcasing how a sponsor can use the property to achieve their objectives and deepen their relationships with customers, fans, staff, etc will increase its value. For more on that, see my video tutorial, Sponsorship Proposal Basics in About 15 Minutes

There is more to it than that, but you’ve got the basics. For a whole step-by-step on offer development, pricing, and the whole sponsorship sales process, check out The Sponsorship Seeker’s Toolkit 4th Edition. If you’re interested in a self-paced, online sponsorship training course, covering the whole sales process, with lots of inclusions, check out Getting to “Yes”.

Need more assistance?

You may be interested in my white papers,  “Last Generation Sponsorship Redux” and “Disruptive Sponsorship: Like Disruptive Marketing, Only Better“. I’ve also got self-paced, online sponsorship training courses, covering the whole sponsorship process, with lots of inclusions. Interested? Check out the Corporate Sponsorship Masterclass for sponsors and Getting to “Yes” for rightsholders.

If you need additional assistance, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive Sponsorship Systems Design service for large, diverse, and decentralised organisations. Please feel free to drop me a line to discuss.

Please note, I do not offer a sponsorship broker service, and can’t sell sponsorship on your behalf. You may find someone appropriate on my sponsorship broker registry.

© 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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