I 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.
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.
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.
There is no formula, but there is a methodology, and here are the basics.
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.
Then you apply market influencers to your baseline fee. These include:
If the market influencers are pushing your market value down toward your red line fee, you have a few options:
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.
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, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive sponsorship capacity-building 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.
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