Taking The Guesswork Out Of Sponsorship Pricing

If you’ve ever guessed at what your sponsorship packages are worth, then you’re not alone. Our research shows that most organizations rely on instinct, educated guess or simply pull figures out of the air to determine the asking price for their sponsorship properties. The main problem with this approach is that it makes it difficult to speak confidently to a prospect about value. At the end of the day, most sponsorships are used to build more brand awareness or help sell a product. So having an accurate value for your sponsorship gives you more selling confidence and your prospective sponsor a better understanding of the value you can deliver.

It is important to remember that most sponsorship proposals are compared against other marketing options such as advertising or sales promotions to determine if the investment represents good value for dollar. For example, if you are offering sponsorship of a unique program that reaches a specific target audience (remember, in marketing there’s no such thing as “the general public”) savvy companies will ask a) is this the best way to reach my key target audience and b) are there more cost-effective ways to achieve the same or better result? If your sponsorship offering doesn’t offer a clear cut advantage, then you’ve likely lost them as a sponsor.

So how do you know if your sponsorship pricing is in line with current market values? While there are numerous factors that contribute to value or perceived value, there are two key elements that need to be considered in a sponsorship pricing strategy.

Tangible Value

Tangible benefits represent baseline values for most sponsorship agreements. These are quantifiable elements or transactions that can be counted and measured from a value perspective.In calculating tangible values, the number of impressions (transactions) received through any benefit is multiplied by a pre-determined dollar value to arrive at a total tangible value. For example, if a logo and link on a web site is exposed to 100,000 “unique visits” during a defined period, it would be multiplied by an assigned value (e.g. $.005) to arrive at a tangible benefit value of $500.00. The same principle applies to all other benefits that can be counted such as the number of people exposed to a banner, ad or logo, the number of samples or coupons distributed, logo placement on print ads and so on.

Tangible benefits without the associative or “relationship” element inherent in sponsorships is similar to other forms of advertising or promotion. If your sponsorship opportunity doesn’t present a strong link between the sponsor and the audience and/or their “experience”, your prospects will likely compare your offering against other traditional marketing options.

Intangible or Associative Value

The intangible or associative value is what separates an advertising opportunity from a sponsorship opportunity. While establishing the associative value of a sponsorship property is generally more subjective, this is where the real value of sponsorship is realized over other marketing mediums. The shift from “transactions” to “relationships” in today’s marketing environment has resulted in sponsorships becoming an increasingly important marketing tool. Research shows that consumers look more favourably upon companies that visibly positioned as supporters of activities or causes that are important to the customer. What woman doesn’t feel a little better about CIBC because of their association with Run for the Cure (Breast Cancer)?

Several elements go into measuring the associative value of any sponsorship property. Some of the more common intangible elements include level of exclusivity, amount of sponsor “clutter”, prestige of the organization / event, audience desirability, whether it’s a worthwhile cause and the relationship between the organization and the audience that can be leveraged to a sponsor’s benefit. These are the factors that turn your advertising opportunity into a value-added sponsorship.

The Intangible value of a sponsorship is established by identifying the top associative elements of the sponsorship opportunity and assigning a premium that is added to the tangible value to arrive at a total value for a sponsorship. For example, a sponsorship worth $10,000 in tangible value that is exclusive by industry sector (e.g. only one bank) could be assigned a 25% premium ($2,500) that would be added to the tangible benefits, making the sponsorship worth $12,500. Commonly, the top 3-4 associative elements (which essentially represent your USP) are assigned percentage premiums and combined with the assigned tangible value to arrive at a Total Value for the sponsorship.

The difference Between Pricing and Perceived Value

You may have the most thought-out sponsorship pricing strategy, but if a company has little motivation, the pricing becomes irrelevant. For example, if a company is new to your community and you present them with a unique opportunity to increase brand visibility in the market, the perceived value of the sponsorship could be high because it responds directly to an urgent need. In this case, you will likely get your asking price. Conversely, if you present the same opportunity to that company another year when they are not as hungry for profile opportunities, the perceived value will be low. This is why you need to be knowledgeable about the prospects you are approaching so that you can ultimately present them with a sponsorship opportunity that matches their needs (or “pain”), and thus, more likely to pay the fair market value you’ve established for the sponsorship.

Effective Pricing Helps You Speak Confidently About the Value of Your Sponsorship Packages

A clear pricing strategy works two ways. It will ensure that you are receiving fair market value for your sponsorship opportunities and it will give you the confidence to speak intelligently to a prospect about the offshore merchant account value that the sponsorship brings to their organization. Once you can speak confidently about the benefits and value of your sponsorship offering, the prospect will have more confidence in your program and their investment decision.

10 Replies to “Taking The Guesswork Out Of Sponsorship Pricing”

    1. Thanks for your question John. Without knowing details, the short answer is that any major sponsorship needs the following attributes:
      highly desirable audience, strong tie-in to corporate business objectives, strong associative elements between the sponsor and the audience, effective communication of brand attributes, marketing-oriented benefits and quantifable measurement metrics.
      BC

  1. Hi there,
    when you speak about ” it would be multiplied by an assigned value (e.g. $.005) (Website)”, where does the CPM come from at $.005) I am looking to establish the CPM for outdoor visibility on posters, flags, T-shirst for my event…

    1. Hi Nick,
      The CPM’s are based on ongoing industry research related to advertising / sponsorship costs in various markets. Although the exact formula we use in conducting our valuations is proprietary, I can tell you that there are several factors we consider including:
      – the cost of traditional media in that particular market (i.e. ad rates in newspapers, out-of-home advertising, etc.)
      – audience desirability (i.e. is it a targeted audience vs. a public audience)
      – the level of impact of the benefit (i.e. the higher the impact, the higher the value)
      A professional Valuation is a good business decision for organizations that want an unbiased opinion of the value of their assets. The main advantage of a formal valuation is that it gives you the confidence to clearly articulate the value of various benefits.
      Hope this helps,
      BC

  2. Hi, thanks for your article it is quite helpful. I would like to find sponsorship for our videos which has a very specific market. I just wondering: Do we include the cost of producing the videos into the total value after adding tangible + Intangible value?
    Regards

    1. Thanks for your question. The short answer is that the price of a sponsorship should be based on the value received by the sponsor – not the cost to create the opportunity. Having said that, if you know the cost to produce the video, you should start with that number to determine the baseline level of sponsorship you’re looking for and then assess that against the value that a sponsor might receive by being associated with that property. If the value is lower than the cost of the video, you would want to “up” the benefits to provide equal or greater value. Conversely, if the assessed value is higher than the cost of the video, you could command a higher price for the sponsorship. Hope this helps. BC

  3. Hi Bernie
    I am working away assigning values to our ‘impressions’….but I have hit a snag. We run a valuable Parking permit program that brings us in a good return. We have a minimum 5600 clients using this service every year. The visibility and recognition factor is of course very high. How do I assign a sponsorship value to what would have to be an exclusive arrangement on a program that is already lucrative. It could be a very valuable property for the right sponsorship match.
    Thanks in advance.

    1. Thanks for your question Judith. Without knowing the full scope of the opportunity and the benefits provided to a potential sponsor, it is difficult to assign a full sponsorship value. The first step would be to identify clear baseline benefits (exposure, direct messaging opportunities, etc.) to the property in order to arrive at a Total Tangible Value for the quantitative elements. The second step would be to assign an Intangible Value which would reflect the quality of the opportunity. In your case, the audience is very targeted (car owners) and if it’s an exclusive arrangement (by industry category – i.e. auto tires), these two factors alone could result in an Intangible premium of between 50-75% which would be added to the Total Tangible Value. Hope this helps. BC

  4. Hi Thanks for your article, very helpfull, still i have a question. We run a live fitness broadcast for free to the user, been free brings a very high level of subscription of a very targeted audience “fitnes minded persons” our users spend 45 Minutes watching the screen as they follow our instructors classes. 45 Min of screen time is a very long time and we asumed it brings addtional value to a Sponsor considering also that our cause is very holistic and certain brand would like to be associated to a good cause, with a very targeted audience. How could we assess additinal value to the screen time and the bussness mission of having people be healty at not cost to them?

    1. Thanks for your question Ernesto. One of the simplest methods of measuring the tangible value of the “screen time” would be to get a total value of the broadcast time and allocate a percentage of the total value of the airtime towards sponsor visibility. This is where the percentage value you allocate gets a little tricky. For example, if sponsor visibility was limited to a logo at the bottom of the screen, you might allocate up to 10% of the total airtime value for the tangible value of this benefit. If it was a rolling message, the percentage would obviously be higher because the impact would be higher. Remember, in the world of valuation, the higher the impact, the higher the value.

      As far as the other factors you mention (i.e. being associated with this free service), you would need to assign premiums that would be added to the tangible value to come up with a total value for the opportunity. For example, the uniqueness of the opportunity could command anywhere from a 10% to 30% premium on top of the tangible (i.e. $10,000 tangible value + 25% premium for the uniqueness of the opportunity = $2,500 for a total of $12,500). You would add other premiums such as the quality of the audience, level of exclusivity, etc.

      Hope this helps,
      BC

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