Activation Ratios Are Dead

By Dan Kozlak, Vice President of Strategy, IEG

Paying a sponsorship rights fee provides access. Activation is what makes the access worth the investment. But the recommended level of additional spending depends on a wide range of factors.

Activation has always been viewed as a means for bringing sponsorships to life and improving their effectiveness. The more hooks a sponsor can place to attach itself to its property via additional marketing activity, the more likely the affinity and reputation of the property can transfer to the brand.

At IEG, we’re often asked about how much sponsors should budget for activation over and above sponsorship rights fees. However, one ratio does not fit all. In fact, for many years, we have studied these ratios, and brands ask about the industry standard. The simple fact is that ratios might not be the most evolved measure given the advancement of the industry, the increasing rights fees and increasing brand scrutiny on budgets. In our most recent Decision Makers Survey, we noted that the activation ratios have fallen significantly over the last 10 years, but that does not mean brands are activating less.

Savvy properties have begun expanding their offerings to become a one-stop shop to capture as much of a brand’s activation budget as possible or even embed activation programs or “banks” into agreements ensuring the sponsor will promote the property beyond the asset list in the deal. While this offers a convenient and cohesive approach, it doesn’t mean sponsors should rely solely on properties to maximize the impact of their sponsorships.

Activation needs depend on the sponsor’s marketing goals, and in today’s climate, we cannot and should not attach a standard to this.

Activation should vary on a case-by-case basis, taking the following considerations into account:

Purchase Funnel Needs

Sponsors should continuously look to address purchase funnel weak points, where the consumer journey needs the most advancement and where sponsorship can accelerate that.

• Is the brand new and attempting to build recognition?
• Do people recognize the brand, but are not sure of what it does or stands for?
•  Is the brand struggling against competitors when it comes to preference?
• Do consumers have high favorability of the brand, but are not making purchases?

Activation is part of a strategic marketing effort to smooth out these friction points in the funnel. This is what makes sponsorship so much more flexible and robust than other forms of marketing.

Clutter

Activation programs may be used to raise a sponsor's presence above others in a crowded sponsorship environment. Fans can only retain so much information, so sponsors with the greatest presence or deepest relevance are most impactful and memorable. When considering activation programs to stand out from the rest, sponsors should consider:

• How many other sponsors will simultaneously engage the same audience?
• Is the sponsor sharing space or having prominent or ownable assets to connect and resonate with the audience?
• How are direct competitors reaching the property’s fans?
• How can the sponsor best position itself to overtake fan mindshare?
• Are category carve-outs becoming too fragmented therefore requiring full exclusivity?

Playing to Strengths

Properties command large-scale, passionate audiences and have created valuable intellectual property and reputations sponsors want to align with. Sponsors know their customers and competitive value differentiators. Therefore, sponsors should consider taking affiliation rights and extending them in ways to best position themselves to their customers. Access to marks and logos, talent, content distribution and data can be leveraged to reach target audiences with the most impactful activations. When determining how to best use sponsorship rights, consider:

• Does having a property’s marks and logos on sponsor packaging/location signage provide a distinct differentiating advantage against competitors?
• Does the sponsor already have a dedicated budget for general marketing and advertising where the creative can leverage property intellectual property rights?
• Does the sponsorship offer unique access where the sponsor can message and engage fans to learn about its offerings?

IEG recommends sponsors carefully evaluate why and where activation resources should be committed, instead of relying on gut instinct or an industry ratio. IEG's Sponsorship Scorecard helps sponsors understand whether current investments are generating adequate, intended performance for the brand and business overall. It also helps identify where additional activation resources may be necessary for sponsorships to achieve their highest potential.