Would the Sponsorship Market Benefit from Published Pricing?
Would The Sponsorship Market Benefit from Published Pricing?
By Dan Kozlak, Vice President of Strategy, IEG
Sponsorship is a multi-BILLION-dollar industry. It’s because it has practically everything going for it from a marketing standpoint. Sponsorship delivers massive reach, desired audience segments, high engagement, and frequency through many different recurring touchpoints. It can dodge DVRs and ad-blockers. It’s customizable. Best of all, it transfers affinity and goodwill from revered and worshiped properties to build up the brand health of its partners. When done correctly, sponsorship’s impact can be game-changing for brands.
So why don’t we allow sponsorship to sell itself?
Almost every other billion-dollar industry has created an efficient marketplace by allowing buyers to make their own decisions on how to receive the most value for their money by giving them the ability to shop. This is achieved by a very simple mechanism that is absent from sponsorship – transparent pricing. While it may flip the sponsorship industry on its head, the case could be made to at least contemplate the idea of properties setting and promoting their prices.
Many in the sponsorship industry would not hesitate to say properties have the advantage when it comes to negotiating deals. But is this really the case? Yes, the economic conditions are in properties’ favor with having a highly valuable, yet scarce resource to a seemingly vast amount of interested buyers. Properties may also adjust time and competitive pressure to each bid. And of course, they can set pricing based on how much they feel each prospect might be willing to pay. Many would think these factors put properties in the driver’s seat, even though they are not the ones writing the checks.
However, when you think about it, blinding the sponsorship marketplace might be working against both properties and brands.
FOR PROPERTIES
Practically all sales are outbound. This alone requires significant resources to identify, qualify, find appropriate contacts, conduct outreach, generate interest, and create proposals for interested prospects - which boils down to headcount, infrastructure, tools, and TIME. This is in lieu of in-bound leads coming from interested brands reaching out to properties about potential partnerships with almost no strain. Properties are likely more than happy to entertain a qualified in-bound lead, but it rarely happens. Why is this?
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FOR BRANDS
It can be equally as strenuous to acquire (buy) a sponsorship. So often, brands are not proactively reaching out to properties based on fit with their greater marketing strategies. Opportunities typically land on brand marketers’ desks out of the blue or because they live in the same market. Even if a proposal is remotely interesting, adequate budgets, marketing benefits, vetting due diligence, and pricing need to align for the sponsorship deal to happen. And often, this all needs to come together before the offer is taken by another (potentially competitive) partner. Sponsors could reach out to properties on their terms during planning stages to contemplate opportunities. So why don’t they?
The solve for this friction could be a simple one – publishing sponsorship pricing.
However, in the sponsorship realm, there are two major factors working against this becoming a reality. Both relate to properties believing they are maximizing (or maxing out) the value they can receive for their offerings.
Utilizing a published or known fee range would immediately solve for the first issue, but not the second. Yet the benefits of publishing pricing for properties could outweigh the limits of a ceiling too.
It could save on outbound sales expenses. Sales would still require significant resources to bring the most valuable prospects across the finish line, but if the funnel were at least partially filling itself, it would certainly lower the strain of continuously trying to fill it. If sponsorship opportunities and pricing were published, it would generate interest and consideration from proactive prospects. More internal focus could be placed on understanding prospects’ needs, crafting packages, and justifying their worth.
Properties could be more selective. If properties have an open (or soon to be open) category, they could set a timeframe for when it would receive bids from interested candidate sponsors. This way, they could choose a partner(s) based on how committed they are to activating, how much they align with the image and reputation of the property, how likely they are to experience a positive ROI from the investment, and to what extent they should make the category exclusive. This could also open the door for competitive bidding, which would ultimately remove any pricing ceiling.
It would minimize deal remorse and set the course for a renewal. Many believe it’s a sign of a fair deal when neither side believes they won every aspect of the negotiation. However, signed sponsorship deals often leave one side feeling like they received the short end of the stick. Brands can feel like they overpaid for what they received because they had no benchmarks to validate the pricing or could not compare against a different offering. Properties may believe a category should have yielded a more lucrative deal but decided to go with a below-market offer because that was all they had. Both results leave somewhat of a bad taste in the partners’ mouths and may create underlying tension. This makes both parties less likely to collaborate to make the partnerships the best version possible. This also reduces the sponsorship renewal potential before the ink is dry on the contract.
Where Could Change Even Begin?
Publishing pricing for sponsorship would need to be reflective of (1) what the marketplace has been willing to pay and (2) the return value sponsors would receive. IEG has created a fair market pricing system, Market Meter Price Check, that accounts for both and has set package pricing across all 152 MLB, MLS, NBA, NFL, and NHL teams for 65+ different sponsorship categories. Sponsors no longer need to wonder whether they are receiving a fair deal, nor do they have to wait weeks to conduct a full detailed valuation. IEG’s Market Meter Price Check provides fair market pricing projections and framing data to compare proposals to existing investments or potential alternatives, allowing sponsors to confidently make the most informed sponsorship decisions possible all in less than 72 hours. If you want to learn more about Market Meter Price Check, contact us at info@sponsorship.com.
Founder | Chief Executive Officer at SportsBiz
1yDan Kozlak Thank you for your thoughtful article. As a former rights owner, I've marveled for decades at the relationship disequilibrium that exists between sponsors and the sports properties / athletes they financially fuel. That imbalance only increases when owners possess coveted rights. Feeling both empowered and entitled to conduct business as a monopoly, the entire concept of fair market pricing is an anomaly, a hindrance to maximizing the bottom line. Ironically, a significant hurdle to fair market pricing remains the stewards of corporate brands who fail to recognize the role they play as enablers of sports sponsorship's vicious cycle.
Sr. Market Analyst
1yThis is great, Dan. I do wonder how reluctant teams/properties would be to do this, they still wanna believe that all their sponsorship info is proprietary and should stay in the "black box." But that's an antiquated, short-sided way of looking at it. you hit the nail on the head with renewals and customer satisfaction. We see so much churn for brand sponsors, that can't be good for anybody. Thoughtful work, as always, Dan. Thanks.