As the president of Navigate Marketing, where we specialize in the research, measurement and analysis of sports sponsorships, I frequently work with properties and brands making the most of their sponsorship opportunities in the sports world. But too often, I witness brands making some common mistakes. Here are five examples, all of them easy to make, and all of them necessary to avoid.
Investing Based on Gut Feel
Too often, a top individual in a company will decide to sponsor a property based on a personal affinity for that property, or a personal belief that the property is hot or increasing in popularity. But this is akin to playing the stock market without really researching any stocks. It’s a recipe for fiscal failure.
Brands need to perform their own due diligence prior to investing with a property. It sounds obvious, but this involves looking at various potential sponsorships and comparing them on a number of levels, including, but not limited to:
- The specific demographics reached by the properties.
- The opportunities for activation with each property.
- The sponsorships already in place with each property.
- How each property aligns with the brand’s identity and objectives.
By making these comparisons, a brand gives itself a much better chance to find the best possible partner for executing a successful sponsorship.
Failure to Cultivate the Sponsorship
Once the decision – and investment – has been made, the tendency for some brands is to believe that the work is done. They can sit back and let the sponsorship perform. Of course, it doesn’t quite work that way. More effort, and more money, is typically required to create a successful investment.
There is some debate in the industry over exactly how much should be spent on activation, but the general consensus is approximately two to three times the cost of the sponsorship agreement. It may be tough for a company to accept spending $2 million in activation efforts for a $1 million sponsorship, but without proper activation, the initial $1 million will likely not be leveraged properly.
Research and measurement is also necessary, and much less costly. We generally advise brands to spend between 1-3 percent of the sponsorship investment cost on research, so between $10,000 and $30,000 for a $1 million sponsorship. The exact type and timing of the research depends on the sponsorship and the objectives desired by the brand.
- For a naming rights deal, the brand can commission a sponsorship valuation before landing a partner to determine the fair market value – much like using Kelly Blue Book before purchasing a car.
- For a bank striving to entice more people to sign up for checking accounts, the research can involve tracking those numbers throughout the sponsorship and surveying people exposed to the sponsorship via a sponsorship impact study.
- For a company selling widgets, a return on investment (ROI) study should be conducted toward the end of the sponsorship term to aid in the renewal process and make a determination on the success of the sponsorship investment.
Measuring ROI Incorrectly
As important as it is to perform research and measurement, the results will be meaningless if the process is flawed.
One common mistake is measuring ROI based solely on the comparison of exposure value to sponsorship cost. While adequate exposure value is a helpful complement to ROI, measuring the incremental sales that can be attributed to the sponsorship is the more insightful method.
This type of study is somewhat complicated, and certainly the process has yet to be perfected (and employed industry-wide). But the advances in these calculations are providing valuable feedback to brands, who are able to learn not only how much exposure value they’re receiving, but also if that exposure is yielding actual results for the company’s bottom line. If a brand is going to pay for an ROI study, it needs to make sure this method is being used.
Putting Too Much Stock in 1st Year Results
The excitement of signing a sponsorship deal is often accompanied by high expectations, especially as the dollar figure grows, and there’s an almost immediate desire to see if the sponsorship is meeting those expectations. Research and measurement efforts assist a brand in determining this, but executives tend to lack something necessary for managing a sponsorship – patience.
Very rarely does a sponsorship investment become a huge success in year one; it traditionally takes 2-3 years for a sponsorship to gain traction. This is simply a result of the time it takes to break through the clutter and become more engrained in the minds of the fans and the public.
When brands start making sponsorship decisions based on first-year performance – especially decisions that scale back activation or drastically change the long-term strategy – they run the risk of dooming the sponsorship before its had a chance to grow. That’s not to say the first year isn’t important; it just shouldn’t be the basis for an overreaction.
Ignoring the Potential Success of Investing in Sports
With the combination of a struggling economy, government bailouts and a cynical public in the past few years, there’s been an understandable hesitancy by some brands to invest in or maintain sports sponsorships. But this is generally a mistake.
Sports have been and are still a great way to reach a group of passionate, loyal customers who have the potential to help a brand grow. Time after time, it’s been proven that sports sponsorships yield positive results when managed correctly.
It’s important not to let fear or temporary public opinion prevent a meaningful partnership that will produce long-term benefits. If a brand does have the financial wherewithal to invest in a sports sponsorship – both the initial expenditure, and then the activation and research/measurement that follows – it should do so with confidence.
AJ Maestas is the founder and president of Navigate Marketing. If you have any questions or would like to learn more information about sponsorship or Navigate’s services, contact him at firstname.lastname@example.org or call (312) 762-7477.