Chapter 5 Sponsorship Foundation: Developing and Selling the Proposal McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. 5-1 Sponsorship Success • Much Like Constructing a Building, a Sponsorship with a Solid Foundation Is More Likely to Endure – and Succeed – for an Extended Period of Time • A Sound Foundation Does Not Guarantee a Successful Sponsorship; However a Weak Foundation Is a Precursor to Failure 5-2 Sponsorship Success There Are 10 Fundamental Requirements (or Building Blocks) for the Construction of a Sound Foundation for Any Successful Sponsorship Program 5-3 Building Blocks for a Sponsorship Foundation • Sponsorship Should Be: – Defined • Need to understand what a sponsorship Is – An Appropriately Selected Communications Medium • Fit the target market and communications goals – Objective-Led • Decision based on Organizational Goals 5-4 Building Blocks for a Sponsorship Foundation • Sponsorships Should Be: – Integrated • Fits within and supports the sponsor’s IMC plan – Effectively Screened • Selected based on merit – Contracted • Written contracts help to avoid surprises and to provide recourse in the case of non-compliance 5-5 Building Blocks for a Sponsorship Foundation • Sponsorships Should Be: – A Long-Term Commitment • Ongoing serial sponsorship over time tends to be more effective than a “once-off” sponsorship – Protected from Ambush Marketing • Both the sponsor and the sponsee should engage in activities that identify and provide protection from ambush marketing 5-6 Building Blocks for a Sponsorship Foundation • Sponsorships Should Be: – Leveraged • Sponsor should recall that sponsorship is not a stand-alone promotional tool and invest an adequate level of resources for collateral support – Evaluated • Marketer will not know if the sponsorship succeeded or failed if there is no attempt to measure the results 5-7 Sponsorship Commitment: The Two Key Questions • How Much Will the Sponsorship Cost? • What Are the Key Timelines Involved? – Payment Schedules – Event Timing – When Can Sponsor Publicize Relationship? – When Does the Sponsorship Begin and End? 5-8 Cost: Cash versus Value-in-Kind • Cash Outlay Required • Value-in-Kind (VIK) Represents the Value of Goods and Services Provided by the Sponsor in Lieu of a Cash Payment • Many Contracts Use a Combination of Cash and Value-in-Kind as Payment 5-9 Trends • Rights Fees Escalating for Many Major Properties • Not All Properties Exhibit This Inflation • Many Sponsors Are Choosing to Forgo LongTerm Commitments in Favor of Property Hopping • Many Contracts Cover a Defined Multiyear Cycle – Typically 4 Years with IOC and FIFA 5-10 Factors That Provide Value • By Providing Value, These Factors Increase the Rights Fees Expected by the Sponsee • Increased Rights Fees Should Be Balanced by Increased Benefits for the Sponsor 5-11 Factors that Provide Value: Tangible Factors • Easier to Estimate Their Economic Value • Examples – Value of free tickets – Value of free advertising – Value of signage at venue – Value of distribution rights 5-12 Factors that Provide Value: Intangible Factors • Difficult to Assign a Monetary Value to, but Must Still Be Taken into Consideration • Examples – Number of sponsors – Attendance at event – Fit between sponsor/sponsee target markets – Right to use property’s trademarks and logos 5-13 Factors that Provide Value: Geographic Reach • Greater Reach Translates into Greater Value • Drop in first six lines of Table 5.2 here 5-14 Factors that Provide Value: Market Factors • Cost of Similar Property in Other Markets • Cost of Alternatives in the Same Market • Demand for the Property • Cost of Purchasing Advertising Time and Space in Traditional Media in that Market 5-15 Factors that Provide Value: Price Adjusters • Drop in Box 5.5 Here 5-16 Price Determination • Make the Sponsor’s Investment and Benefits Measurable – Prospect will likely perform some type of costbenefit analysis prior to making investment – Perceived value should exceed the price charged by the sponsee for rights fees 5-17 Establishing the Price for the Sponsorship Rights Fees • Cost-Plus Approach • Competitive Market Approach • Equivalent Opportunity Approach • Relative Value Approach 5-18 Cost-Plus Approach • The Cost Incurred by the Sponsee in the Delivery of the Sponsorship Components PLUS a Pre-Determined Fee. • The Pre-Determined Fee May Be: – Fixed monetary amount – A fixed percentage based on the cost 5-19 Competitive Market Approach • Determined by Assessing Supply and Demand for Sponsorship Opportunities within the Market(s) Reached by the Sponsorship in Question • Focus Is on Value Rather than Costs • Considers Disparate Properties – For example, sports event vs. an art exhibit 5-20 Equivalent Opportunity Approach • Establish Cost of Sponsorship Based on the Cost of Attaining Similar Promotional Value through Traditional Media • Advertising versus Sponsorship 5-21 Relative Value Approach • Comparable Value of Anticipated Exposure for the Sponsor • Based on Forecasts of Exposure • If Average Sponsor Has Its Logo on TV for 6 Minutes, What is that Exposure Worth? 5-22 Recall the Methods of Payment • Cash • Value-in-Kind (VIK) • Combination of Cash and VIK 5-23 Sponsorship Level • Many Sponsees Have Different Levels of Sponsorship that Have Varying Rights Fees • Different Plan Components at Each Level • Can Use to Overcome Price Resistance 5-24 Sponsorship Level Illustrated • Drop in Table 5.4 Here 5-25 Timing Issues • Duration of the Sponsorship Agreement – Once-off versus ongoing serial sponsorships – Variety of terms from one day to lifetime • Timelines for Sponsorship Designation – Prior to Event – After Completion of the Event 5-26 Timing Issues (Cont’d) • Projected Schedule of Sponsee Activities that Identify Sponsors – When will ads be run – When will the sponsee’s Web site reflect the relationship with the sponsors – When will signage be erected & dismantled – When will press releases be disseminated 5-27 Timing of Payments to Sponsee • Date of Initial Payment • Date of Interim Payments • Date of Final Payment • Date of Any Required Lump Sum Payment • Delivery of VIK 5-28 The Sponsorship Proposal • Can Now Move on to the Development of the Actual Sponsorship Proposal • It Is a Sales Tool for the Sponsee • It Is Essential Information for the Prospect • It Typically Includes Six Key Components 5-29 Preliminary Actions (Before Developing the Proposal) • Prospecting – Finding Potential Sponsors • Gather Information – On Prospects – On Prospects’ Target Markets 5-30 Sponsorship Proposal • Must Match the Proposal to the Needs of the Prospective Sponsor • Effort to Link Prospect and the Property • Remember that It Is a Sales Tool • It Is a Basis for Initiating Negotiations 5-31 Six Elements of a Sponsorship Proposal • Drop in Box 5.8 Here 5-32 Introduction • A Written Handshake • Create Positive Impression • Help Get the Proposal Read by Prospect • Include Basic Information; Specifics Follow 5-33 History of the Event • When Was Event First Staged? • Has the Title Changed Over Its Life? • Who Are the Participants? • Is There Any CRM Overlay? • Media Coverage • Rudimentary Financial Information (Optional) 5-34 Plan Components • What Will the Sponsor Get from the Sponsee in Return for Its Commitment? • Customize – Boilerplate Proposals Do Not Work • Offer Components Such as: Category Exclusivity, Signage, Hospitality, etc. 5-35 Value Enhancements • Ways in Which the Sponsee Will Help the Sponsor Achieve Its Objectives • Examples: – Leveraging Opportunities – Cross-Promotion Opportunities – Protection Against Ambush Marketing – Postevent Research Regarding Effectiveness – Fulfillment Report 5-36 Terms • Rights Fees – Cash – VIK • Timelines – Single Payment Due – Payment Schedule for Lengthy Contracts – When Does Sponsorship Begin & End? 5-37 Executive Summary • May Be at Beginning or End of Proposal • Capture the Key Elements of the Proposal • Important because Not All Executives Will Take the Time to Read the Entire Proposal • May Be the Basis for Rejection 5-38 Compliance with Prospect’s Guidelines for Your Proposal • Some Large Companies Receive a Large Number of Sponsorship Proposals • They May Have Staff Whose Primary Task Is to Identify the Good and Bad Proposals • These Companies Often Have a Standardized Format That Must Be Used 5-39 A Harsh Reality • It Has Been Reported that Less than 10% of the Proposals Submitted to Prospects Are Given Serious Consideration • Less than 1% of All of the Proposals Receive Funding from the Targeted Prospective Sponsors 5-40 Selling the Sponsorship • Convert the Prospect into a Customer • Typical Business-to-Business (B2B) Marketing Strategies and Tactics 5-41 Selling the Sponsorship • • • • Negotiating the Deal Proposal Represents an Offer by Sponsee Prospect Likely to Issue a Counteroffer Need Mutual Understanding – What Do I (the Sponsee) Have to Offer? – What Does the Prospect Need? – What Adjustments to Proposal Are Needed? • Close the Deal 5-42 Closing the Deal • Typical Closing Techniques • Examples: – Added Inducement Close (e.g. more signage) – Standing Room Only (SRO) (other prospects) – Balance Sheet Approach (list pros and cons) – Alternative Decision Approach (Want A or B?) 5-43 Customer Relationship Management (CRM) • Focus on Customer (Sponsor) Retention • Focus on Sponsor Satisfaction and the Resolution of Problems that Emerge • Focus on Communication 5-44 Closing Capsule • Successful Sponsorships Are Characterized by a Solid Foundation • This Foundation Is Comprised of 10 Basic Building Blocks • Task Is to Convert Prospect into a Sponsor 5-45 Closing Capsule • Key Element is the Sponsorship Proposal • Will Likely Involve Meaningful Negotiations • Sponsorship Requires a Commitment of Resources by Both the Sponsor and the Sponsee 5-46 Closing Capsule • Both Parties Seek A Fair Return on the Resources that They Commit (Win-Win) • Sponsors Will Re-evaluate the Value They Received at the End of the Sponsorship • Focus on Sponsor Retention 5-47