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The New Era of Sponsorship Measurement

Michael Phelps—dropped by Kellogg’s after having his picture leaked taking a hit from a bong. Kobe Bryant—losing his endorsement deals with McDonald’s and Coca-Cola after being accused of sexually assaulting a 19-year-old woman. And, yes, Tiger Woods… These and other well-publicized scandals, combined with the great recession, have transformed the face of sports sponsorship forever.

In the wake of these events, companies need a more precise and credible measurement of sponsorship effectiveness as opposed to the broad, generalized and subjective approach.

It’s time to reinvent sponsorship measurement and figure out its real impact to the business.

The two sides of the coin

Coca-Cola is one of the top sponsors of FIFA and did a great job in the last World Cup in Brazil, even with the corruption scandal involving FIFA later on. The “One World, One Game” campaign tells the story of fans from all around the world and provides them the opportunity to be part of this major event. It engaged the audience and reinforced the brand value all around the world, especially in Latin America, one of the largest markets for The Coca-Coca Company.

On the other hand, the National Guard sponsorship to NASCAR goes to the list of failures in sports sponsorships. In 2012, the Guard spent $26.5 million as a NASCAR sponsor, expecting to bolster its marketing and recruitment. However, not one single new soldier signed up. Even after over $88 million of sponsorship in 3 years, it is unclear how many new recruits signed up.

I could go on and on listing numerous examples of success and failures in sports sponsorship. The good news is that sponsorship costs have lowered to levels that reflect more realistic valuations. Companies are also doing a better job of identifying sponsorships that align to the business and brand objectives. In addition, companies are getting smarter when negotiating sponsorship deals, adding incentives and payment triggers based on performance. For example, if a pro golfer finishes in the top 10 only half the number of times he promised, then he might get only half the targeted payment. Companies are increasingly incorporating performance accountability directly into sponsorship contracts.

Despite significant progress, one area that remains largely unchanged is performance measurement. Sure, companies have devoted lots of discussion to sponsorship measurement but the approach has remained the same when trying to figure out the business impact from a sponsorship, and whether it was worth the cost. Until now, this was typically addressed under the murky banner of “Return on Sponsorship (ROS)”or “Return on Objectives (ROO)”.

 

It’s time to revisit measurement

In today’s brutal landscape of unrelenting economic pressure and sponsorship behavior, the old ROS and ROO methodologies aren’t telling the right story anymore.

To be blunt: companies need less story and more fact.

They need a more precise and credible measurement of sponsorship effectiveness and less of a broad, subjective approach. Consider for a moment those typical ROS and ROO approaches. What exactly are these and do they even qualify as true metrics? Companies often employ these as directional correlations between a sponsorship and the brand, but these do not pinpoint business impact as a true ROI. In fact, one could say the term “return” is out of context in ROS and ROO – these don’t express a monetary return from a specific financial investment, they don’t represent an impact on sales or margins.

5 Key Principles to revisit reinvent sponsorship measurement

Maybe it’s not only time to revisit; it’s time to reinvent sponsorship measurement – and everything surrounding it. More specifically, companies need to take a radically different approach based on 5 key principles for sponsorship investments and measurement:

  1. Real ROI.  The typical ROS or ROO metrics have no place in financial decisions, and a sponsorship is, at its core, a significant financial investment that should have clear monetary returns. CFOs should assess sponsorships using ROI calculations that can be tracked against the company’s investment hurdle rates.
  2. Measurable Objectives. Companies must define – in precise terms – the targeted objectives for any proposed sponsorship. There must be clear targets for impact on sales, margins, share, etc. Of course, companies should also include targets for impact on corporate, channel or brand-related objectives. The point is that monetary impact should be the priority.
  3. Broad skill Set. Companies need to assemble the right team to monitor and assess sponsorship impact. The team must be cross-functional and broad-based by definition: they will need to monitor research, sales, market and channel data to detect impact at the corporate, regional and local level. A sponsorship is an investment like any other, and should be treated as such.
  4. Data Partner. Much of the data that needs to be included in measurement analysis is external and sourced from various providers. A third-party, single-source data partner that has established relationships with relevant data providers, that can bring analytical resources ready to consolidate with the company’s data, and drive toward meaningful outputs and insights will be crucial to success.
  5. Strategic Partner. As with most business initiatives, the devil is in the execution details. Sponsorship measurement will need a clear strategy and activation plan. Success will involve a heavy dose of change management to ensure the organization embraces explicit measurement at every level. All marketing resources must be aligned around the new measurement paradigm. A strategic partner can bring the expertise needed to both design and effect the change.

 

Summary

ROI-based measurement is a concept already being employed by several large consumer brands, typically done by their own internal teams. In fact, some mega-sponsors have sophisticated in-house analytic and measurement capabilities. They’re doing real ROI analysis using multi-variable regression models and other sophisticated tools.

But the majority of large corporate sponsors, perhaps as many as 90% of the Fortune 1000, do not have the resources, skills or processes needed to measure the true impact of their sponsorship investments. And worse, they have not yet escalated ROI-based measurement to being a top priority. Certainly their executives often ask “is this sponsorship moving the needle?” but the organization cannot provide a definitive answer.

Here’s the good news for this latter group of sponsors: there are firms out there that can help develop an ROI-based sponsorship discipline, and better yet, can execute on that discipline – right now. TopRight Sponsorship Optimization is designed to help our clients maximize the power of sponsorships within the context of overall brand strategy and activation, to ensure that scarce marketing dollars are allocated to their fullest impact. Sponsors such as LG, IBM, UBS and IZOD are leading the way in demanding clear and comprehensive measurements and are currently leveraging outside firms to help them achieve the rigorous measurement needed to make the right sponsorship decisions.

In short: the 5 key principles for sponsorship investments and measurement call for a big change in what is done regarding sponsorship measurement (explicit measurement of ROI), and also how it’s done (with partnerships). Companies that embrace this big change achieve greater financial impact from sponsorship investments, capture returns faster due to a partnership-based approach and #MoveTopRight.

The time for real sponsorship measurement – and partnership – has arrived.

 

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