Measure Sponsorships to Drive Sales

Shift Gears: Move Beyond Perceiving Them as Mere Brand Builders and Instead Assess ROI

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Event sponsorship has become one of the fastest-growing areas of U.S. marketing. From the Super Bowl to Nascar to the New York City Marathon, brands are spending billions of dollars to reach out to touch consumers through sponsorship.

Illustration: Andy Potts
Sponsorships can be an enormous waste of money and a drain on the marketing budget without a well-structured business case and a measurement plan.

A nasty little secret, however, is that despite all the emphasis on marketing accountability, the sponsorship and events segment remains one area of marketing that hasn't embraced accountability. Sponsorship is the victim of a marketing myth: that it drives brand equity, not sales, and is not worth measuring. It's seen as sexy and fun; it's assumed to be valuable by lending cachet and status to a brand. Add to that the fact that sponsorship is considered notoriously difficult to measure, with so many moving parts -- signage, naming rights and advertising, among others -- and you have the current scenario: Sponsorship gets a pass at accountability.

Taking advantage of a misperception
Sponsorship is also the beneficiary of the perception that TV advertising doesn't work as well as it used to. Money once meant for TV is flowing into sponsorship -- with little accountability.

Spending on sponsorship is projected to reach $14.93 billion in 2007, a rise of 11.7% from 2006, according to sponsorship-research company IEG. In contrast, IEG projects advertising growth of just 2.4% in 2007.

Today, most marketers limit their sponsorship evaluation to brand equity. Did a sponsorship increase awareness of my brand? Did it drive more impressions? While brand equity is important, it doesn't answer the question of the value of a given sponsorship. It doesn't provide any way of comparing an investment in sponsorship with investments in other marketing tactics.

And there's the problem. Sponsorships can be an enormous waste of money and a drain on the marketing budget without a well-structured business case and a measurement plan. When it comes to sponsorship, the key question marketers need to ask is: How do you do sponsorships that build brand equity and maintain fiscal responsibility?

Sponsorship, as a marketing tactic, addresses many of the challenges marketers wrestle with. Unlike the traditional 30-second TV spot, sponsorship embeds the message in the content, so it has the power to engage consumers even when they have the remote in hand. A well-developed program can even amplify the impact of traditional ads: Ad copy can reference the sponsorship, and the ads themselves can be displayed at a sponsorship event. Synergy makes the ads more powerful and the sponsorship work harder.

Touching consumers directly
"Sponsorship is an opportunity to directly touch consumers and be true to the lifestyle of the brand," explains Chris Fuentes, VP-marketing at Nautica. "It lets you have a conversation with consumers."

Or as Michael Reisman, founding partner at Velocity Sports & Entertainment, a sponsorship and lifestyle agency in Norwalk, Conn., says: "The reason more money is being allocated to sponsorship is similar to digital. It's a way of building a relationship with the customer. The beauty of sponsorships is that they change the marketing dynamic. You're no longer talking at customers. You're talking with them."

For marketers, the challenge is to do this in a way that maximizes ROI while building the brand. This involves a delicate balance of not under-spending in the name of ROI but not overspending to the point of diminishing returns.

Which brings us back to measurement. Despite the myth that sponsorships only build brand equity, the fact is that to be successful, they need to both contribute to the brand's health and generate sales. In our experience, brand equity and ROI go hand and hand. If, in the short term, you don't find any movement in your sales from sponsorship, you've built no longer-term brand equity. That doesn't mean a sponsorship has to pay out in the short term. But there has to be some sales spike to affect the brand in the long term.

While the majority of marketers limit their sponsorship evaluation to brand awareness, some leading-edge marketers are recognizing that they can't get away without tying sponsorship to sales.

You need benchmarks
"It's important when constructing your sponsorship plans to have benchmarks and a plan that looks at how you are going to evaluate your sponsorship," says Mr. Reisman. "The companies that are doing this well are setting up the business case with an idea of ROI."
John Nardone is co-president and chief client officer of Marketing Management Analytics.
John Nardone is co-president and chief client officer of Marketing Management Analytics.

It's important when you build models that you do so at the granular level. That means not just looking at the impact a sponsorship has nationally but also looking at how it affected the local markets where the sponsorship was held. This will give you a more accurate assessment of the value of your sponsorship.

Of course, all of this will be for naught if you don't build measurement into the negotiation for the sponsorship. Marketers often struggle to justify the year-over-year expenditures on sponsorship because they don't have the necessary data. The time to define the measurement program and metrics is during the sponsorship negotiation, when the property can be compelled to create and provide the data. The two parties must agree on how the program will be monitored so that the right "trail of breadcrumbs" can be left behind.
Ed See is co-president and chief operating officer of Marketing Management Analytics.
Ed See is co-president and chief operating officer of Marketing Management Analytics.

Sponsorships are great brand builders; now companies must make sure they are fiscally sound. Getting sponsorships to pay off, and being able to provide clear evidence that they do, should be of principal concern to marketers as their budgets come under greater scrutiny. For marketers to truly understand the value of sponsorship investments, all their impact -- from direct to indirect to activation activities -- must be evaluated. The end result is an apples-to-apples comparison of sponsorship ROI in relation to all other components of the marketing mix. Only by doing that can marketers understand the optimal allocation of marketing investments to achieve business goals and objectives.
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