In some senses, sailing has it easy when it comes to sponsorship. The relative immaturity of the sport means that often sponsors are not as rigourous as brands sponsoring other sports. This will obviously change and both sponsor and sponsored will need to understand the value of their property. The following excerpt is from an article is featured in Sports Business Journal. It shows that measurement is a way of life for those looking to get others to pay for their sport. It also discusses ROI versus ROO. If you don’t know what ROO is – it’s a must read.
Bank of America, in the days following this year’s Super Bowl, was forced to defend its presence at the game as an NFL sponsor. Spurred by media reports that used words like “lavish” and “luxury” to describe the spending habits of a bank that has received $45 billion in federal bailout money, the bank blasted out a statement to defend its actions.
“Our relationship with the NFL is a carefully managed and heavily evaluated business that generates profits for our shareholders that are many multiples of what we pay the NFL,” read the statement.
Bank of America, for the first time, later revealed financial returns on its sponsorship investment. For every dollar the bank spends on sports sponsorships, it earns back $10 in revenue and $3 worth of net income. The revelation was an unintended use of data collected from measuring the value of sponsorship investments, but one that is a new reality in today’s economy, observers said.
“Historically, it was never approached from a PR perspective,” said Simon Wardle, head of Octagon’s research group. “That’s something that’s very new based on media scrutiny, and now there’s an even bigger desire to show the value of these sponsorships.”
The manner of use for such data is just one of many trends in sponsorship measurement. The practice is booming as companies look to cut expenses in a down economy and make their dollars go further.
“Measurement business is way up because all these properties are now faced with having to measure and justify the dollars (charged), and on the sponsor side they need to answer to senior level management to justify the dollars (spent),” said Len Perna, president and CEO of Turnkey Sports and Entertainment.
Applying the metrics
Brands are crafting measurement programs that are more layered than they once were. No longer do companies that spend millions on sponsorships and research analysis just measure brand awareness through press clippings or focus groups; they are also tracking media exposure and image transfer.
Companies are also looking at data that doesn’t necessarily support its intended sponsorship goal. For example, a Fortune 100 brand mostly interested in customer acquisition is now looking at brand-building activities like media impressions to quantify additional value.
When budget cuts are necessary, agencies are helping brands quantify what spending works and what doesn’t. Navigate, an agency that has worked with the NFL and U.S. Cellular, said a client recently streamlined its sponsorship activation spend to strictly supporting media after the agency’s research found one touch point was better than two.
Bank of America…
“We look at what the relationship could be worth solely on a business basis of revenue,” said Ray Bednar, head of sponsorship at Bank of America.
ROI vs. ROO
The argument remains about whether return on investment or return on objective is more suited for measuring a sports sponsorship.
ROI generally measures the ability of a sponsorship to affect the bottom line, and ROO delivers on more qualitative metrics such as employee good will or product satisfaction.
Agencies may agree on the need for sponsors to measure their returns, but they offer varying opinions and approaches on how best to go about accomplishing that goal. Some agencies say sponsors must focus on ROO by setting and measuring against goals for metrics such as sponsor recall. All agree that, at a minimum, each brand should be setting ROO benchmarks and measuring against them, whether it’s brand tracking, media monitoring or sponsor surveys.
The days of spending without financial justification are over, said brand and agency executives, and sponsorship measurement is expected to be part of whatever new economic model survives the current downturn.
“If it’s going to explode it will be in the next five years because everything is being scrutinized,” said Steve Seyferth, founder of SSG Marketing, which uses Six Sigma processes to evaluate sponsorships.
“Every dollar is being looked at and has to be maximized. We know sponsorships work, but it’s got to be put into a paradigm that everybody respects and tackles together.”
Read the full article at: http://www.sportsbusinessjournal.com/article/61642