Nielsen Sports expert Lars Stegelmann, Executive Vice President Commercial Operations, regularly provides sports business insights. This time, he describes how brands can optimize their sponsorship investment by integrating ROI models in their strategy.
Many sponsorship executives use media evaluation only to justify their engagements, and others solely take market research results into consideration. But is this isolated view enough to optimize a sponsorship strategy?
What’s key for a successful sponsorship analysis is a model that meshes several methodologies. More and more executives are aware of the importance of a combined, holistic sponsorship model.
So, have you ever thought about using these types of ROSI models to figure out your return on sponsorship investments?
According to the latest trends report Sponsor-Trend (German only) most sponsorship executives are in it for the positive influence an engagement can have on their image and brand awareness.
To accomplish these objectives many companies make use of a multi-asset-strategy, utilizing different platforms for different sponsorship objectives. In this situation keeping track of the engagements´ success leads to a host of data sets which can easily add up to several dozen important indicators (media equivalency values, broadcast times, figures of awareness and interest etc.).
And so, many of these sponsorship executives are looking for a simple way to translate the research data into a reduced set of KPIs. Not only to ensure a better usage of the data in their daily business but also for decision making (contract extension/cancelation) or management presentations.
This is where a ROI-KPI model comes into play. It makes use of existing research data as mentioned above and results in a very easy and comprehensible KPI. It combines media values and several other integrals from the contract with data from market research into one total monetary value the sponsor hypothetically gains from the partnership.
This means that all the monetary values generated by the sponsorship (e.g. media equivalency values, on-site-visibility, business seats, the right to make use of team players etc.) are summed up and build the essence of the ROI. Within this step a sponsor should also take into consideration that activation is an important pillar in the success of a sponsorship. That´s why the activation costs (incl. sponsorship related media expenses) can be included in the media value as well.
Because a sponsorship not only results in media values but influences brand positioning on several levels (e.g. by enrichening a brands’ image or increasing its positioning in the clients’ relevant sector, a weighting factor for the media value is calculated based on results from market research. This factor has almost no constraints and therefore could comprise results e.g. from consumer, client or even employee research.
So, by combining media values with activation and market research, all impact levels of a sponsorship are combined and summed up in a total monetary value.
To calculate the ROI the total monetary value is divided by the sum of costs for activation and the sponsorship fee, with a very easy to use result. If the result is below 1, you invest more in your partnership than you get out of it. If it is bigger than 1, you did a good job and you get more out of your partnership than you actually paid for.
This model is most suitable for a quick overview of your sponsorship portfolio and for comparing your partnerships.
Keen to discuss suitable approaches for your company? Please contact Lars Stegelmann, Executive Vice President Commercial Operations, Nielsen Sports.