Action 1 – Rationalise sponsorship budget
It is key for advertisers to rationalise their sponsorship portfolio. Advertisers need to assess if they are active in the right domains (sports, music events, series etc.) and if their properties continue to have strong overlap with their target audience and have the right brand association. This requires advertisers to be critical towards their portfolio and to stay on top of emerging sponsorship opportunities, such as e-sports.
Action 2 - Define performance metrics and negotiation strategy
Most advertisers do not really know what the right price for a sponsorship deal should be, nor do they have a negotiation strategy. A performance metric can help align the internal organisation and rationalize spending decisions. It can also help in negotiations with rights holders. Given the complex dynamics and lack of transparency (e.g. strong price fluctuations, no visibility into competitive moves) around sponsorship deals, a negotiation strategy is key to get to a favourable deal and to sustain positive ROI. A negotiation strategy includes a price estimate (valuation of sponsorship property), preferred rights package (e.g. include more digital rights) and an alternative strategy. The alternative strategy sets your ‘walk away point’, i.e. the cost at which you are better off implementing the alternative strategy.
To mitigate risk of overpaying, some advertisers are jointly setting targets with the rights holders, creating incentive-based contracts. This move, which is regarded as quite revolutionary within the industry, is quite common in other parts of the A&M spend of advertisers. AB Inbev is rolling out an incentive-based model and already has four partners on board under this new format: the New Orleans Saints, the Los Angeles Dodgers, the Minnesota Timberwolves and NASCAR. An incentive-based contract is a way to align the incentives of advertisers with rights-holders and broadcasters, and is a way to maintain a positive ROI.
Action 3 - Go where the action is
After closing a favourable deal, success is not yet guaranteed. It is essential for advertisers to know how, when, and where to connect with fans. This enables advertisers to unlock the underlying value of the sports asset and therefore the sponsorship. Although traditional in-game exposure will continue to be the foundational value driver, advertisers can stand out by creating breakthrough multi-media activation. This allows advertisers to connect with fans, be part of the conversation and follow the viewers where they consume the sport.
Advertisers need to experiment with these new forms of activation, connect with new types of content ‘around the sport’ and with formats in which the viewers consume sport. PlayStation’s UEFA Champions League sponsorship concept ‘Fantasy Football’ is a good example of this. Women’s soccer and eSports are good examples of non-traditional platforms that are increasing in value and relevance to core target groups.
Potentially use kind of call-out to elaborate on example:
PlayStation, one of the official UEFA Champions League sponsors created an online game concept called ‘Fantasy Football’. Directly creating a link between Champions League and gaming. Via the official Champions League website and additional app fans can play ‘Fantasy Football’ (manage an online squad) and win PlayStation prizes. With this PlayStation is triggering engagement and generating valuable consumer data.