Is a sponsorship good value?

I had a conversation with someone this week. This person is a senior decision maker for a business who make products that cyclists want and need, and has been involved in the sport of cycling for around a decade. We were discussing the opportunities available to brands within the sport in the UK, and debating the relative merits of some events over others. We got onto the subject of one major event, and the amount of money that the rightsholder is looking to get from principal sponsorship. This guy felt it was extortionate, and couldn't figure out why it was so expensive and still available when, according to him, cycling is in such rude health and surely brands are lining up to associate themselves with the sport.

I guess this raises two questions - firstly how do you value a sponsorship opportunity, and secondly are brands lining up to get involved in cycling?

This blog is going to tackle the first question - the second one I'll try to cover at another time.

So - how much is a sponsorship worth? How can it be valued?

I find there are three ways to look at this - and probably the right answer lies somewhere in the middle. When I get a proposal land on my desk, and it is a proposal that actually has some interest to me and the brands I work for (that's around 5% maximum of all proposals I receive) then I consider three things:

1 - How much can we afford to pay for this?
2 - Is it comparable with any other similar opportunities - and if so, how much were they valued at?
3 - If this were a straight media buy, how much would it cost?

Points 1 and 2 are clearly individual to different brands, and to different sports/events, but actually should form the clearest guide as to what the right value is. Point 3 is only there to satisfy the bean counters who are still under the misguided illusion that a sponsorship is only about logo exposure and media value (but bean counters rule the world and we have to tick that box).

So for me, a sponsorship is only good value if it is both affordable and realistic in terms of the market. Obviously if we're talking about a sponsorship renewal, then hopefully we'd have an idea of the value to the business the sponsorship is giving, but when it's a new proposal, then it pays to do some research and find out what other similar properties are worth. If that means looking at properties in other countries, then do it, because someone is going to ask you, at some point, how it compares to other sponsorships - so it's worth doing your homework.

I think the guy I was talking to was only considering point 1 - i.e. it was out of his (budget)league, because I happen to know that the figure being quoted was actually very comparable to other similar properties both in the UK and in other countries.

Oh, and it doesn't stack up too badly on media value either!!