Last Tuesday I wrote about three “sponsorship asset / package valuation methods”. This week I have three more. Last week we really looked at the historical approach of guessing, going for broke on the ask and blind trust comparison valuation process. If you missed that read… you can find it here. Just scroll down to the page and you will find it below.
This week we are going to look at four metric based valuation processes. As I mentioned last week, valuation of sponsorship assets is a tricky process. You have to know what you want to measure it correctly.
- The High Level Valuation – Some might call this the “quick and dirty” method. It is a real method but very high level. It uses basically “impressions” alone to determine the marketing value. This used to be the gold standard of the valuation process… counting eyeballs. Today this high-level process, when done professional and correctly using industry accepted processes and algorithms and derivatives, has a place. When you need a verification done (as a sponsor or a property) this will give you a metric based, quantifiable benchmark valuation for anything from your rink board to a naming right to an employee engagement program. The process should be looking at impressions associated directly to the assets being valued as well as digital and social exposure, broadcast coverage if applicable and should be using high level benchmark comparisons of actual sold naming rights or sponsorships… so that agency doing this work needs to have a catalogue of hundreds of sold and activated naming right deals to draw comparisons to. This “quick and dirty” method is often used to determine if it is worthwhile to proceed with a full-scale IAV (Inventory Asset valuation) or to present to a Board / Council to get the go-ahead to work on development of a sponsorship program. It also is a handy process for brands / sponsors to “quick-check” proposals from properties. It is important to remember that this is for the most part, “impressions based” with some high-level benchmarking on pricing. It is a valid process but not one I would base an entire program valuation process on. Typically, this method will give you results in five to 10 business days but you will need to provide the agency with the required metrics such as social followers, vehicular traffic counts where applicable, broadcast numbers where applicable and of course actual bodies that visit the asset be that a rink, a yoga class or festival. We are excited to be launching (in the new year hopefully) a “self serve” valuation online tool with AI support for anyone to use with results in 2-4 days – you can check it out at hoona – the sponsorship calculator.
- Then there is the full-scale Inventory Asset Valuation (IAV). This is the most comprehensive and reliable valuation process in the industry. When done properly and efficiently this valuation process will provide you pinpoint valuations for everything from a naming right to a mom and tot swim sampling opportunity; from a speaking role on stage at a festival to a behind the scenes experience at a professional sport or theatrical production. This methodology will take into account not only the “eyeball impressions” but also determine the validity of those impressions. Just because there are 60,000 people in a stadium or 1.9 million people drive by your facility that has a naming right on the outside does not mean all those people will actually see it… and at what point does if become “white noise”. It also has to apply a visibility factor element into that valuation of impressions. Then the culture of the organization needs to be considered. Will there be push back from operations people or will the entire organization embrace sponsorship valuation updates? What about stakeholders like user groups and sponsors? They need to be interviewed and understood as well as staff to truly understand the culture. And what is the strength of the property’s brand? And a deep dive into their communications plan presently and in the future is critical when determine a property’s asset valuations. This process will typically take 3 to 6 months to complete and longer if there are multiple events / experiences spread throughout the year because site visits to events / experiences are critical. How can someone measure the value of an event or experience if they do not show up at the experience / event. This method will yield you the best results, the most accurate results and provide you with irrefutable valuations. But it is by far the most expensive. This process though can be undertaken for something as simple as a golf tournament or as complex as a recreational complex (no pun intended), a professional sport organization or a festival.
- Then there is the metric-based benchmarking process. Unlike the “comparison” process outlined last week, this is more reliable and accurate. The agency you hire should have a data base of hundreds of properties that they compare your property to. In that proprietary database they will have valuations based on past IAVs but must also have a database with hundreds of examples (again propriety and confidential) of closed and activated naming right contract and sponsorship agreements. Through this process your property, be that a single sheet of ice in a small town to large festival with over 1M attendees; from an art gallery in a major metropolitan centre to a member-based association or trade show. This again is a faster process than a full-scale IAV and much less expensive but leaves out the key elements of subjectivity and localized research such as economic landscape, culture, onsite experience, property brand value / goodwill.
Again, as I mentioned last week, it is always important to remember that any valuation is an estimated value. The true value is what the partner is willing to pay. I have seen cases where a sponsor “overpays” and is fine with doing so. We had a client (performing arts facility) who’s original sponsorship partner paid $100,000 a year for 10 years… (total $1M!). The actual valuation of that naming right was about $24-$30,000 per year in value. It was a small centre but in a wealthy community. The sponsor was a developer and “needed” support on Council for some variances. For the developer, the $1M was a drop in the bucket and it was worth it to them. But try selling that same facility 10 years later when there is no such “value add” for the sponsor… and convincing that Board that their property truly is not worth $100,000 a year. But truly it shows that the buyer sets the price, but the property needs to know their BATNA to ensure they get their real minimum value.
And if you want to learn even more on sponsorship valuations and have access to those that do those valuations or those that have had them done… register for the Western Sponsorship Congress® – Alberta Forum today before the price goes up and it gets sold out again!
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