Avoid The Wrongs Of Rights Activation

by Ove Haxthausen, May 18, 2010, 9:28 AM

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According to the IEG / Performance Research Sponsorship Decision Makers Study, 60-70% of companies spend the same or less on sponsorship activation than they do on rights fees, and that range has remained relatively constant since 2003. At the same time, a consistent 15-20% of sponsors have spent more than three times their rights fees in sponsorship activation over the same period. What accounts for this broad range of activation levels?

At least three possible answers come to mind with regard to low activation spenders:

• Brands who spend little on activation are constrained by budget and want to make sure they sponsor decent properties, so they end up spending most of their budget on rights

• Brands with little activation spend don't measure activation ROI; they spend little because they don't know what activation does for them

• Low activation spenders have adjusted their activation levels for optimal sponsorship ROI, given sponsorship objectives

Instinctively, spending more on activation than on rights makes sense. Sponsorship rights only buy that -- the rights to be an official sponsor. Some location signage, free tickets and other benefits may be included with the rights, but there is usually little media exposure included, apart from what is gained through media event transmissions showing onsite signage or otherwise mentioning official sponsors.

The rights primarily allow the sponsoring brand to associate itself with the new equity provided by the sponsored event. By sponsoring tennis tournaments, yacht and car races, among other sport events, the Rolex brand benefits by association from the exclusivity, international renown and performance perceptions associated with such events. But to achieve their full impact, these new equity associations need to be communicated to the brand's target audience. This is where sponsorship activation comes in.

In some cases, however, not spending a lot on activation can make sense. The key to a successful sponsorship program is clear program objectives. If the target of the sponsorship program is narrow, and will be exposed to the sponsorship without need for activation, don't activate. An example would be a sponsorship program aimed at building relationships with business partners.

Here, the objective is not to reach potential customers with exciting new brand equity associations from the sponsorship, the purpose is to get business partners excited about doing business with the brand by inviting them to the sponsored events, have them interact with athletes, etc. No activation is needed.

But we see many examples where low activation spend is primarily driven by the two first answers: Budget constraints and inability to measure activation effects. Examples include companies finding themselves with too many properties sponsored, as a result of legacies from past acquisitions and chief executives, and facing increasing budget constraints. We also see companies with no plan for measuring sponsorship ROI.

According to the IEG / Performance Research study, 70-80% of sponsors don't have a specific budget for sponsorship research, and some 25-40% of respondents don't spend anything on measuring sponsorship effects. It wouldn't be surprising if these sponsors were unwilling to spend a lot on activation. Nobody wants to spend money if they can't measure the value it creates.

The take-away is clear: If you are going to invest in sponsorship rights, you need to make sure they are optimally activated. In order to do that, you need to measure your sponsorship ROI. There is clear evidence of upside potential. We see it with our clients, and the consistent 15-20% of sponsors who spend more than three times their rights investment in activation must be seeing an attractive ROI; otherwise they wouldn't keep doing it.

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0 comments on "Avoid The Wrongs Of Rights Activation ".

1. Seth Leeds from Sponsorium
   

   commented on: May 18, 2010 at 10:21 a.m.

   The key component to this information is that successful sponsors identify their criteria for sponsorships in advance (as mentioned in the above article, graf #5). They set and weigh objectives, which include activation strategy and costs.

   Their other focus is on understanding that ROI is only part of the whole puzzle. Identifying sponsors Return On Objective allows them to quantify the other intangibles in sponsorship....measuring passion, affinitiy, and overall performance.

   The Sponsorium Report is published quarterly (available at www.sponsor.com), and through actual data rather than a survey, speaks exactly to the points of:
   -How is the industry meeting the needs of sponsors?
   -What are the average asking rights per sponsorship sector?
   -What trends are we able to see in rights fees and sector performance?

   Critical information to say the least.

2. Steve Barnes
   

   commented on: May 18, 2010 at 11:52 a.m.

   I agree with the vast majority of the article, my only question is what constitutes "activation".

   The author states, "In some cases, however, not spending a lot on activation can make sense." he cites this example, "An example would be a sponsorship program aimed at building relationships with business partners... the purpose is to get business partners excited about doing business with the brand by inviting them to the sponsored events, have them interact with athletes, etc. No activation is needed.

   I would argue that IS activation...hence my question, what is the definition of activation?

3. Jim Andrews from IEG
   

   commented on: May 18, 2010 at 12:34 p.m.

   Ove's commentary underscores the fact that the "pressing issue" here is not that sponsors don't spend enough on activation--they don't always have to--but that they invest far too little on measuring and evaluating both ROI and ROO.

   To Steve's point: I agree that entertaining B2B customers and prospects is a form of activation; activation being defined by IEG as all forms of promotion, advertising, etc. that leverage the sponsorship rights.

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