Whether it is real estate, grocery shopping or sports marketing, as buyers we all want to know that we are paying a fair price for that purchase.
In every profession, the ability to benchmark data leads to informed decision making, minimized risk, and overall improved performance. Sponsorship is no different.
One of the most critical points of information that sports marketers should examine is any gathering of market intelligence – large swaths of sector by sector data. We all must read the market and adapt.
For example, out of the nearly 14,000 actual sponsorships that came through our clients’ sponsorship management systems, we can share data such as the average dollar amount requested by rights holders, from where, and targeting who. But the question that everyone wants to know first is the same one you ask when house hunting, bike shopping, TV buying, and more….how much should you pay?
So we took those 14,000 actual sponsorships and also extracted the final budget items, or in essence, the Asking Rights versus the Actual Paid.
By no means am I professing to be an expert in negotiating. I purchase, probably like many of you, on instinct. Pretty simple philosophy: if something feels like it’s worth more than what the price tag says, I go for it. Isn’t it a great feeling when you get a great deal or that bargain find? How many of us go into a store, find something we want, but check Amazon for their price before we purchase in store? How do we replicate that in sports?
That online price check is exactly what we’re talking about here. The ability exists for brands and agency partners to understand what their peers paid for partnerships in the same region, same industry sector, same sport. Here’s what we know from 2014:
On average, sponsors paid 36.6% less than what was initially asked by sponsees across all sports. Now this is not to say that there weren’t other costs or in-kind services exchanged, but global average rights fees were essentially negotiated down 36%.
Here’s are just a few sectors that stood out and the percent decrease from what was initially asked versus actually paid (in order of number of sponsorships tracked):
We’ll use another column to discuss what may be the reasons for such variances, but we can also examine year-over-year changes. In fact the 36% reduction is a three-year high. We’ve reported before that sponsorship fees in sports have dropped, but does the competitive landscape and desire to find unique partnerships warrant greater reductions in what sponsors will ultimately pay?
Clearly, sports are a fluctuating market, just like real estate, consumer products, and many other industries. But without the ability to access data, you might be buying without really knowing what’s going on.