SBJ/Jan. 17-23, 2011/Opinion

Companies find there's no subsitute for real ROI measurement

To say that the last two years are seminal in the history of sports sponsorship is not an understatement. The recession combined with the well-publicized scandals of high-profile athletes has changed the face of sports sponsorship forever.

While change is always upsetting to conventional thinking in the short term, in the long term, the sponsorship business has come out of these last two years a lot smarter. The cost of sponsorships has adjusted to levels that better reflect their proper valuation, and companies are doing a better job of analyzing and identifying the right sponsorship that aligns to a company’s business and brand objectives before jumping in.

Companies are also getting smarter when negotiating sponsorship deals, adding incentives, triggers, and stipulations, including variable payments based on the performance of the brand or property being sponsored. For example, if a pro golfer finishes in the top 10 half the number of times he promised his sponsor at the outset, he gets only half the money he was promised, under contract. In other words, he gets paid more if he is winning and less if he is losing.

And then there is the topic of measurement. Measurement has been a perennial pain point and people are worn out by the topic, but it is a critically important topic that deserves a new perspective every so often, especially considering there is more scrutiny than ever on budgets and an unprecedented demand for clear and credible metrics around the performance of sponsorships.

The measurement thermometer is hotter than ever. CEOs and CFOs are stepping up the pressure on their CMOs and brand executives to provide deeper understanding of the impact of their investments. And yet, most continue to struggle with answering the ultimate questions: What is the true impact on sales and margins? What is the actual return on our investment? How do we maximize the return on our dollar going forward?

We hear about return on objectives and return on sponsorship, but what exactly are these? These measures are in place to avoid the topic of real measurement. With due respect to the originators, they don’t even make sense. A return is a monetary term, meaning you put in dollars and get a certain amount of more dollars in return. Do you put in an objective, and get a number back? A CFO or CEO will have little use for ROO and ROS measures.

This brings me to the following point. There is a new revolution brewing, a new era of measurement — let’s call it “measurement 2.0” — that is characterized by the following five drivers:

The need for real ROI measurement. Not those ROS or ROO measures that are in place as a workaround to avoid real measurement, but solid ROI measurement that CEOs and CFOs can use to track against a company’s hurdle rates.

The need for a single source that can provide the full spectrum of output and impact metrics — including primary and secondary research, sales pipeline analysis, work force impact data, and ROI analysis — and do so across a company’s total portfolio providing a common currency of metrics for all corporate, regional and local sponsorships.

The need for a strategic partner who can work with the client to interpret what all the tracking and measurement data means for decisions on future activation plans, marketing mix and sponsorship investment.

A partner who is sensitive to corporate dynamics and has change management expertise to assist with getting the executive team aligned to and supportive of the sponsorship plans and measurement tracking system.

A system of measurement that doesn’t bog down the marketing team.

These drivers will lead to an upsurge in a managed-services model, whereby companies will lean on outside firms with deep analytics and project management capabilities to serve as their research and measurement arm, using a “command center” approach to provide a comprehensive view of the sponsorship.

This is a model already used by the big, global consumer brands. These mega-sponsors have sophisticated in-house analytics and measurement capabilities and are generally ahead of the curve when it comes to measurement. They are doing true ROI analysis using multivariable regression models and other fancy methods, and they don’t require a whole lot of change management since sponsorships are at the core of their DNA.

But there’s a large group of big corporate sponsors — I would argue that 90 percent of the Fortune 1000, especially the business-to-business companies where sponsorships are more at the fringe — that do not have the resources, tools and processes needed to ensure a clear understanding of the impact of their investment. This is both an opportunity and exposure for our CMO friends.

Prioritization continues to be the crux of the problem. I still come across situations where companies wait months into a new mega-sponsorship before deciding to get serious about measurement, missing the opportunity to establish key baselines from the get-go. They come up empty-handed after the one-year mark when a board member or CEO asks “How is our investment moving the needle?” There goes the opportunity for increased budget, and so goes a potential credibility hit.

The good news is twofold. First, there are firms out there who can help companies get up to snuff in no time and can bring to the table all the “measurement 2.0” elements mentioned above, including the secret sauce of true ROI measurement. What it basically boils down to is prioritization. Secondly, there are clear signs of an upswing in prioritization, with the likes of Aon, LG, IBM, UBS, Izod, and others who are leading the way with demanding clear and comprehensive metrics and who are leveraging full or partial managed-services models.

These companies are defining this new era and are creating the springboard for what I believe will be a substantial acceleration by the Fortune 1000s over the next few years in investing in more sophisticated measurement methods supported by a managed-services model to help them drive critical decisions around their sponsorships. The time for solid measurement has come, and 2011 will prove to be a defining year.

Guy Nielsen (Gnielsen@toprightpartners.com) is managing director of TopRight Sponsorship. LG, UBS and Izod are clients of IFM Sports, one of TopRight’s exclusive strategic partners.

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