How to Assess the Value of Your Sponsorship Offering
By Abby Clemence, MFIA
Abby addresses questions from non-profit sponsorship seekers in an attempt to unravel some of the complexities involved in assessing the value of sponsorship.
1. When a not-for-profit organisation is seeking to engage a sponsorship partner, what is the best way to go about valuing their service, programme, event or organisation prior to approaching a company or brand?
Sponsorship is a people business, which means in order to give yourself the best chance of success, you need to create a relationship with a company before you ask them for their investment.
Working out the value of your offering is probably the trickiest part of the sponsorship seeking process. There are no hard and fast rules, and no widely upheld benchmark or central repository of information where sponsorship seekers can go to draw comparisons and contrasts to gauge the value of what they have to offer a sponsor.
Fortunately, or unfortunately, this is the intrinsic nature of ‘partnership’ — a fantastic opportunity to create bespoke offerings that create win-win-win situations. You win because your organisation receives much-needed funds, your corporate partner wins because they gain access to a previously untapped market and your supporters win because they receive greater benefits and services as a result of their alliance with you.
A common method nonprofits use to value their sponsorship offerings is to look at their costs, and then add a random percentage on top of that. No one wants to lose money on a sponsorship deal and whilst taking your costs into consideration is an essential part of the process, basing your offerings on costs alone will never get you close to estimating the true value you represent to a sponsor.
The way to get the ideal outcome from any sponsorship deal is to work out the investment amount in collaboration with your potential sponsor, first ensuring that your sponsor’s target market is indeed people that you can put them in touch with. I use a formula with my clients that factors in the price of the product or service the company sells, the total size of the audience you can expose a sponsor to, and then calculates a feasible market share they could expect to gain as a result of their alliance with you. This can be a powerful process that not only builds trust, but excitement about the potential of the opportunity you represent.
2. How do companies value a sponsorship opportunity, and is there any variation in the valuation process when they make an approach vs. them reacting to a sponsorship proposal submitted to them?
Sponsorship comes out of a company’s marketing budget and so any investment opportunity to be considered will be based on a couple of initial criteria:
Will this opportunity give us access to a new or existing target market?
How much ROI does this opportunity have the potential to make for us?
Appraisal of a non-profit sponsorship proposal goes through the same process, where companies look for opportunities to make money on their investment.
There can be other things that are also taken into consideration when dealing with sponsorship in the nonprofit sector, such as the company’s desire to connect with and educate or support your community or whether they see this as an opportunity to be a ‘good corporate citizen.’ In the end though, their decision to sponsor will be assessed in their ability to make a return on their investment, not what a valuable cause you are.
In terms of whether it makes a difference if they approach you, or you approach them — I would like to say that there is no difference, but in Australia and New Zealand there are more than 700,000 nonprofits all looking for corporate investment of some kind. Companies are becoming spoilt for choice. If a potential sponsor identifies your organisation or event as an opportunity they would like to explore in partnership, initially it will always be easier to build rapport and speak openly about goals, targets and budgets if they approach you, than if you are the one seeking the investment.
3. What happens in a situation where there is agreement that a partnership is desirable (by both parties) but where there is also a reasonable difference in the perceived dollar (or dollar/in-kind) value of the sponsorship between the parties?
This is the point in all sponsorship discussions when it comes down to two things: the strength of the relationship you’ve built and how aligned the opportunity is with the company’s target market.
Every buyer wants to pay the lowest amount possible for their purchase, and conversely every seller wants the maximum amount for what they’re selling. This is business — and you will need to negotiate. If you have already built a relationship and had discussions about what a company wants in a partnership deal, you are ahead of the game. Keep coming back to how you are the gatekeeper who can put this company or brand in front of people who are not mandated to be with you, but who stay because they value the service and support you give them. That’s a very ‘warm’ target market for a company to be introduced to.
Ensuring that you’ve done your research, worked through what the potential ROI could be and knowing there’s a solid alignment between who your supporters are and who their target market is are all essential to helping you stand your ground when the inevitable discussions around price come up.
One important thing to note here is that many nonprofits feel that ‘in-kind’ sponsorship is somehow less meaningful that a cash contribution. It’s true that you can do more with a cash investment, but it should not be forgotten that ‘in-kind’ products or services also have a value. If you are really struggling to get sponsors to invest cash, then targeting sponsors who have the kind of products and services that you would normally have to pay for to run your event or organisation can be a good option. Saving cash or bringing in cash — either way the budget is happy!
4. Just as not-for-profits like to raise ‘untethered’ funds so that they can be applied where needed; how can a not-for-profit maximise their benefit from a partnership by negotiating a cash sponsorship or at least a cash/in-kind mix?
To make the most of a sponsorship deal for YOUR organisation or event (rather than your sponsor), in other words to maximise the amount of profit you can funnel back into your organisation, means that you have to be truly ready to engage corporate partners.
If you are seeking corporate annual partners (as opposed to event sponsors) then ensuring that you are giving partners access to your supporters across all the ways you communicate with them throughout the year is going to minimise the costs associated with servicing a sponsor.
Providing them with the opportunity to leverage established channels of communications means that you have already budgeted for the money needed to create your quarterly newsletter, regular e-bulletins, social media campaigns and so on. Any excess funds coming into your organisation can go straight back into expanding the benefits and services you provide to your community of supporters.
Remember, sponsorship is not advertising. We're not talking about logo placement. Corporate partners want the opportunity to connect with your supporters, to differentiate themselves from their competitors and to be able to impact your supporters’ purchasing behaviour. Thinking about how you can offer deeper and more meaningful levels of engagement to a sponsor will help you to maximise your allure to potential partners.