Synergy Decisions White Paper

A Framework for Sponsorship Valuation

Decisions

Nothing is more important to the future of sponsorship than

for all of us to become far, far better at understanding,

quantifying and communicating its value.

The sad truth, however, is that most of the industry is looking

for it in the wrong place. There is no magic number, unifying

model, game-changing algorithm, foolproof formula or reliable

proxy. Without a good understanding of the value created,

Return On Investment (ROI) is just a meaningless ratio, while

Balanced Scorecards and Return On Objectives (ROO) are

lame attempts to coat easily manipulated and fluffy ‘marketing

speak’ with some science (but at least they nod to the breadth

of ways that sponsorship can create value).

Most people are asking the wrong question. For them,

it’s about ‘What is this sponsorship property worth?’ rather

than ‘What is this sponsorship property worth to my business

if I use it in this way?’

The fact is, the exact same property would be worth £A to

Aviva, £B to Budweiser and £C to Cisco. And it goes without

saying that the exact same property would be worth a lot

less if you did nothing with it, as opposed to if you activated it

heavily through all available channels.

Sponsorship’s great strength is the precise thing that makes

it so difficult to value. Used correctly, sponsorship is not a

channel in its own right, like advertising, PR, digital or

experiential; rather, sponsorship is an asset that is used

to make all those channels more effective.

The problem is that each of the aforementioned channels

has different measurement mechanics, meaning that we are

constantly comparing apples to oranges. Plus, with so much

activity happening through those channels, both sponsorship

and non-sponsorship related, it’s nearly impossible to isolate

the impact of the sponsorship activity.

As a result, sponsorship valuation is typically done very badly,

if at all. That’s a big problem when sponsorship is trying to

fight its corner for a share of a company’s resources.

Sponsorship needs to speak in a language that the CEO and

CFO understand, and to present its case at the same level of

rigour as any other business function looking for investment.

The fact that this is currently highly challenging at best erodes

the credibility of sponsorship as a discipline; at worst, it leads

to resources being allocated away from it altogether.

The good news is that a compelling way to value sponsorship

does already exist. We just need to take it from other

industries and apply it to our own.

For the past year, Synergy has been applying this approach

in a controlled manner to some of our major clients. Having

gained this experience, we are now in a position to roll it out

more broadly across the market.

We call this product Synergy Decisions and we look forward

to using it to help more of our clients make more informed

sponsorship decisions.

Carsten Thode

Chief Strategy Officer,

Synergy & Engine Partner

The Challenge of Sponsorship Valuation

The Value of Sponsorship

Implementing the Asset Valuation Approach

Building Sponsorship Valuation Models

Using the Model

In Summary

Appendix

The Challenge of Sponsorship Valuation

Contents

In purely theoretical terms, the value of the sponsorship

is the difference between the ‘base-case’ value of the

company (the value of the company without the sponsorship)

and the value of the same company with the sponsorship.

In other words, the value of the sponsorship equals the value it

adds to the company.

Ultimately, every company engages in sponsorship because

they are convinced that it will add value to their business –

either by driving incremental revenue or by reducing costs.

Therefore, if the company is worth £1.5bn without the

sponsorship and £1.51bn with the sponsorship (once the

rights fee and activation costs have been taken into account),

then the sponsorship’s value to the company is £10m.

Figure 1 – Sponsorship Value

On that basis, sponsorship can be thought of as an

asset that makes a company more valuable by making

its marketing more effective.

This is exactly the same as a new bit of machinery that

makes production more efficient or a new vehicle that

makes distribution more effective.

It is also the same logic used when making an acquisition.

When Apple bought Beats Electronics or Facebook bought

WhatsApp, they did so in the expectation that it would allow

the combined company to create value over and above what

the acquisition cost them. The thing is, there is a very well

understood methodology for calculating the ‘value’ of an

asset: the difference between the present value of cash inflows

and the present value of cash outflows – in other words the

Net Present Value (NPV). Investment banks, private equity

firms and strategy consultants apply this methodology to

real-life decisions every single day. That’s how they decide

which assets to buy, whether to make an acquisition, or which

strategy to pursue.

Sponsorships can and should be evaluated in exactly the

same way. Basically, this involves building financial models

which use inputs, assumptions and calculations to explore

all the different ways that sponsorship makes an impact on

the bottom line. We only model the incremental impact of

sponsorship activity, which helps us to address the difficulty

of isolating this amongst all the other activity that might be

in market.

This values sponsorship in terms of pounds and pence

(or dollars and cents), which is the language of CEOs and

CFOs looking to make investment decisions and assess

trade-offs on a like-for-like basis.

Over the past year, Synergy has been implementing this

approach with three of our clients. In each of these cases,

we have been able to use the model to inform decisions

that have led to quantifiably better outcomes, in one case

saving a client around £400k during their negotiations for

a new property. This paper gives an overview of our

process (although, as you would expect, we don’t give

away all our secrets), whilst sharing some of our key

findings and learnings.

In writing this paper, our hope is that we will be doing our bit to

help the sponsorship industry make better decisions by

gaining a better understanding of the value of sponsorship and

the drivers of that value. In turn, we hope that this will help

sponsorship hold its own at the top table of companies’

strategic investment decisions, which will ultimately result in

increased sponsorship spend.

The Value of Sponsorship

Sponsorship is an asset that makes a company more valuable by making its marketing more effective.

£10m

£million

Before describing the process in detail, it is worth considering

a few things that are crucial to its successful implementation.

Firstly, the purpose of this process is not to find ‘an answer.’

Of course, knowing the final number – the total sponsorship

value that the model spits out – is interesting, but is not the

end in itself. Rather, the point of this process is to help our

clients to use the insight generated by the model to make

better sponsorship decisions.

There are all sorts of decisions this process can inform,

but they basically fall into three groups:

1 FORWARD-LOOKING

(e.g. How much should I pay for this sponsorship?)

2 ACTIVATION PLANNING

(e.g. Where should I focus in order to optimise my

activation budget?)

3 BACKWARD-LOOKING

(e.g. How much value did the sponsorship create and

how can I improve it next year?)

There is no point calculating the value of sponsorship if

it isn’t going to change any behaviour or help to make better

decisions. The key is to be very clear what decisions need to

be made so that the valuation model can be created

accordingly.

Increasing complexity can risk making any model difficult,

or even impractical, to use. If you are using the model to

help decide whether to sponsor property A or property B,

you only need to build a model that will help you make that

decision with confidence – you don’t need to solve the

universal formula for sponsorship valuation.

Secondly, using the model to help understand the drivers

of sponsorship value is more important than just knowing

the sponsorship value itself, given that this allows for

improved decision-making.

Knowing that a sponsorship is worth £10m is useful; but it

is far more important to have a good understanding of

exactly what needs to be true for that value to be realised.

What percentage uptick in brand awareness and favourability

does the sponsorship need to help our brand achieve?

How many high-value corporate hospitality guests do we need

to entertain and what sales conversion rate do we need to

deliver? What response rate do we need to reach from our

sponsorship-themed promotions or Direct Marketing

campaigns? How many social media engagements do we

need to generate?

Breaking down the overall value into its constituent parts

and understanding the assumptions that are driving that

value provide a set of KPIs that can be measured and

managed over the course of a campaign.

Finally, the inputs and assumptions that drive the model

should be completely transparent and there to be discussed,

debated, flexed and revised.

Sponsorship valuation can’t be a ‘black box’ algorithm,

where the all-important output is revealed as if by magic.

To get a real understanding of how the sponsorship is

creating value, the model needs to be ‘played with’ in

order to identify the key sensitivities, scenarios and

breakeven points.

The model should be used to stimulate discussion and

debate, because that’s the best way to get people to

engage with it. All the inputs and assumptions should flex

– because if someone doesn’t agree with an assumption,

rather than discrediting the whole model, they should be

able to amend it and see for themselves the consequent

impact on the sponsorship value. What these principles

highlight is that the real power of sponsorship valuation is

in the process, not the number.

Of course, buying into theory and principles is all well

and good, but the real challenge is learning how to build

a model in practice.

Implementing the Asset Valuation Approach

The real power of sponsorship valuation is in the process, not the number.

STEP 1 Understand the Pathways to Value

Figure 2 – The Five-Step Process to Building a Sponsorship Valuation Model

STEP 1

Understand the Pathways

to Value

STEP 2

Identify the Value Drivers

for Each Pathway

STEP 3

Build the Model

STEP 4

Find the Best Possible

Inputs and Assumptions

STEP 5

Interrogate the Model

Building Sponsorship Valuation Models

The first step is to understand all the different ways that the

company is using sponsorship to create value. We call each

of these routes a Pathway to Value, and they sit at the centre

of our approach.

To give a better sense of what we mean by this, here’s a

set of examples, across five defined categories:

1 Brand Pathways to Value

Brand Awareness: Sponsorship can be used to make more

people aware of the brand. This effectively fills the top of the

sales funnel and, assuming that the conversion rates remain

the same, will result in a proportion of new customers coming

out at the bottom of the funnel. Each of these customers has

a lifetime value that we can attribute to sponsorship.

Brand Favourability/Consideration: Sponsorship can also

make the audience feel more favourable towards the brand.

So even if someone was already aware of the brand,

sponsorship could help increase the relative conversion rates

down the funnel. Again, this will lead to new customers and

incremental value.

2 B2B Pathways to Value

Product Showcasing and Stress Testing: Many B2B

brands use major events to showcase their technologies

and capabilities. For example, Atos sponsor the Olympic

Games because, quite frankly, if they can manage the

accreditation process for the Olympics, doing it for your

company will be a piece of cake. They can then use their

sponsorship to open new doors and showcase their

products in action. This should lead to new prospects,

higher sales conversion rates, and ultimately new revenue.

Corporate Hospitality: Sponsorship provides amazing

opportunities for companies to build better relationships

with both existing and potential clients. Clearly, this can

help open doors for new prospects and improve sales

conversion and customer retention.

While building financial models is nothing new, applying them to sponsorship is. So while the principles remain the same, the approach has to be adapted so as to be relevant for the valuation of sponsorship assets.

0

2

4

6

8

10

12

14

BrandFavourability

CorporateHospitiality

ConsumerPromotion

EmployeePerformance

TenderRights

SponsorshipCost

NetSponsorship

Value

£million

STEP 2 Identify the Value Drivers for Each Pathway

Every Pathway to Value has its own value drivers. These are

basically the things that influence how much value is being

created within the specific pathway.

Let’s take the Corporate Hospitality Pathway to Value as a simple

example. Here are some of the value drivers that may be relevant:

• Number of hospitality spaces available: This could include

VIP and VVIP spaces.

• Cost per space: This needs to be fully allocated to include not

only the cost of the ticket, but all the travel, entertainment,

food and beverages – along with anything else that goes into

the event. If corporate hospitality is a major Pathway to Value,

it might also make sense to allocate a portion of the rights fee

to the cost per space.

• Ratio of clients to hosts: We are only interested in the number of

clients we are bringing because only clients create incremental

revenue.

• The proportion of clients that fall into different client or product

segments: This is assuming that each segment has a different

value and conversion rate.

• The proportion of clients that are being taken for different

business reasons: Some clients might be new business

prospects while others are existing clients that we want to

grow or maintain. If they have different values or conversion

rates we need to consider them separately.

• Expected incremental conversion rate of a new business

sale that is influenced by sponsorship: For example, if the

base case expected conversion rate is 20%, by how much

does that increase because we are able to use sponsorship

to influence the purchase decision? If it jumps to 25%, then

we are only interested in the incremental 5%. It’s worth

noting that we have to believe that there is some increase in

the conversion rate or else we shouldn’t be using corporate

hospitality at all.

• Expected incremental retention rates: How much more likely

are we to retain a client because we entertained them at a

sponsorship event?

• Average expected lifetime value: What is a new business win

or retained client worth over their lifetime?

Of course this is just an example of the value drivers that might

make up a pretty standard corporate hospitality programme.

In reality, the specific value drivers are likely to be more granular

and complex, but, for the purposes of this example, it is helpful

to keep it simple.

3 Campaign Pathways to Value

Consumer Promotions: B2C brands often create

promotional mechanics that use sponsorship themes,

imagery or assets. Whether it’s a ‘win-a-ticket’ or even a

‘win-a-player’ promotion (as per Coke’s famous Football

League activation), the aim is to drive sales at the point of

purchase. Comparing engagement and conversion rates

between sponsorship-themed campaigns and non-

sponsorship-themed campaigns will allow us to see the

incremental impact of sponsorship.

CRM and Social CRM Campaigns: Sponsorship is a great

way for brands to acquire customer records and open up

direct paths of communication to them. Using typical

conversion rates, we can estimate how many of these new

records will lead to sales.

4 Internal/Employee Pathways to Value

Employee Performance Programmes: Many of the most

sophisticated sponsors use their assets to improve their

employees’ performance. For example, they create training

programmes that use their access to elite athletes, coaches

and sports psychologists to transfer the principles behind

elite human performance to their workforce. Applied

successfully, this can take employee performance to a new

level and have a tangible impact on a company’s output and

efficiency.

Employee Retention and Recruiting: Replacing employees

is expensive. An ability to reduce churn, even by a small

percentage, is incredibly valuable. Sponsorship can impact

retention rates, help a company attract better candidates

and/or even lower the cost of recruitment. All of these lead

to direct and substantial cost savings.

5 Direct Revenue Pathways to Value

Pouring/Distribution Rights: Many sponsorship deals come

with the exclusive right to sell the sponsor’s product at the

venue. Beer, soft drinks, betting and even automotives are

all examples of categories that sell products directly to the

audiences at the events that they sponsor.

Tender Rights: Even if the sponsorship deal doesn’t include

a guarantee to use the sponsor’s products and services,

the sponsor is usually in an advantageous position to be

awarded the contract. At the very least, they will be

involved in the tender process with a tie-breaker in their

favour, but it is not uncommon for a sponsor to have the

option to match the best offer. This can lead to huge

contracts for the company/brand.

While these examples are relatively obvious, it is interesting

to see the breadth of ways that brands can use sponsorship

to create value: what other asset can you buy that has so

much flexibility to create value? So far we have worked with

around 25 different Pathways to Value that have all been

applied to our models.

Clearly, not all Pathways to Value will be relevant to every

brand or every sponsorship property, but for any given

sponsorship asset, a brand will probably have around four

to eight individual Pathways to Value. The first step in

building an appropriate sponsorship valuation model is to

identify which are the most relevant.

We can then model all Pathways to Value to find the overall

sponsorship value. The example (See: Figure 3) below

could be for an energy brand (or any company that has

both a B2B and B2C business) and shows how their

sponsorship campaign has delivered £10m in value.

Figure 3 - Example of Value Created Across Pathways to Value

Client Breakdown (% clients in each segment/reason)

Inputs (Value Drivers)General Inputs

Total Hospitality Places 500Fully Allocated Cost per Place £500% of hospitality places used by hosts 20%

Segment A Segment B TotalNew Business Prospects 20% 25% 45%Existing Clients for Retention 30% 25% 55%Total 50% 50% 100%

Incremental Conversion/Retention Rate (% point uplift in conversion/retention because of hospitality)

Segment A Segment B

New Business Prospects 5% 10%Existing Clients for Retention 10% 15%

Average Customer Value of a Converted/Retained Client

Segment A Segment B

New Business Prospects £50,000 £20,000Existing Clients for Retention £40,000 £15,000

CalculationsTotal number of clients 400

Number of clients in each segment (total number of clients x percentage of clients in each segment)

Segment A Segment B TotalNew Business Prospects 80 100 180Existing Clients for Retention 120 100 220Total 200 200 400

Number of Incremental Clients Converted (number of clients x increase)


Value of Incrementally Converted Clients (number of converted clients x average value)

Segment A Segment B TotalNew Business Prospects £200,000 £200,000 £400,000Existing Clients for Retention £480,000 £225,000 £705,000Total £680,000 £425,000 £1,105,000

OutputsTotal Incremental Sales Driven by Hospitality £1,105,000Total Cost of Hospitality Programme £250,000Total Value of Hospitality £855,000

STEP 3 Build the Model

We can use the value drivers to create a model which helps

us understand the value created within each Pathway. By

way of example, we have used the aforementioned value

drivers to build a sample Pathway which we will use as a

reference during the rest of this document. We have made

a few simple but reasonable assumptions so that we can

calculate a value and generate some insights.

So, in the below example, subtracting total programme

costs from the incremental sales driven by hospitality, we

can expect the corporate hospitality programme to create

just under £855k of value.

As mentioned earlier, however, the real value of this process

is not in discovering that number itself – it is in analysing the

model to find scenarios, sensitivities and breakeven points.

So, here are some examples of the insights we can draw

from this simple model:

1. We know that Segment A clients are more valuable than

Segment B clients. Therefore, if we are able to shift our

guest list towards Segment A, so that 75% of our guests

rather than 50% are from Segment A, we could increase

the value by £127.5k to just under £1m (See: Appendix 3).

The model shows us that we should tailor our invitation

process to try to capture this incremental value.

2. Counter-intuitively, even though the value of converting

a New Business Prospect is higher than retaining an

Existing Client, increasing the proportion of New Business

Prospects from 45% to 75% leads the total value to

decrease by £105k. This is because the incremental

conversion rate is so much lower on New Business

Prospects (See: Appendix 4).

Without the model, we might be tempted to skew the

guest list towards New Business Prospects. However,

the model tells us that this would be a mistake. If we

shift the focus towards Existing Clients for Retention

and increase our proportion of Existing Clients from

55% to 75% of the attendees, we can increase our

value by £70k (See: Appendix 5).

3. Estimating the incremental conversion rate is pretty difficult.

So, what we do is turn the question on its head: ‘What does

the incremental conversion rate need to be to make sure

that this corporate hospitality is creating value?’ Using the

model, we discover that the breakeven value is 2 percentage

points. So as long as we think that bringing a guest to the

corporate hospitality will add 2 percentage points to our

conversion rate, then we know we will create value.

Knowing what it needs to be gives us a target to aim for

and a KPI to track (See: Appendix 6).

It is easy to see how even this very simple model could help

a brand make decisions that will lead to a more effective

corporate hospitality programme.

Modelling all relevant Pathways to Value in this way provides

a compelling overall view of how and where the sponsorship

is driving value (or could drive value). It will help optimise

activation spend and set targets while underpinning fact-

based strategic discussions.

Step 4 Find the Best Possible

Step 5 Interrogate the Model

‘Garbage in, garbage out’ is a common refrain when it

comes to building financial models. The outputs of a model

can only ever be as good as the inputs and assumptions

that drive it.

In our experience, pinning down these inputs and assumptions

is usually the most difficult and time-consuming part of the

whole process. It certainly causes the hottest debate.

Broadly speaking, there are three types of input:

1 FACTUAL INPUTS THAT ARE RELATIVELY

EASY TO FIND (e.g. Number of tickets, cost per space, how the spaces

are being filled)

2 CALCULATED INPUTS THAT REQUIRE A

BIT MORE DIGGING (e.g. Average values of new business wins and

retained clients)

3 BIG ASSUMPTIONS THAT ARE

VIRTUALLY UNKNOWABLE (e.g. Expected incremental conversion rates)

So does the fact that the model requires some unknowable

assumptions call the whole process into question? For us,

the answer is a clear ‘no’.

Firstly, as discussed earlier, this process is not about finding

the right answer – it’s about making better decisions.

An assumption doesn’t need to be 100% accurate, as long

as it doesn’t change the ultimate decision.

In the example above, does it really matter if the average

customer lifetime values for our four segments are exactly

£50,000, £40,000, £20,000 and £15,000? What if they were

actually £45,127, £36,742, £18,561 and £13,236? Well, it turns

out that the programme would still create over £750k in value.

That’s about £100k less (See: Appendix 1), but it wouldn’t

change our decision about whether or not to invest in the

corporate hospitality programme.

It is absolutely crucial that we use the model to find

breakeven points. This gives us various ‘ranges’ within which

the decision remains the same. As long as we are confident

that our assumption falls within that range, we are happy to

move forward.

Using our example model, we find that the corporate hospitality

programme will be creating value even if the average value for

each of our segments is 77% lower than our assumption.

The breakeven values are £11,312, £9,050, £4,525 and £3,394

(See: Appendix 2), which gives us plenty of confidence that the

actual value is well above our required minimum.

In addition, there is another very simple and powerful tool to

help us deal with ‘unknowable’ assumptions: the Wisdom of

Crowds. I won’t go into the science behind it in too much

detail here (you can read a whole book about it if you want),

but the Wisdom of Crowds basically means that when a

number of informed people make an independent estimate

(i.e. they don’t know what others have guessed), then the

average of all those estimates is remarkably accurate. In

other words, if you ask 500 people to guess the number of

jelly beans in a jar, the average of all the guesses is likely to

be more accurate than even the most accurate single guess.

So, if we don’t know what the average incremental

conversion rate is, we ask 20 of our client’s salespeople what

they think. The average of all their answers is likely to be spot

on – and certainly good enough to use in our model.

But, most importantly, having a debate about the

assumptions is a good thing. This is how you stimulate

valuable strategic dialogues, which will lead to better

decisions in themselves. The model should be completely

open and transparent – if someone doesn’t agree with an

assumption, change it there and then to discover the impact

it has. The model simply provides the basis for a more

productive, fact-based discussion.

So, while we do have various tools and techniques to make

better assumptions, the usefulness of the model doesn’t live

or die on getting all the inputs right to two decimal places.

Another strength of this process is that it can be used to

inform all kinds of sponsorship decisions, spanning the

period from before the deal is signed to after the campaign

is complete.

Before the Deal:

Should I sponsor Property A or Property B? Is it worth

spending the additional money on title sponsorship or will

I create more value as a 2nd tier partner? What is the

maximum price I should pay?

These are all common decisions that a financial model will

help to inform. It is absolutely critical that a brand goes

through this kind of due diligence before starting negotiations

with a rightsholder, as it is at this stage that we have found

some of the most important benefits of the process.

It is incredibly powerful to go into negotiations knowing how

much value you are expecting to create versus the other

options you are considering, as well as what you need to do

to create that value. It not only sets your maximum price, but

also gives you a way to make informed decisions about

rights trade-offs. Do you really need perimeter boards, or

would you be better off trading those in for other rights that

would allow you to create more value?

In a recent case, building a simple decision model helped our

client save about £400,000 on their rights fee by establishing

a maximum ceiling price and focusing the package on the

rights that were most closely aligned to their key value

drivers. The client now uses our decision model to evaluate

every sponsorship proposal they receive.

During the Campaign:

The decision model also helps to inform campaign

planning decisions.

How should we allocate our activation budget to create the

most value? Do we believe that this promotion will deliver the

required response rate? How many customer records do we

need to capture to ensure we create value?

Within each Pathway to Value, the model helps to track and

manage the key value drivers. For example, the model helped

one client realise just how important the ‘quality’ of the guest

list was to their corporate hospitality programme. Just like in

the aforementioned example, the model demonstrated that

they could increase the value of their programme significantly

by ensuring that at least 75% of their guests who attended

were from their highest-value segments. Just understanding

the importance of this metric encouraged them to revise their

invitation process and resulted in a year-on-year increase in

the proportion of high-value clients from 40% to 80%.

That shift was worth around £500,000.

By creating a model and identifying the key inputs,

assumptions and value drivers, we can also ensure that the

right measurement and tracking processes are undertaken

to assess actual results. If shifts in brand awareness and

brand favourability are key, then we can ensure that the right

brand tracking surveys are in place. Similarly, if point-of-sale

activity is key, we need to be certain that appropriate

measures can track the differences between sponsorship-

themed activity and non-sponsorship-themed activity.

As the real-world results start trickling in, we can replace

the assumptions in the model with actual numbers

(Factual Inputs). That provides a running total of the value

being created by the campaign, which can be used to

create a regular management dashboard. If some of the

results are starting to look like they are under-performing,

this also provides an early-warning system, which might

allow the brand to take positive counteractive measures.

After the Campaign:

How much value did our sponsorship campaign create?

Did we hit our KPIs? What impact did it have on the overall

value? Should we renew our sponsorship and what rights

do we need to increase our value in the next contract?

By the end of the campaign, the model should be full of

actual results which provide a complete picture of the

value created by the sponsorship. It will also shine a light

on what worked well and what didn’t, in order to help make

better decisions about how to activate the sponsorship in

the following year. Finally, the results taken from this model

can be used to improve the accuracy of next year’s model.

Another great feature of this approach is that our ability

to understand and measure the value of sponsorship

improves over time.

Using the Model

The model can inform decisions on tough questions at every stage of a sponsorship.

Before the Deal

• Should I sponsor Property

A or Property B?

• Is it worth spending the

additional money on title

sponsorship or will I create

more value as a 2nd tier

partner?

• What is the maximum price

I should pay?

Pho

to ta

ken

by A

ctio

n Im

ages

, Spo

rts

phot

ogra

phy

agen

cy

During the Campaign

• How should we allocate our

activation budget to create

the most value?

• Do we believe that this

promotion will deliver the

required response rate?

• How many customer records

do we need to capture to

ensure we create value?

Post-Campaign

• How much value did our

sponsorship campaign create?

• Did we hit our KPIs?

What impact did it have on

the overall value?

• Should we renew our

sponsorship and what rights

do we need to increase our

value in the next contract?

The sponsorship industry struggles to assess and

communicate the value of sponsorship because there is

no single ‘magic number’ that does this. The value of

sponsorship is entirely contextual, depending on who the

sponsor is and what they are doing with it.

However, if we think of sponsorship as an asset, then it can

be valued like any other investment. Synergy combines a

deep knowledge of sponsorship’s Pathways to Value with

the tools and techniques that investment bankers and

strategy consultants use every day, to create a robust

process that helps make for better sponsorship decisions.

This process involves building simple models that use

strategic inputs and assumptions (value drivers) to calculate

the incremental value created by sponsorship. In doing so,

however, it understands that the real benefit isn’t in the final

number that the model generates, but in its ability to

improve the quality of the strategic dialogue around

sponsorship investment and activation.

The model we have built for this document illustrates not

only the process behind how we would create such a tool,

but also how we would use it to deliver the insights that will

improve your sponsorship decisions.

Hopefully, it has become clear how this approach offers a

better solution than other attempts to measure sponsorship’s

value; however, in summary, we have found that this

approach delivers the following benefits:

• It reflects and captures the breadth of ways that sponsorship

creates value

• It speaks in the language of pounds and pence – the

language of the boardroom – allowing sponsorship to take a

seat at the top table

• It helps with a wide variety of sponsorship decisions from

before a deal is signed to after the campaign has been

completed

• It provides context and a fact base which significantly

elevates the quality of strategic discussion around

sponsorship

• It doesn’t rely on large amounts of data (that can be

expensive to collect) to be useful

• It is constantly evolving and improving over time as we

find better assumptions and incorporate new learnings

• It’s tried and tested. We know that it works and helps our

clients make better, more informed sponsorship decisions

We truly hope that the sponsorship industry can use some of

the thinking in this document to make better, more informed

sponsorship decisions. Fundamentally, getting better at

creating value through sponsorship assets is the only way to

ensure that sponsorship will continue to grow in importance

and remain at the centre of brands’ marketing campaigns.

In Summary

Appendix

Appendix 1: Flexing the Value of a New ClientAn assumption doesn’t need to be 100% accurate, as long as it doesn’t change the ultimate decision.

Even if the actual customer life time values are lower than we first thought the programme would still create value.

The highlighted inputs have been flexed.


Segment A Segment BNew Business Prospects 5% 10%Existing Clients for Retention 10% 15%

Segment A Segment BNew Business Prospects £45,127 £18,561Existing Clients for Retention £36,742 £13,236






Difference to Base Case -£99,438









Appendix 2: Finding the Breakeven Value of a New ClientUsing our example model, we find that the corporate hospitality programme will be creating value even if the average value

for each of our segments is 77% lower than our assumption. The highlighted inputs have been flexed.

Segment A Segment B Total

Breakeven Decrease

New Business Prospects 20% 25% 45%Existing Clients for Retention 30% 25% 55%Total 50% 50% 100%


Segment A Segment BNew Business Prospects £11,312 £4,525 77%Existing Clients for Retention £9,050 £3,394

Calculations

Total number of clients 400



Segment A Segment B TotalNew Business Prospects £45,249 £45,249 £90,498Existing Clients for Retention £108,597 £50,905 £159,502Total £153,846 £96,154 £250,000

OutputsTotal Incremental Sales Driven by Hospitality £250,000Total Cost of Hospitality Programme £250,000Total Value of Hospitality £0









Segment A Segment B TotalNew Business Prospects 30% 12.5% 42.5%Existing Clients for Retention 45% 12.5% 55.5%Total 75% 25% 100%






Segment A Segment B TotalNew Business Prospects £300,000 £100,000 £400,000Existing Clients for Retention £720,000 £112,500 £832,500Total £1,020,000 £212,500 £1,232,500


Difference to Base Case £127,500



















Difference to Base Case -£105,000







Appendix 4: Increasing the Proportion of New Business ProspectsCounterintuitively, shifting the proportion of guests towards new business customers, who are more profitable on a per-guest

basis, actually reduces the expected value of the corporate hospitality programme. The highlighted inputs have been flexed.

Appendix 3: Increasing the Proportion of Segment A GuestsShifting the proportion of guests towards the more profitable Segment A leads to more value creation. The highlighted

inputs have been flexed.










Outputs

Total Incremental Sales Driven by Hospitality £1,175,000Total Cost of Hospitality Programme £250,000

Total Value of Hospitality £925,000

Difference to Base Case £70,000







Segment A Segment B TotalNew Business Prospects 20% 25% 45%Existing Clients for Retention 30% 25% 55%Total









50% 50% 100%






Segment A Segment B TotalNew Business Prospects £81,301 £40,650 £121,951Existing Clients for Retention £97,561 £30,488 £128,049Total £178,862 £71,138 £250,000

Outputs

Total Incremental Sales Driven by Hospitality £250,000Total Cost of Hospitality Programme £250,000Total Value of Hospitality £0

Appendix 6: Calculating the Breakeven Incremental Conversion RateAs long as we believe that the Incremental Conversion Rate is above 2%, then the corporate hospitality programme will

create value. The highlighted inputs have been flexed.

Appendix 5: Increasing the Proportion of Existing Clients for RetentionEven though they are less profitable on a per-guest basis, better incremental conversion rates mean that we can increase the value

of the corporate hospitality programme by increasing the proportion of Existing Clients. The highlighted inputs have been flexed.

We make New for our clients and share it with the world.

We love change, stay curious,and always ask ‘What’s next?’

We’ve been making New since 1984, so we know a thing or two about it.

And if you like what we did yesterday just wait and see what we come up with tomorrow.

We are Synergy.Innovators in Sponsorship.

Synergy Sponsorship 60 Great Portland Street

London W1W 7RT

Read our blog: www.synergy-sponsorship.com/blog

Watch us on YouTube: www.youtube.com/synergylondon

We are Synergy

Innovato rs in Sponsorship

Synergy Decisions White Paper

Documents

Transcript of Synergy Decisions White Paper