Sports Marketing: Benchmarking the Sponsor Fee

In 1984, sports business marketing took off with the commercialization of competitors' gear and facilities from the Los Angeles Olympics onwards. Recently, sponsorship, where the company provides the products and logos of the sports event or sports team, has become extremely active. For instance, it is said that the largest sponsorships go to Manchester United of the England Premiere League; they require more than €25 million from their uniform sponsor alone. Soaring sponsorship fees illustrate tremendous popularity growth of the game of football.

However, is the amount of sponsorship really appropriate? Could it be a type of bubble economy born of a market overheated with sports marketing fads? One of our clients was wary about this issue. To solve the question, SPI launched a project whose objective was to calculate the net value of the contract between the client and the team they sponsored.

Approach

In addition to the direct value such as the sales of official goods, we calculated the total value of the brand by identifying the present value and estimating the future value regarding the following three points:

1. The brand of the team (likeability / TV rating of the games, etc.)
2. Media value such as the exposure of the logos on various media
3. The link between the company and the team from the consumer's point of view
   

Process Outline

During the actual process, the net value was calculated by multiplying the three points above using the following formula:

(Team value + Media value) x Linkage = Net Value

Also, the net value through the contracted period was calculated by estimating the future value utilizing simulations of past trends.

Results

With the appropriate value calculated utilizing this process, a fascinating fact was confirmed: the total net value of the contract possibly exceeded the offered sponsorship fee. This result gave our client the scientific evidence necessary to enable them to see how they can achieve more accountability from a decision to renew their contract.

Author: SPI

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