Sponsorship teaches marketers the value of long term investment, if they’ll let it
Analytic Partners' Jo-Ann Foo argues that using short-term ROI to understand the value of sponsorship is proof marketers need to learn to take the slower path.
With increased pressure on marketers to do more with less, the need to be able to demonstrate genuine return on investment to business is crucial.
Yet, despite this, and particularly in the areas of brand and sponsorship, there appears to be an aversion to ROI measurement. And I mean ROI as the accountant approving your budget understands and calculates it – in dollars, not clicks, not leads, not more favourable to the brand.
Many are hanging their hats on these more subjective metrics, like how these tactics make consumers feel, how many people they reach, or some other ethereal measure of market or media value. And every few months (sponsorship being the prime example) there seems to be a New Improved Metric, claiming to be the “New ROI”, with no real basis for calling itself ROI and no comparison or benchmark against the performance of other marketing tactics.
So, without an ability to provide or make any comparisons to other actual ROI measures, it should be no surprise that both sponsorship and brand campaigns are two of the first areas that finance looks to cut when budgets need tightening.
The problem is that they take a too limited, too short-sighted view.
It’s not that ROIs can’t be calculated. It’s that most analysts only calculate a direct, short-term ROI. And if you do it this way for brand or sponsorship, often your result is going to suggest that you’re losing money on your investment.
Both sponsorship activities and brand campaigns are specifically designed to provide the foundation on which to build the rest of a brand’s marketing tactics.
This means you’re your performance metrics need to include: (1) the indirect impact they have on strengthening your other communications with consumers, and (2) the longer-term impact that they have on your brand’s value.
“But that’s exactly why those intangible metrics are being used!”
I know. But those metrics aren’t ROI. And unfortunately, even if you’re drinking the most expensive champagne, finance isn’t going to take you seriously unless you’re showing them the money.
The solution is not to shy away from ROI measures because they seemly tell a poor story, nor is it to create new metrics as an alternative, the solution is to ensure that you fully capture the wider (indirect) and longer-term impacts of your investment.
Using a case study in event sponsorship as an example (think sponsorship of a Major League Baseball game) we used marketing mix modelling to isolate the impact that marketing and sponsorship had on sales.
The short-term direct ROI of sponsorship was less than $1, in line with other studies we’ve run. This wasn’t unexpected, but it is the reason most people avoid using ROI measures for sponsorship.
However, when you consider indirect impacts, we found the sponsor generated an additional $5 on top of this, through other marketing activities which were not possible without that sponsorship. When compared to other marketing tactics, this makes sponsorship a worthy investment.
There are other benefits too. Understanding this indirect contribution enables you to identify how to best leverage sponsorship investments.
In our example, we found that social media surrounding an event plays a significant role in boosting impact, but not far behind is ensuring synergies with offline media (i.e. making sure the sponsorship reflects, and is reflected in, traditional media channels’ creative is important).
Then there’s the long-term benefit. Our results across numerous studies confirm that sponsorship is indeed a long-term burn. While returns may be less than a dollar in the short-term, sponsorship activities can add up to five times more in the years following the initial investment.
The numbers change depending on the industry and final execution, but there’s a consistent pattern once the short-term and long-term effects have been built in. So, don’t be afraid of measuring ROI of your longer-term investments, embrace it.
Because the more you do, assuming your decision was a good one and you’re measuring it holistically, the stronger the case for continuing to invest in sponsorship and brand in the future.
Jo-Ann Foo is director of Analytic Partners.
