The (Sponsorship) Price Is Right
One of the most common questions we get at SponsorPitch is how to price your sponsorship opportunity. At the end of the day, the market will determine the true worth of your sponsorship, but there are a few common tactics you can use to anchor the price of your sponsorship from the get-go in your conversation (if you choose - see when to price here) with potential sponsors and improve the chances you'll get a good deal during a back-and-forth negotiation. Here are some frequently used ways to set the price of your opportunity:
Research the Market Rate of Sponsorships
Understand what your competitors are charging their sponsors by collecting comparables ("comps") for recent deals in your area or event type. These benchmarks, though not the final answer, will provide good clues to let you know if you're pricing your sponsorship in the right ballpark. From there, you can add a premium or discount for variables like market size, demographics, attendance, etc.
Cost Plus Pricing
First, add up ALL costs for bottom line such as tickets and included hospitality, printing and signage, digital marketing and evaluation, legal consulting, admin/staff hours, cost to deliver benefits, media promotion and public relations, and sales cost. Here are a couple example for developing a standard pricing formula:
As with most things, cost almost certainly will exceed your estimate so be sure to build in plenty of cushion in your sponsorship pricing and develop a price or value-in-kind in your mind that you will absolutely not go below. Stick to it!
Create A Sponsorship Valuation Formula
Items to consider when evaluating your opportunity includes the size of your audience, the frequency of events, hard costs/expense, price per conversion, quantity of sponsors, and quality of activation opportunity. Assign yourself bonus points for unique assets and/or hold a leading position in the marketplace. Per each sponsor, consider the value of in-kind donations and price accordingly. No matter what, be ready with an explanation for the premise of your pricing model
Sponsors realize that they don’t need to pay for the assets that are not needed so pricing a sponsorship package is really only a starting point to a negotiation. Since what you offer will almost certainly not be the final assets in the contract, it's important to have a deep understanding of all the potential assets that you can provide and their cost to deliver so that you can nimbly and appropriately package assets quickly within a sometimes tense and evolving negotiation. The more perceived value you can create for your sponsor by creatively packaging an opportunity that responds to a real business need, the better off you'll be. And that leads us to two advanced sponsorship pricing methods..
Value-Based Pricing
Through the conversations and clues mentioned above, sometimes it is possible to determine what the true value of the sponsorship is to a potential sponsor and price your sponsorship to match the perceived value of the sponsorship, not the cost. If you're delivering a truly custom and unique sponsorship opportunity, this is an ideal scenario.
Performance Pricing
Going one step beyond value-based pricing, if you truly believe in your sponsor's ability to effectively activate and monetize the sponsorship, you can propose a performance or incentive-based sponsorship model that initiates payment based on agreed metrics such as product sales, new leads, trials, or whatever else the sponsor's specific objective is. One of the globe's top sponsorship spenders, Anheuser-Busch InBev, is reportedly keen on ushering in this particular pricing strategy.
If your new sponsor gets a unique and customized opportunity and if you price it right, you'll be set-up for a win-win sponsorship! Think about implementing some of the tactics mentioned above to price your sponsorship right.
