Strategic Decisions Group was brought in to conduct a valuation of a potential deal with a sought-after sports team coming off contract and to develop a framework for understanding the impact to the broader sponsorship portfolio. Using a decision quality approach, SDG helped the client develop a detailed analytical framework and financial model that explicitly incorporated the uncertainty in the deal-value drivers. The preliminary analysis demonstrated that indirect sales were both a huge driver of value and extremely uncertain.

 

Situation Analysis

In recent years, the price associated with many sports-team sponsorship opportunities has risen precipitously. The brand marketing team of a global sporting goods giant was struggling to understand whether these marketing investments were now generating sufficient returns given that many of the benefits associated with sponsorship are hard to quantify and highly uncertain. Does brand loyalty and sales meaningfully increase as a result of sponsorship? How much are these deals really worth? The regional office and headquarters held different beliefs on the benefits of these deals.

Without an evaluation framework focused on value and hard data, they could not achieve clarity of action. SDG was brought in to conduct a valuation of a potential deal with a sought-after sports team coming off contract and to develop a framework for understanding the impact to the broader sponsorship portfolio.

 

Discovery and Solutions

SDG worked to quickly map out all sources of value and risk in sponsorship deals. It became apparent that there were two key areas for understanding the value of these deals: direct sales value and indirect sales value. Direct sales value included easier-to-quantify items like projected licensed sales and sales to season ticket holders. Indirect sales were sales that could not be explicitly tracked but occurred as fans developed brand affinity and awareness of the product.

Using a decision quality approach, SDG helped the client develop a detailed analytical framework and financial model that explicitly incorporated the uncertainty in the deal-value drivers. The preliminary analysis demonstrated that indirect sales were both a huge driver of value and extremely uncertain. The client had never reliably measured indirect sales; achieving clarity here would be essential to making good decisions on future sponsorship deals. SDG used advanced analytics techniques together with historical company, social media, and demographic data to model and understand the indirect sales impact of sponsorship. This approach provided a credible quantification of the potential upside and downside risks associated with indirect sales. A clear range of value could now be established for prospective sponsorship deals.

 

Results and Impact

SDG’s analysis allowed for the sporting goods enterprise to enter into negotiations with confidence, now that its negotiators could understand the price they should be willing to pay to engage in the sponsorship opportunity. Having clarity on the value of sponsorship deals and the ability to calculate ROI—instead of relying on qualitative evaluation and debate—was a huge benefit to the organization.  Measuring indirect sales, a significant pain point for management, provided insights into the organization’s broader sponsorship portfolio. The ability to reliably quantify indirect sales had been a recurring problem in many of the client’s marketing investment decisions. The client believes that this data-driven focus on value and ROI will provide immense benefits when prioritizing future marketing investment opportunities.

 

 

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