Decisions

A Framework for Sponsorship Valuation

The Challenge of
Sponsorship Valuation
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).

Contents
The Challenge of Sponsorship Valuation
The Value of Sponsorship
Implementing the Asset Valuation Approach
Building Sponsorship Valuation Models
Using the Model
In Summary
Appendix

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

if at all. Thats a big problem when sponsorship is trying to
fight its corner for a share of a companys 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.

Most people are asking the wrong question. For them,

its 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?

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.

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.

We call this product Synergy Decisions and we look forward

to using it to help more of our clients make more informed
sponsorship decisions.

Sponsorships 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, its nearly impossible to isolate
the impact of the sponsorship activity.

Carsten Thode

Chief Strategy Officer,

Synergy & Engine Partner

The Value of Sponsorship

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 sponsorships value to the company is 10m.
Figure 1 Sponsorship Value
million

10m

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. Thats 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 dont give
away all our secrets), whilst sharing some of our key
findings and learnings.

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

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.

Sponsorship is an asset that makes a

company more valuable by making its
marketing more effective.

Implementing the Asset

Valuation Approach
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 isnt 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 dont need to solve the
universal formula for sponsorship valuation.

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 cant 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 thats the best way to get people to
engage with it. All the inputs and assumptions should flex
because if someone doesnt 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.

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

The real power of sponsorship valuation

is in the process, not the number.

Building Sponsorship
Valuation Models
STEP 1

STEP 2

STEP 3

STEP 4

STEP 5

Understand
the Pathways
to Value

Identify the
Value Drivers
for Each
Pathway

Build the
Model

Find the
Best Possible
Inputs and
Assumptions

Interrogate
the Model

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

STEP 1 Understand the Pathways to Value

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, heres 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.

3 Campaign Pathways to Value

5 Direct Revenue Pathways to Value

Consumer Promotions: B2C brands often create

promotional mechanics that use sponsorship themes,
imagery or assets. Whether its a win-a-ticket or even a
win-a-player promotion (as per Cokes 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 nonsponsorship-themed campaigns will allow us to see the
incremental impact of sponsorship.

Pouring/Distribution Rights: Many sponsorship deals come

with the exclusive right to sell the sponsors 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.

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 companys 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.

Tender Rights: Even if the sponsorship deal doesnt include

a guarantee to use the sponsors 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.

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.
Lets 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.

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.

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

clients we are bringing because only clients create incremental
revenue.

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.

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.

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.

E xpected 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%. Its worth
noting that we have to believe that there is some increase in
the conversion rate or else we shouldnt be using corporate
hospitality at all.

Figure 3 - Example of Value Created Across Pathways to Value

million 14

12
10

E xpected incremental retention rates: How much more likely

are we to retain a client because we entertained them at a
sponsorship event?

8
6

Average expected lifetime value: What is a new business win

or retained client worth over their lifetime?

4
2
0

STEP 2 Identify
the Value Drivers for
Each Pathway

Brand
Favourability

Corporate
Hospitiality

Consumer
Promotion

Employee
Performance

Tender
Rights

Sponsorship
Cost

Net
Sponsorship
Value

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.

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.

Inputs (Value Drivers)

General Inputs
Total Hospitality Places
Fully Allocated Cost per Place
% of hospitality places used by hosts

500
500
20%

Client Breakdown (% clients in each segment/reason)

New Business Prospects
Existing Clients for Retention
Total

Segment A
20%
30%
50%

Segment B
25%
25%
50%

Total
45%
55%
100%

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

Segment A
Segment B
New Business Prospects
Existing Clients for Retention

5%
10%

10%
15%

Average Customer Value of a Converted/Retained Client

Segment A

Segment B

New Business Prospects

Existing Clients for Retention

50,000
40,000

20,000
15,000

Calculations
Total number of clients

400

Number of clients in each segment (total number of clients x percentage of clients in each segment)
New Business Prospects
Existing Clients for Retention
Total

Segment A
80
120
200

Segment B
100
100
200

Total
180
220
400

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

New Business Prospects
Existing Clients for Retention
Total

Segment A
4
12
16

Segment B
10
15
25

Total
14
27
41

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

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

Outputs
Total Incremental Sales Driven by Hospitality
Total Cost of Hospitality Programme
Total Value of Hospitality

1,105,000
250,000

855,000

Step 4
Find the Best Possible
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 its about making better decisions.
An assumption doesnt need to be 100% accurate, as long
as it doesnt 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.
Thats about 100k less (See: Appendix 1), but it wouldnt
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 wont 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 dont 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 dont know what the average incremental
conversion rate is, we ask 20 of our clients 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 doesnt 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 doesnt live
or die on getting all the inputs right to two decimal places.

Step 5 Interrogate the Model

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. W
 e 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. C
 ounter-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).
 ithout the model, we might be tempted to skew the
W
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 factbased strategic discussions.

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.

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.

Before the Deal:

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 sponsorshipthemed activity and non-sponsorship-themed activity.

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

Photo taken by Action Images, Sports photography agency

Using the Model

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 didnt, 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 years model.
Another great feature of this approach is that our ability
to understand and measure the value of sponsorship
improves over time.

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?

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?

In Summary

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 sponsorships 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 isnt 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 sponsorships
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 doesnt 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
Its 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.

Appendix

Appendix 1: Flexing the Value of a New Client

An assumption doesnt need to be 100% accurate, as long as it doesnt 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.

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 highlighted inputs have been flexed.

Inputs (Value Drivers)

Inputs (Value Drivers)

General Inputs

General Inputs
Total Hospitality Places
Fully Allocated Cost per Place
% of hospitality places used by hosts

Appendix 2: Finding the Breakeven

Value of a New Client

Total Hospitality Places

Fully Allocated Cost per Place
% of hospitality places used by hosts

500
500
20%

Client Breakdown (% clients in each segment/reason)

Segment A
20%
New Business Prospects
30%
Existing Clients for Retention
Total
50%

500
500
20%

Client Breakdown (% clients in each segment/reason)

Segment B
25%
25%
50%

Total
45%
55%
100%

New Business Prospects

Existing Clients for Retention
Total

Segment A
20%
30%
50%

Segment B
25%
25%
50%

Total
45%
55%
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%

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
New Business Prospects
45,127
Existing Clients for Retention
36,742

Average Customer Value of a Converted/Retained Client

Segment A
New Business Prospects
11,312
Existing Clients for Retention
9,050

Segment B
18,561
13,236

Breakeven Decrease

77%

Calculations

Calculations
Total number of clients

Segment B
4,525
3,394

400

Total 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
Total
New Business Prospects
80
100
180
Existing Clients for Retention
120
100
220
Total
200
200
400

Number of clients in each segment (total number of clients x percentage of clients in each segment)
Segment A
Segment B
Total
New Business Prospects
80
100
180
Existing Clients for Retention
120
100
220
Total
200
200
400

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

Segment A
Segment B
New Business Prospects
4
10
Existing Clients for Retention
12
15
16
25
Total

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

Segment A
Segment B
New Business Prospects
4
10
Existing Clients for Retention
12
15
16
25
Total

Total
14
27
41

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

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

Segment A
Segment B
Total
New Business Prospects
180,508
185,610
366,118
Existing Clients for Retention
440,904
198,540
639,444
Total
621,412
384,150
1,005,562

New Business Prospects

Existing Clients for Retention
Total

Outputs

Outputs

Total Incremental Sales Driven by Hospitality

Total Cost of Hospitality Programme
Total Value of Hospitality
Difference to Base Case

1,105,562
250,000

755,562
-99,438

Total
14
27
41

Total Incremental Sales Driven by Hospitality

Total Cost of Hospitality Programme
Total Value of Hospitality

Segment A
45,249
108,597
153,846

250,000
250,000

Segment B
45,249
50,905
96,154

Total
90,498
159,502
250,000

Appendix 3: Increasing the Proportion of

Segment A Guests

Appendix 4: Increasing the Proportion

of New Business Prospects

Shifting the proportion of guests towards the more profitable Segment A leads to more value creation. The highlighted
inputs have been flexed.

Counterintuitively, 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.

Inputs (Value Drivers)

Inputs (Value Drivers)

General Inputs

General Inputs
Total Hospitality Places
Fully Allocated Cost per Place
% of hospitality places used by hosts

Total Hospitality Places

Fully Allocated Cost per Place
% of hospitality places used by hosts

500
500
20%

Client Breakdown (% clients in each segment/reason)

Segment A
New Business Prospects
30%
Existing Clients for Retention
45%
Total
75%

Segment B
12.5%
12.5%
25%

Total
42.5%
55.5%
100%

500
500
20%

Client Breakdown (% clients in each segment/reason)

Segment A
New Business Prospects
35%
Existing Clients for Retention
15%
Total
50%

Segment B
40%
10%
50%

Total
75%
25%
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%

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
New Business Prospects
50,000
Existing Clients for Retention
40,000

Average Customer Value of a Converted/Retained Client

Segment A
New Business Prospects
50,000
Existing Clients for Retention
40,000

Segment B
20,000
15,000

Calculations

Calculations
Total number of clients

Total number of clients

400
Segment A
120
180
300

Segment B
50
50
100

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

Segment A
Segment B
New Business Prospects
6
5
Existing Clients for Retention
18
8
Total
24
13

400

Total
170
230
400

Number of clients in each segment (total number of clients x percentage of clients in each segment)
Segment A
Segment B
Total
New Business Prospects
140
160
300
Existing Clients for Retention
60
40
100
Total
200
200
400

Total
11
26
37

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

Segment A
Segment B
New Business Prospects
7
16
Existing Clients for Retention
6
6
Total
13
22

Number of clients in each segment (total number of clients x percentage of clients in each segment)
New Business Prospects
Existing Clients for Retention
Total

Segment B
20,000
15,000

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

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

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

Segment A
Segment B
Total
New Business Prospects
350,000
320,000
670,000
Existing Clients for Retention
240,000
90,000
330,000
Total
590,000
410,000
1,000,000

Outputs

Outputs
Total Incremental Sales Driven by Hospitality
Total Cost of Hospitality Programme
Total Value of Hospitality

1,232,500
250,000

Difference to Base Case

127,500

982,500

Total
23
12
35

Total Incremental Sales Driven by Hospitality

Total Cost of Hospitality Programme
Total Value of Hospitality

1,000,000
250,000

Difference to Base Case

-105,000

750,000

Appendix 5: Increasing the Proportion

of Existing Clients for Retention

Appendix 6: Calculating the Breakeven

Incremental Conversion Rate

Even 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.

As 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.

Inputs (Value Drivers)

Inputs (Value Drivers)

General Inputs

General Inputs
Total Hospitality Places
Fully Allocated Cost per Place
% of hospitality places used by hosts

Total Hospitality Places

Fully Allocated Cost per Place
% of hospitality places used by hosts

500
500
20%

Client Breakdown (% clients in each segment/reason)

Segment A
New Business Prospects
10%
Existing Clients for Retention
40%
Total
50%

Client Breakdown (% clients in each segment/reason)

Segment B
15%
35%
50%

Total
25%
75%
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
New Business Prospects
50,000
Existing Clients for Retention
40,000

New Business Prospects

Existing Clients for Retention
Total

Segment A
20%
30%
50%

Segment B
25%
25%
50%

Total
45%
55%
100%

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

New Business Prospects
Existing Clients for Retention

Segment A
2%
2%

Segment B
2%
2%

Average Customer Value of a Converted/Retained Client

Segment B
20,000
15,000

New Business Prospects

Existing Clients for Retention

Segment A
50,000
40,000

Segment B
20,000
15,000

Calculations

Calculations
Total number of clients

500
500
20%

400

Total 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
Total
New Business Prospects
40
60
100
Existing Clients for Retention
160
140
300
Total
200
200
400

Number of clients in each segment (total number of clients x percentage of clients in each segment)
Segment B
100
100
200

Total
180
220
400

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

Segment A
Segment B
New Business Prospects
2
6
Existing Clients for Retention
16
21
Total
18
27

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

Segment A
Segment B
New Business Prospects
2
2
Existing Clients for Retention
2
2
4
4
Total

Total
4
4
8

Total
8
37
45

New Business Prospects

Existing Clients for Retention
Total

Segment A
80
120
200

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

Segment A
Segment B
Total
New Business Prospects
100,000
120,000
220,000
Existing Clients for Retention
640,000
315,000
955,000
Total
740,000
435,000
1,175,000

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

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

Outputs

Outputs

Total Incremental Sales Driven by Hospitality

Total Cost of Hospitality Programme
Total Value of Hospitality
Difference to Base Case

1,175,000
250,000

925,000
70,000

Total Incremental Sales Driven by Hospitality

Total Cost of Hospitality Programme
Total Value of Hospitality

250,000
250,000

We are Synergy
We make New for our clients
and share it with the world.
We love change, stay curious,
and always ask Whats next?

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

Weve 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.

Innovato rs in Sponsorship