How Does J.I.T. Sponsorship Affect YOU?
Yesterday, Viacom talked about an environment of "Just-in-Time" advertising whereby advertisers have been waiting longer in the sales cycle to purchase inventory. "Just-in-Time" is a widely-used business strategy designed to manage carrying costs of goods and inventory by ordering inventory upon demand. Like retail inventory, many marketers are waiting until later in the sponsorship sales cycle to order their inventory. In a highly uncertain environment, advertisers (and sponsors) can reduce the risk of having external factors impact an already purchased sponsorship. By waiting longer in the sales cycle, sponsors can gain an informational advantage on how best to use their sponsorship. Afterall, no one wants to end up with a sponsorship that they can't activate to the fullest extent because of any number of external factors including earnings announcements, layoffs and legislative hearings to name a few. Take for example, a recent NYT article on stealth sponsorship spending at this year's U.S. Open golf tournament.
Since sponsorships in many aspects are a limitless resource (not taking into consideration cat excl.), there is not a built in immediacy around getting a deal done for sponsors. Sure you can build incentives such as a limited number of sponsorships at a certain level, deadlines for certain assets and more, but you have exploding inventory that if not used gets wasted. Sponsors, of course, know that in this environment the longer they wait the better deal they can get - another incentive for J.I.T. sponsorship if they can get away with it.
The idea of Just-in-Time sponsorship understandably may strike fear in the hearts of many sponsorship sellers, but there's a few reasonable steps you can may be able to take to reduce your risk.
So what does J.I.T. sponsorship mean for properties and how can you successfully deal with it?
Given a shorter planning cycle, it is more important than ever to source and verify reliable vendors that can ensure J.I.T. delivery on assets such as signage, premiums and more. In recent years, technology has dramatically shortened the lead time and variation possible on deliverables.. which may allow you to source JIT benefits for your JIT sponsors. Want to know more? Start your search here.
If you can, implement exploding offer or time sensitive pricing to incentivize sponsors to act early. Many businesses do this, why not properties to counter-act the weakened leverage as you near your event date. Be sure to talk to all competitors in a category early in the process, even if they don't indicate a strong interest at the time, to gauge interest, needs and objectives. Finally, one upside is that the closer you get to gametime the better knowledge you will have of the true market for your sponsorship proposition.
This can be an additional incentive to act early, but only if the benefits of which are clearly communicated. Also, be careful about making price concessions because of missed assets. This can be a slippery slope.
It's not a good feeling when you sell exclusivity only to have a competitor come in and present a better offer. Ever heard of seller's remorse? Like all good negotiators, why not use your current discussions to gauge interest from other parties and better understand pricing power within the category. Given the current volatility, focusing on one "sure thing," to the exclusion of other category participants, is more dangerous than ever.
Price reduction? Given the additional cost you may incur to rush J.I.T. sponsor assets, you may be justified in asking for a premium rather than a reduction. In addition, you should always consider how slashing prices may set the stage for future negotiations. No matter what, be very transparent about how your current and future pricing is structured from the beginning.
Even though you may not have as much time to react, this is a good thing.
There are two ways to play this. The idea of testing the waters can often work out well for both parties. Properties get to see what kind of partner they might be getting in bed with and sponsors can figure out how to make the most of a potential long term partnership prior to negotiation. Of course, if you want a longer term deal (as most properties do), you can use the prospect of locking in favorable pricing to entice potential partners into long term deals (as was the strategy of SpongeTech during the financial crisis).
Unfortunately, there's just not a really good way around this - aside from regular communication. It will be more difficult for other divisions to budget when sponsorship revenue is uncertain for a longer period of time.
In general, I'm a big fan of smart pass-throughs, but be sure to set some ground rules from the start (non-competitive to other partners, limit of one, etc.). As long as they are adding value and requesting additional benefits, I say the more the merrier.
Got more tips on how to deal with J.I.T. sponsorship? Share 'em...