Apr 20, 2012 at 03:46 PM
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Should Sponsors Share Deal Prices?

The better question may be do sponsorship sellers really have a choice, but more about that later...

Hat tip to Daniel Scully for sending us this very interesting article. To catch you up, a few sponsors of the NRL (National Rugby League) have come together and seemingly agreed to share all of their sponsorship prices with each other in order to get a better handle on what fair value is (i.e. who's getting a fair shake on their deals and who's not). Some will realize their deal is overvalued and others will see they're getting a great value. Either way, they'll know where they stand and can hold properties more accountable. So the theory goes, at least.

Let's set aside the fact of how easy or not it would be to compare the inherent value in sponsorships with an apples to apples analysis (afterall, how can a a benefit like this not be an orange!) and even assuming comparable assets, we all know that each benefit is valued differently by each sponsor anyway. That's what makes sponsorship special and why we're all forced to be a pretty creative bunch. We digress..

The article makes a curious automatic assumption that by having more transparent information available to sponsors somehow the market for them will automatically and dramatically suffer. I don't know if there's an ulterior motive with this article, but it seems that's a red herring. What the article fails to even briefly consider is that if more companies have more data to back up their expenditures, isn't it quite possible under the pretty well vetted practices of market making that a lot more sponsorships will be justified to upper management in the first place? Would you purchase a stock without looking at the price of the previous sale? In an economy where expenditures are scrutinized to the last nickel, it may be true that a few overpriced deals would be restructured, but it seems that the current difficulty sponsors have in valuing what a deal is worth in the first place scuttles many more deals before they ever even start. That's the really scary part isn't it?

We certainly understand that at times some transactions involve sensitive information and NDA's are absolutely necessary in some cases, but it's probably a good idea to also consider the reality of the situation when entering into them. At the end of the day, we've all got to justify our price and prove our value. That's the best way to build and keep long term relationships, not by clamping down on information as if you're the only person selling a ceramic vase in the souk. Bottom line: you're not. In our case, we have to justify the price of our subscription fee because we know you have other options (conferences, excel spreadsheets, spending hours on research, sourcebooks, cd-roms, contact lists, etc.) and we don't mind our competitors (even the excel spreadsheets you've prepared) knowing what our subscription fee is (it's $25 btw!) or their clients knowing because we're confident we're delivering a lot more value and our 8,300 members validate this assumption by choosing to subscribe. Not coincidentally, that's why you can subscribe month-to-month because we know if we continually create value, you'll continue to love SponsorPitch and we won't have to lock you in to a commitment like others. It's a small industry.

Without any marketplace insight, sure it's true that one or two sellers may sneak one by buyers that are new to the sponsorship game, but isn't it also true that a whole lot more sellers will also lose credibility when they propose a vastly over-priced deal operating under the false assumption that the buyer has no knowledge of other offerings? Smart, experienced marketers - i.e. the ones that get activation and you should want to work with the most - will correct the seller probably to their surprise, lose faith in the opportunity at hand and possibly the medium of sponsorship as a whole. From where we stand, the more information that's available the more efficiently the market can operate for everyone. That may not be good for every single person, especially those that operate unethically, but it seems like a pretty good thing for the industry as a whole.

What are your thoughts?

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