Optimizing a Long-Standing Sports Sponsorship at Renewal

CASE STUDY: Castrol | Sponsorship Renewal | MLSE | Canada

Assignment

Advise Castrol on the renewal of a long-standing sponsorship with the potential for expansion of the package from a single team, single venue deal to a multi-team and multi-venue sponsorship consisting of properties across the NBA, NHL, MLS, and AHL.


SOLUTION

We provided a comprehensive evaluation of the rightsholder proposal to assess overall value, focused on optimizing the value proposition (recommending expanded rights) along with crafting and executing an effective renewal negotiation strategy.

APPROACH & EXECUTION

ASSET VALUATION AND STRATEGIC ALIGNMENT

To identify key value-drivers, we assessed the value of both the tangible and intangible (the value of each property’s IP) assets using Lumency’s proprietary valuation model, TrueValue™.  Understanding the value of the assets, alongside key strategic brand objectives, allowed us to effectively pursue the asset scoping and negotiation stages of our sponsorship evaluation process.

ASSET SCOPING

A comprehensive Asset Scoping exercise (covering 70+ assets, that included X data inputs, across the five teams and three venues within the sponsorship package) was conducted against the backdrop of the client’s commercial and brand objectives.  Assets were evaluated as ‘must-haves’, ‘nice-to-haves’, and ‘flares’ (assets that may have high value to the property but low value to the client), based on their ability to deliver against the client’s needs.

NEGOTIATION

We developed a three-round negotiation strategy, anchored to an investment level based on our recommended target value-to-rights fee ratio.  The client-approved approach included an opening counteroffer, settle point and walk-away investment level ensuring we could lead negotiations seamlessly on the client’s behalf aligning on final deal points, and ultimately contractually ratifying the agreement.

KEY INSIGHT

We were initially tasked with expanding the expiring agreement consisting of two teams and one venue into a five-team, three-venue deal.  After reviewing strategic objectives and conducting an asset scoping exercise, we identified that removing entitlements around two of the teams (and maintaining a three-team deal) would still enable the brand to achieve the goals of the partnership, while reducing investment and optimizing the value to rights fee ratio.   

WINS

  • Through the development and execution of an effective negotiation strategy, anchored to the asset scoping exercise, we were able to maintain the strong value ratio of 2:1 carried over from the expiring agreement, despite increased investment with the addition of the NBA Toronto Raptors to the deal.
  • During the evaluation process, we had identified the Toronto Raptors as a key component of the package to try to add to the renewal based on the team’s projected performance in the coming years and the expanded audience reach. In year two of the renewal term with the Raptors now included in the deal, the Raptors won the NBA Championship facilitating strong opportunities for activation and a lift of over 20% in deal value due to increased viewership, engagement and associative benefits.
  • While the initial assignment called for us to support negotiations through strategy development, our role was expanded to lead negotiations on the client’s behalf based on the thoroughness of the analysis and trust established with the client.

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Optimizing a Long-Standing Sports Sponsorship at Renewal