Sponsorship activation is the omni-channel marketing activity conducted by a sponsor to promote a particular sponsorship. Activation costs are in addition to the cost of acquisition of a sponsorship by a sponsor (the rights fees). Activation is critical for a sponsoring brand to fully leverage the opportunity that a sponsorship provides to a sponsor.
Activation ratio is a vital leading key performance indicator (KPI) for sponsorship marketers. Activation ratio is the spend in activation relative to the spend in rights fees for a particular property, across a full sponsorship portfolio or across a subset of properties.
It’s a leading KPI because better activated sponsorships perform better at delivering against measurable business and brand outcomes. This doesn’t mean spend for spending’s sake. Activation design needs to be thoughtful and intentional. But activation spend is a necessary consideration for sponsors, and understanding the spend relative to rights fee spend helps drive greater efficiency and effectiveness. It’s unfortunate when a brand invests in securing sponsorship rights but lacks the budget to activate them effectively.
In a remarkable example we came across recently, a major brand with a significant sponsorship portfolio had an activation ratio across its portfolio of 0.03:1, while performing poorly in aided awareness and attributable incremental revenue scoring across its portfolio.
As sponsorship consultants, one of the questions we’re asked most frequently is: “what’s the right activation to rights fee ratio’. And the answer is, it depends. The answer to the question of the right activation to rights fee ratio is nuanced and depends on several factors.
It depends on the country market, it depends on the category the sponsor competes in, it depends on the regional or urban market that a property sits in, it depends on the type of property, and it depends on the sponsor’s objectives for the property.
In a recent industry report published by the World Federation of Advertisers (WFA), in partnership with Lumency, the global average activation ratio is 0.81:1, for sponsors that knew what they were spending in activation. For every currency unit (€/$/¥, £, etc.) in rights fee spend, sponsors are, on average, investing 0.81 currency units in activation.
Let’s define what we mean by ‘omni-channel’ activation. Activation is the activity a sponsoring brand undertakes to leverage its sponsorship portfolio across as many connection points as possible, based on where the property sits in its sponsorship portfolio.
The connections mix varies by sponsor and industry category, including channels like above-the-line advertising, customer relationship management, employee engagement, social media, and more.
Not all properties within the sponsorship portfolio warrant a full 360-degree activation plan across the connections mix. A regional property at the country market level, for example, might not warrant activation through packaging for a consumer packaged goods (CPG) brand. An International Olympic Committee (IOC) or UEFA Champions League sponsorship should, by size of rights fee investment and media commitment investment, be fully leveraged across a sponsoring brand’s entire connections mix across as many country markets as makes sense.
From our WFA study, 43% of sponsors don’t know how much they were spending on activation. Only 18% of sponsors are spending at an activation ratio of 1:1 or higher. 9% of sponsors are spending at 0.20:1, or less.
The lack of visibility on activation spend (the 43% of brands that don’t know what they’re spending) isn’t as surprising as it might seem. Activation is often funded outside of a brand’s sponsorship budget, from various budgets across the brand’s organization. Trade activation might be funded by a trade marketing budget, employee engagement activation might be funded by a human resources budget, as examples. These spends might not be reported back to those accountable for managing the sponsorship rights, or for managing the sponsorships.
A global sponsorship rights fee might be funded from a global sponsorship budget with country markets responsible for, or at least expected to activate the sponsorship locally. The country market activation spend might not be reported up to the global center and the local business unit might not have visibility on the proportion of rights fee spend allocated to its country market.
Our advice is that it is important, extremely important in fact, for a brand to track its total spend on activation as part of its sponsorship operations.
Understanding the full activation spend by property, and across the portfolio, enables the organization to ensure its aligned to optimizing its sponsorship portfolio for a total investment perspective. This helps the brand/sponsor be more choiceful. To course correct and sponsor less, activate more – if there are properties in the portfolio that aren’t getting the right amount of investment in activation.
Properties that aren’t properly activated will deliver less impactful outcomes to the business. They will perform less well across the sales and marketing funnel.
Here is a how-to for brands:
Track
Track activation spend by property, regardless of which budget within the organization is funded the activation.
Report
Report an activation ratio for each property, back to leadership and back to internal stakeholders (brand, trade marketing, community relations, etc.).
Set Action Standards
Develop activation ratio targets, or target ranges, for different kinds of properties within the portfolio. This could include, as an example:
- By country market
- By urban market
- Music festivals, across markets
- National Sporting Organizations, across a particular continental zone
- EPL football clubs in the UK
- Community level events in Brazil
- Food and wine festivals in Western EU
Align
Align stakeholder groups involved in specific properties within the portfolio to commit to activation within those ranges, with discussion and alignment when activation spend is planned to be over or below those activation ratio ranges.
Review
Review and adjust those activation ratio ranges on an annual basis, based on how properties are performing against measurable business and brand outcomes.
Here are a few examples where a brand’s activation ratio ranges may throttle up or throttle down from your portfolio average activation ratio rage target:
1/ A sports property in an urban market where the brand holds strong market share (a ‘maintain’ market) might require less investment in activation spend.
2/ Converse to the above example, a sports property in a ‘conquest’ urban market for the brand, where the category competitors hold rights to most of the other sports properties, the brand is under fair market share against country market share, might deserve a higher investment in activation spend.
3/ A property that is going to exit the portfolio at the end of the current sponsorship agreement term due to lack of strategic fit might deserve minimal, or even no, investment in activation.
4/ A set of properties in a country market where the national activation ratio average, by all brands across all categories, is low. Properties in this market may require less investment in activation than in other country markets because share of voice within any given property in that country market is easier to earn.
Each of these examples demonstrates where establishing activation ratio range commitments can ensure that a brand’s organization is investing appropriately, not too much and not too little, in activating the sponsorships within its portfolio.
Understanding, tracking and optimizing activation to rights fee ratios is paramount for brands seeking to maximize the impact of their sponsorships. Activation is not merely an additional expense; it’s a strategic investment that amplifies the benefits derived from sponsorship agreements. As highlighted throughout this discussion, the activation ratio serves as a critical leading KPI, guiding brands in their efforts to achieve measurable business and brand outcomes.
Determining the ideal activation-to-rights-fee ratio is not a one-size-fits-all endeavor. It requires careful consideration of various factors, including market dynamics, property type, and brand objectives. By tracking activation spend, setting action standards, and aligning stakeholder groups, brands can ensure optimal investment in activation across their sponsorship portfolio. Ultimately, a well-calibrated activation ratio range empowers brands to make informed decisions, driving greater efficiency and effectiveness in their sponsorship initiatives.
By: Ian Malcolm
Looking for Smarter Sponsorship?
We can help.
