It’s Time to Throw Out the 3:1 Value to Investment Model

For decades, the sponsorship industry has leaned on a dated benchmark. The idea that a property or rightsholder should deliver three or more dollars of value for every dollar a brand invests. I’m not sure where it came from, or who created it, but I can appreciate that getting 3 dollars for every one dollar spent has made it easier for brands to justify investing millions in sponsorship marketing. 

But why would a rightsholder give a 3:1 return instead of commercializing that inventory with other partners? Or why would a brand expect to receive a 3:1 return when other media channels don’t provide that same value? Perhaps it stems from the early days of sponsorship as a tactic to attract brands to invest in what was a newer marketing channel. This expectation (which can often climb to 4:1 or 5:1) has created a distorted view of reality, causing spin. 

The reality is that consumers continue to prove that a well activated sponsorship delivers outsized returns, so it’s time for us to sunset this benchmark. 

The Good and Bad of Tech

The good news? Advancements in technology, such as the rise of computer vision, have made it possible to track logo exposures across just about any channel or medium with incredible accuracy. The bad news? These advancements have been made without adjusting the expectation, and as a result the industry tries to back into proving that rightsholders and properties are delivering on that dated benchmark. 

If you’re a supplier of data and insight, the odds are pretty good that you’ve been in a meeting with a decision maker who has told you that they need a “higher number” or a “larger value”. Within a competitive marketplace, a provider willing to deliver on that need is surely a top contender for the work. Next thing you know, these technological advancements are doing the opposite of what they intended to do.

Not too long ago, we saw data that implied that the entire population of a country had seen a brand logo exposure at a frequency of 55x over the course of a sports season. A logo on a jersey, a helmet, or on the field of play is highly valuable that can produce significant impression counts with strong frequency, but to imply and to value that asset based on an entire country seeing a logo 55x isn’t the most reliable soundbite.

A New Benchmark

Our valuation philosophy is simple. Build a fair partnership that will stand the test of time, where both sides win. We’ve found that a value-to-investment ratio of 1.25:1 represents a balanced deal. The brand receives measurable, tangible value for its investment, while the property or rightsholder maintains the integrity and scarcity of its commercial inventory.

There’s a better way to more credibly value exposure and activation. It starts with understanding the effectiveness of sponsorship assets. Does the asset breakthrough with fans and drive sponsor awareness? Does that asset deliver an impact among the fan base? These are the critical questions that allow us to identify the real value of assets.

A bathroom poster featuring a sponsor will have a tough time breaking through, and will struggle to deliver impact. Whereas, a brand activation footprint with brand ambassadors offering product samples is surely to more effectively capture and influence the audience. Not all assets are created equally and a valuation needs to account for these asset-level differences. 

Grounding Valuation in Reality

It’s time to replace arbitrary ratios with transparent methodologies that reflect real consumer behavior and business outcomes. We would never try to convince you we have the ‘perfect’ methodology, but we will always gladly defend our approach and the science that backs it. There are many valuation experts out there trying to modernize industry expectations, so ask around, meet with different people, ask whether they believe in 3:1 and if so, why.

SponsorPulse’s proprietary valuation model was designed with exactly that goal in mind - to help brands and rightsholders negotiate fair, data-driven deals that build stronger, longer-lasting partnerships. If you’re ready to move beyond the 3:1 myth and bring greater clarity to your sponsorship valuation strategy, we’d be excited to chat. 

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