Common Issues with Revenue Generated from Broadcasting Right
February 12, 2025
As discussed in the previous article, capital rationing is a form of capital budgeting. In capital rationing we change the unlimited capital assumption of capital budgeting and we try to choose projects with the finite capital that we have on hand. This finite capital may be in the form of capital that the firm already […]
The United States is economically the most powerful nation in the world today. This is what makes the study of central banking in the United States all the more interesting. Almost all other countries in the world adopted central banking without any major hassles. However, in the United States, a lot of conundrum took place […]
Formula Working Capital to Sales Ratio = Working Capital / Sales Meaning Stating the working capital as an absolute figure makes little sense. Consider two companies, both having the same working capital of USD 100. While one company uses this working capital to generate sales of USD 500, the other uses the same amount as […]
In terms of products and service coverage, the commercial banking ecosystem is much larger than the retail banking ecosystem. Corporations have a wide variety of business needs and commercial banks being their financial partners are expected to take care of these needs. In this article, we will have a closer look at the various categories […]
Financial modeling has become an essential part of most real estate transactions today. This is because of the fact that real estate deals today are complex are undertaken not only by individuals but by corporations who specialize in such transactions. Take the case of Real Estate Investment Trusts (REITs), for example. These trusts are organizations […]
In the previous article, we have already seen how multinational companies spend large sums of money in order to buy the rights to be associated with a large sporting event.
Companies are willing to provide these resources since they feel that they will be able to meet their corporate objectives.
Sports sponsorships are purely commercial deals and have very less to do with charity or corporate social responsibility-related objectives of any company.
We know for a fact that most corporations are publicly listed companies. Hence, they are answerable to their public shareholders about why they spent money on any type of expenses including sponsorships.
Also, since sponsorships entail giving away large sums of money, these expenses tend to be thoroughly scrutinized in order to gauge the effectiveness of the spending. The larger the expense, the more detailed the scrutiny.
Large corporations always want to know whether they are getting a better deal by associating with a particular event or whether their money can be spent elsewhere in order to meet their objectives.
Hence, as far as sponsorships are concerned, almost every sponsorship activity ends with an evaluation with the corporate sponsor regarding whether or not they were able to meet their objectives. In this article, we will have a closer look at how companies evaluate their sponsorship expenditure as well as the issues that they face while doing so.
There are various methods of evaluating the effectiveness of a sponsorship. However, the use of these methods primarily depends upon the objective of the sponsorship. Let’s look at some of the popular methods mentioned below:
These tests related to brand recall have a wide variety of questions that check whether the prospective users are able to recall a brand by associating it with a product category.
These tests also check whether the prospective users are able to recall and identify the brand after being prompted by the researcher. This approach is based on a fundamental assumption that any increase in the brand recall that happened during that period must be attributed to the sponsorship campaign.
Also, in many cases, corporations also survey the effect of brand recall on competing brands. If all brands have experienced a higher recall, then the effectiveness of the sponsorship comes into question. The objective of the sponsorship is to gain a higher brand recall vis-a-vis the competition.
In order to do so, the first step is to once again take a survey. This survey will also have details about the pre and post-levels of brand awareness. This will help zero down on the delta awareness which was created by the sponsorship.
The next step is to assign a monetary value to how much advertising would cost to generate the same level of awareness. The end result would be that the company would have two monetary values viz. one which was paid to the sponsors as well as one hypothetical advertisement value. Hence, the values can be compared to check whether or not, sponsorship was a more cost-effective option.
In the end, a monetary value is assigned to all the impressions that the brand has been able to achieve. This helps corporations put a monetary value to the benefits they derive. However, it needs to be understood that since the management of the sporting league cannot exert complete control over the broadcast, they cannot make promises regarding how many impressions the brand might be able to achieve.
The delta increase in sales is attributed to the sponsorship. It is also common for companies to measure this increase in sales relative to the investment that they made. This figure is often expressed in the form of a return on investment.
Hence, the bottom line is that there are a wide variety of ways that can be used to measure the effectiveness of sponsorship. Some of these methods are quite complex and difficult to implement. However, there are third-party companies that do provide specialized services in this field.
Your email address will not be published. Required fields are marked *