Essential vs. Expendable. How you should be thinking about your sponsorship packages
Originally posted by Nick Lawson of SQWAD
(BONUS: An active worksheet your team can use to game plan your outreach…but first you have to read the article to understand & use it. It will be worth it…I promise)
I’m a fanatic about how to thrive in economic downturns. And what I’ve realized is most of it comes from fear of looking back and saying “Man, I missed that opportunity.”
With this, I had been reading constantly on the dynamics of a downturn in all industries and see how we can shift to our work in sponsorship.
In that research, I came across a great HBR article that looked at the changing purchasing behavior in consumer segments and how brands can adjust their offering to ensure that sales don’t slump.
There was such an alignment to our sponsors and prospects that I edited the process to fit our industry based on their framework. Here is the result (Plus again a worksheet at the end to jam on):
Overall, your sponsors can be broken down into 4 groups of customers
Normally we break our customers into demographics. Food partners, car partners, etc. and build packages that overall encompass all of them.
There is an issue there. Some restaurants make more than others. Some have different goals. Some are franchisees vs. mom & pop.
This article brings a new way to segment our sponsors into four groups: Slam-on-the-breaks, Pained-but-patient, Comfortably well-off, Live for today.
As the article defines the segment:
The slam-on-the-brakes segment feels most vulnerable and hardest hit financially. This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases. Although lower-income consumers typically fall into this segment, anxious higher-income consumers can as well, particularly if health or income circumstances change for the worse.
These are our sponsors hit hardest by the shutdown and will most likely see a slow recovery when we get back. One segment that jumps to the top of my head are most restaurants…others are barbershops and in-person attractions like bowling alleys.
The biggest test on this is are they looking for money back or to break contracts. They will be slamming the breaks on any partnership spend.
Another test…have you seen any digital ads from this partner or category?
Pained-but-patient consumers tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term or their ability to maintain their standard of living. Like slam-on-the-brakes consumers, they economize in all areas, though less aggressively. They constitute the largest segment and include the great majority of households unscathed by unemployment, representing a wide range of income levels. As news gets worse, pained-but-patient consumers increasingly migrate into the slam-on-the-brakes segment.
These are our sponsors that are less effected directly from the shutdown but have the ability to wait it out on their sponsorship packages. They still have a budget to spend…but they are waiting to spend as they think games are coming back.
Auto dealerships come to mind here. Right now they are pained with little to no purchases coming…but if this doesn’t change and they can’t get people back into dealerships that can drop into the Slam-on-the-breaks.
Comfortably well-off consumers feel secure about their ability to ride out current and future bumps in the economy. They consume at near-prerecession levels, though now they tend to be a little more selective (and less conspicuous) about their purchases. The segment consists primarily of people in the top 5% income bracket. It also includes those who are less wealthy but feel confident about the stability of their finances — the comfortably retired, for example, or investors who got out of the market early or had their money in low-risk investments such as CDs.
Here we see the brands that are doubling down on marketing efforts. Notice I said marketing efforts…not sponsorship spend. While they might not be spending with you…you could still see them double down on digital ads.
Generally speaking beer, insurance, and banks come to mind here. Again we don’t want to place a whole industry here as microbrews could be in the Slam-on-the-breaks segment while big brews come into this category as comfortable.
The live-for-today segment carries on as usual and for the most part remains unconcerned about savings. The consumers in this group respond to the recession mainly by extending their timetables for making major purchases. Typically urban and younger, they are more likely to rent than to own, and they spend on experiences rather than stuff (with the exception of consumer electronics). They’re unlikely to change their consumption behavior unless they become unemployed.
On the sponsorship end, these are the wildcards. Sometimes it’s because they are well-funded startups…sometimes it is because they just had a ton of cash on hand before the shutdown.
As the description says above they will still spend but push the timetable of their big spending.
The next part: Segmenting how they will respond to our packages
So we understand the segments, how can we understand how they will purchase in the new world? Well, this article does a great job of breaking down the purchases & products into a few categories:
Regardless of which group consumers belong to, they prioritize consumption by sorting products and services into four categories:
- Essentials are necessary for survival or perceived as central to well-being.
- Treats are indulgences whose immediate purchase is considered justifiable.
- Postponables are needed or desired items whose purchase can be reasonably put off.
- Expendables are perceived as unnecessary or unjustifiable.
Again this is based on consumers, but it holds true to our sponsorship categories as well. This is how they will analyze our products in their heads before buying.
How can we know what items fall under these categories? You’ll have to be brutally honest with yourself, ask your sponsors, and a bit of analyzing what they have purchased in the past.
For example if a sponsor has always demanded couponing in their packages…most likely that is essential for them.
On the macro-level we can look at what they have said is most valuable as well, as IEG did with the below graph.
I’ll caveat this with the fact that this could be totally upside-down with the pandemic. I would imagine tickets & hospitality has plummeted, access to personalities (think IG Live with players) has skyrocketed. Use this as a hypothesis building chart…but really challenge these with your conversations with partners.
Again what is expendable to one is essential to another. Really use the knowledge you have on a partner in order to finish this.
From here we can start to chart how each segment will react & behave to our products based on their classification.
From the chart above we can see where we will have success and where we’ll struggle for each partner. As you can see, this will allow us to adjust our sales pushes to set ourselves up for success.
From here we can start to look at what tactics will work for each of these behaviors.
So how do we put this into practice? We can use this to build packages & prices for all segments to maximize revenue.
The second graph the article has created a beautiful map to do just that:
Some of these again we’ll have to adjust based on our industry…but we can get a pretty good idea of where we will have to make adjustments in order to be successful.
For example, even though a slam-on-the-brakes sponsor might find an asset essential…that doesn’t mean they won’t be price sensitive. We’ll need to unbundle our $20,000 packages into a la carte items that may be $500 each. I’m thinking social posts here, charge by the tweet….not the whole season.
Understanding these dynamics could be the make or break to a deal.
Ok, now how do I get tactical?
As the article states:
Begin by performing triage on your brands and products or services. Determine which have poor survival prospects, which may suffer declining sales but can be stabilized, and which are likely to flourish during the recession and afterward.
Each sponsor will be different, each category as well. But the first step will be to categorize each one of your current partners into these customer segments.
Once you do this, you can understand which of your products in the packages you send out will need to be tweaked and which will be fine for the downturn.
Off the top of my head, I’m really looking at signage as a tough sale. For most brands this is an expendable item. Vanity metrics that don’t prove sales that you have to buy all at once.
If you understand that this asset will sell less in the downturn you can either adjust the pricing model or overall understand there will be a drop in sales here so we need to change our sales goals to push more essentials.
By breaking these down this allows us to understand which products we can push at what price to each segment. This also shows us that we are going to have to get creative with our packages and how we price them.
One important piece in this is don’t forget your core brand when looking at these items. As the article states:
When sales start to decline, companies shouldn’t panic and alter a brand’s fundamental proposition or positioning. For instance, marketers catering to middle- or upper-income consumers in the pained-but-patient segment may be tempted to move down-market. This could confuse and alienate loyal customers; it could also provoke stiff resistance from competitors whose operations are geared to a low-cost strategy and who have intimate knowledge of cost-conscious customers. Marketers that drift away from their established base may attract some new customers in the near term but find themselves in a weaker position when the recession ends. Their best course is to stabilize the brand.
You don’t want to move down market and start slashing prices. If you can understand the customer segments and their needs you can get more flexible with your prices and packages.
Don’t bring down the price of your packages, but offer alternatives and pieces. You don’t want to drop the value of what you are selling…rather your goal should be to re-structure your assets so they can fit the cash-flow budgets of the
Pepsi did this by offering single cans in supermarkets over the 12 pack. They cost the same…it just gives the Slam on the brakes customers the ability to buy within their budget.
Overall we should be making small but powerful shifts with this information.
We may have to piece together more deals…but you will be able to reach all segments with the packages and therefore have more customers willing to buy.
You are being empathetic toward the sponsor’s situation. You are offering them the ability to still be a part of your influence and reach even if things are tough. This is our goal with this structure.
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And now….as promised Click HERE for a free spreadsheet worksheet that puts this into a process. You won’t be able to edit it…but if you duplicate it through File-> Make A Copy you can have your own version to work with.
As always my goal is to help sports sponsorship thrive. If we can understand our sponsorship needs better than other options we’ll win. This is hopefully the blueprint your organization needs to offer the perfect products that will sell and be a fit with our sponsors.