Does Pay For Performance Make Sense For Corporate Partnerships?

            The Arsenal Football Club and The Emirates Group recently made news when the Dubai based airline announced there had incorporated performance-based clauses in its sponsorship agreement with the English Premiere League team. Emirates and Arsenal have a five-year contract that pays Arsenal £30 million ($48.6 million) in annual fees for partnership inventory including a jersey sponsorship. While Arsenal has qualified for the Champions League every season for the past eight years, it has not won a major title during this span (FA Premiere League, FA Cup, and UEFA Champions League). If the team fails to qualify for the Champions League or does not perform well in the Premiere League then, "There are certain clauses, from 2015, that we pay them a percentage less if they don't perform," Emirates SVP Boutros Boutros said. "It's fair to us and fair to them."

            On the surface, it does seem fair. Sports organizations should absolutely be held accountable for their performance with regards sponsorship agreements. The question is what the definition of performance. More importantly, does competitive performance always translate to a successful sponsorship?

The answer is both yes and no. A team should be evaluated on both the quantity and quality of the impressions it delivers to corporate partners through inventory items like jersey sponsorships.

Quantity of impressions is relatively easy to define. It is generally considered to be the number people who view, consume, or experience an inventory item. For a corporate partnership agreement, a team should estimate the total number of impressions for each inventory during the course of the year. It should be rewarded for exceeding this number and penalized for missing these estimates.

Quality of impressions, however, is more difficult to define. At Block Six Analytics, we define the quality of impressions by a sports organization’s ability to help its partners to increase revenue and meet sponsorship goals.  By increasing revenue, B6A recognizes that different types of impressions can generate differing amount of revenues. For example, arena / stadium signage likely does not have the same impact on new customer acquisition or customer attention as having a partner’s core customers attend a game in a luxury suite. It is not that the stadium / arena signage in not a valuable piece of partnerships inventory. It is that that the luxury suite is more valuable to the partner because it targets specific customers and creates in an environment that is more likely to generate revenue.

Not all partnerships, however, are about generating revenue. Therefore, it is critical to define what the sponsorship goals are for each partner. Enhancing brand perception through sponsoring a community’s professional, collegiate, or high school team has a higher priority for many partners than increasing revenue. Sports organizations can be evaluated for its ability to maximize this type of impressions as well.

The Emirates deal, and the fairness component of this deal, appears to focus more on the quantity of impressions. Most of the Champions League value comes from the media rights deals for tournament games. If Arsenal does not qualify for the Champions League then the team will not be able to broadcast its jersey sponsorship to the hundreds of millions of fans who watch the tournament each year. This will decrease the overall number of impressions. However, it is not clear how much it will decrease quality of impressions. Most of the impressions from a jersey sponsorship go towards increasing brand awareness to viewers watching television broadcasts. While these are valuable, these impressions may not be as valuable those that go directly to increasing customer acquisition and customer retention. After all, how many airline purchases are individual purchases making in a given year?  

This goes to the heart of return on investment (ROI) calculations when it comes to sponsorship. Winning generally does help increase awareness and interest in a team or individual. This translates into increases in gameday attendance, television ratings, and unique visitors the organization’s websites. While this is good for the sports organization, corporate partners need to ensure that these new impressions actually generate profitable revenue growth or help meet sponsorship goals for their organizations. Simply generating a massive number of impressions can no longer be the standard used to evaluate partnership value. Books like Sasha Issenberg’s The Victory Lab: The Secret Science of Winning Campaigns shows how successful political campaigns use microtargeting to focus on the most valuable voters – people who can be persuaded vote for a specific candidate but only after being contacted by a campaign with a specific message.

This same logic should be applied to corporate partnerships. For example, Arsenal could provide Emirates with introduction to team fans or other sponsors that make enterprise purchasing decisions about corporate travel. This type of introduction could occur whether the team is losing or winning on the field. More importantly, this is the type of microtargeted impression that is much more likely to deliver increases revenue to the Emirates than if the team qualifies for the Champions League.     

While usually aligned, winning in competition can mean something entirely different than winning with the corporate partnerships. It is definitely a good idea to hold sports organizations accountable for sponsorship spend. Partners need to ensure that they are holding sports organizations accountable in the right way.  

Voicing Concerns Should Not Be A Concern For Those In Sports

Today’s shooting in Newtown, CT has caused unspeakable heartbreak for too many families at Sandy Hook Elementary School. Yet, the tragedy has already seemed to find a voice on numerous social media outlets. More specifically, people are talking about the unbelievable loss of life in the context of a larger debate about gun violence. The debate has centered on whether there should be a debate at all. Can a tragedy as terrible as this one be used to examine second amendment rights and gun control laws? 

For many sports fans, this unfortunately sounds eerily similar to the conversation that happened after Jovan Belcher’s death two weeks ago. The former Kansas City Chiefs linebacker shot and killed his girlfriend before driving to team’s stadium and shooting himself in front of Chiefs General Manager Scott Pioli and Head Coach Romeo Crennel. Many players, fans, and media members sought to express their opinions about this tragedy and spark a larger conversation about gun violence and professional athletes. NBC broadcaster Bob Costas used the halftime of a Sunday night NFL game to question whether the deaths of Belcher and his girlfriend would have occurred if he not owned guns.

This blog post is not to debate the merits of second amendment rights. It is a complicated issue in which both gun control advocates and critics have valid arguments. However, there seems to no debate that those in sports, whether players, coaches, or media members, should not be talking about issues outside of sports. Many people may not have agreed with Bob Costas sentiments about the Belcher tragedy. Yet, the larger controversy has come from his saying anything about killings at all. Because he was “simply” a sports broadcaster, Costas should not have use a football game to present his gun control views or provide his take on what happened with Belcher.

This sentiment is not just shared by people outside of the sports industry. Minnesota Vikings punter Chris Kluwe has been outspoken voice on numerous issues. Kluwe wrote an open letter to Maryland state delegate Emmett C. Burns criticizing his efforts to have Baltimore Ravens owner Steve Bisciotti fine Ravens linebacker Brendon Ayanbadejo for supporting the state’s gay marriage bill. Recently, Kluwe’s special teams coach stated that he was tired of Kluwe’s taking stances on controversial issues. “To me, it’s getting old,” Mike Priefer said. “He’s got to focus on punting and holding.”

When it comes to sports players, coaches, and media members talking about issues outside of sports there should really be no debate. To say that Kluwe cannot punt or holder as well as he possible could because he voices his opinions makes little sense. To criticize Costas for just talking about gun violence within the context Belcher’s death and claiming he is not doing is job as a sportscaster is upsetting.   

We understand that players, coaches, and media members have a large platform from which to share their opinions simply by being associated with professional or major collegiate sports. And yes, athletes, coaches, and media members can and will say things that are offensive to most people. Pittsburgh Steelers running back Rahshard Mendenhall’s comments about September 11^th or Ozzie Guillen’s comments about Fidel Castro are a particularly egregious example of people using their fame from sports to loudly and widely broadcast some asinine thoughts.

However, those in sports do have a unique opportunity with which to bring a spotlight to issues. It is their right to talk about issues that are important to them. There really should be no debate that those in sports have a right to start a debate.

Block Six Analytics Advisory Board

Block Six Analytics (B6A) is pleased to announce the creation of the company’s new Advisory Board. This three-member panel will provide recommendations to the company about strategic, marketing, finance, and operational opportunities and issues. Advisory Board members are leaders in their field and provide years of experience working on the types of challenges that B6A will face as it continues to add clients and create new service offerings. Advisory Board members include:

John Biggs – John Biggs background includes serving for more than ten years as Chairman, President and CEO of TIAA-CREF, the major pension and investment firm serving higher education. He recently resigned from the Board of Directors of Boeing and Chairs its Audit Committee. He has served as a Director of the National Bureau of Economic Research and is a past chairman of the NBER. He has also served as a Director of JPMorgan Chase, the NASD and numerous not-for-profit institutions. He joined New York University Stern School of Business as an Executive-in-Residence in 2005.

Irv Rein  – Irving Rein is a Professor of Communication Studies at Northwestern University’s School of Communication. He is an internationally known expert in public communication and popular culture. He has been a communication advisor to numerous highly visible places, organizations, and individuals including Major League Baseball and the United States Olympic Committee. He has authored 12 books including The Elusive Fan, High Visibility and Marketing Places with publishers such as McGraw-Hill, Free Press, Financial Times / Prentice Hall, and John Wiley & Sons (Asia).

Matthew Levin – Matthew Levin is the Executive Vice President and Head of Global Strategy Aon. He is responsible for developing Aon's overall global strategy, with a particular emphasis on accelerating its growth agenda. He has more than 17 years of experience in corporate development and strategy, where he led growth initiatives for a number of Fortune 1000 companies, including Hewitt Associates, Neustar and IHS, a global provider of technical information and decision support tools. He holds a master's degree in business administration from the University of Chicago and a bachelor's degree from Northwestern University. He currently serves as a visiting lecturer at both institutions.