Assessing the Financial Impact of

Sponsorship Investment
Anastasia A. Kourovskaia
Millward Brown Optimor
Tony Meenaghan
University College Dublin
ABSTRACT
This paper outlines an effective approach to the problem of assessing the nancial impact of
sponsorship investment, which has a track record of successful implementation in the sponsorship
industry. Based on a number of interrelated proprietary models the approach provides the tools to
measure the brand nancial uplift created by a sponsorship programme and the shareholder value
thus created. The core thrust of the paper is around the use of the MBO model, i.e., the Millward
Brown Optimor model, which has proved successful in capturing the effectiveness of sponsorships
and in forecasting nancial performance of the brand and thus allowing for the quantication of the
value created for the brand by the sponsorship investment. The implementation of the MBO
approach is outlined as a ve-step process involving comprehensive segmentation, benchmarking to
derive a brand discount rate, modeling of nancial performance, determining the role of the brand in
ultimately driving usage choice, and ultimately providing the techniques to calculate Brand
Contribution in nancial terms. The paper concludes that the complex tasks involved in assessing
the nancial impact of sponsorship investment and the impact on shareholder value can be
rigorously addressed through the application of these tools and sponsorship managers can thereby
make improved decisions which are underpinned by market and nancial analysis.
C
2013 Wiley
Periodicals, Inc.
Sponsorship has seen signicant growth in recent
decades, becoming an important marketing tool and
a substantial investment focus for many brands. As a
brand investment option it is imperative that sponsor-
ship be measured and held accountable for the value
it creates for the companys shareholders. Widely used
methods of sponsorship evaluation such as media expo-
sure valuation, econometric modeling and the tracking
of specic brand metrics, provide useful measures of
sponsorship impact, but they do not however provide
a comprehensive assessment of the actual value that
sponsorship creates for the brand and ultimately for
shareholders.
The model for measuring sponsorship impact out-
lined in this paper, the Millward Brown Optimor model
(herein after referred to as the MBO model) is based on
measuring the brand nancial uplift created by a spon-
sorship programme. In this model brand performance
is assessed across different market segments and those
segments where sponsorship has been implemented are
isolated in order to identify the nancial value uplift for
each individual segment. A fundamental of the model
is that if the sponsorship has a positive effect, then
those consumers exposed to and interested in sponsor-
ship should generate a higher brand loyalty and cre-
ate greater value for the company than consumers who
have not been exposed to the sponsorship or who lack
specic interest in it.
SPONSORSHIP AND BRAND VALUE
The sponsorship journey starts with an analysis of the
competitive environment, market trends, and brand
image. This analysis enables brand owners to under-
stand how and where value is created, where the op-
portunities for growth are and what levers can be used
to effect that growth, particularly which brand image
characteristics need to be changed and how this change
might be achieved. When sponsorship is being consid-
ered, this understanding needs to be matched with the
proles of sponsorship properties in order to assess
strategic t and model the impact of the proposed spon-
sorship programme on the brand, on the business as a
whole and ultimately on shareholder value. This pro-
cess is illustrated in Figure 1 below.
Psychology and Marketing, Vol. 30(5): 417430 (May 2013)
View this article online at wileyonlinelibrary.com/journal/mar
C 2013 Wiley Periodicals, Inc. DOI: 10.1002/mar.20616
417
Figure 1. Sponsorship and brand value generationthe
process.
THE BRAND AS FINANCIAL ASSET
For any corporation, brand is one of the most valu-
able nancial assets. Companies with strong brands
achieve greater sales and prots and create lasting
business value, a key nding of the PIMS research
studies (Buzzell & Gale, 1987; Buzzell, Gale, & Sul-
tan, 1975). Indeed Millward Brown Optimor analysis
indicates that the book value of a company in 2012 ac-
counted for only 47% of an average companys market
capitalization. The rest of its capitalization consisted of
intangible assets, and about half of that gure, some
31% of total market capitalization, was related to the
brand (Stengel, 2011).
A strong brand therefore is an asset that needs to be
carefully crafted and developed and then continually
nurtured. Axiomatically, the brand as an asset has to
deliver value in excess of the cost of its maintenance or
marketing investment. When a brand is encountered by
the consumer, it evokes a set of associations, including a
range of rational and emotional dimensions of response.
Effective marketing helps builds strong brands by com-
municating and evoking what the brand stands for in
a clear, consistent, and compelling manner across all
touchpoints. A list of brand denitions as used in this
paper is included in Appendix A.
PLANNING AND CHOOSING THE
SPONSORSHIP PROGRAMME
Corporate investment in sponsorship has experienced
signicant annual growth for several decades, though
some deceleration of rate has characterized the recent
nancial crisis. Sponsorship is regarded as different
fromother marketing activities in terms of its enhanced
ability to emotionally engage with and build strong
brand associations among consumers. The unique ca-
pacities of sponsorship can be deployed toward gen-
erating brand awareness, fostering brand perceptions,
and driving brand engagement, but the achievement of
these outcomes demands a rigorous sponsorship man-
agement process.
Decisions made at key stages of the sponsorship
management process have a signicant bearing on
the subsequent effectiveness of the sponsorship invest-
ment. The following steps are critical to effective and
successful management of a sponsorship programme:
(a) Specifying sponsorship objectives.
(b) Selecting the sponsorship programme.
(c) Implementing a comprehensive sponsorship ac-
tivation programme.
(d) Measuring sponsorship effectiveness.
Each of these decision stages is briey outlined, with
particular elaboration where specic decisions feed into
understating the use of the MBO model to determine
the nancial value of sponsorship investment, which is
the core issue discussed in this paper.
Specifying Sponsorship Objectives
The objectives of sponsorship vary and can be targeted
at both internal and external audiences: Such objec-
tives include
r
Building Brand/Corporate awareness: Sponsor ex-
posure creates consumer brand awareness.
r
Enhancing Brand/Corporate image: Sponsorship
enables a brand to create a unique personality
and style, which distinguishes one product from
another in the marketplace.
r
Building Customer Relations: Sponsorship can
foster dialogue between corporations, portraying
the sponsor as both global player and suitable
partner for potential business interaction. It can
simultaneously provide suitable hospitality vehi-
cles for client engagement.
r
Improving Employee Relations: Focused inter-
nally, sponsorship can foster company pride and
loyalty and assist in attracting and retaining staff.
r
Strengthening Community Relations: Sponsor-
ship can display a companys commitment to its
community and its concern for citizens.
In an effective sponsorship programme, tight spec-
ication of these kinds of objectives must always be
sought. The objectives, wherever possible, must be ex-
pressed in terms of precise outcomes with a clear in-
dication of the metrics, which will be used to evaluate
whether or not the objective has been achieved. The
concern of this paper would suggest that, even at a pre-
liminary stage of selection, it is valuable to identify the
kind of objectives that are being sought both in terms
of the cost of seeking them through various marketing
communications platforms and the projected monetary
418 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar
Figure 2. The impact of appropriateness of the sponsorship on brand image.
Source: Millward Brown Optimor.
and nancial value which brand uplift created by that
sponsorship can deliver.
Selecting the Sponsorship Programme
Potential sponsorship options should be evaluated
against designated criteria to determine the capacity
of each option to satisfy desired objectives and to de-
liver, within the cost parameters, the desired nancial
benet to the brand. While inevitably some element of
judgment will always be involved in such situations,
the evolution of sponsorship has seen the development
of a range of tools to provide a more scientic basis to
underpin selection decisions. Two such tools are now
briey discussed. They provide approaches to optimize
sponsorship appropriateness and sponsorship/brand
matching in the ultimate pursuit of generating brand
uplift and nancial impact.
The issue of the determination of "sponsorship ap-
propriateness" is increasingly the subject of formal
research. Figure 2 depicts the results of a Millward
Brown study of the impact of perceived sponsorship t
(Appropriateness of Sponsorship) on brand image (Bet-
ter Impression of Brand). As can be seen there is clearly
a strong correlation between perceived appropriate-
ness and better impression of the brand. Research
at the early stages of sponsorship programme develop-
ment can indicate market perceptions of t between
brand and sponsorship property and thus guide the se-
lection to maximize the impact and eventual nancial
returns.
A precondition for successful sponsorship is that the
sponsored property must simultaneously be of inter-
est to and have the potential to engage the brands
target market. Where brands seek to reposition, pre-
viously appropriate properties may recede in terms of
relevance. For example, InBev in 2008 decided, after
29 years involvement, not to renew the Stella Artois
sponsorship of the (pre-Wimbledon) Queens Club ten-
nis tournament because its target market had changed
(Sandison, 2008).
Where there is a perceived t between the sponsor-
ship and the brand, improved results can be observed.
According to Speed and Thompson (2000) the level of
t is positively related to sponsorship responses, in-
cluding willingness to consider the sponsors product.
Overall, partnerships that offer the most appropriate
association tend to be more effective in improving brand
perception and ultimately drive the commercial success
of the brand.
Implicit in the discussion regarding perceived t are
the concepts of personality and image values, which are
applicable to both brand and sponsored activity. The
concept of personality in sponsored properties has long
been recognized. In 1984, Meenaghan suggested that
Individual activities or events are possessed of partic-
ular personality attributes in the public mind and much
sponsorship activity is directed towards garnering a
rub-off effect to the company or its products through
association with a particular sponsorship event or ac-
tivity (Meenaghan, 1983, p. 29).
In a brand/sponsorship relationship there is a trans-
fer of sponsored property values to the sponsoring
brand. This process is illustrated in Figure 3 below.
In terms of image, Gwinner and Eaton (1999) dif-
ferentiated between function-based and image-based
t. Function-based t exists or can be created when
the brands products are actually used in connection
with the sponsorship, e.g., sports apparel and a sports
event. Image-based t is achieved when the sponsors
image is congruent with the image of the event, e.g.,
Coca-Cola and its music sponsorship programme. For
most brands it is often easier to achieve image-based t
ASSESSING THE FINANCIAL IMPACT OF SPONSORSHIP INVESTMENT 419
Psychology and Marketing DOI: 10.1002/mar
Figure 3. Sponsorshipimage transfer by association.
Source: Meenaghan (2003).
compared to function-based t, this is particu-
larly true for nonsports brands sponsoring sporting
events.
The CEBRA matching matrix model is the second
tool that can be used to optimize sponsorship selec-
tion. The model denes the image proles of brands
and those of various potential properties and assesses
the t between brands and potential properties, based
on calculating a distance score between the image
proles. From this analysis, the top matches are
highlighted. The matching matrix also helps to iden-
tify properties that will either compliment the current
brand prole or alter that prole as required. Brand
strategy, driven by consumer and market understand-
ing, outlines the required brand prole. An analysis of
CEBRA results can determine whether the association
will help to stretch the brand in a desired direction,
allow the brand to conrm its current image or poten-
tially detract value by stretching the brand image in an
undesired direction.
By way of illustration, Figure 4 shows the match
between a luxury Hotel Brand and a Yacht Regatta
sponsorship. Clearly this match illustrates consider-
able overlap in brand values, but also shows the po-
tential addition of values such as passion and fun
and the opportunity to move the hotel brand into a more
dynamic territory.
Figure 4. Sponsorship equity t: Regatta versus Luxury
Hotel Brand.
Source: Millward Brown Cebra (2012).
The marketing strategy adopted combines two fun-
damental elements of brand, i.e., awareness and the
appropriateness of the associations. To this end, mar-
keters must rst build awareness among the target
market and concurrently or subsequently build the
right associations that will ensure differentiation and
build strong relationships with customers.
Sponsorship Activation
Activation is a fundamental element in ensuring a suc-
cessful sponsorship strategy. Activation includes the
use of promotions, competitions, television advertising
during breaks, corporate hospitality, etc., to promote
and exploit the sponsorship investment. At the simplest
level, if customers are unaware that the brand is spon-
soring an event, there will be no brand benet. In the
words of Joe Tripodi, Chief Marketing Ofcer of Coca-
Cola In sponsorship its not what you have, its what
you do with it. Its all about activation (Economist,
2008). Adequate activation budgets that may exceed
property rights fees are vital to the success of the spon-
sorship programme. In 2011, the average ratio of acti-
vation spending to the costs of acquiring sponsorship
rights was $1.60 (on leveraging) to $1 (on rights fees).
According to research from IEG (2011), the high water
mark for activation spending to rights fees was $1.90
$1 in 2007.
Measuring Sponsorship Effectiveness
Global spending on sponsorship in 2012 is expected to
reach 10%of total marketing budget (IEG/Performance
Research, 2012), which is four times higher than the
2.5% recorded in 1987 Otker and Hayes, (1987). Given
the scale of expenditure involved, the accurate mea-
surement of sponsorship effectiveness is vital. Such
measurement will establish sponsorships contribu-
tion in achieving brand ambition as well as provid-
ing valuable input to enable planners to maximize
the returns to be gained through the sponsorship
programme.
As with marketing inputs generally, the measure-
ment of sponsorship impact is not straightforward,
with a number of factors rendering the process more
difcult:
r
Sponsorship is rarely the sole marketing activ-
ity. Typically, a combination of several marketing
tools is used to support the brand, thus making
outcomes achieved the results of several market-
ing activities. These individual contributors may
not be easily separated from each other.
r
Results can be impacted by a variety of external
factors such as the adverse economic conditions,
technological breakthroughs, or competitive activ-
ities that may not be easily isolated in attributing
results to particular inputs;
420 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar
Unsurprisingly, many companies are hesitant to al-
locate additional budget spend to measuring the ef-
fects of a marketing input when they have fundamen-
tal doubts as to how well such impact can be measured.
Even when budget is allocated to measuring sponsor-
ship impact, many organizations concentrate on mea-
suring awareness and tracking brand image or attempt
to quantify the direct sales impact of the sponsorship
activity.
APPROACHES TO MEASURING
SPONSORSHIP EFFECTIVENESS
Widely used approaches to measuring sponsorship ef-
fectiveness can be categorized under a number of
headings including determining media equivalence,
econometric modelling, and brand impact measure-
ment.
Determining Media Equivalent Value
Assessing and valuing media coverage delivered by the
sponsorship is a widely used approach to quantify spon-
sorship impact. This revolves around eyeball count-
ing, i.e., measuring media equivalent ratings, gross
rating points, time on screen, etc. Valuing media ex-
posure is an easy to measure, relatively cheap, well
understood, and a process familiar to managers that
generates numerical outcomes for consideration and
comparison.
Determining media equivalence involves calculating
the value of exposing a brand name or logo to consumers
in traditional media, primarily television and press.
Current research methodologies allow brand owners to
very precisely track the duration of brand name or logo
exposure on screen, such as in the case of shirt spon-
sorship or perimeter board exposure during a sports
event. The calculated time on screen or in press is con-
verted into a nancial value by applying advertising
rate card rates to the time or space. In the case of tele-
vision exposure, the numerical value generated is typi-
cally heavily discounted as this type of media exposure
is regarded as not delivering the same quality media
connection as a television commercial because viewers
are primarily viewing a match rather than focusing on
perimeter boards or team shirts. Additionally, a 30 sec-
ond television execution carrying a direct brand mes-
sage has greater impact when compared to a 30 sec-
ond perimeter board exposure involving brand name or
logo. The level of discount is difcult to quantify, but
may be as high as 90% according to industry sources.
Once discounted, the estimated value of exposure can
be related to the cost of the sponsorship investment to
calculate ROI on sponsorship and further to determine
the relative effectiveness of sponsorship compared to al-
ternative expenditures such as a television advertising
campaign. Visibility monitoring is also useful in terms
of benchmarking the brand against competitors. It is
however important to recognize that visibility is only
one element of marketing and cannot be considered in
isolation. Overall, determining media equivalence pro-
vides a quick, measurable assessment, but should not
be employed in isolation to evaluate the effectiveness
of a sponsorship programme.
Sponsorship and Econometric Modeling
The second method, applying econometric modeling, is
usually more accurate in terms of quantifying short-
term marketing impact and attributing that impact to
different marketing or promotional activities. The ef-
fectiveness of the sponsorship however depends largely
on the scale and quality of activation undertaken by
sponsors. Good econometric models allowa sponsorship
manager to capture and explain short-term movement
in key metrics, e.g., revenue or sales volumes. This is
especially true for consumer-facing companies. Many
B2C companies in fact have a long history of sponsor-
ship, advertising, and other marketing programmes,
which allows them to have, by way of reference, a set of
revenue uplift benchmarks based on past programmes
with similar budgets and activation levels. Such bench-
marks provide a basis for comparison of effectiveness.
Sponsorship and Brand Impact
Measurement
The third approach relies on measuring the impact
of sponsorship in terms of improvements in brand
image and enhanced emotional engagement with the
brand and even purchasing intent. For example, fol-
lowing its sponsorship of the Beijing Olympics, Coca-
Cola achieved a 25% increase in awareness in China,
with 50% of consumers conrming that they thought
more positively about the brand and 37% claiming they
would be more likely to buy Coca-Cola in the future
(Mediaedge:cia, 2008). This illustrates a very tangible
long-term effect that is typically not captured by econo-
metric models, as the full effect of a marketing cam-
paign can only be seen over an extended period of time.
THE MBO MODELKEY PRINCIPLES
The widely used sponsorship measurement approaches
outlined above focus on different stages of the
consumer purchase/relationship continuum up to and
including purchase intent and even declarations of ac-
tual purchase. Such methods (because of claimed na-
ture of research responses) do not necessarily in them-
selves identify the actual nancial consequences of the
sponsorship investment. The MBO approach to spon-
sorship effectiveness measurement however compares
the total cost of the sponsorship programme with the
value created by it in order to identify the actual nan-
cial impact of the sponsorship investment.
ASSESSING THE FINANCIAL IMPACT OF SPONSORSHIP INVESTMENT 421
Psychology and Marketing DOI: 10.1002/mar
KEY PRINCIPLES UNDERPINNING
EFFECTIVENESS MEASUREMENT
Prior to discussing the MBO approach to the task of de-
termining sponsorship effectiveness there are a number
of fundamental guiding principles, which underpin the
MBO model, broadly falling into two groups related to
marketing evaluation issues and more specically spon-
sorship evaluation issues.
Marketing Evaluation Underlying
Principles
Both academia and business practice have long rec-
ognized that marketing investments have both short-
and long-term effects. Many marketing activities such
as advertising can produce an immediate result (e.g.,
direct response), but where advertising intent is brand
equity related, the results of such investment in terms
of enhanced brand image, brand engagement actual
sales, and brand loyalty will of necessity be evaluated
in the longer term. A properly constructed effectiveness
measurement system must examine investment effects
both short and long term.
Brand, in terms of its market equity is increasingly
recognized as an important corporate asset though of
course positive consumer sentiment toward a brand is
valuable only if it can translate into shareholder value
that can ultimately be quantied. Loyalty to the brand
and consequent repurchasing of the brand translates
into revenues that are realized through changes in pur-
chase volume, price, and frequency. But revenue is not
the same as value and what must be taken into ac-
count in the calculation of value are the costs incurred
inproducing product and creating and maintaining con-
sumer demand including brand development and main-
tenance costs.
In addition to its demand generating capacity, it
should also be recognized that a well-managed brand
has a positive impact across all functions of the com-
pany from Sales to Human Resources. The supply side
benets of strong brands allow businesses to reduce
overall business risks and optimize their operations.
Such benets include the ability to negotiate better
terms with suppliers, to attract, and retain the best
employees, to facilitate expansion into new products
and markets, and to reduce tax rate through brand
licensing.
Globally the importance of brand is growing steadily
but there is a signicant level of variation in terms
of brand equity value between geographies, industries
(compare Personal Care to Fuel), markets, and even
individual companies.
Past performance can aid the prediction of future
behavior but it is the brands ability to deliver en-
hanced future revenues that really matters and accu-
rately quantifying the net value of such revenues is a
crucial issue in the evaluation process. The MBOmodel
discussed in this paper combines and deploys a range
Figure 5. The BrandDynamics
C
Pyramid.
Source: Millward Brown (2012).
of techniques to forecast nancial performance of the
branded business in order to calculate such future earn-
ings. Future brand earnings cannot of course be guar-
anteed in an environment where risk is inherent but it
is acknowledged that the greater the brands strength,
the more future earnings are reliable and the lesser
the risk. Future brand earnings must of course be dis-
counted to the present value to take into account the
risk associated with the brand.
How can future consumer sentiment toward a brand
be predicted and how can its translation into share-
holder value be modeled? The MBO model relies on a
proprietary approach known as BrandDynamics, which
is a framework that maps consumer relationships with
brands and measure brand strength in consumers
minds. The BrandDynamics
C
Pyramid is shown in
Figure 5.
The ve levels of the pyramid indicate the stages
of the consumer/brand relationship. The basic level of
the relationship is that of Presenceknowing some-
thing about the brand. Brands like Lenovo, following
its acquisition of IBMs personal computing business,
had a crucial need to build familiarity. If consumers do
not know about the brand, then even if they buy its
products, the decision is driven by reasons other than
brand, it could be price, availability, but not brand. The
next level, Relevance, is all about meeting needs. As
such the brand and what it stands for has to be rel-
evant to consumers, otherwise it will not be consid-
ered. Once the brand is perceived as offering some-
thing relevant, the product or service needs to meet
consumer expectations for a brand in this category
and deliver against the brand promise, i.e., brand Per-
formance. The top two levels of the pyramid describe
strong feelings toward brands. Those consumers at the
Advantage level perceive the brand as offering some-
thing better than its competitors, while at the Bonding
level, the brand uniquely owns some important cate-
gory characteristicsnothing else beats it in the con-
sumers mind. In effect the higher the consumer is on
the pyramid, the higher will be the brands share of the
consumers wallet and of the expenditure dedicated to
that product or service category.
Bonding, the highest level of the Pyramid indicates
the proportion of the consumer base which is bonded
422 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar
Figure 6. The relationship between market share
and bonding.
Source: Millward Brown Optimor.
to the brand reecting the proportion of customers
who would buy only that brand or have it as their
rst choice. As the most loyal consumers, the bonded
deliver the highest proportion of spend to the brand.
Figure 6 shows the results of research indicating the
very strong relationship between a brands bonding
score and its market share, which in turn is central
to delivering nancial results.
The better the brand performs at the top levels of the
BrandDynamics
C
Pyramid, in particular at the level of
Bonding, the greater the share of product category
spend will come to the brand. BrandDynamics
C
Pyra-
mid serves as a basis for Brand Contribution calcula-
tion in the MBO model.
Sponsorship EvaluationUnderlying
Principles
Sponsorship is generally implemented as part of a
media mix and is rarely the only marketing input.
However, while the sponsorship team may operate in
relative separation, if not isolation, from the adver-
tising and marketing teams, the reality is that con-
sumers are generally unable to attribute their recall
and memories to specic marketing inputs. For exam-
ple consumers are unable to satisfactorily specify for
researchers whether sponsorship, TV advertising, ra-
dio advertising, or Internet has been the source of the
brand message. Although it is possible to ask respon-
dents whether they have seen or heard something
that they call sponsorship, the answers are likely to
lack reliability and precision. This reality must be ac-
knowledged in constructing any sponsorship evaluation
methodology.
A further consideration in designing an appropri-
ate research methodology is the prior knowledge of po-
tential respondents. A particular sponsorship is often
chosen because of the overlap between the target audi-
ence and the sponsored activity audience. Thus, even
before the sponsored activity commences, some of those
likely to be later exposed to the activity (existing brand
Figure 7. Customer groups based on exposure and interest
in sponsorship.
Source: Millward Brown Optimor.
users) will already be more favorably disposed to the
brand. This predisposition must be taken into account
in any analysis of effectiveness. Research, prior to the
sponsored activity, is necessary to establish the bench-
marks against which success can be subsequently de-
termined. Additionally, consumers who feel closer to a
brand will be more likely to notice that brands spon-
sorship of an event. So comparing attitudes toward the
brand among those aware of the sponsorship versus
those not aware of the sponsorship is likely to result
in misleadingly high differences in response scores.
Finally, in framing research, it is not productive to
start with the event and ask respondents who they
think the sponsors are. There is a substantial research
evidence to indicate that well-known brands and those
that have historically sponsored events will dominate
respondent answering (Cornwell, Weeks, & Roy, 2005,
2006; Johar & Pham, 1999, 2006; Lardinoit & Derbaix,
2001; Wakeeld, Becker-Olsen, & Cornwell, 2007).
These problems cannot be overcome by merely ex-
amining and comparing brand users and nonusers; the
sponsorship effect is more subtle than that. In order
to quantify the impact it is necessary to isolate the
sponsorship effect by identifying those exposed to the
sponsorship compared to those (of a similar prole) who
have not had the opportunity to experience the spon-
sorship activity, i.e., those who are unexposed (Walshe,
2002). Figure 7 illustrates this process in relation to
interest in the Olympics mapped against sponsorship
exposed/not exposed.
The customer base in Figure 7 is split into four
segments along two dimensions: (1) Level of interest
in Olympics and (2) exposure to the sponsorship. As
shown, some 49% of the consumers are interested
in the Olympics and 20% are exposed to the spon-
sorship, with 12% both interested in the Olympics
and exposed to sponsorship. This leaves 37% of the
customer base interested in the Olympics but not
exposed to sponsorship. Comparing and analyzing
consumer brand responses across the four segments
in Figure 7 provides valuable insights for sponsorship
strategy and facilitates sponsorship evaluation. The
process of comparing similarly proled sponsorship
exposed versus not sponsorship exposed segments
ASSESSING THE FINANCIAL IMPACT OF SPONSORSHIP INVESTMENT 423
Psychology and Marketing DOI: 10.1002/mar
serves to identify and isolate those segments where
sponsorship is impacting, thereby rendering available
for deeper analysis of effects. This particular analysis
is an essential of the MBO model and is discovered
more fully later in this paper.
In considering the measurement of sponsorship ef-
fectiveness it is important to realize that consumers
are buying brands and not necessarily looking out for
sponsorships. This is why sponsorship does not gen-
erally triggers signicant short-term direct responses
(although such effects may be observed in sponsorship-
related benets such as pouring rights). However, spon-
sorship activities tend to have a more lingering impact
on brand perceptions. Any analysis of sponsorship ef-
fects must consider both the short-term (inuencing in-
store decisions) and long-term impact of related invest-
ments.
THE MBO MODELUNDERSTANDING
THE PROCESS
Key principles underpinning marketing effectiveness
generally and sponsorship effectiveness in particular
have been outlined above. Against the backdrop of
these principles and the increased demand for market-
ing accountability, the challenges posed by the need
for effectiveness measurement are signicant. These
include disaggregating the effects of multiple inputs,
accommodating the short- and long-term perspectives
and of course the complexities implicit in human con-
sumption behavior. The requirement of determining
a specic nancial value arising from such marketing
investments adds a further layer of complexity to the
task of forecasting.
The MBO model can be utilized to determine the im-
pact of a range of marketing inputs and to produce a
statement of nancial return arising from such invest-
ments. This paper will now build upon the perspectives
discussed in previous sections to detail the methodol-
ogy used in the MBOmodel in determining the nancial
value derived from sponsorship investment. The model
relies upon a number of specic steps to isolate the ef-
fects arising from the sponsorship programme and to
derive a nancial impact statement for same. This pro-
cess involves the following:
Step 1 Isolating the brand earnings and segment-
ing the branded business.
Step 2 Benchmarking the brand to derive brand
discount rate.
Step 3 Modeling nancial performance of the
branded business.
Step 4 Determining the role of brand and building
a brand driver model.
Step 5 Calculating the sponsorship impact.
Figure 8. Segmenting the branded business of a telecom
operator.
Step 1. Isolating Brand Earning and
Segmentation
A brand only deserves credit for the monetary ows
created under its banner. Not all of the Coca-Cola cor-
porate earnings come from the Coca-Cola brand, as the
company owns a portfolio of brands that bring in a sig-
nicant proportion of its earnings. Coca-Cola currently
has over 800 low- and no-calorie beverages in its portfo-
lio and this is just 25% of available options (Coca-Cola,
2012). Thus, the rst step is to separate the earnings
generated under the banner of the particular brand un-
der investigation.
In order to truly understand how and where value
is created, the branded business is segmented (see Ap-
pendix A for brand-related denitions). Depending on
the nature of the business, the branded business could
be segmented by regions, customer segment, channels,
product lines, etc. Figure 8 illustrates the example of
how such segmentation could be implemented for a
Telecom client.
For the purposes of isolating the branded earnings
(those attributable to the particular branded business)
the business of the telecoms operator, e.g., can be seg-
mented as follows
By Geography. The basis for consumer brand choice
can differ substantially between markets and the choice
of marketing strategies will vary to reect this reality.
Thus, the telecoms clients branded business could be
segmented by different country markets that likely will
feature different degrees of competition, wireless pen-
etration, stage of economic development, and market
growth rate.
By Line of Business. As the clients operations ex-
pand beyond wireless to other lines of business (includ-
ing other telecom services, other telecom devices, and
nancial services, see Figure 8), other segments of the
branded business will emerge. Different lines of busi-
ness bring differential value and the brand is likely to
424 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar
be perceived differently across them. Sony would have
different levels of customer loyalty and brand percep-
tions in televisions versus mobile phones. In order to
make an accurate assessment of specic brand value it
is also important to analyze the business and the brand
across this dimension.
By Customer Segment. Various customer segments
have different value proles and from a marketing per-
spective this is the most important variable. Thus, the
business can be divided into three B2B segments
Corporate, SME and Micro-businessand two
B2C segmentsMass-market and Top-end.
Overall, in the example in Figure 8, 180 individual
segments are available for analysis, such as Financial
Services in Spain in the Top-end B2C market segment
or Wireless in Greece in B2B Corporate market seg-
ment.
Step 2. Brand Benchmarking to Derive
Brand Discount Rate
The second step in the process is to provide a real-
istic assessment of future brand earning potential in
each segment and so future earnings must be converted
into current values using an appropriate discount rate.
The discount rate is essentially a measure of risk, i.e.,
the likelihood of achieving projected earnings (Jeffery,
2010).
The discount rate used by the MBO model in this
process is based on the cost of capital of the company
that owns the brand, which is modied to reect the
specic risks associated with the category and brand. If
the brand has a good track record of producing prots
and the future projections appear realistic, then the
brand would merit a low discount rate. Conversely,
a much higher discount rate would apply where the
brand is deemed less credit worthy. Strong brands
in stable categories should attract lower discount rates
and weak brands in volatile categories should attract
higher rates. The assessment of brand risk should in-
volve parameters such as stability, leadership position,
growth trend, and level of marketing support, aimed
at identifying competitive benchmarking and provid-
ing a structured evaluation of the brands position in
the market.
Step 3. Modeling Financial Performance of
the Branded Business
The value of a brand is evidenced in terms of its ability
to generate future prot. Hence, the MBOmodel identi-
es the nancial performance of the branded business
to calculate the net present value of future branded
earnings. To deal with the complexity of brand value
creation, it is necessary to build a nancial model fore-
casting earnings (net of costs) for each segment as in-
dicated in Step 1 (e.g., Financial Services in Spain in
the Top-end B2C market segment), which aggregate to
the nancial performance of the branded business as
a whole (see Telecoms Operator example in Figure 8).
Using nancial analysis techniques employed by eq-
uity analysts, smart models of nancial performance,
which contain not just numbers, but also relationships,
are constructed.
Throughout this process of forecasting earnings, it is
vital that both the projected costs and the projected rev-
enue generated by the branded business are identied
and linked. As stated it is also important that consid-
eration is given to the short-term and longer term per-
spectives. Figure 9 illustrates how the MBO methodol-
ogy combines these two time horizons:
r
Short-term sales effects: Linking marketing spend
directly to sales (this is usually a small effect for
most marketing activities and for sponsorship in
particular).
r
Longer term brand equity effects: Linking market-
ing spend to changes in brand perceptions, and
then to sales (this is usually a critical effect for
sponsorship activities).
The MBO model enables the total nancial im-
pact to be captured by measuring the overall uplift
in Brand Value attributable to the sponsorship invest-
ment. Financial forecasts are derived from the corpo-
rate/strategic plans benchmarked to historical nancial
data as well as an analysis of industry trends and the
competitive landscape, current and future.
The typical time horizon used is a ve-year terminal
value. Once the brands future earnings are modeled,
they are discounted to a net present value using Brand
Discount Rate obtained in Step 2 (see Jeffery, 2010 for
discussion of discounting and net present value).
Step 4. Determining the Role of Brand and
Building Brand Driver Model
Finally, it is necessary to quantify the role that brand
plays in creating shareholder value and Brand Dynam-
ics market research poses two key questions to inform
the analysis:
(1) What are the drivers of the customer purchase
decision? and
(2) What role does brand play in that decision?
Statistical analysis enables the identication of
the key drivers of the customers decision to choose
the brand and can further identify how strongly the
brand is associated with each one of these drivers. The
process of identication commences with the creation
of a Brand Dynamics Pyramid map of the customer
relationship (as in Figure 5) with a brand in each
segment (e.g., Wireless in Greece in B2B Corporate
market segment).
Further analysis can then determine the relative im-
portance of each driver to consumer decision making.
Figure 10 indicates the various drivers of the customers
ASSESSING THE FINANCIAL IMPACT OF SPONSORSHIP INVESTMENT 425
Psychology and Marketing DOI: 10.1002/mar
Figure 9. Measuring the returns on sponsorship activities.
Source: Millward Brown Optimor (2012).
Figure 10. Drivers of customer choice (example of nancial
services brand).
Source: Millward Brown Optimor.
purchase decision to choose a brand in the Financial
Services category. These include the extent to which the
brand in question delivers empowerment, safety and
security, convenience, and other important drivers of
customer choice.
The left side of the chart in Figure 10 portrays
the various drivers of the customers purchase decision
ranked in order of importance. Each bar represents how
much each driver contributes to that choice. The sum
of the bars is 100%, representing the total choice de-
cision. The right-hand side of the chart in Figure 10
represents how brand performs on each choice driver.
This latter analysis is overlaid for both exposed and
unexposed groups, thus moving toward a detailed mea-
sure of the impact of sponsorship. The two questions
posed by the Brand Dynamics (drivers of purchase and
role of brand) thus directly relate response to the brand
with the purchase decision and the consequent revenue
impacts.
It is thus possible to evaluate how well the proposed
sponsorship programme ts with the brand (how it in-
uences individual drivers and howthey in turn impact
on usage choice). Ultimately the approach provides a
framework, which explains why a particular sponsor-
ship works or does not work.
The output of this analysis is a measure of the ex-
tent to which the consumers decision to purchase a
branded product or service is driven by brand. This, in
turn, allows the sponsorship manager to quantify the
brands effectiveness in driving business earnings, i.e.,
the Brand Contribution. Brand Contribution is then ex-
pressed as the percentage of branded earnings that can
be attributed to the impact of brand, as opposed to oper-
ational elements of the branded business (e.g., product
functionality, price, distribution, and so forth).
Step 5. Calculating the Sponsorship Impact
At this stage of the process two key sets of numbers
are identied for each segment of the branded busi-
ness (see the Telecoms operator segments example in
Step 1)
r
The Brand Contribution, which quanties the por-
tion of those future earnings that can be reason-
ably attributed to the brand.
r
The Branded Business Value of each segment, cal-
culated as present value of future branded earn-
ings of that segment, discounted to the present
time based on the brand risk rate as previously
described.
By multiplying the Brand Contribution of the seg-
ment by the Branded Business Value of the segment, a
Brand Value of each segment is generated (BC BBV
= BV of each segment).
Total Brand Value is generated by summing up
the Brand Value of all segments. By summing up the
Brand Value of all sponsorship exposed segments,
the Brand Value created within the segments exposed
to sponsorship is clearly identied (i.e., the Brand
Value of exposed segments). Similarly, it is possible
to determine the Brand Value of unexposed segments
as the sum of brand values of all the segments not
exposed to sponsorship.
An example will serve to illustrate. Consider the
case of Brand X in the UK market, which for simplic-
ity is assumed to have two subsegments: sponsorship
exposed and sponsorship unexposed and that the
Branded Business Value and Brand Contribution for
each segment are as specied in Figure 11.
426 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar
Figure 11. Illustrative example of brand X, UK marketsSponsorship Present.
Source: Meenaghan (2003).
Figure 12. Illustrative example of brand X, UK marketsSponsorship not Present.
Figure 13. Isolating the brand value created by
sponsorship.
Thus brand creates value to the amount of 29.40
million in the exposed segment and 9.30 million in
the unexposed segment. In the scenario of there being
no sponsorship present, then the Brand Contribution
of the exposed segment would have been the same as
Brand Contribution of unexposed segment. Now, the
table summarizing results would look as depicted in
Figure 12:
In this scenario, the exposed segment creates only
21.70 million in Brand Value as opposed to 29.40
million in the scenario where sponsorship takes place.
It is thus possible to conclude that that the sponsorship
investment created value of 38.70 million less 31.00
million equals to 7.70 million.
To generalize, if the higher level of Brand Contribu-
tion in the exposed segment is reset to the level of Brand
Contribution observed in the unexposed segment, then
the total Brand Value created by the sponsorship pro-
gramme can be derived.
This methodology as illustrated in Figure 13 enables
the impact of a sponsorship, beyond the immediate
sales uplift impact, to be captured, as it quanties the
incremental Brand Value created by involvement with
the sponsored event as communicated through optimal
sponsorship activation. Finally, by relating the result-
ing Brand Value uplift with the cost of the programme
it is possible to calculate the return arising from the
sponsorship investment.
Finally, Appendix B of the paper provides two de-
tailed case studies (2008 Beijing Olympics and UEFA
Cup) to illustrate both the process and the working
through of the model.
SUMMARY
Widely used approaches to sponsorship evaluation tend
to focus on various stages of the consumer/brand inter-
action, rather than determining the nancial benets
of that interaction as inuenced by sponsorship. This
paper sought to outline the application of the MBO ap-
proach to assessing the nancial impact of sponsorship
investment. The underlying principles, which inform
the MBO approachprinciples relating to marketing
evaluation and principles relating to sponsorship eval-
uation were explored by way of background.
Relying on a number of proprietary tools, the ve
key steps of the model were examined to indicate both
the thinking and process underpinning the model. Case
instances outlining the application of the MBO model
are indicated in the main paper and two unidentied
case study examples from practice are contained in the
appendices. To illustrate howthe approach is helpful in
determining the ROI from sponsorship and its capacity
and thus improved decision making.
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Appendix A
DEFINING THE BRAND CONCEPTS
In discussing the concept of brand, the impact of spon-
sorship and the resultant economic value and how they
relate to each other, a clarication of brand-related ter-
minology is useful.
Brand: A set of associations in the mind of con-
sumer, linked to a name, mark, or symbol re-
lated to a product or service offering. This set of
associations has the capacity to predispose con-
sumers to choose a brand over others, buy more
of it, or pay more for it now and in the future.
Branded Business: The entire business trading un-
der the banner of the brand (e.g., Coca-Cola),
including the associated goodwill and all other
tangible and intangible assets employed by the
business.
Branded Earnings: The portion of corporate earn-
ings attributable to a particular brand within
a corporations portfolio of brands; the same as
the earnings of the Branded Business.
Branded Business Value: This is the sum of all the
branded earnings expected to be generated in
the future, discounted to a present-day value to
reect risk and time value of money, based on
current use of the brand.
Brand Contribution: A measure of brand effec-
tiveness in driving business earnings, derived
from Millward Brown Brand Z research and ex-
pressed as a percentage of branded earnings.
Brand Value: The nancial value created by brand
and brand alone, calculated as a multiple
of Brand Contribution and Branded Business
Value.
ROI Return on Investment is a performance
measure evaluating how efciently an invest-
ment performs by considering prots generated
by the investment in relation to invested capital:
Return on Investment = (gain from investment
- cost of investment) / cost of investment.
Appendix B
Two case studies based on real, but unidentied
client experiences with the MBO model, further ex-
plain the models capacity as assist sponsorship deci-
sion making.
Case Study 1
A sponsor of the 2008 Beijing Olympics wanted to as-
sess the ROI on its global sponsorship programme.
428 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar
Figure B1. Total sponsorship ROI by country.
Source: Millward Brown Optimor.
The analysis began by designing market research in
each of the countries where the sponsorship would be
activated. The research was conducted pre, during,
and post the activation campaign. Statistical analy-
sis of the research data was then undertaken to iden-
tify how exposure to the Olympic campaign impacted
purchase choice through changes in brand perceptions
as well as through direct effects (e.g., short-term on-
sites/promotional sales). These inputs were then linked
to a nancial model to provide a comprehensive view of
the value created by the sponsorship, a process outlined
in the main body of the paper.
The analysis provided a sponsorship ROI by coun-
try and identied opportunities for spend optimization
across countries where the sponsorship was activated.
See Figure B1 below. Similar analysis and subsequent
recommendations were used to design the sponsorship
activation programme for this sponsors investment in
the 2012 London Olympics.
Figure B3. Incremental brand value by source.
Source: Millward Brown Optimor.
Figure B4. Incremental brand value by country.
Source: Millward Brown Optimor.
Case Study 2
In this case a framework for linking the sponsorship
marketing efforts to brand and shareholder value was
built for a client selling to sponsor to sponsor UEFA
Figure B2. The framework linking sponsorship efforts to brand and shareholder value.
Source: Millward Brown Optimor.
ASSESSING THE FINANCIAL IMPACT OF SPONSORSHIP INVESTMENT 429
Psychology and Marketing DOI: 10.1002/mar
Cup. In this case 11 cuts (similar to the telecoms ex-
ample in Figure 8) were made by geography and three
audience segments: channel partners, end users, and
retailers. The relationships between these segments
were quantied and linked to create a valuation model
as indicated in Figure B2 below. This valuation model
incorporated factors such as new customer acquisi-
tion, increased sales volume, and enhanced customer
loyalty.
This approach to determining ROI is unique in iden-
tifying the true nancial returns for the business at a
Prot & Loss level. It goes beyond the provision of -
nancial numbers to identify where sponsorship creates
value and to improve sponsorship returns in the future.
Through linking sponsorship impact on brand mea-
sures, e.g., loyalty, purchase intent, to nancial out-
comes, the model was able to identify additional brand
value generated as a result of the sponsorship by source
of value creation (see Figure B3 below). The source
of the Brand Value could include attendance at the
event (UEFA cup attendance) where particular rev-
enues ows such as on-site sales occur. Figure B4 below
indicates the incremental brand value created in differ-
ent countries as a result of the sponsorship.
430 KOUROVSKAIA AND MEENAGHAN
Psychology and Marketing DOI: 10.1002/mar