|
Selling
More Agencies, More Clients As Economy Spurs Interest In Rep Firms
More agencies are in the representation game, but they are still selective in choosing property clients.
2/22/10: A period characterized by fewer dollars and fewer deals in sponsorship has turned out to be a mixed bag for agencies who sell sponsorship on behalf of property clients.
While commission checks may have been harder to come by in the last year or two, there has been more business knocking on the door in the form of new clientele seeking their expertise and sales muscle.
For example, Creative Strategies Group picked up several new clients in the past year, including Denver's National Western Stock Show. It also is negotiating with the Denver Sports Commission to represent the Rocky Mountain Showdown football game between the University of Colorado at Boulder and Colorado State University at Invesco Field at Mile High.
"The economy has pushed a lot of organizations to turn to people who sell sponsorship for a living, because it's a hard thing to do," said Bruce Erley, CSG president.
However, in addition to prompting more rightsholders to seek outside sales assistance, the economy also has pushed a number of agencies to expand their business offerings to include sales—upping the competition for existing rep firms.
Sponsorship consultancy Engage Marketing launched a property representation division in January '09 to expand its services amid the sluggish economy.
"As a small business owner, I saw a need to diversify our revenue stream at a period of time when there was not as much consulting and activation activity," said Engage president Kevin Adler.
Attributes Of An Attractive Property
Sales agencies consider a number of factors when deciding whether or not to represent a rightsholder, including audience, salable sponsorship inventory and the event's prestige.
The bottom line: Is it a property the agency believes it can sell?
"Will corporate America want to partner with this property? What is unique about it, and can the property become a marketing solution for a company?" are among the questions typically asked, said Michael Neuman, president of Amplify Sports and Entertainment.
Most agencies also look for alignment with their specialties, such as sports, entertainment, festivals, etc. Those firms with a geographic focus also take the property's location and reach into account.
"Properties need to make sure they are working with an agency with the best fit. A festival should find an agency with festival experience," Adler said.
When vetting potential partners, agencies often look for clients with sponsorship growth opportunities.
For example, former NASCAR marketer Brian Corcoran, who recently founded Shamrock Sports Group, said he seeks to align with established properties with underdeveloped sponsorship sales programs, pointing to the Professional Bull Riders as an example and NASCAR as a more mature property with fewer sales opportunities.
Agencies also look for properties that fill a void in their portfolios and that will not conflict with other clients.
"We need to be selective in who we work with and make sure there is no overlap. We don't want to do a client a disservice by not making the appropriate calls," said Chris Foy, president of General Sports Alliances, which has a client roster ranging from a single-market music festival to a Formula 1 motorsports team.
One quick turnoff for agencies: Properties looking to raise money quickly.
"A lot of people call us saying 'we need money.' I'm not interested in working with an event that is in crisis mode," said Rick Kern, managing partner with MixIt Marketing.
How Payment Structures Work
While some agencies will work on commission only, the vast majority look for a retainer plus commission.
The average commission is between 15 percent and 20 percent. That number can drop down to 10 percent or below or go as high as 35 percent based on the size of the deal, the prestige of the property, the time it takes to secure a deal, and other factors.
Retainers and other fees also range widely. Generally speaking, an agency hired strictly to sell may seek less than $1,000 a month from a small property, while projects that include asset inventory, packaging and sales can demand higher fees.
"The retainer depends on the size and scope of the project, and how many resources the property wants us to put against its business," Adler said. "If they want a dedicated 40-hour-plus work week, they need to pay for that."
Some agencies will be flexible in re-working their standard deal structures for properties that show promise. For example, Adler has considered lowering monthly retainer fees in exchange for a higher commission.
"There are occasions that I will make a strategic decision to show some flexibility on the retainer. But if a property reduces their risk, they will have to increase my upside on the back-end."
Generally speaking, agencies typically receive the same commission on in-kind deals as cash deals.
In addition to payment for new deals, properties and their agencies must also come to terms on compensation for renewals of deals that pre-dated the agency, future renewals of agency-led deals and in-kind sponsorships.
Typically, an agency that renews a sponsor originally signed by the property will receive its standard commission only on the amount of any increase.
For renewals of deals the agency secures, some firms reduce their commission rate, while others don't.
Best Practices For Working With Sponsorship Sales Agencies
Below, tips on landing and working with a sponsorship sales agency:
Grant exclusivity. Most agencies will not take on a client without exclusive representation rights. Those rights can span across all categories or be limited to a few agreed-upon industries.
"If you get too many agencies in the mix, it can confuse buyers and prospects," Corcoran said. "In a perfect alliance, the agency has an exclusive situation where they become a complimentary sales force that enables the property to maximize yields and profits."
Have reasonable goals. Properties should not be surprised if it takes eight months to a year for an agency to secure their first deal.
"If you're looking for sponsorship for 2010, you're already too late; you should be looking at '11 if something isn't already in the pipeline," said Cary Chevat, president of Sponsorship Resources.
Know your worth. In addition to the time it takes to secure a deal, properties also should be realistic when it comes to their value.
"Most properties have unrealistic expectations," Chevat said. "A property will tell me they need $1 million because that's how much the event will cost to produce. I ask them if they have $1 million of value, and I get a blank stare."
Chevat recommends that rightsholders look at similar types of properties to gain a feel for revenue potential.
Some agencies require properties to have an outside valuation before bringing them on as a client. For example, Proxy Partners requires all new clients to be independently valued, either by the agency or a third party.
"People sometimes think their property is worth $10 million, and they're actually worth $100,000," said John Greenwood, Proxy president and CEO.
Maintain constant communication. Properties should try to treat agencies as they would their own sales departments. That includes keeping lines of communication open and ensuring the agency is up to speed on any new programming, operational issues or advertising and marketing initiatives.
"We need to understand the DNA of what a property is all about; we want to talk all the time, not just check in once every two weeks," said Josh Kritlzer, president of Property Consulting Group, which represents The Baseball Hall of Fame, Beyer Racing's Grand Am Rolex Sports Car Series team and other properties.
Communication is a two-way street and properties should require their agency partners keep them informed of sales efforts, contacts and overall progress.
General Sports Alliances provides clients with biweekly status reports that include outgoing calls, proposal updates and status reports on negotiations, Foy said.
Provide support. Where possible, properties should participate in sales calls and provide other support to their agencies.
"We need to have a seamless relationship, and we want our clients to be part of the sales process all the way through," Foy said. "If we are doing a major sales presentation, we want them to be in the room with us. If we are creating a proposal, we want their thoughts. They know their property as much as we do."
Sources
Amplify Sports and Entertainment, Tel: 212/812-8966
Creative Strategies Group, Tel: 303/469-7500
Engage Marketing, Tel: 312/981-3800
General Sports Alliances, Tel: 303/713-8597
MixIt Marketing, Tel: 404/243-5051
Property Consulting Group, Tel: 312/948-0255
Proxy Partners, Tel: 303/293-3020
Shamrock Sports Group, Tel: 207/400-1678
Sponsorship Resources, Tel: 973/746-1925
IEG Sponsorship Report, Part 1
IEG Sponsorship Report, Part 2
|
