Five Keys To Maximizing the Value and Reducing the Risk of Branded Partnerships
Branded partnerships are when two or more companies come together to market or create a joint program, promotion, product or service offering. For example, Citi AAdvantage cards that give you American Airline miles when you spend money incentivizes both companies. These partnerships often combine or draw upon the brand equity, customer preference, customer access, and channels for reaching, engaging and activating customers of two or more partners to create a whole that greater than the sum of the parts.
A profitable branded partnership is a strategic alliance that contributes to the financial performance of both companies by improving the financial value of brands and creating measurable sales outcomes. This requires businesses to share risk, audiences, brands, and reputations. To minimize the risks with partnering, companies should make sure they are using financially valid business criteria for evaluating, valuing, and prioritizing and managing the outcomes of brand partnerships.
In a profitable partnership, one plus one can equal three or more when two brands partner in a measurable, strategic and effective ways.
The problem for CMOs is that Branded Partnerships are valuable but tricky to manage and measure. CMOs have historically argued that brand partnerships are complex investments that require a combination of art and science. So they fail to quantify and communicate how these investments create financial value beyond their equivalent media value in terms of growing brand equity, improving customer loyalty, and reducing customer acquisition costs, improving cultural relevancy. Another ultimate problem is CEOs and Chief Financial Officers complain the marketing industry lacks agreed upon measurements and financial standards for evaluating the ROI of branded partnerships, co-branded offerings, and sponsorships set by FASB, ISO or the marketing industry. One that compares working together vs. going it alone on a financially valid and apples-to-apples basis.
Until these problems are solved, marketers and their CFOs will struggle to optimally allocate growth resources to these potentially powerful programs relative to competing investments in advertising, product innovation, marketing, and sales.
Five Keys To Maximizing the Value and Reducing the Risk of Branded Partnerships
To effectively assess, value and prioritize the best branded partnerships, Marketers need to apply consistent, comparable, and financially valid standards for measuring their value.
Applying greater financial scrutiny to strategic marketing investments is a good thing for marketers. There is near consensus across the marketing industry that improved financial accountability will protect, unlock and grow the value realized from these long-term investments and growth assets for all participants – including the media, brand and non-media value brands create. They just need apply common financial standards that communicate, quantify and grow that value so they can compare brand partnerships to other marketing programs on an apples-to-apples basis.
Unfortunately, with current budget setting processes, financial reporting standards and measurement practices – less than a third of brands are able to measure their financial return on these strategic objectives according to the MASB research.
According to research by the Marketing Accountability Standards Board (MASB), potential partnership should:
- Factor in the media equivalency of owned channels their partners can provide. These can range from on product, storefronts, equipment, offices, and vehicles, to uniforms, packaging materials and cups.
- Inventory in the strategic, amplification and creative aspects of a sponsorship audience can deliver relative to a traditional media buy;
- Place a financial value on non-media factors like brand value, relationship equity, acquisition economics and partner, distributor and employee engagement that create most of the financial value because they are too hard to measure;
- Value partnerships as assets instead of expenses because the access, channels, rights, media, and talent assets that have real financial value and will generate returns over years, not weeks.
Specifically, MASB advises CMOs and their brand, partner, and strategy teams to evaluate brand partnerships across five dimensions:
1. Brand Impact – Branded partnership can strengthen preference for brands, build awareness for new brands, and relevance to established brands. A financially valid formula for valuing the financial contribution of brand to a business has been well established by the International Standards Organization ISO and MASB. Yet only 57% of brands are measuring the financial impact on the sponsorship on brand strength, value and awareness.
2. Activation Economics – Most brands rely on the financial impact of customer activation promotions and acquisition economics to justify their partnership and sponsorship investments. But less than a third (28%) are actively measuring the results.
3. Customer Loyalty – Many brands rely on the relationship equity with distributors, partners and customers and loyalty with consumers as a major component of brand partnerships. Unfortunately, only 55% of brands report they are actively measuring the financial impact of customer premiums, loyalty and retention.
4. Owned and Paid Media Equivalency – Brands value the partnerships for the incremental visibility and reach they deliver to an attractive target audience. And properly structured and managed, branded partnerships can offer unique value relative to straight media buying when brands leverage the unique benefits of “live eyeballs”, preferred inventory, and media amplification in social media and drive to web activations. Even with all this focus on the exposure value of sponsorship, less than two thirds (57%) of brands are actively measuring the total media exposure financial return in their sponsorship ROI calculations.
5. Partner Asset Valuation – Marketers need to find a better way to price and value the commercial channel and engagement assets each contributes to the partnership. The market is illiquid. Value is subjective. And there are no accounting standards or benchmarks or valuation models that brands can use to determine the fair financial value of a team, stadium or athlete. 96% of brands want to compare sponsorship investment performance to other marketing programs on an apples-to-apples basis.
This inability to connect upstream activations and experiences to downstream sales attribution and brand value causes marketers to shy away from doing creative partnerships that create real value like extending the consideration set in new ways and offering highly differentiated customer experiences.
To help the marketing industry work with financial stakeholders to arrive at a common financial framework for evaluating, prioritizing and measuring the performance of brand partnerships and sponsorship programs, the faculty of the Revenue Enablement Institute has been working with the Marketing Accountability Standards Board (MASB) to build a consensus on how to best communicate, quantify, and measure the financial contribution of brand, partnership and sponsorship strategies and investments to the entire organization – from the board to customer facing employees. To do this we have developed the Marketing Value Chain – a financially valid method to prove align these investments and assets with a growth strategy that will grow firm profits. This robust and academically validated model calculates the causal relationship between marketing investments and actions and firm value and financial performance. This has made it much simpler for marketers to develop research, KPIs and measures to track the key changes in customer behavior, price sensitivity and retention that underlie the value a branded partnership can create.
This level of financial rigor sets the stage for creating externally validated metrics, benchmarks, and best practices for measuring the financial impact of brand partnership and sponsorship investments.
A SCORECARD FOR EVALUATING THE FINANCIAL CONTRIBUTION OF BRANDED PARTNERSHIPS
In addition, these financially valid standards and metrics to help marketers develop a financial vocabulary to help them translate the unique assets of sponsorships into measurable business outcomes impair sponsorship returns. This will solve three big problems that stand in the way of unlocking the full potential of creative branded partnerships:
- Underutilized assets. The unique assets – culturally relevant content, intellectual property, digital innovation, and social amplification remain largely untapped. For example, most marketers don’t understand how to value and measure content as an asset – or how to fully monetize it in the social, digital, and mobile channels they are so desperate to develop.
- Under-developed channels. Not enough effort is being made to quantify and leverage social highlights, digital amplification, and network effects that are far more aligned with the way consumer consume content and engage with brands.
- Lack of innovation. Without better marketing accountability brands and the owners of sponsorship prosperities cannot adapt the way they design, value, and measure these programs to reflect the changing media landscape and leverage new technologies to maximize the value of their sponsorship program assets and investments.
To learn more about this marketing accountability research, standards, and best practices – and how it applies to sponsorship programs by contacting our faculty at the Revenue Enablement Institute.