This is a guest post from Rasmus Bech Hansen – CEO and Co-founder of Airfinity, a UK based technology firm seeking to make event sponsorship as easy, precise and accountable as digital advertising.

A simple set of principles on how to price your sponsorship correctly

All events, from the biggest live broadcast sports matches to the tiniest local gathering have one thing in common: They all have value from a sponsor perspective. If you have an event with an audience it has value. The question, of course, is how much?

This is not a simple question to answer. Pricing in the world of event sponsorship is famously opaque and is not an area that commands lots of serious research and development. Simply speaking, I have observed that events apply 1 of 2 pricing tactics:

What you can get away with.

Many events don’t publish their sponsor packages but leave the pricing for a 1-1 negotiation and pitches. I have talked to high flying sponsor agents representing some of the top sports properties, e.g. Premier League teams, who told me that they had charged one company 4 times more than the other company – for the exact same sponsor package! This is an extreme example, but it’s not uncommon for events that apply this tactic to price the same thing differently depending on who asks.

Cost based pricing.

On the other end of the spectrum, some events simply price their sponsorship based on the cost of hosting. This is generally more the food and drinks and in-kind sponsorship, but can also be found even with the biggest event organisers.

Neither of these tactics is a good way of pricing, and events apply them to their detriment. The first approach, “what you can get away with” risks over-pricing which might sound like a good thing, but is short-sighted. If a company pays too much, they won’t do it again. Also, secret and differentiated pricings undermine trust in the event. But even if it’s not the case, the idea of keeping pricing secret can result in the sponsor wondering whether they have paid too much which doesn’t start the relationship off on the right foot.

The problem with the second tactic, cost-based, is that it risks leaving money on the table. The events under-price themselves, which is a very real problem for small and midsized events. In a study of the small and midsized tech events in London, we found that under-pricing and lack of sponsorships left up to £20 million a year on the table for the these. A significant number.

Enter: Value-based pricing

So, for the event sponsorship market, there is a need for a different way of pricing. The obvious one is the 101 from economic theory, value-based pricing. The event should price based on what the event is worth to the sponsor.

This is easier said than done. But to do this, the event industry can learn from digital advertising. The world of advertising was transformed partly by a pricing system that was linked up to a price per either individual views (or in advertising lingo, CPM = 1000 views) or actions (CTAs). Whatever the metric the idea is that a simple, standardised metric allows the advertiser to compare and assess the value of various media properties. This has allowed for a much more efficient market where prices are set by auctions.

A simple framework

What would a similar metric for the event industry look like? Based on analysis and conversations with a number of organisers and sponsors, from professional events in the technology industry, we at Airfinity have developed a simple metric that can help an organiser price on a more value-based way:

Price calculator per sponsorship per event

As the metric shows, there are two main drivers of value. One is the size of the event. A sponsor obviously wants to reach as many as possible. The second is the quality of the event. There are a number of factors that go into quality and ultimately it is a subjective term, but things like how well known the speakers are, the quality of the location, pricing of the event and career seniority of attendees go into this.

So, a big high-quality event would be worth more than £2,500 for an individual sponsor where-as a smaller gathering can fetch a few hundred in sponsorship.

Bigger not better

One of the interesting things about event pricing is that bigger doesn’t always mean better. It could be argued that every single runner at a small marathon is as valuable to Nike as every single runner at the London Marathon – despite the London Marathon being one of the biggest event sponsorship tickets in the UK, with Virgin Media paying £17 million for the 5-year official sponsor rights. In the same way, a small event for smart software engineers is as valuable per attendee as say, “Web Summit”, one of the largest technology events in the world.

One could even argue that a small event is worth more for a sponsor on a per attendee level because it allows for more direct exposure and interaction with the attendees.

So, if you are an event and want to increase the value of your sponsorship, it’s not always smart to grow. You could consider focusing more on having a very well-defined audience, quality in all aspects of your event and drive up the value this way.

The actual prices will change over time and depend on the industry. But the key point is that all events have value. Getting the pricing right is a key part of capturing that value.