Marketers considering a sponsorship deal need to assess a wide range of factors, including their own brand’s equity and the amount of competing clutter, to help determine the right price, an article in the Journal of Advertising Research (JAR) has suggested.

The study, which used Formula 1 racing as the basis for its analysis, was written by Jonathan A. Jensen (University of North Carolina at Chapel Hill), Joe B. Cobbs (Northern Kentucky University), Benjamin Albano (University of North Carolina at Chapel Hill) and B. David Tyler (University of Massachusetts Amherst).

And they found that “the brand equity of the sponsoring company and shared nationality with the sponsored team are more salient to pricing in F1” than various other factors they assessed.

“Marketing managers at companies high in brand equity consequently should scrutinize sponsorship prices in particular, especially in cases of shared nationality,” they recommended in a paper entitled, "Analyzing price premiums in international sponsorship exchange: What drives marketing costs in Formula One racing?"

In reaching this conclusion, the authors built a mathematical equation that incorporated numerous factors that shape the pricing of sponsorship deals.

For the sponsoring company, these considerations spanned the level of brand equity, company size and industry, and if it was a business-to-business enterprise.

Turning to the sponsored entity, team and driver performance were analyzed, as were the amount of other team sponsors, as this was an indicator of potential clutter.

Some broader factors were the “congruence” between the two organisations, the home base for the sponsoring brand and the nationality of an F1 team, and economic growth rates in these countries.

The level of sponsorship acquired by a brand, and the type of resources they provided in exchange (for instance, performance-based incentives, industrial support on monetary support) were also included.

While nationality and brand equity may inflate prices, the study suggested that functional- or image-based congruence with the sponsored team, as well as uncluttered environments, represent prospective opportunities.

For teams being sponsored, performance levels undoubtedly play a role in pricing. But the research revealed that other factors, such as the level of sponsorship on offer, can be influential.

In particular, “ownership and title-sponsorship levels commanding premiums of six times and three times the prices paid for official category status in this study, respectively,” the authors wrote.

“Likewise, to maximize sponsorship revenue, it now seems prudent for sponsored entities to target sponsors in the same country, because shared nationality resulted in a price premium of more than $4 million on a per-sponsor basis in this study.”

Sourced from Journal of Advertising Research; additional content by WARC staff