the typical reasons for discounting sponsorship fees
I spoke with a very good organization the other day who wrote out the reasons for themselves. After listening to these typical reasons, I will answer each one:
- Is it okay to do this because otherwise our people will be sitting around with nothing to do, and so some money is better than what we should really get paid?
- Will this one instance pay off in the long run because it will open all sorts of doors through which good-paying sponsors will march?
- Can we trade this for something else besides opportunity, like invaluable publicity or direct referrals?
why the reasoning is flawed
So let’s look at these in order. Taking this lesser-paying work makes sense because:
- It keeps people busy. I’d say that the best use of their time could be to work on your own marketing. There should always be a list of content to write, illustrations to build, features to incorporate, product/service offerings to research, and ABM initiatives that will have a more direct benefit to your firm.
- It will open doors. I think there’s some value in this argument THE FIRST TIME YOU MAKE IT. But after that, it starts sounding like Groundhog Day reruns. I find that the principals who base decisions on this frequently don’t know when there’s enough proof to now move to a fully paid model because the expertise is evident. Discounting your work can act like a drug of choice, justifying the continuing behavior under the guise of “this is great for our org's future.” In that world, the future seldom even shows up.
- It’s about more than money. Well, not really. The longer the period of time, the more measurable other things should be. You should be able to quantify the value of repeat business, for example. This comes up a lot when I do valuations, during which a principal will try to explain all the goodwill not captured on the financial statements. What I want to say is this: “Okay, how many more years will you need to start seeing the financial results? And if you have not been able to drop that goodwill to the bottom line, how would you suggest a new buyer will be able to do that?” I’m being a little flippant because I do think there are valid reasons–besides money–do discount your fees, but let’s at least be honest among ourselves about what’s really happening.
There are reasons to lower your fees. Most of them are nonsense, and few justify it more than once or twice.