One of the first things you learn about baseball when you step into the front office is that it is a sport rooted in trade. From players and office staff exchanges in the bigs to sponsorship agreements in the minor leagues, the business model of baseball is saturated with trade agreements.
Every year teams spend hundreds, if not thousands, on items they could be getting in trade – office supplies, team equipment, transportation and clubhouse food are just the tip of the iceberg. Gas for company vehicles, internet services, uniforms and machines to enhance practice time are some additional opportunities often left on the table.
What we’ll be discussing in this session should be “for office use”. In other words, here’s where we leave the fans behind. The items we get in trade for the fans we’ll call promotional items and those will be covered in another training session.
Today we’re looking at types of trading and some examples of each. This should provide brainstorming materials moving into the off-season. Throughout the fall we’ll follow this up with more advanced sessions on securing sponsors, and we'll include some front office drills.
Let’s start off with some terminology as it relates to sports.
A sponsorship is a mutually beneficial relationship between your club and a potential financial provider such as a business.
A sponsor is a person, firm or organization that pays for all or part of the cost of putting on your sporting event.
To sponsor something is to support an event, activity, person or organization financially or through the provision of products or services.
A supporting company gets one or more benefits for their support. The potential for brand awareness, improved reputation from community involvement, networking opportunities and additional sales are just a few ways a sponsorship can benefit from the supporting brand.
Trading is an exchange of items, usually without payment of money. It is also defined as an exchange of commodities for other commodities or money.
There are many types of trade opportunities available but here are the ones you will most often run into as an organization: Trade Down, Trade Up or Trade Off. Each will be discussed with examples to follow. We’ll start with the easiest to understand and implement, the trade down.
A Trade Down – To exchange a more valuable or desirable item for a less valuable or desirable one.
Why would a company participate in a trade down?
A classic trade down, one you might already have implemented, involves print materials. This should be one of the first trades any team attempts if they do not already have an agreement in place.
From business cards to programs, every club needs year-round printing. Most businesses won’t print entirely for free but with the right deal, in terms of community exposure or reaching their target demographic, they will be open to a partial trade agreement which will significantly cut your budgetary needs.
Let’s look at an example of a team using trade down to their advantage. Suppose you host night games and, in the evenings, the temperature can drop significantly. If your team store had sweatshirts available, they would sell well. However, sweatshirts are a high-cost, low profit item. Additionally, people will not pay as high a value for a screen-printed high-ticket item as they might one with embroidery, but that further increases your costs.
A simple way to overcome that cost is to find an embroidery company in your local area. Offer them advertisement in exchange for part of the cost of their work. The set up fees alone on either a silkscreen or embroidery are the largest expense in merchandising so getting this “covered” in the advertising trade, and ensuring that the team retains the materials necessary to use the set up with other vendors, is crucial. This is the value to the team.
For the sponsor, they get some cash and some advertising expose to a market they may not have otherwise tapped into because it would be cost/benefit prohibitive for them.
The most common trade for a team is the trade up.
A Trade Up is the exchange of a less valuable or desirable item for one with more value.
Let’s say one of your biggest expenses each year is travel costs. Your annual budgetary need to cover this expense is 1€. Your outdoor fence signs cost a sponsor 10€/season. If you were to offer a company the outdoor sign in exchange for that transportation cost, and require that they pay for the printing of the banner as well, now you’ve saved two costs for the team and the “value” you’ve given up is a perceived amount – a number your organization charges for the benefit.
When making trades it is often difficult for you to see the value of what you offer because it is, to an extent, arbitrary. After all your organization could just as easily have said fence signs cost 5€/year right? When trade enters the picture it is always important to remain locked on your original number. Give it the value you’ve assigned and make sure what you ask for in trade retails at that cost. Basing the negotiations on retail pricing builds in a benefit to the sponsor because their overhead is not affected by the trade.
Using our numbers above, let’s say, as an example, you ask your regional train service for 5€/year in tickets to use for player transportation costs. You have now increased your overall transportation budget without spending a penny. Assuming their printing costs are less than 5€, you have also given value to the train company by charging them less than your retail for the advertising space.
Even if they “break even” however, giving you 5€ in tickets and spending 5€ on the sign, they will still come out ahead. That is because you have exchanged their retail value on the tickets and all retail value has the profit margin built in.
This means they will have received from you a sign that retails at 10€ but only cost them, somewhere around 7€ in actual out of pocket expense. That is a value-add for them. By trading it also saves them a line item in their overhead – advertising costs. If their advertising budget for community outreach each year is 100€, and by trading they can save 3€ on 10 trades, that saves them enough to afford upwards of three more advertising campaigns or allows them to report an overall budget savings on advertising for the year and put that money back into the company in another way. If your club is operating as a non-profit, then you’ve just provided them a tax break as well so that’s another benefit to sell the sponsor.
A stadium sign, for you, has no overhead costs. It simply exists as open space for sale. It’s prime real estate. The same goes for advertisements in your program. Treat them as such and the sponsors will as well. These are the two best places to make trade up agreements because the product is 100% in-house, created by a team. Once you get into broadcast rights and other sponsorship opportunities, there is generally overhead or a third party to consider beyond a built-in expense.
A Trade Off is an even exchange of one thing for another. This is the utopic reach for an organization. Naturally you want to provide your sponsors with fair market value for the items that you will receive in the exchange. Most often however, that market value, when you talk in trade, is diminished by context of removing the money.
This is why, when talking trades, the language must always remain centered around the benefit to the sponsoring organization while diminishing, in their eyes, the financial benefit the club receives. The best way to do this is by over-emphasizing any non-monetary benefits the club gets from the sponsor. For example, if a company wants big exposure for their buck, offer a tarp sponsorship.
Tarps are crazy expensive. Every team could use one but many will never be able to budget it in. For the amount of times it’s used in a season, there are much higher priorities in spite of the loss of practice and field prep time as well as revenue from rainouts or delays. Rather than emphasizing how much value a tarp offers the team, talk about the value-add to the fans for the company’s support.
By buying a tarp and providing it to the team, their company can brand it with their logo. Any time the tarp is pulled out their brand is exposed to the fans at a time when their full attention is on the field. The fans will see the value the tarp provides, realizing it offers an opportunity to extend play, and the value to the fan will be subconsciously realized over time. ‘When ABC Company’s tarp goes on the field, I know I can stick around through a small rain cloud because the game will go on.’ It’s a perception-based value you’re selling.
What’s up for trade? The reality is the sky is the limit. The only boundaries are your imagination, and negotiating skills, so start brainstorming your 2017 budget away!