Anheuser-Busch InBev this month launched a new pay-for-performance sponsorship model that will have a significant impact on every property in the beverage giant’s extensive sports and entertainment portfolio.

Nick Kelly, A-B InBev head of U.S. sports marketing, explained the thinking behind the strategy in his presentation “Sponsorship Evaluation and Building a Sustainable Strategy” at IEG 2018.

Below are edited excerpts from the presentation.

My job is to lead consumer connections. Consumer connections include three pillars: traditional media, sponsorship and events. We try not to silo them—they should all touch across the board. Every sponsorship tries to cram in media, and every event tries to cram in sponsorship; we look at them all the same now.

A lot of the success we’ve had over the last 18 months has been outside those pillars. The successes we like include earned media, are attention-driven, and things that disrupt the traditional sponsorship/media/event model.

We want to provide experiences only we can provide. But that comes with a change in philosophy: Everyone knows Budweiser and Bud Light. You know the brands, what they stand for and what they look like. We don’t have a lot of experiences built into our deals with teams and leagues. We have a lot of billboards, signage and tickets. But I don’t need awareness. I need experiences.

I want my experiences to be in sports because they drive the most meaningful experiences. Beer is synonymous with sports, family, friends and hanging out. Football, baseball, hockey, doesn’t matter. We want our experiences to be sports led.

We sponsor a lot of properties. Eighty pro teams, 50 or 60 college sports teams, golf tournaments, races, you name it. This is important to us. We sell beer at events. We have a consumer network and a wholesaler network that expects us to be there. There is a ton of value to be as at many places as we can be. But we can’t be everywhere. There is only so much budget.

We’ve evolved over the past few years in terms of what our partnerships look like. We don’t need signage and awareness, and we don’t want to compete with every other brand.

What we have been able to do is focus on engagement. Creating activations no one else can create. Bringing something authentic to a moment where it makes sense to tell our message.

How Do We Keep Up And Get Ahead At The Same Time?

Five Key Marketing Challenges For A-B InBev:

  • Reaching cord-cutting and cord-never Millennials
  • Increased competition from craft beer
  • New consumer passion points (esports, etc.)
  • Declining attendance at sports events
  • Sluggish in-venue beer sales

Experiences over things, media fragmentation, more passion points and declining sales are some of our primary challenges.

We couldn’t keep up at the pace that we were going. We started looking at this 18 months ago, and we created our first ROI model.

ANHEUSER-BUSCH PROPERTY ROI MODEL—VERSION 1.0
ANHEUSER-BUSCH PROPERTY ROI MODEL VERSION 1.0

The model includes five buckets that drive ROI for us.

Packaging. Intellectual property rights matter. We want to leverage our association with a team with a fans’ number-one passion point. If I put the New England Patriots on a Bud Light can, hopefully a Coors Light drinker will come over to the brand.

Trade. Will I get better display because I have a great partnership? The Wal-marts and Kroger’s of the world want to see an amazing display for MLB Opening Day or the World Cup.

On a normal Tuesday Bud Light isn’t getting that. It’s usually the local craft guy, or currently its Corona. Those are the types of brands getting display. We need something that separates us and drives true ROI.

Paid Media. There is inherent value with paid media. It’s built into a deal because we want a team or league be an official partner. But the reality is, when a property signs a deal with a radio or broadcast partner, their partners are going to fill the gap.

We have started to work media out of our deals. It’s not that we don’t want it. The last thing we want is to leave a window of opportunity for a competitor to come in and position themselves as a sponsor of a team that we value so much.

The difference is, we buy national scale. If a property is selling me local radio, I can buy it nationwide 30 percent to 40 percent cheaper. It’s not that we don’t want the media; we just don’t want it tied in.

In-Stadium. How much beer am I selling at your event? Properties can’t impact that. I can’t impact that. It is what it is. But it’s the easiest ROI.

Experiential. Experiential is big with us. This has been the bane of my existence since I started. Everyone wants to do experiential. Everyone wants to do big ideas and big events.

The biggest issue is that teams aren’t properly staffed to activate the types of experiential programs big brands want. Teams are typically spread so thin with game day activities.

If you can take that hard cost out of my pocket and include it in the partnership, that has huge value in us getting the most out of the deal.

ANHEUSER-BUSCH PROPERTY ROI MODEL—VERSION 2.0
ANHEUSER-BUSCH PROPERTY ROI MODEL VERSION 2.0

After the first time around we got feedback from properties. And we have evolved. We have evolved to get more value and take certain things into account.

Packaging and the trade. Packaging is the same, but we now know that it needs to have the right display. We have the right tools in place, and we can see if we’re getting a sales lift.

Paid Media. We have taken a lot of value out of paid media. If you’re forcing me to buy media for $1 million, and I can buy it for $600,000, my ROI is taking a $400,000 hit. I would probably buy it for $600,000, but you’re making me pay the million bucks.

In-Stadium. Our focus on experiences remains the same. Properties need to understand if you hire two people to activate on behalf of Anheuser-Busch, it may cost $200,000 all in. If I know the value is $500,000 and we can meet in the middle, a property can pocket the difference.

We’re not the first brand going in this direction. But our goal is to push the industry to do more of these types of activations.

Tickets and Hospitality. Tickets and hospitality weren’t in the first ROI model.

The internal debate with tickets and hospitality is that if I don’t have a relationship with a particular property, I can still buy tickets.

But there is a value that has nothing to do with what the tickets are worth. It’s all about who you bring, and the value of the relationship on the back end.

A Commitment To Results
There is nothing that will make properties do what we want them to do without some sort of incentive.

We have built an incentive based model that motivates properties to help us get greater return. We hope properties hit their incentives. If they hit their incentives, I’m getting more value.

We would never increase the quarter billion dollars we spend annually without more ROI. I can’t drive anyone to do it without them having an incentive to do so. Its mandatory for every team we do a deal with moving forward so that we can grow the partnership.

If a team makes the World Series, they will be rewarded immediately. They probably sold more beer, and we can take their packaging to retail for a longer period with more accounts. I want them to be rewarded right now. I don’t want them to wait until the renewal two years from now. If I’m getting a positive impact, we’re more than happy to reward you.

This is not a cost cutting effort. We want to make sure that we can reward properties who perform. There is no penalty for those who don’t. We have set a baseline of what we know our ROI will be for now, but should you overachieve, you will be rewarded.

Properties have been asking sponsors to bet on them. Now we’re asking them to do the same.