The Impact Of Narrative Economics On Sponsorship Revenue

BY ADAM GROSSMAN

The number of students majoring in science, technology, engineering, and math (STEM) on college campuses throughout the U.S. has increased significantly since 2008. What is not surprising is that the primary casualty of this increase are the humanities majors that now are at their lowest levels in decades. What is surprising is that many economists are worried about the decline in humanities majors for reasons that directly impact the sponsorship industry.

Nobel Prize winning economists Robert Schiller addresses this issue directly in his new book Narrative Economics: How Stories Go Viral and Drive Major Economic Events in two primary ways when comes to economics. First, looking at non-traditional economic indicators frequently helps economists better determine what is happening in a market. Schiller states that a history class he took at the University of Michigan “was far more useful in understanding the period of economic and financial turmoil [of the Great Depression] than anything he learned in his economic courses.” Second, stories often drive markets because what people tell each other can have a profound implication on asset value. Schiller uses bitcoin as an example of value created more by narrative shared by cryptocurrency backers rather than underlying economic fundamentals.  

Schiller’s book builds on behavioral economics work we highlighted in previous posts and leveraging non-traditional sources for insights highlighted in David Epstein’s book Range: Why Generalists Triumph in a Specialized World. A natural question is why would company that focuses on data science, technology, engineering, and math like Block Six Analytics (B6A) want to highlight these types of ideas like economists calling for less STEM majors?  

The answer is that we understand that importance of narrative thinking in revenue generation and return of investment derived from sponsorship. More specifically, our team generates narrative insights for our clients within our Partnership Scoreboard by finding stories and patterns within data.

A good example of this thinking comes from the process in building our Corporate Asset Valuation Model (CAV) for our clients. In particular, the model provides company-specific results for each activation within a partnership. The question becomes what does company-specific mean?

The answer is complex and requires non-quantitative analysis because companies are often looking at more than maximizing revenue or profits when considering sponsorship ROI. For example, corporate partners often want to enhance brand sentiment, engagement, and awareness with their future customers even if that does not have immediate or direct impact company’s top or bottom lines right now. Leveraging sports narratives to create brand associations is a compelling to achieve this goal as my co-authors and I demonstrate in our book The Sports Strategist: Developing Leaders for a High-Performance Industry.  

Understanding these types of considerations are critical in answering a common question we receive from current and potential clients – what opportunities am I missing? From the company perspective, this means finding new properties to consider because they can help better achieve its specific revenue and brand goals. From the property perspective, this means finding new partners to consider by examining companies that will generate the siginifcant value by leveraging its partnership assets.

There is no doubt that data analysis and understanding a company’s business model help in answering this question. For example, our Audience Inference Platform (AIP) enables our clients to determine who makes up a company’s audience, what topics do they talk about, and how passionate are they about those topics by leveraging natural language processing (NLP) and algorithmic analysis within our Social Sentiment Analysis Platform (SAP).

However, looking for new partners means taking a non-traditional approach to valuation including fully understanding what buyers and sellers are looking for in partnerships beyond solely economic considerations. The conversations we have with our clients as part of our on-boarding process and the diverse background of our team are critical reasons we generate non-traditional insights that most effectively answer the what opportunities am I missing question.   

This is also why we highlight the research on topics such as narrative and behavioral economics as a data-driven company. There is a plethora of evidence that shows why having a diversity of thought and taking non-traditional approaches to analyzing data frequently leads to the best insights. That is the most important reason we created tools and develop strategies that combine narrative understanding with data-analysis to best deliver value to our clients.