Motorsports Sponsorship

Over the last few years, many new companies have come to the forefront as motorsports sponsors. Companies that never considered motorsports marketing as a viable medium are using it today to get their message across. UPS, Viagra, the U.S. Military and a host of other companies have learned that motorsports sponsorship can put them on the map.

Buddy Lazier, the winner of the 1996 Indianapolis 500 Mile race, was sponsored by Delta Faucet, an Indiana based company. Delta Faucet received the equivalent of millions of dollars of international exposure before, during and after the race. For years to come, this company will be known as an Indy 500 winner and will bask in the glory of being the best.

How To Get Racing Sponsorship

Since then, the Indy Racing League, the sanctioning body that runs the Indy 500, has made great strides in becoming one of the most exciting and innovative racing venues in the world. Fans have noticed the breath-taking wheel-to-wheel competition and are flocking to the track. Sponsors have noticed the large number of fans and want to draw more impressions and customers by supporting the teams. A synergy has developed as the best race drivers in the world have joined the IRL fray, adding to the exciting competition and the IRL's worldwide reputation.

No matter what the venue, racing is fun, exciting and it often takes place on beautiful sunny days. The danger, drama, outdoors environment, added to the roar of engines, smell of hot dogs, burning fuel and screeching tires make motorsports an All-American pastime with a huge audience. Add a few marching bands, movie stars and 4-star generals and you have the ingredients for a day not soon forgotten.

Indeed, there is great interest in racing nationally and internationally. Television crews cover all major league races live. A winning driver, who is interviewed often, gives the sponsor free exposure. The cost of such exposure in any other advertising medium is often ten times more expensive than the cost of having a logo visible on camera during television or trackside coverage. Many companies base their entire marketing plans around their motor sport involvement because they know it can catapult them to market share supremacy.

Racecar drivers are daring and heroic figures. Not only are they skilled drivers but fans love their positive personalities and charisma. Executives want to do business with them. Commentators and writers want to feature them in their stories. Track owners want to make sure they show up at the track so the fans keep coming and car owners want to pay them well so they keep the team in the winner's circle. People who like a particular driver will eagerly patronize the companies that put their logos on his uniform and racecar.

A quote from the United States Auto Club FF2000 Media Guide:

"As a marketing vehicle, auto racing is a proven winner. No sport attracts more corporate sponsorship dollars. Of the estimated $3.2 billion spent on sports sponsorship last year, 25 percent was directed towards auto racing. Racing is regarded as an exciting, glamorous, unique and effective marketing tool."

Auto racing is the number one and fastest growing spectator sport in the United States with over 80 million fans attending events each year. The percentage of television sports viewers per household watching auto racing is virtually tied with NFL regular season football, and higher than all other television sports except NFL playoffs and college football bowl games. That's why more companies invest in auto racing for sports sponsorship - more than pro sports teams, golf or tennis. (Source: Bozell, Jacobs, Kenyan and Eckhardt Advertising)

There is no other sport like auto racing that provides the corporate sponsor with so many different ways to merchandise and market its racing association. The role of the corporate sponsor has long been recognized in auto racing as a major and necessary component of the sport. Baseball, football, basketball, hockey and other team sports do not permit the direct commercial sponsorship association that is offered and nurtured in auto racing. Support of the sponsor and its products or services is an accepted way of life.

  • Cars serve as moving billboards for the sponsor's logo. When properly placed on the vehicle, the sponsor's graphics are highly visible to the fans in the stands and to the TV viewers at home.
  • Drivers and team uniforms, along with event and race circuit signage, which carry prominent sponsor identification, give the sponsor additional visibility with fans at the track and also appear in TV coverage and newspaper photos.
  • Drivers support sponsors by wearing brand or corporate apparel at public appearances away from the race event to further the sponsorship association.
  • Trucks which transport the cars to the racing circuit also serve as traveling billboards for the sponsor and its racing association.
  • Products can be showcased at the track through hospitality functions and display exhibits where additional signage and product sampling opportunities are available.
  • Print and electronic media outlets, which set the standard for news coverage, have agreed to mention race sponsors of events and cars in their coverage if those sponsorships are an integral part of the story.
  • This is a much more liberal policy than is followed in other types of sports coverage and in hard news and feature stories.
  • Cross marketing programs between several corporate sponsors present opportunities to sell and promote products in a unique and innovative fashion.
  • In-store product displays using a racing theme, coupled with a driver autograph session or a racecar display, generate additional traffic into retail stores.
  • Corporate trackside hospitality provides for a unique way to entertain clients, employees and VIPs.

What is Motorsports Sponsorship?

To understand the industry of motorsports sponsorship, we need to understand its components and how they function.

A race team is a business made up of car owners, mechanics, drivers and equipment. The car or team owner has the important job of making the team successful, getting it on the racetrack, winning and collecting the earnings. In major league racing venues, team ownership is big business involving all the management and marketing tools used by mainstream businesses. These teams employ talented marketing and promotions managers and are highly sophisticated in their business dealings. They understand that in order to be successful on the track, the team must be successful in the boardrooms.

Racing, for the big time team, can be very profitable if it approaches business relationships with professionalism and good will. Successful team managers know they must ensure that each sponsor receives a tangible result in return for their financial investment in the team.

Don't be mistaken about sponsorship. The sponsor is the most important element in the team's and driver's success. Sponsors are a key component of the race team, every bit as important as the guys who turn the wrenches and change the tires. The sponsor provides the operating capital for the team and in return is allowed to use the team's and the driver's prestige, charisma, fan interest and media coverage to its advantage. A company involved in motorsports sponsorship can get its message across to millions of potential customers, generate good will in the community and most importantly, increase market share and profits. Pure and simple, sponsorship of a race team is a marketing play, a way to make more money by getting more people to buy products or services.

Types of sports sponsorship activities:

Advertiser: included in a printed game program and/or a team or league media guide

Associate Car/Truck/Motorcycle Sponsor: secondary sponsor on a vehicle involved in motorsports

Associate Sponsor: secondary sponsor of a sports property or event

Associate Team Sponsor: secondary sponsor of a motorsports team

Award Sponsor: sponsor of award given to an athlete or a team

Broadcast Sponsor/Advertiser: sponsor or advertiser on radio broadcast, cable telecast or over-the-air broadcast

Building Naming Rights: sponsor receiving entitlement to a stadium or arena

Car/Truck/Motorcycle Sponsor: primary or main sponsor on a vehicle involved in motorsports

Founding Sponsor: sponsor given this designation by the property or event, usually for size of sponsorship in addition to timing of deal

In-Stadium/Track Signage: company with signage in a stadium, arena, motorsports track or other venue

Official Licensee: company given this designation by the property or event

Official Marketing Partner: sponsor given this designation by the property or event

Official Sponsor: sponsor given "exclusive" or "official" status (usually in a defined product category) by the property or event

Official Supplier: sponsor whose agreement calls for the company to provide its product or service to the property or event

Driver Sponsor: sponsor with recognition tied to a particular driver

Presenting Sponsor: sponsor given this designation by the property or event

Promotional Partner/Sponsor: sponsor with presence tied to in-game or retail-based promotions

Series Sponsor: sponsor of a motorsports race series or other series of events Sponsor: general sponsor of a sports property or event

Team Sponsor: sponsor of a motorsports team

Title Sponsor: sponsor receiving entitlement for an event, award, etc.

As you can see, the options in sports sponsorship are many and most race team sponsors will use a combination of these options when attempting to leverage their team involvement.

Racing teams, in general, have three basic types of sponsors:

  • Primary sponsors have the most visible presence and provide major dollars. They purchase primary logo placement on the racecar, team equipment, uniforms, etc. They make it a practice of getting the most for their considerable investments by developing additional promotional and hospitality programs. They are the big boys.
  • Secondary level sponsors purchase secondary status on racecar and team signage. These companies obtain positions on racecars in order to maintain or grow their company image. They spend less than the big boys do but they are big in their own markets.
  • Associate level sponsors are often smaller companies, or again, large companies where success in their industry requires at least a motorsports presence. Such sponsors are in racing to enhance a portion of their marketing program. They do not spend as much as the big boys but still gain more than the cost of their investments. Associate level sponsors can also be brands that accompany a group of other brands on the car in a cooperative marketing program. Other types of associate sponsors include those whose logos are required on every car by the racing series or through cross-promotional programs.

Certainly, every sponsor of motorsports has a deep love for competition and racing. It is this love that propels many CEOs to use motorsports sponsorships to help their companies grow. Their presence at the racetrack gives them a chance to see firsthand what many other companies are doing to grow their businesses. The people who have the most fun at the track are those who cheer for a team or driver who is their spokesperson and friend.

Sponsorship can consist of more than just a driver or team sponsorship. Companies access a variety or a combination of sponsorship opportunities in motorsports such as:

  • Title Sponsorship
  • Official Sponsor
  • Marketing Rights.- Licensing Agreements
  • Official Suppliers Rights
  • Driver/Team/Series Sponsor
  • Endorsement Agreements
  • Single Race or Event Sponsorship
  • Broadcast Sponsorship.
  • Racetrack venues for sponsors are opportunities to gain name and brand recognition through a variety of means such as:
    • Racetrack signage
    • Contests
    • Product giveaways
    • Cross-promotional opportunities with the team on television, radio, the Internet and at the track.
    • Event Program advertising
    • Hospitality opportunities
  • Licensing and merchandising rights

Brand Identity

There is a famous story that circulates in the Marketing Department at Great Western Bank in Los Angeles. Several years ago, a man walked into their Bellflower branch (Los Angeles) and asked to see the manager. The manager came out and the customer informed him that he had his last paycheck in hand and that he wanted to deposit it into a new Great Western checking account.

"That's fine", commented the manager, "but you look rather young to retire and never work again."

"Well", replied the customer, "I just won the lottery and I want to bring all of my money to Great Western Bank."

The manager smiled and asked, "You must have passed six other banks on your way to this one. Why do you want to deposit your money at Great Western?"

"I've been a Lakers fan my entire life", stated the new millionaire. "Great Western sponsors the team, puts their name on the building they play in, so that's where I'm bringing my money!"

This story taken from the book "Sports Marketing" by Phil Schaaf illustrates one of the major benefits of sports sponsorship - brand or product loyalty. Fans do notice which companies sponsor their favorite team or racecar driver. SRI says 45% of ChampCar fans are more likely to buy a product from a sponsor. This level of brand loyalty is typical of all race fans. Other forms of sports sponsorships generally support only 20% brand loyalty.

What do these companies have in common?

Nike
Gatorade
Coca-Cola
Pepsi
Home Depot
Pennzoil

Yes, they are all sports sponsors. More importantly, they are successful because sports sponsorships are a major component of their marketing programs. They know that there are good business reasons for their sponsorships. Simply put, the millions of dollars they spend on sports sponsorships have come back to them many times in product loyalty from fans.

Brand or logo exposure such as that found on billboards, banners, display advertisements and television commercials work because they engage the attention of the person exposed to them. What you experience in seeing a sign is the called power of suggestion. Each time you look at a sign or message, marketing people count an "impression." The next time you see that name on the shelf of your local store, you will get another impression. When you see a magazine ad featuring the product, you get another. You may see a sign or message so often that you neglect to register it consciously. You still register it subconsciously. This gives the product a subliminal monopoly on your time and thinking. You will probably buy lots of that product. The cost of creating the sign or message is little compared to the return on the exposure.

The psychology of developing product or brand impressions on the minds of consumers is a proven concept. It works; otherwise, you would not see companies like ESPN, ABC, NBC and many others selling advertising time for big dollars.

One of the most inexpensive ways to develop sign impressions is to sponsor a race driver or team. The racecar and driver's uniform, racecar transporter and team bus, uniforms, etc., offer the sponsor an opportunity to get attention, particularly if the driver is a frequent winner or has a great fan base. Every second that the racecar is on television or seen by the fan at the track, the sponsor receives an advertising value equal to the money that would have otherwise bought that time in traditional advertising media. If the driver is constantly in the top five, the sponsor will reap many times the sponsorship investment.

Some companies, such as Joyce Julius and Associates, count the amount of time each sponsor logo appears on television. They calculate the dollar value of the exposure the sponsors receive in order to help them estimate return on investment. Sponsors also look at press releases and news stories that show up in newspapers and magazine articles. Just the general interest in the driver and the racing can make sponsorship and logo signage a significant boon to the properly positioned sponsor company.

Motorsports involvement is an effective way for a new, small or medium sized company to grow. A carefully executed marketing program can result in a great increase in brand identity and product loyalty. The investment need not be large because a small increase in market share means much more to a smaller company. It also provides the foundation for future growth and a more prominent motorsports presence.

Oil companies like Pennzoil, Valvoline and Texaco use motorsports merely to maintain their respective market shares. If one of them were to stop their motorsports involvement, brand identity would seriously suffer and, over a period of time, they would lose significant market share. Each spends considerable sums to connect with a team that can be a winner. Watch any televised race and notice the number and variety of companies involved in sponsorship of events or teams. Notice their TV commercials to see how they enhance their image by connecting with winning drivers or racing themes (Want to have a better performing car? Buy our product. Want a faster computer or faster Internet access, use our software, etc., etc.). Look at the special promotions they conduct at the track, the displays they set up, the posters and collector's items they give away or sell. Notice the questionnaires they ask you to fill out so they can learn about your age, income, spending habits, etc.

Racing and the racetrack provide a tremendous entertainment value for families and fans. Race events give fans a chance to associate their personal values with such core values as teamwork, achievement and hard work. Sponsors will benefit from a variety of opportunities to successfully gain a return on their involvement. The range of marketing goals at the track can consist of increasing brand loyalty, creating awareness and visibility, changing or reinforcing your corporate image, rewarding your sales force, exciting your employees, networking with other teams and sponsor organizations, changing consumer behavior, driving traffic to retail locations or web sites, educating race fans, finding new markets and much more.

Finally, let's look at a fun side of motorsports involvement. One important way for a company to grow business is through hospitality at sporting events. Giving their best customers access to the pits and hospitality area is an excellent way to build lasting relationships.

In the late 1980's, a Nabisco executive gave a newspaper interview where he discussed his sponsorship with a prominent local baseball team. In the article, he identified his luxury box access as a tremendous advantage in entertaining key customers. "The luxury suite", he stated, "allows me to entertain customers, especially the decision makers, at the highest level."

Two weeks later, the baseball team won the pennant and was on the way to the World Series when the Nabisco executive received a phone call from one of his most important supermarket buyers. "Look", the customer said, "if you want to sell me some product, I need to be entertained at the highest level.... How about some series tickets?".

This story, also taken from the book "Sports Marketing" by Phil Schaaf, points out the importance of good relationships with key customers and how sports sponsorship and hospitality can increase the bottom line. If you are not entertaining them at the ball game or the racetrack, someone else might be. Certainly, product quality and service are the most important reasons a company should do business with you, but hospitality at major sporting events is a proven way to develop familiarity and trust with decision makers. They expect first class treatment.

There is a company that monitors the growth in business from customers entertained at Indianapolis during the month of May. Each year, business growth from these customers is higher than from customers that were not invited.

In addition, the racetrack is a great way to meet other company executives in shirtsleeves, relaxed and enjoying the surroundings. Through these contacts, business relationships develop that can mean significant numbers to a company’s bottom line. Many of these executives would prefer to deal with other executives who support the sport they love.

First Steps

Generally, a large or medium sized company will go through a long process in order to determine if motorsports can benefit sales and growth. The first phase involves investigating whether sponsorship is a viable marketing medium. This phase requires analyzing motorsports, the fans, the races, related advertising mediums like television commercials, print advertising, etc., to determine if opportunities exist in motorsports to gain new customers.

Once they decide on a racing driver and/or racing series, they must then choose who will receive their support. There are several options depending on how much money they want to spend and how much exposure they seek. There is an old axiom in racing: "Speed costs money. How fast do you want to go?" Certainly, the established teams with high dollar sponsors will go fast and race toward the front. This keeps their sponsors in the limelight. Any company that becomes the primary sponsor for such a team will do well. But it will cost and they will seek to gain maximum advantage from their primary involvement. Furthermore, they will insist that there be a tangible result and will expect the racing driver or team to actively participate in sales and marketing initiatives on their behalf. They will tie the sponsorship, not just to racing success, but also to sales success.

If a company wants to test the waters and see if sponsorship will work for them, (and they do not want to spend the big bucks), they may want to find an up-and-coming driver. A driver in this category often needs sponsorship assistance and one company may be just the shot in the arm they need to become a winner. As the company’s market share grows, they can afford to take him or her to the next level of the sport.

Some companies hire an outside marketing firm to find the right team and driver for them. Many outside agencies will even design the entire motorsports marketing program for them, analyzing the market, matching the demographics and developing marketing strategies and programs to enhance the company’s involvement.

Other companies may choose to contact the agent of the driver or team they like. The agent will arrange for them to meet the driver and prepare the contracts and agreements necessary to complete the sponsorship arrangements.

Before the company begins their sponsorship program, they will identify the basic areas where a motorsports program can be most effective for them. And the first question is "Should our company be in motorsports? Can it improve brand recognition and customer loyalty? Can it significantly impact their success? The excitement found in the motorsports arena is known to give many companies a boost in positive exposure and attach a positive image to the brand and/or logo.

At this point, it is a good idea for the company to develop an inventory of promotional programs and opportunities they would like to implement in their motorsports marketing strategies. This inventory will become the primary tool put into use by the driver or team they choose to sponsor. Below are some suggestions on what race drivers and teams can offer the sponsor. These are just a starting point.

  • Preferred Supplier Status – this status tells the public that the driver/team uses only the company’s products within their category because of loyalty and quality.
  • Naming Rights – the sponsor purchases the right to change the name of the team to one appropriate to their marketing and branding strategies.
  • Official Product Status – similar to Preferred Supplier Status except that the driver/team has designated the sponsor their “official” supplier – this is most often used for major events like the Super Bowl or Indy 500, but if the team garners enough attention, they can do it as well.
  • Single Race Sponsor – some sponsors are more interested in a particular market – the driver/team can offer primary sponsorship while they race in that market alone.
  • Primary Sponsor – this is the sponsor that obtains primary positioning on the car and other equipment visible to the public. This company provides the biggest share of the driver/team’s budget.
  • Secondary Sponsor – the company that purchases a secondary sponsorship obtains logo placement on the car and other equipment visible to the public but much smaller than that of the primary sponsor
  • Affiliate Sponsor – this company has purchased a smaller logo size or has traded products or services in return for small logo placement on the car and other equipment visible to the public.
  • In-car Camera Sponsorship – when the television camera looks out through the in-car camera, the sponsor’s designated logo is visible in the camera shot.
  • Category exclusivity – this means that the sponsor gains exclusive status in a particular industry or product category in return for sponsorship participation – the company is their only sponsor among their competitors.
  • Licensing – this enables the sponsor to be the sole licensee for any products that relate to the driver or race team such as t-shirts, posters, die cast cars, etc.
  • Endorsements – this is a specific category of opportunity where the driver or team endorses a particular product to the public in return for dollars.
  • Cross-promotional sponsorship – this is where one sponsor or another team sponsor gives the team product instead of dollars – the team takes the product and negotiates with another sponsor for special shelf space positioning and advertising in a retail location – the race team receives all or a percentage of the profits from the retailer.

Once a company decides to enter motorsports, they need to plan their marketing programs. This is where the sponsorship can pay. If the marketing program does not aim to take full advantage of the sponsorship involvement, the sponsor is throwing dollars away and will wonder later why the sponsorship did not work. In other words, successful sponsorship involves the investment of additional marketing dollars above and beyond the amount given to the team. The rule of thumb: in order for the sponsorship to work, the company needs to invest additionally at least as much in marketing and activation as they spend on the sponsorship.

To be effective, a sponsor’s activation strategy should focus on the following goals:

  • To appeal to their customers and potential customers to increase business.
  • To improve their relationship with employees and their local or national community.
  • To enjoy watching and participating in the success of their sports personality.

Here are some suggestions on how they might maximize their investment:

To increase market share, they should first review their existing marketing programs to determine which programs would benefit from being related to motorsports sponsorship. For instance, magazine advertising gains zing by using pictures of the racecar driver endorsing your products. Drivers can do television commercials and make personal appearances at conventions and trade shows they already attend annually.

Companies can improve employee morale or sales by having the driver personality come to a meeting and give a motivational speech. He can tell stories from his career or talk about safety, health, avoiding drunk driving, etc. In other words, some marketing programs become stronger when they intelligently employ the racing personality and his/her success.

Once the company has reviewed and converted existing marketing programs, they will turn to new initiatives that will further expand the company's image and market share. These initiatives will aim at the target audience and take full advantage of the appeal and influence of the driver/spokesperson.

Marketing programs are successful when they help the company gain new business or maintain existing business. The following marketing initiatives have been successful. By no means do they exhaust all the possibilities.

  • Develop an "Instant Win" Radio Promotion featuring the driver and the company.
  • Develop a "Fantasy Team Member" competition where the winner has a chance to be a race team member with uniform and pit access, etc.
  • Create crowd giveaways between races where fans answer trivia questions about racing and win prizes.
  • Develop additional signage opportunities at tracks, retail locations, etc., where blank space is available.
  • Create a sponsor Booster Club for additional hospitality and promotional opportunities.
  • Obtain space on outdoor billboards for the company featuring the driver and sponsor.
  • Create a cost-effective literacy campaign or other charity program using the driver as spokesperson.
  • Develop cross-promotional campaigns with retail extensions and suppliers.
  • Set up product sampling opportunities at racetracks and other events.
  • Develop die-cast models of the racecar showing the sponsors on the car.
  • Develop Rent-a-Tent parties at the track for product displays.
  • Execute Scratch-Off Card Promotions.
  • Pursue Event sponsorship for the sponsors or supplier(s).

ROI

When market share increases as a result of a specific initiative, the company will want to enhance it to gain even more market share. They will also need a way to monitor the effectiveness of each initiative in order to assess its impact on their business. The company and the team should work together to implement some reporting processes so they can evaluate the sponsorship. Without such an assessment, they have no way of knowing which elements of their marketing programs are working best and which are not working at all.

Show Me The Money

There are many ways to pay for sponsorship. A company could budget the payments over the season or pay one flat amount. By financing the sponsorship with a business loan, the team gets the money to run but the sponsor can spread the payments over time with the proceeds from increased sales. In some cases, the sponsor could provide product in trade. The driver or team could either use the product or hand it off to a retailer or wholesaler for some racing dollars. The sponsor can become involved in a cooperative sponsorship program where the company and others could pool marketing money and invest in a team.

There are other opportunities, such as offering contingency awards or prize money to a team. In this way the money goes to the team only when they win specified results. Some companies may not think that motorsports is right for them. Yet, they can still gain marketing points by paying for sponsorship and placing the logo of a favorite charity or cause on the car. They could also help a driver or team obtain sponsorship from one of their customers or associate companies. The driver or team will probably reward such help by placing the company's logo on the car also.



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