In the last few years, NASCAR has said good-bye to Texaco, Verizon, Old Spice, Jim Beam, Jack Daniel’s, Irwin Tools, AT&T and Wrigley’s.
And while they haven’t said good-bye, they’re seeing much less of DeWalt, DuPont, Kellogg’s and DirecTV.
All those major companies have cut their NASCAR sponsorships during the last few years. In their place, NASCAR teams have added The AARP Foundation, GoDaddy and Aflac.
Granted, the economy certainly has impacted sponsorship renewals. Part of a NASCAR sponsorship relies on such subjective criteria as a feel-good spend. Sponsoring a driver or team boosts a company’s morale and having a driver pitch a product certainly can’t hurt sales.
But not until companies began watching every penny did they need to see enough return on investment to know that money spent on NASCAR generated more revenue.
Many sponsors rely solely on television ratings. Others rely on ratings plus activation through at-track sales and in-store promotions.
With ratings on the decline, teams and NASCAR must show that they can provide value beyond a television rating.
• Tracks must recognize the investment of team sponsors when negotiating prices for suites, food and hospitality.
• Teams, tracks and NASCAR must avoid competition, working together to put package deals in front of sponsors without fear that they will undermine each other.
• Tracks, sponsors and drivers must work together more to promote races, with tracks providing breaks to sponsors whose drivers help the tracks.
• Put together a social media program that teams and NASCAR can use in selling sponsorships.
More Affordable Hospitality
It doesn’t take a rocket scientist to see that sponsors who purchase suites and hospitality from tracks begin their negotiations from an outrageous price menu.
Take, for instance, costs at Phoenix International Raceway. The track’s rate card shows $65 for a three-pound bag of M&Ms – which costs about $11.50 at a retail store. At Las Vegas Motor Speedway, a case of Coca-Cola costs $90, or $72 if purchased a month before the event. The costs at a supermarket – $11. At Martinsville, a case of Bud Light costs $66. At the supermarket – $17.
At Phoenix, a buffet lunch, at its cheapest, is $58 per person, sold in 25-guest increments. That doesn’t include costs for the attendant and a 19 percent service charge plus tax.
Why would a potential new sponsor want to entertain guests at prices twice as high as a catering service in an office conference room?
The tracks obviously get companies to pay those prices so, in some ways, it's hard to blame them. Teams and sponsor representatives say tracks do negotiate prices. Earnhardt Ganassi President Steve Lauletta says his team has successfully signed deals with tracks for discounts.
But from the outside looking in, it doesn’t seem like much of a concession. Any company that sponsors a race car should get a 25 percent discount on food in their suite or hospitality area. The industry needs to help those sponsors who have invested in the sport and help put cars on the track. If they leave with a bad taste in their mouths, it not only impacts whether they return to that track but also could cause it to question its entire NASCAR program.
Helping Each Other
One of the problems with the three entities – NASCAR, the tracks and the teams – working together is that all three need sponsors and all fight for the same advertising dollars.
One team executive said last month that even though his organization desperately needs sponsorship, he will not ask NASCAR for help when pitching new sponsors. He remains afraid of NASCAR trying to lure those sponsors away.
Such an attitude is understandable, but it comes with a price. NASCAR has a research group that helps put together sponsor presentations for teams and helps with data on NASCAR demographics and other vital statistics. Teams have credited NASCAR with helping them land sponsors, and NASCAR needs to continue making that a focus of its sponsorship retention efforts.
Meanwhile, all three entities need to find ways to work together and help each other.
Michael Waltrip Racing will announce later this year a new sponsor program that includes at-track signage, hospitality, team sponsorship and race entitlement elements. The talks for such a deal began two years ago.
Earnhardt Ganassi Racing just announced a deal that combines track and team sponsorships at Charlotte Motor Speedway.
Why did it take so long? And why haven’t more tracks and organizations put together deals that help both sides?
“Everyone feels like we’re in such a competitive situation,” Michael Waltrip Racing General Manager Ty Norris says. “It does seem simple. You definitely have to be aggressive in how you package it.
“And everyone has to take a little bit of a cut. I’m not going to be able to get my premium price for this and he’s not going to get his premium price and the media [partner] guys are not going to get their premium price. But if we do it all together, the sponsor is going to have better pricing all around and they’re going to have a better experience. It’s not just race paint.”
NASCAR, the tracks and the teams need to look harder at ways to share the wealth. If a sponsorship can provide value for everyone, it will pay off in the long run.
“Everybody has the overall feeling that if we can deliver value to either a new partner or an established partner and do it where they stay in the sport or come into the sport, it’s good for all of us,” Lauletta says. “It’s a longer-term view of when you’re going to see higher margins.”
The next step, Lauletta says, includes teams using drivers from other organizations to help land sponsorships. He says his organization willingly allows Juan Pablo Montoya to make appearances for a Hispanic initiative of another team’s sponsor.
But to do that, the other team runs the risk of exposing their sponsor to another team’s driver.
“It took a heck of a long time to get there,” Lauletta says. “There are still folks that don’t get that and don’t participate the way they should. Juan Pablo Montoya is a great example of that.
“[He’s] the only Hispanic [driver] at the highest level of the sport, a global personality. There are a ton of companies in the sport – why wouldn’t you use him? You don’t have to be on the car. It’s a matter of being confident that it is not going to come at your expense, that it’s not going to come at, ‘Oh, we like Juan Pablo better than our guy so just leave our guy and do that.’”
As teams become more desperate for sponsors, more teams may have to work together.
A Good Experience Means Everything
With teams relying on more than one sponsor per car, the sport as a whole needs more sponsors.
That means now, more than ever, a sponsor needs to have a good experience. A bad experience with one team or one track can result in a sponsor leaving the sport without giving it a second try.
The recession required many companies and organizations to rethink their policies. As the economy weakened, tracks decreased the number of exclusivity deals, including allowing multiple manufacturers to have displays at the same track.
Those tracks should not re-engage in exclusivity talk when the economy rebounds. It gains too much by having healthy teams and happy manufacturers to sign exclusive deals that shut out others.
Teams also cannot afford limitations in their at-track promotions. Gone are the days of the one-car, one-sponsor model. That in many ways is a good thing because if one sponsor leaves, it doesn’t decimate a team. But now teams must work harder to find multiple partners and work harder to keep them all happy.
In turn, sponsors have more difficulty in maximizing their investment because the driver and team isn’t solely theirs. Fans often associate a sponsor with a driver and get confused when multiple companies are involved.
The more sponsors a team has, the more difficult it is for one sponsor to activate their program. Having those programs further limited by exclusive track sponsorships only reduces the benefits even more.
To maximize value, sponsors should explore more opportunities to give one of their driver appearances to a track so the track can use that driver to promote its upcoming race. In return, the track should give that sponsor more exposure or a discount on hospitality fees.
That would allow for more publicity for the event and make it easier for a sponsor to get value from having hospitality or a display at a race.
With social media platforms in constant flux, having people who can show sponsors how to capitalize by using Facebook, Twitter and other websites will put NASCAR ahead of other sports leagues, helping it attract more national advertising.
How fans follow the sport has changed. They don’t just get their information from television or daily newspapers anymore, spending four hours watching an event as well as prerace and postrace coverage.
They use other media. No ratings exist yet to track the value of how many of Brad Keselowski’s 13,680 Twitter followers read his tweets each day or how many people listen to his scanner over the Internet during a race. But each day there’s potential for interaction with his fans. Considering the role sponsorship plays in NASCAR, the sanctioning body needs to take the lead in maximizing and calculating what that’s worth and then communicate that value to sponsors.
Sponsorship remains something race teams can’t live without. Only with the entire industry working together will NASCAR, tracks and the teams convince sponsors that they can’t live without NASCAR.