Nextel Communications Inc. put the pedal to the marketing metal last month, signing a 10-year deal with the National Association of Stock Car Auto Racing. Nextel will replace R.J. Reynoldsâ Winston cigarettes as the title sponsor of NASCARâs elite racing series. The Winston Cup will be known as the NASCAR Nextel Cup Series beginning in 2004.
Under the terms of the deal, Reston, Va.-based Nextel will pay a reported $750 million fee to NASCAR over the next 10 years. Industry observers estimated that Nextel will spend at least as much over the next decade promoting its affiliation with NASCAR on television, in print, on the Web and elsewhere.
Nextelâs ability to promote freely is a marked contrast to R.J. Reynolds Tobacco Holdings Inc., which, as a tobacco marketer, was restricted from advertising on TV, for instance.
The key question facing Nextel: Can the deal help the company catch Verizon Wireless, Cingular Wireless, AT&T Wireless and Sprint PCS, all of which Nextel trails in total wireless subscribers.
Nextel CEO Tim Donahue told Reuters that the deal would not change the financial outlook for Nextel, which posted revenue of $8.7 billion in 2002. "The expense of NASCAR will not even be a blip on our screen," he declared.
Shawn Bradley, COO of the Bonham Group, a sports marketing firm, said the affiliation with NASCAR could pay large dividends for Nextel. "It could launch them to a dominant position," he said, "but itâs going to take a lot of work."
Al Ries, chairman of branding consultancy Ries & Ries Inc., agreed: "This is the best sponsorship deal you could buy." Ries said the wide-open nature of the wireless market made the aggressive move by Nextel a smart one.
Crowded wireless arena
In a battle for market share, none of the big wireless providers has established itself as a dominant player, although all the protagonists are pursuing high-profile advertising efforts. Consider the campaigns of Verizon ("Can you hear me now?"), Sprint PCS (the man in the trench coat), AT&T Wireless (m-life), Cingular (NCAA basketball sponsorship), U.S. Cellular (renaming the Chicago White Soxâs Comiskey Park U.S. Cellular Field) and T-Mobile (with Catherine Zeta-Jones as spokeswoman).
"The situation is up for grabs," Ries said. "They [Nextel] may be paying an arm and a leg, but this is one of the few situations where theyâre going to get their moneyâs worth."
Nextel also is beginning to promote Nationwide Direct Connect, its "digital walkie-talkie" service thatâs intended to differentiate it from its competitors. "It fits very well with our timing with Nationwide Direct Connect, out this summer," Michael Robichaud, Nextelâs director-sports and entertainment marketing, said of the NASCAR announcement.
The NASCAR fan base allows the company to reach both business customers and consumers. NASCAR boasts about 75 million U.S. fans, about one-third of the U.S. adult population.
And the sportâs fans are more affluent than stereotypes might lead one to believe. NASCAR says about 12% of its fans have annual incomes of between $75,000 and $100,000, the same percentage as the general U.S. population. "I donât mind saying that we were pleasantly surprised" about the relative affluence of NASCAR fans, Robichaud said.
Nextel has used sports marketing extensively in promoting its services. Among its many sports affiliations are sponsorships of the Breedersâ Cup and Major League Baseball, as well as media buys during the upcoming PGA Championship. The company also pours marketing dollars into the National Hockey League. "Hockey has the b-to-b, white-collar business decision-maker whoâs technologically savvy that we want," Robichaud said.
Other b-to-b sponsors
When considering NASCAR, Nextel saw that other b-to-b marketers were using the racetrack to reach customers. "Itâs not the most original path," Robichaud said, "but we said even if weâre not going to create the path, weâre going to follow it."
For example, E.I. du Pont de Nemours and Co. sponsors driver Jeff Gordonâs racecar. After a race several weeks ago, Scott Nelson, global manager for the DuPont brand, said the company planned to continue its sponsorship of Gordon. "He was second yesterday, which we like," Nelson said. "The DuPont oval gets a lot of airtime."
Electrical equipment manufacturer Square D Co., a unit of Schneider Electric SA, sponsors NASCARâs Craftsman Series, but not for the TV exposure. "Granted, weâre very happy to have some TV exposure, but itâs not about promoting the brand," said Scott Bonthron, Square Dâs manager-marketing intelligence. "There arenât many electrical contractors who havenât heard of Square D."
Instead, the company sponsors NASCAR for the hospitality opportunities, allowing distributors to invite key customers to races around the country. Square D entertained about 10,000 customers and prospects at races in each of the past two years, Bonthron said.
Another b-to-b marketer, United Parcel Service of America Inc., likes the branding and hospitality opportunities that NASCAR offers, said Susan Rosenberg, UPS manager-public relations. The company also uses its sponsorship to pursue business relationships with NASCAR and affiliated sponsors, she said.
Nextelâs Robichaud also sees the potential value in creating business relationships with NASCAR and other sponsors. Additionally, he said, NASCAR should be a showcase for Nextelâs technology. The company is already talking about providing communications technology to racing teams and enhancing the ability of fans to follow the races whether theyâre at the track or not.
Together with TBWA/Chiat/
Day, its new advertising agency, Nextel is formulating a marketing plan that will complement its NASCAR sponsorship, Robichaud said.
Time will tell whether Nextel can come from back in the pack to set the pace in wireless communications.