Nascar Should Be Racing to Demonstrate ROI for Sponsors

With Fans, Brands Increasingly Falling Away in Down Economy, League Needs to Justify Marketer Investment

By Published on .

Roland Grybauskas
Roland Grybauskas
Sponsors are leaving Nascar, but are they making the right decision? Is the issue that Nascar isn't a great marketing platform, or is it because their agencies and brand mangers don't understand how to activate this huge, passionate fan base to create long-term brand loyalists?

Nascar and the sponsors have to take responsibility for what appears to be an inevitable crash. Many Nascar fans were willing to travel to up to 36 races a year because of their passion, cost notwithstanding. Now cost is a factor. Fans will not -- or cannot -- pay $70 to $120 per ticket anymore for a weekend plus expenses. Motorsports Authentics, the primary provider of Nascar-related merchandise, has lost $20.1 million in the first nine months of 2009 versus profits of $10 million in the same period of 2008.

Credit: AP
The easy answers for what's going wrong are: the economy, gas prices, high ticket-prices and cost-of-travel (food, parking, money spent at the track). Marketers in every category are facing the same issues, especially in the sponsorship and event-marketing arenas. Given the high cost of sponsorship at Nascar, it's an easy line item to cut.

I having attended a number of races this year, and recently, at Lowes Motor Speedway in Charlotte, I witnessed the sad fact that attendance was drastically down throughout the pre-Sprint races. Saturday night's Sprint race at Lowes was packed and very exciting, but it wasn't nearly as full as in past years. Friday's Nationwide race was about half full, though still big numbers, a substantial decrease.

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So how could Nascar crash? To put a dollar figure on it, if race teams lose five to 10 key sponsors and a number of smaller sponsors, and attendance drops more than 50% per season, that could add up to over a billion dollar decline a year.

Value perceptions
The economy is the easy villain, but there are deeper issues that explain why the sponsors are bailing: They are not seeing the value of their investment in Nascar. Here's a breakdown of a sponsor's investment:

  • Title sponsorship of a top race team: $25 million to $30 million
  • Footprint at 36 races: $7 million to $10 million
  • Hospitality: $3 million
  • Title sponsorship of races/tracks: $10 million to $15 million
  • Endorsement contract with drivers: $1 million to $3 million (e.g., Dale Earnhart Jr. for Wrangler or Juan Pablo Montoya for Coke)
  • TV commercial production: $750,000 to $1.2 million per spot
  • Media buy, TV, out-of-home, point-of-sale: $10 million to $20 million
So that's a roughly $80 million outlay, but what is the return on investment?

My experience over the last six years has been working with clients to develop data-capture programs to activate the Nascar fan with interest in a brand or driver. This will drive loyalty and actually drive fans to make purchases.

If you like Kevin Harvick, will you buy Pennzoil at AutoZone or get an oil change at Jiffy Lube? A value exchange has to be determined. Consumers will give you information about themselves and permission to contact them if they perceive a value exchange. Would you rather have an e-mail from Kevin Harvick or from Pennzoil? Would you like to get an e-mail from the Jack Daniels race team every Monday and also be invited to a special Jack Daniels tasting in your city? The viral and buzz factor is invaluable -- a simple e-mail is not.

When my agency pioneered electronic data capture for Crown Royal in 2006, we captured over 170,000 names. We activated customers right from the footprint. These names were 100% accurate and 100% opted in. Follow-up was within 48 hours via e-mail. The research on purchase behavior and brand preference was invaluable. That's the good news; the bad news is that Crown Royal did virtually nothing with those names.

Sifting through data
Here is the disconnect. Currently, only a few sponsors have any sort of data capture. Chevy and Jack Daniels have kiosks at races in which the consumer has to self-administer data by filling out forms. Most consumers can't be bothered. Most sponsors still use paper and pencil. Imagine the cost of data entry, the degree of data error, and by the way, six months later you might get a follow-up.

A more troubling issue is the relationship-marketing follow-up. Would you not want to know that a consumer is ready to buy a Chevy truck in the next three months so you could connect him to a local dealer? Would you not want to pre-qualify him for the truck loan via one of the credit services?

If you invest in Nascar as a marketing platform, you need to understand the ROI. Event-marketing agencies have sold impressions and traffic with no actual ROI metrics. In this economy, no marketer can afford to not connect the brand with the consumer and find every way possible to build sales. Electronic data capture is one tool, but mobile and interactive digital signage can also be very effective.

Track attendance may be down this year, but the Nascar nation is still estimated at 40 million-plus strong, which presents tremendous opportunities for advertising, online, mobile and interactive marketing. Now is the time for sponsors to engage with this passionate and loyal audience and leverage their investment.

Here are some questions that CMOs and CFOs should be asking before investing in sponsorship and event marketing regardless of the sport or event:

Will this reach our target customer in a meaningful way? Will we be able to connect with this consumer and capture his or her data? If we want customers to give us permission to contact them, what is the long-term value exchange? What are the ROI metrics against this investment? How can this investment provide drive to retail programs that can be tested? What digital platforms can we use to engage consumers and build a database?

Roland Grybauskas is managing partner and president of Envisage Engagement Marketing, with offices in New York and Toronto.
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