No matter where your brand is investing marketing dollars, the value you get back is the priority. For different forms of marketing, there are different value equations. In motorsports marketing, the value equation involves four primary stakeholders: fans, sponsors, teams, and series. Each different channel will function differently, but they all need to work together to maintain a sustainable balance for everyone involved.
We work with our partners to ensure their channel generates sustainable value throughout their entire program. See below for a look at the various components.
There are many entertainment options and sporting events for fans to spend their money on. Race fans and their loyalty are why sponsors are involved because racing provides a unique platform to engage them through. They will be happy if they receive a great experience, the action is captivating and if they can feel connected to their driver and favorite team.
Fans understand that sponsorship is vital to the success of any team or driver and are loyal to those companies who support them. According to research by Nielsen, NASCAR has the most brand-loyal fans among any other American sport. If fan-centric elements are missing, fans will find somewhere else to spend their time and money.
Often for sponsors, the aforementioned fan loyalty and their demographics are a critical driver of involvement. This places importance on viewership and attendance data. There are fundamental business relationships that reduce the reliance on fan attendance and viewership numbers, but for marketing programs, the numbers remain a priority. If the fan base, spectator attendance or TV ratings decline, then the relative value of the marketing investment declines.
This doesn’t mean that the investment loses all of its value, but it does call for adjustments in the marketing strategy. We often hear from teams that “it costs us X million to run a season, so we need sponsors to cover that cost."
Covering the cost is necessary for the team, but if there is a limited value returned to the brand for this investment, it becomes a less attractive opportunity for the brand. If the cost of competition rises while the fan base and viewership decline, there is an imbalance in the relationship that needs to be addressed.
For teams to be successful, they need to invest in things like talent, equipment, testing, technology and infrastructure. Many revenue sources make up the budget to support those investments and sponsorship is often the most significant percentage of that budget. For sponsors looking to get involved with teams there is a premium for associating with winning or front-running teams. Depending on your objectives, you might not need to go this route. In exchange for this funding provided by sponsors, teams grant unique access to the sport through various assets.
The value relationship between the teams and the sponsors directly correlates to the viewership and attendance data mentioned earlier. Large audience numbers call for more substantial sponsorship fees while a more targeted audience provides less-expensive entry points for brands.
For the teams to go racing, they need a group to organize tracks, broadcasting, and more. The series then generally rely on local promoters to grow the sport while selling tickets to fans. This successfully managed event then becomes the showcase for the drivers to perform, develop a following and provide significant exposure for their sponsors.
This channel is impacted when macroeconomic shifts hit the economy, as that is when spending on entertainment generally drops. On a more controllable front, if rules or operation of a series become boring or confusing, fans have a hard time sticking with it. That leads back up to the teams and fans, highlighting the inter-connected nature of the different channels.
Delivering Sustainable Value
When all four channels are value-healthy, the motorsports sponsorship strategy in sports business can provide exceptional ROI. Each channel relies on the other to remain stable. When one channel experiences pressure, the system will begin to put pressure on program sustainability. This is a key reason why SD recommends brands to spend $2 on brand activation for every $1 spent on any property so you can be more responsive to shifts in external pressure that are outside of your control.
No matter what different property your brand is looking to partner with, we represent you and your objectives. If something doesn't look right or isn't getting maximum value, we will be the first to tell you.
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