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Motorsports Marketing and Sponsorship Activation Blog

Sports Business 101: What You Need to Know

12/4/18 10:03 AM

The first thing that you need to know is that the business of sport starts in the marketing department of your company. Often, that is where the decisions are made when brands mix in with sports, but it does not (and probably should not) end there. We are going to explore the tactics, mechanics, and strategies of today’s leaders in sports business and gain an understanding of how you too can leverage this dynamic platform to better your business.

During our time together here, we will crunch some definitions, bust some myths, define some jargon and get you to a place to be dangerous the next time a team or venue approaches you for sponsorship.

Sponsorship: The glue that keeps sports and business working together

When you look to market a product, technology or service, there are hundreds of platforms for you to choose from (digital, print, etc.). However, much of this traditional media can be “interruptive” by nature. It is unnatural, forcing a potential customer to view your pitch while they’d instead be watching/listening to something else. In sports, and especially motorsports, sponsorship is enthusiastically accepted and intrinsically linked to a team’s ability to compete. This crucial first differentiator for sponsorship allows your brand to become part of the team, part of the success, part of the journey. The content and access that comes along with these rights are the starting points for your ROI formula. There is no one-size-fits-all potion to get this part right, and it will look a lot different for you than it might for your competitors or other sponsors in the industry.

Beyond this dynamic, the sponsorship world has gotten more and more scrutinized at the same time that competition within sports has never been more fierce. This has created a necessary dynamic for teams, series and venues to be extremely diligent with how they spend their time and money. Often that plays out to a service-heavy sales and acquisition process for new sponsorship where you may feel very well looked-after, followed by a sometimes tricky “stage 2” where you want to start using your investments.

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Rights holders are under the same amount of pressure to raise money as you are to deliver ROI on behalf of your marketing team. It is critical to understand that these rights holders ultimately have a primary function. Whether that be to compete, deliver entertainment or host hundreds of thousands of guests, they cannot be expected to manage details of each sponsor’s needs surrounding the event. It is unrealistic, and the expectation for a sponsor going in shouldn’t be that everything will be automatically taken care of.

The realities of having many sponsors involved with a particular team are that the most popular assets can get crowded and it is not always straightforward or fair how they get assigned. You are still the customer in this relationship, as you are purchasing the right to access all of the assets. In this case, your role happens to go a bit further in that you need to make sure you are still getting what you paid for.

The ROI you are looking for in sports marketing will require strategy, attention, consistency, activation and accurate scope of work.

What is a Property in Sponsorship?

In motorsports sponsorship, the property is what your brand will represent, and it is where your logo will be shown. Things like race teams, drivers, race series', tracks/venues and more can all be utilized as properties. In motorsports, each property offers unique value and can apply to your brand in very different ways. Often going straight to an individual property without representation as a brand can leave your brand vulnerable to the downside. A lot can be promised up front with vague and uncertain terms that end up with 100% of your budget going to one, potentially narrow, scope of assets.

What is Activation in Sponsorship?

Sponsorship activation is what you do with the property you have just acquired. Media integrations, fan engagement, contests, lead generation, awareness campaigns, and any number of custom programs fall into this category. Activation is where your brand comes to life, and where you can start to see significant ROI connected to your business. Because we see the majority of results come from activation spending rather than property spending, we want to place the majority of resources in this space. By focusing on activation, you also build in a lot of flexibility to where you put your property budget. Based on how your activation efforts generate results, you can adjust your property mix accordingly.

Sports and business are a natural fit together when thinking hard about what you can do with the property rights you have acquired. Our challenge to you is to think about what you can do with your sponsorship with absolutely no logo placement whatsoever. Take it a step further and think about ways to use your sponsorship if your team or property does not have a winning season. Does that make us sound crazy? Talking about sponsorships with no logos?

We think that it is an innovative approach to strategize with constraints, when often the main question we get is, "How can I engage the audience when all there is to see is my logo on the car?” There is a nearly unlimited list of ways to do this. Depending on your objectives there are a few answers to this question. If you are seeking unique opportunities to develop your product or service or prove it’s prowess under challenging conditions, that will be on approach. If you are looking to broaden your audience/customer base and make a stronger brand association, that will be a different strategy and approach altogether.

How to use sponsorship in your business

The starting block to using sponsorship effectively is to go all the way to your end goal. Ask yourself and your team these questions. Chances are, you will have more specific ones that are tailored to your business or industry, but these are here to get you started.

  • What am I responsible for reporting on?
  • What do I want to accomplish?
  • What metrics need to grow?
  • What change am I seeking to make?
  • What decision making do I want to influence?
  • Who is my audience?

Ideally, your activations and campaigns add up and integrate toward answering these various questions. It is critical for marketing teams to zoom out often so that every dollar of marketing investment can be attributed to moving objectives forward. It is probable that sponsorship won’t be the only platform and tool you have at your disposal to move these forward. Consider how your new access in sponsorship can integrate and enhance your other assets and creative campaigns. There is enough depth for your sports marketing to stand out on its own, no doubt, but it is that much more effective and ROI rich when it is integrated.

Using your sponsorship as a technical proving ground

One of the biggest reasons the world's leading brands are investing nearly $6 billion in motorsport sponsorships are for the opportunities to build productive, technical partnerships with race teams, venues, and series. Not many professional sports offer such an exciting proving ground for products and innovations that benefit consumers every day.

Behind the scenes of the speed, glamor and excitement in motorsports is where the value proposition ramps up for organizations looking to operate and test their products at the highest level. Common technical partnerships form between a race team and a sponsor, or a series and a sponsor. Sponsors and the teams or series will all have different objectives for their partnership, such as an oil & gas company partnering with a race team to study improvements in efficiency and performance of products on the race track. That oil & gas company then uses the lessons learned on the track when developing products we buy at the gas station, or off the shelf. The advertisement below demonstrates this idea.


We love to see this mutually beneficial relationship, creating value at every turn. We also consider this type of B2B relationship a foundational element of sponsorship activation, and it is a big reason why we recommend our 2:1 activation-to-property rights budget allocation rule to fully gain the advantages of motorsports sponsorship.

Grow your brand with sports marketing

If your objective is more in line with the brand development and audience engagement side of things, your approach is going to look entirely different. An overlooked pillar of ROI is to develop creative ways for non-traditional business units to leverage and integrate sponsorship assets. The most apparent business units to leverage sponsorship assets are usually your marketing and sales teams. Start there, but don’t stop there. Engage your customers with your assets or bring your partners together by using your assets creatively. There are also many opportunities to build your employer brand by showing some love to departments that do not always get to see their work outside of the office such as human resources, engineering or administration.

Sponsoring an existing property means you gain access to an audience that they have already built. Before you sponsor any old thing, this is an opportunity to be hyper-strategic with your investment. If you are actively marketing your brand in a place where your customers are not already, you are going to need to do extra work to convince your customers to go there. Better to understand where your customers want you to be so that you can meet them there in a creative way. It is entirely possible that your customers are in more than one location or you want to engage them differently at different times. With a little know-how and expertise, you can craft the perfect asset mix across different properties to match your investment exactly with who and how you want to engage customers.

 customers-partners-employees-engagement-venn-diagram

Generate maximum ROI when you leverage your sponsorship assets to engage the most critical stakeholders of your business.

What properties are doing to enhance their value

Even though our team does not actively sell new sponsorship properties, we are excited to work with some of the best teams, drivers, venues, and series in the world and have the unique perspective to see many different dimensions to sports marketing. Over the last few months, we have seen properties developing into full-on ecosystems of opportunity for sponsors to take advantage of. The kicker here is it will always be on you to make sure you get the right access promptly. That is easier said than done when teams are balancing more and more sponsors, more demanding media schedules and extremely tough competition on the track.

Curating digital platforms

Teams and drivers are recognizing that their digital footprint can be helpful to sponsors, showcasing that they are the unique platform the sponsors have been looking for. We see up to date presentations ready to go that illustrates the demographics of their footprint, the size, growth rate, etc. We have seen teams create platforms in the form of a blog, YouTube channel, Instagram account, website, app, or any other means of developing digital content. These platforms have become necessary for drivers and teams to demonstrate their personalities, the behind-the-scenes of what they do and allow for a means for fans to feel connected. This is also the #1 thing we get asked for by our clients looking to activate their sponsorship.

Demonstrating the right value

A given team in a given sport during a given season all put together makes each property unique. How can new partnerships capture that uniqueness to build value? Properties are starting to think of ways to work together that would make for a remarkable story. There have been some athlete + sponsor pairs so successful together that entire dynasties have been built from them. We are thinking of Michael Jordan and Nike, Jimmie Johnson and Lowe's for many years and Helio Castroneves and Shell-Pennzoil to name a few. You can just as easily be part of a team's journey as they are a part of yours.

Being creative

In this market, teams are more willing to try innovative things with you. They realize that the logo placement and the impressions that come along with it might not be enough. We have worked with teams and tracks especially to do never-before-seen things in the world of live sport, and there is plenty more to be built.

Breaking into some realities

When you invest in sponsorship as a brand, we can bet on some things that are bound to happen. It’s natural and not necessarily a bad thing, but we think you should be aware.

Whoever or whatever you are sponsoring is in business to make themselves successful and perform well, as it should be. Teams will convince you that they can offer everything a company would need to be successful, but how would they know without going through a discovery process and being held accountable to those needs? The truth is they won't have the staff to provide you with 100% focus and do what’s always best for you at every turn. If you are new to the sport, negotiating with a team may be difficult since you are not sure what a good deal is or not and what assets are usable for what you want to accomplish.

If you go to only one property directly, they will tell you what they want and have to sell. In a presentation or introduction, it's a friendly and inviting environment that makes it all feel right. What is often missing is understanding the uniqueness of racing and the value equation for what is being presented as part of the sponsorship. Properties know which assets cost them money and which ones do not. Naturally, they are going to prioritize the assets that do not cost them anything even though that might not be the asset that your business needs. With a sanctioning body, for example, they push hard to sell their logo rights. These have value, but they do not cost the sanctioning bodies anything to “sell” those rights. However, things like annual credentials, access to B2B meetings and introductions within the entire sport can generate particular value, and therefore you push for more quantity in that category.

Don’t go into a negotiation unprepared to discuss these things.

Another reality of this world is that the overnight success of sports business programs does not exist. There is no instant gratification, and there are not immediate metrics like Google AdWords might provide you. We understand that is a hangup for some marketers, but it should not be a dealbreaker. When you sustainably approach sponsorship, testing and learning along the way, the authentic humanity and richness you can add to your brand are unmatched by any platform.

Summary

Our team believes sponsorship is the ultimate platform to grow, showcase and develop your brand when you prioritize activation and strategy over anything else. The opportunities are plentiful and unique, but equally challenging and bring a level of intensity to your marketing that you won’t find anywhere else. Does all of this get you excited? Us too.

Explore how business can come alive in motorsports, big budget or small.

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Topics: Sports Business Foundations

Team SD

Written by Team SD

Leveraging a wide range of experience in sports marketing and sponsorship activation, our team is always looking to add value. We love collaborating with each other and we write together with you in mind.

 

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