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Getting Formula One Sponsorship Back on Track

21 Mar 2011

Formula One is a massive sporting event, attracting a global audience of over 500 million people and reportedly generating revenue of $3.5 billion per year.

It is therefore easy to understand why companies would want to become involved in the sport. Even retired World Champions such as Nigel Mansell still carry valuable brand equity from F1, as proven by his recent appearance in car insurance commercials in the UK.

However, in recent years the number of companies involved in Formula One has reduced. Massive global brands such as BMW, Toyota and Panasonic all decided that the financial investment required were not worth it given what they were getting in return. So, is Formula One sponsorship no longer attractive to companies?

The beginning of Formula One sponsorship
One of the obvious benefits that companies are aiming to derive from sports sponsorship is brand awareness. This is why in the 1960s Gold Leaf cigarettes became the first company to sponsor a Formula One team when their brand logos were emblazed onto the side of the championship winning Team Lotus cars.

The basic level of thinking was that if a consumer went into a store to buy cigarettes, they would be more likely to buy the one with the recognisable brand than one they had never heard of.

As more companies followed Gold Leaf into the F1 it became more difficult to stand out. Marlboro recognised this and ploughed millions of extra dollars into the sport in order to ensure that their sponsored teams featured the best drivers.

This led to Niki Lauda coming out of retirement to join McLaren in 1982 and also Michael Schumacher joining Ferrari from Benetton 14 years later.

Marlboro had realised that differentiation was possible through fan affiliation, and recognised that the sports most prominent stars generally had a larger positive following. The general belief was that fan affiliation would then be transferred onto the sponsoring brand, making these consumers more likely to buy Marlboro cigarettes. 

The crowded market
Despite Marlboro’s strategy of utilising fan affiliation, companies continued to plough into the sport following the Gold Leaf method of placing a logo on the side of a car and relying on this to lead to brand awareness and recognition.

However, by the end of the 1990s the number of companies involved in the sport had become excessive and companies gradually began to realise that a small logo placed on a Formula One engine cover would not be guaranteed to be spotted amongst all the other brands featured on the cars bodywork.

The events of September 11th forced companies to rethink their marketing strategies, and many companies involved in Formula One simply decided to end their sponsorship programmes in the sport as their was not enough evidence that it was working.

This led to the loss of companies such as Orange, FedEx and Benetton. Teams began to struggle as sponsorship investment plummeted, leading to the collapse of the Prost and Arrows teams in 2001 and 2002 respectively.

The marketing world was changing, and techniques were becoming ever more sophisticated. Brand awareness and fan affiliation were no longer sufficient, as the new buzzword was integration.

Every message emanating from a company had to be aligned to the company’s key aims and purpose. This means that it would make no sense for an anti-smoking organisation to sponsor a tobacco endorsed F1 car as the mix up in messages is clear and would only pollute the anti-smoking organisations desired image. Sponsors were therefore beginning to search for a team, which would reinforce their brand image, which obviously limits their options.

A team with a very specific identity, such as Prost who were very much keen to remain true to their French origins, were always likely to struggle in their attempts to source sponsors from anywhere other than their home country. This was made particularly difficult by the fact that the majority of companies involved in F1 have an international presence.

The changing business model
One of the first team owners to realise the need to craft an image, which would appeal to specific sponsors, was Ross Brawn. Brawn had formerly been the team manager at the Honda F1 team, but the Japanese manufacturer ultimately decided that they could no longer warrant the financial investment in light of their lack of success.

The sport was simply not allowing them to support their image of technical excellence. Brawn bought the team for about $1 in order to avoid the complete closure of the operation and gained access to Honda’s 2009 car, which had been developed intensively throughout 2008 along with Honda’s 2009 season budget, which would otherwise have been spent on redundancies.

This lucrative financial state was not disclosed to journalists or fans as Brawn began to highlight the squad’s sponsors-less livery to build the team up as the 2009 underdogs.

Brawn knew one man who would be enticed by this image was Richard Branson. Branson had built his Virgin Company on the back of an image of being the underdog challenging separate industries established players. This appeals to consumers in countries across the world, and Branson does what ever he can to encourage this image of him being seen as a modern day Robin Hood.

Branson knew that sponsoring Brawn GP would be another communication outlet in which to demonstrate his brands underdog persona and became the main sponsor of the team for 2009.

Brawn GP team went on to win the 2009 world championship, resulting in masses of media coverage and television airtime. Branson’s deal was universally hailed as a masterstroke as his brands desired underdog image had been supported and fan affiliation had grown.

However, Brawn sold his team to Mercedes prior to the start of 2010 and their driver line up of championship virgins Jenson Button and Rubens Barrichello were replaced with the sports most successful driver Michael Schumacher and his compatriot Nico Rosberg. The underdog image had been replaced with a German image of precision and success.

Branson knew that there was nothing to be gained through supporting the team for another season and decided to switch allegiance to Manor GP, which would be one of the new comers for 2010 utilising a pioneering car design technique, with their chassis entirely designed using CFD (Computer Fluid Dynamics) rather than the traditional technique of wind tunnels. Branson would once again be communicating his brands underdog image.

The Digital Age
We are now firmly within the digital age, an era in which communication over large distances is an every day occurrence. Companies no longer just communicate marketing messages through sponsorship, television commercials and poster campaigns due to the fact that all three communications outlets have become overly crowded meaning the individual company messages are getting crowded out in the noise.

Increasingly, companies are utilising new methods of communications available in this new era such as social media. An increasing number of companies have their own unique Twitter profiles or Facebook groups, which communicate company messages and information to followers and fans. This is helping them to build the brand image they desire.

However, it isn’t just the sponsors who are utilising this media. Most Formula One teams are using these websites to communicate with Formula One fans about their activities and plans for the season. This has enabling them to craft unique images for their team which helps them to stand apart from their rivals.

For example, McLaren are not just a Formula One team with Lewis Hamilton as a driver, they are a multiple championship winning team with masses of history keen to be as precise and leading edge as possible. Manor GP however are very much learning as they go in the sport, this along with their pioneering car design techniques very much places them as the sports underdog outfit.

These messages are communicated by the teams to the world via these social media websites, making it far easier to understand Virgin’s decision to sponsor Manor, and Vodafone’s decision to sponsor McLaren given their desire to be seen as technically more advanced than their rivals in the telecommunication market.

Communication
The increasing number of communication channels means that integration of message is more important than ever before. It could therefore be seen as a burden in a lot of respects, as it makes it much easier for companies to slip up and give off signals, which will ultimately pollute their carefully crafted image.

However, it is also possible to view it as an opportunity to further strengthen messages or even to highlight facts, which would otherwise have gone unnoticed. This is never truer than in sports sponsorship, as it is generally believed by marketing academics that in the new era of crowded sponsorship markets, an association to a sponsored entity has to be highlighted in other forms of communication.

Spanish banking group Sandtander for instance are another of McLaren’s sponsors alongside Vodafone. With their similar red and white branding to that used by Vodafone, it is easy for Santander’s sponsorship association to go unnoticed amongst the masses of Vodafone logos on McLaren’s cars.

However, Sandtander has wisely utilised McLaren’s Lewis Hamilton in their television commercials highlighting their association with McLaren. This ultimately helps them highlight to consumers the image that they are seeking to engender through the association; something which might not otherwise have been obvious to people who do not watch the sport.

This could therefore be considered a lifeline to Formula One, as sponsoring a team no longer just helps craft a desired image in the eyes of the sports viewers; it also influences the perception of the great majority.

However, one of the dangers of this technique has been highlighted by the fact that Vodafone has also utilised Hamilton and McLaren in their own advertisements.

It is therefore more than likely that this will confuse consumers, and perhaps associates messages from both companies with a single brand, which could ultimately damage that brands image.

This can be considered to be one of the drawbacks of the new age, in that there are now so many communication outlets and messages flowing that it is difficult to assign the correct message to the correct company.

Is F1 sponsorship effective?
One of the inherent problems with marketing is that it is very difficult to measure success, with many of the benefits being largely immeasurable due to them being processed subconsciously.

Nevertheless, it was recently calculated by Formula Money that Red Bull’s ownership of two teams which have been heavily branded with the company logos along with their championship success means that Red Bull branding featured in a remarkable 30.5% of Formula One’s total television broadcast images during 2010.

Given that Formula One reaches approximately 520 million people globally each year, it has been calculated that this level of television broadcast time would cost a company $358.5 million in traditional television commercial campaigns.

This makes Red Bull’s $240 million annual Formula One operating budget appear to be remarkable value for money especially when elements which are more difficult to measure, such as fan affiliation, are considered.

However, 141 different companies sponsored a Formula One team in 2010, and it is doubtful that all of these companies got the value for money they were expecting. Utilising Formula Money’s technique, it would be calculated that online trading company XTB got just as much television coverage as Vodafone did due to them both being featured on the bodywork of McLaren cars in 2010.

However, with such extensive and noticeable Vodafone branding can anyone honestly say that they noticed the XTB logos? 

It appears that in order for Formula One sponsorship to be effective, a company needs to monopolise the external decals of a car and have the team crafted to support the company’s specific brand image.

This once again supports Branson’s technique, as by buying shares in the Manor GP team, which was renamed Virgin and featured Virgin logos all over the car, he is not only ensuring that his company logos are noticed but also ensuring that the team exactly matches the image he wants his brand to portray.

Formula One sponsorship is no longer as simple as a Gold Leaf logo on the side of a car but still has the potential to be effective to a smaller number of companies.

Summary
Marketers can learn many lessons from the fast paced world of Formula One.

In summary, here are the six key learning’s from this analysis which invariably apply to any type of sports sponsorship:

  • A logo is no longer enough: Placing a logo on a sponsored entity used to be enough to ensure brand awareness and recognition, but in an increasingly crowded market place this is rarely possible.

  • Fan affiliation is powerful: Fan affiliation is undoubtedly a very powerful benefit of sports sponsorship, which is difficult to repeat in any other kind of marketing activity.

  • Choose wisely: Your brand image should be strengthened by the association to the sponsored entity due to its own brand image. Branson’s switch of allegiance away from the more successful Brawn/Mercedes team to the far less competitive Manor GP outfit is evidence of the importance of this. Remaining loyal to Brawn’s team would only have damaged the Virgin brand in light of the arrival of Schumacher and Mercedes Benz.

  • Integrated communication is vital: Regardless of your opinion on whether it is a good thing or not, the digital revolution is in full flow there are now more communication outlets than ever before.
    You can’t control what other people say, but the messages emanating from your own company should be perfectly in sync and integrated so as to strengthen your image and avoid confusing consumers.

  • Utilise social media: Social media is here to stay and it should be embraced. This can be an incredibly powerful tool, which can help aid brand image formation and engender a certain degree of fan affiliation. It can also be a great tool to help fathom the brand image of your rivals or potential sponsored entities.

  • Don’t sponsor in isolation: Linking into the importance of integrated communications and the fact that a logo is no longer enough, sports sponsorship will be infinitely more effective if the association is utilised in other forms of marketing communications such as television commercials or poster campaigns.

  • Even competitions could be linked to the sports sponsorship, with the potential to give away tickets to the event. 

 

Contact - Author: Mark Martin: motoringguru@gmail.com