Branding the World of Sports

Darling of sports marketing hits the skids

Posted by ZA on December 8, 2008

NASCAR…the fastest-growing, best-run sports business in America...” – Fortune Magazine, September 2005

For years NASCAR has been the sport that sponsors pointed to as an example of strong brand identification and growth.  NASCAR fans were known as the most fiercely brand loyal group of sports fans, this side of English Premier League soccer. The NASCAR fans are the ones who drove around with numbers on the back of their car signifying the driver they support.  They shopped at the stores their drivers pitched (you would never fan a Tony Stewart at Lowe’s) and used the products their drivers wore on their sleeves.

Now things are starting to change at NASCAR, those same fans are not turning out in the same numbers at the track or on television.  And sponsors are finally starting to reduce, or drop entirely, their sponsorships of NASCAR.  Long-time sponsors like Kodak are leaving entirely (22 year relationship) and others like Sears and General Motors are significantly scaling back their investments in the sport.  The big US automakers are being forced to rethink their investment in the sport.  NASCAR drivers are without sponsors heading into 2009 and NASCAR just laid off 1000 employees.  It seems everything and everyone involved in NASCAR are starting to tap the brakes.

The question is how long will the downturn last for NASCAR? And will NASCAR comeback just as strong once the economy, and the automakers, gets going again?  Both are impossible to answer right now because no one can accurately predict the effects of their economic downturn.  What I do know is that NASCAR once again needs to change.

NASCAR has evolved in a large way before, moving from a regional sport supported by people in the South to a sport that commands more sponsorship dollars ($3 billion per year) than the NFL.  It has shed its hillbilly, redneck reputation and being a darling of the corporate world picking up huge deals with brands like Fox and Sprint.  Now NASCAR must change again, again evolving to ensure it can stay afloat in the wake of these tough economic times.

NASCAR needs to continue to diversify, adding more drivers from other cultural backgrounds like Juan Pablo Montoya.  Don’t believe me?  The most popular driver in Formula One right now is a Lewis Hamilton, an Englishman who is black.  Hamilton has become such a phenom on the F1 circuit that he had to move from his home country, England, to Switzerland to avoid being mobbed on a daily basis (and to save a few dollars on taxes).  I know the old guard probably gets tired of outsiders, like me, beating this drum but a more diverse group of drivers will increase exposure.

NASCAR also might consider tweaking  some other things like shortening a few races to appeal to a more mainstream television crowd.  They could also do some more skills type competitions, that auto racing purists might hate, but would appeal to the casual fan.  Look at the success the NBA All-Star Game, MLB All-Star Game and Pro Bowl have been as showcases for their sports.  Also trimming the number of cars in the field from 40+ back to a more manageable 30 would help, as currently 12 drivers are without sponsors heading into 2009.

But one thing that NASCAR needs to change for sure, is they must change the way they fund their sport so they are not so reliant on corporate sponsorships.  NASCAR teams get up to 80% of their revenue from their sponsors, which typically equates to nearly $20 million per year for the sponsors.   There are not going to be as many companies who can afford to throw down $20 mil a season for operating costs, plus the supporting millions required to promote their brand in that sponsorship.  With a declining ROI on NASCAR sponsorships large companies are going to pass on that investment opportunity, and smaller brands will only be able to tackle a portion of it.  That will leave most NASCAR teams scrambling to find dollars to keep the lights on, instead of focusing on racing.  Other professional sports teams don’t operate that way, and NASCAR won’t be able to either if they want to keep growing.

Update: NY Times did a piece on Nascar’s sponsor cash crunch.


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