Friday, April 03, 2009

A Capitalist Pig's View on Why NASCAR Sponsorship is a Good Thing

It is disturbing that there are some good teams with good drivers in NASCAR that are still unsponsored for the season. Disturbing because it seems to be due to a reluctance to invest money in what is an efficient, and effective, marketing system. The reason for such reluctance is that, in this day and age, investing money in a form of entertainment is looked down upon by the mob mentality that our society has acquired which makes us think that we know best how to run and market a business. Money is now evil, and making money is even worse. Now we have the equivalent of Hitler's Brown Shirters storming AIG shouting "Death to the Rich"

Granted, there should never have been a bailout, but isn't it silly to complain about 18 million dollars when we should be worried about getting back the 180 billion that we shouldn't have had to pay in the first place? Put that in perspective--18 million dollars to 180 billion is the same as one penny to 1000 dollars. If you can't pay the people who are capable of rebuilding the business to a point where it can pay us back, how do you expect to get the money back? Bear with me, I will tie this into NASCAR eventually.

Before you call me a "NASCAR shill" or a "Capitalist pig," you must first understand that, due to a debilitating condition, I am unable to work, and make less than $15,000 a year. Ironically, this has helped me to understand the importance of having a job and making money in the overall view of the economy. It also helps me to understand the importance of those who sign the paychecks, and do the marketing.

So, yes, you may call me a "Capitalist pig." It is true that con artists like Bernie Madoff, and bad players in the banking and financial industries who ran their businesses into the ground for their own personal gain, play a big role in the current economic crisis, but they make up a very small percentage of the people who keep the capital flowing. The person who makes over $500,000 a year is at least as important as the person who makes $9.00 an hour in making and keeping the economy healthy.

There was some backlash over GM's participation in motor sports, particularly in NASCAR, while they were accepting a bailout of taxpayer money. Why should taxpayers' money go to supporting the already wealthy Brian France, when there are over a hundred thousand North American jobs at stake? First of all, the premise that the money, between six and seven million dollars per car, goes to NASCAR is wrong. The money goes to the Chevrolet teams--Earnhardt/Ganassi Racing, Hendrick Motorsports, and Richard Childress Racing. Since GM is in the process of restructuring, the high return for a relatively low annual payout is a good idea. Ninety-eight million dollars buys hundreds of hours a year of brand publicity for nine months. It costs more than fifty million dollars for one thirty second commercial during the Super Bowl, and over $100,000 for each fifteen second spot during any prime time program on any given night. The NASCAR route is the most efficient way of getting the brand out to the public. Now that the Federal Government is in charge of General Motors, even they--who have yet to figure out that if they don't build the Camero, they have to pay back the tens of thousands of buyers who pre-ordered it--understand that.

Okay, I got a little off track. What I was trying to illustrate was the advantages per advertising dollar a sponsorship of AJ Allmendinger, for example, would present. Allmendinger gets mentioned several times during a race, and often during the NASCAR news and entertainment programs such as Trackside and NASCAR Now That is about seven hours a week of advertising for thirty-six weeks, reaching at least 50 million potential customers, a great bargain as advertising dollars go. Instead of "AJ Allmendinger, who needs a sponsor to compete for the entire season," the message could be "AJ Allmendinger, driving the Food City car..."

I am purposefully using Food City as an example, because if they can shell out the estimated $47 million it costs to sponsor one race, they can certainly afford $10 million for 26 weeks of sponsorship for a potential NASCAR champion. Especially when the team has the Petty name tacked to it.

It is not corporate greed that requires sponsorship, it is the need to pay the workers on the teams, and the workers who make the parts the teams need. When these workers get paid, they can go to Best Buy, or Target, or Walmart, or even The Gap, and pay money that eventually gets to the employees of those companies. With that money in their pockets, these employees can go to Safeway, Food City, Best Buy, or Walmart, or maybe even be able to buy tickets to go to a race. That's how the economy is supposed to work, and it has nothing to do with corporate greed or government interference.

I'm not pretending to be an economist, but this is just common sense. Surely there is a need to spend three million dollars in advertising for nine fifteen second spots on each of four networks every night, in order to reach a wider market, but to me, common sense says that it is a much more effective use of the money to sponsor a team in NASCAR.

NASCAR was founded as a marketing tool. If Bill France hadn't thought of it, someone else, like Bruton Smith, would have. It is still, today, an effective marketing tool, not only because it puts the best "tin top" drivers in the world in competition with each other, bringing the entire show on a nationwide tour, but it gives every sponsor the advantage of a partnership, of sorts, with every other sponsor. This is the "Business to Business (B2B)" model developed by Bill France, Jr. These businesses offer discounts and other perks to each other by association in NASCAR. They help each other out.

Then there is Action Sports, the collectable souvenir business owned jointly by ISC (NASCAR) and SMI (Bruton Smith). I know there are some who grumble that every retro paint scheme is just another deal to make and sell another diecast car. Even though these car models are made in China, the paint, detailing and packaging is done in the United States. This means more circulation of capital in the economy. But the real reason for special paint schemes is for the sponsor, and that is where the attention goes. That is the idea of the special paint--to draw attention to the sponsor. It doesn't hurt to have the sponsor's name on the diecast, though. .

Again, this is not corporate greed, it is running a business the smart way. Running business the smart way avoids loss of jobs, bankruptcy, and government interference. This is why it is so hard for me to understand, even in tough economic times, why more businesses do not take advantage of the benefits of sponsorship.

Tony Stewart is a smart man. Rather than trying to get one or two sponsors to cover the two cars in his team for the entire season, he offered joint sponsorship, which is less costly to the sponsor, while being more beneficial to the team. Perhaps this is what could work out for the teams that are hurting, such as Yates and Petty. Granted, they have probably already tried that, but just haven't had the offer accepted for a satisfactory arrangement.

I know I sound like a NASCAR shill, and I expect to be called that by some, but the point of this post is not so much to sell NASCAR as it is to note how strange it is that the smartest way to get the brand name out to the public is being ignored. I would, if I were in such a position, be trying to sell drivers such as Johnny Benson, the current reigning champion in the Truck Series, Todd Bodine, a former Trucks champion, and Allmendinger, the fastest rising star in the Sprint Cup Series, to the potential sponsors. There is no reason why these drivers shouldn't already have sponsorship for the entire season. Perhaps it is the way the teams are going about trying to get sponsors, or maybe potential sponsors just don't appreciate the value of a sponsorship, but either way somebody needs to think of something.

Postscript: There are exceptions to every rule, however, and GM wasn't running business the smart way. They were building cars they couldn't sell, and spending money they didn't have to spend. They offered outrageous legacy plans to their employees that couldn't be covered by any amount of money they could make. . The worst, and the least smartest thing they did was ask the government for money, rather than going the more traditional route of bankruptcy and restructuring. But that is a different subject for a different blog.

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