It’s all about the ROI.
Return on investment. For a motorsports sponsor, in the final analysis, it’s all about a pretty simple equation:
What am I getting for my money? And how much of it am I getting?
Traditionally, motorsports sponsorship value has been determined by factors related to “branding.” In rough terms, it works like this: If somebody sees your logo enough times, Mr. or Ms. Sponsor, they’ll remember you when it’s time to purchase whatever it is that you sell.”
That’s called “brand recognition.” (Or “brand identity”)
In big time motorsports, the equation gets extended a bit: “If you attach your logo to a big time driver, all of that driver’s fans will also become your fans.”
That’s called “brand loyalty.”
The presumption in either case is that branding through motorsports is a powerful promotional strategy. The problem in either case is that the actual dollar value of branding efforts is inherently tough to pin down.
There are plenty of tools available, most famously the Sponsor’s Report provided by consultants Joyce Julius and Associates. It purportedly tells teams -and their sponsors- just how valuable their television exposure is.
Joyce Julius has created some very sophisticated technology for capturing the very precise number of seconds (and maybe much smaller time increments) a sponsor’s logo appears on television during a broadcast. Including in-car cameras, signs on billboards at the track, and even shots of the haulers from overhead blimps, if the logo shows up on TV, Joyce Julius can report it.
In addition, sponsors can track “verbal mentions,” the number of times an announcer or driver -or anyone on a broadcast- speaks the sponsor’s name. Each of these can be dutifully logged and reported to the sponsor.
Finally, technology is even getting sophisticated enough to track the number of times a sponsor’s logo is served online at, say, NASCAR.com.
In all, there is an enormous amount of branding activity taking place in motorsports, and a huge effort at documenting it so that sponsors can track their ROI.
But here’s the problem: How much are those exposures worth? What is the benchmark. In the Joyce Julius model -which is obviously proprietary- TV exposures are translated into sponsor value by running them through an advertising grid.
If a sponsor’s logo is shown on TV for 3 seconds, in the Joyce Julius model, that sponsor receives roughly the same value as they would from 3 seconds of television advertising time. So if a 30 second spot on the race broadcast is selling for $30,000, each second of exposure generates $1,000 of sponsor value. 3 seconds onscreen, 3 grand in sponsor value. (Yes, it’s more sophisticated than that; I’d welcome anybody from Joyce Julius to enlighten is to the specifics. But the general concept is accurate.)
If I’m a sponsor, I’ve got to ask this question: Is 3 seconds of logo exposure really worth the same thing as 3 seconds of a television ad? Is a quick, out-of-context flash of my logo really worth the same as a snip of a well-crafted advertising message?
Is the logo imprint, coming to the viewer as a secondary visual artifact (the primary visual artifact is the car, driver or racing activity the viewer is actually watching), really worth as much as a purposeful, professional advertisement?
Given all we know about human perception and the deletion process (by which we tend to eliminate irrelevant items from our visual focus), it’s hard to figure that logo impressions are really worth as much as tailored advertising messages. Not even close.
We can debate the specifics. We can even use neuropsychology and technology to tweak the models. But that’s exactly the point: The best we can do with a branding-oriented sponsorship campaign is to keep getting “closer” to the actual value of a sponsor’s investment.
But at the end of the day, we cannot answer this key question: How many people who see my brand take positive action regarding my products or services?
That is, how much payback am I actually getting, measured in terms of additional sales? Put another way, what’s my ROI?
Without really accurate metrics, we don’t know. That’s why rooms full of MBA’s sit around trying to convince one another of the value of “brand loyalty” and then push largely meaningless forumulas through spreadsheets, trying to justify huge sponsorship fees.
Enter Google.
What does a search engine have to do with motorsports sponsorships? At first glance, nothing. But upon further review, Google has completely changed the game.
Through its targeted advertising model, Google has introduced the entire world of big-time marketing to a new and scary concept: Accountability.
The mechanics of Google’s system are secondary here, though they’re fascinating. Briefly, Google offers advertisers the right side panel of its pages; it serves those ads tightly targeted to the searcher’s query term. A searcher is exposed to advertising unobtrusively (for the most part) and directly related to the term they came to Google to search.
The major point: Google’s platform gives advertisers direct access to two things they crave: a hungry crowd of potential customers predisposed to seek out their products; and deadly accurate feedback as to the results of their advertising investments.
In other words, if an advertiser spends $1 with Google, Google can tell the advertiser exactly what happened to that dollar. And if the advertiser is sharp, they can tag and track that investment through the entire cycle of converting an “eyeball” (a prospect) into a customer.
Google - along with its search engine competitors - is at the leading edge of the “direct response” model of
marketing and advertising.
Direct response operates just like it sounds: Advertisers and marketers make an appeal; prospects and customers make some kind of response directly back. Cause and effect. Stimulus and response.
Traditionally, “direct response” has been synonymous with direct mail or classified advertising. As such, it has been relegated to a far lower prestige ranking by the pinstripe suit brigade who focus on more glamorous media, specifically TV.
But here’s a little secret: Direct response works.
Here’s another: Google is using direct response concepts to turn the advertising world on its head.
See those little ads on the right hand side of a Google page? Click one and you’re taken “directly” to an
advertiser. You can “directly” interact with the company, its products and relevant information. If you want to, you can take action right on the spot (assuming the advertiser knows what they’re doing).
Pushing this a little further into the pipeline, if the advertiser is really sharp, they can track every visit that
results from a click, know exactly what visitor did on the site, and stimulate some sort of action (a purchase, inquiry, subscription, etc.). They can organize their advertising by “campaign” (in Google terms) and know which ads are pulling the best responses.
There’s a scary amount of data available with high tech direct response. And data is exactly what motorsports sponsors need in order to determine their ROI.
The more precise the data, the better. The more conclusive the data, the better. The more results-oriented the data, the better. That’s exactly where direct response shines and branding-focused campaigns dim.
Let’s think about this from a prospective sponsor’s point of view. Sales are down; profits are slipping; budgets get tighter every day. Marketing VP’s all over the landscape are sweating every dollar.
A big-time racing operation shows up at the door pitching a contingent/partial sponsorship for, let’s say, $5
million. They offer nicely tailored, engaging and exciting promotional materials, and probably some Joyce Julius data to back up their ROI claims. If they’re on their game, they offer several smart ways to “activate” the sponsorship (to get race fans more involved with the sponsor, deepening the connection, presumably).
The sharp marketing VP owes it to herself to say, “but how much more product am I actually going to sell; how many new customers am I going to gain; how many current customers am I going to retain for the $5 million?”
Asking that question out loud during a sponsor pitch meeting will probably elicit a torrent of buzz words and MBA-speak, perhaps highlighted by mostly-meaningless stats and even a graph or two.
But the real answer is this: Nobody knows.
And that’s not the harsh part: In a branding campaign, nobody knows how to even frame the question. In other words, it is not only fundamentally impossible to predict in hard terms the impact of a branding campaign, it is fundamentally impossible to even make the prediction.
Contrast that with Google’s results. If our sharp marketing VP puts the same $5 million into a Google pay per click campaign, not only will she know her exact cost of customer acquisition, she’ll get tons of bonus data about impressions, click-throughs and overall visitor behavior. Plus, she’ll give herself the chance to actually sell something right on the spot.
The sponsorship world is built on branding, and branding is built on building relationships. The direct response
world is built on transactions.
In a world shifting from relational to transactional focus, branding is in trouble.
Branding-based sponsorships will get harder to sell, even if/when the economy comes back. Direct response simply provides better accountability.
Unless motorsports teams figure out better accountability models, their value to sponsors will continue to dwindle, especially compared to the sponsor’s direct response options.