Saturday, April 7, 2012

Work Those Assets…Providing Sponsor Value in an Era of Diminished TV Ratings…

Two weeks into the season and the IndyCar series has seen declines in year to year ratings for their first ESPN on ABC and NBCSN broadcasts. As you might expect, never being ones to pass up the opportunity to cast mid stream post mortems, the IndyCar pessimists society has been out eulogizing the patient presumed dead.

Lost in the shrieks and cries, lies another measure of worthy of evaluation for the first two events of the year. That measure being the increase in year to year attendance at both St Petersburg and Barber. In fact, St Pete saw an all time attendance mark and Barber was a thousand or two deterred by a Friday weather forecast from doing the same.

Long Beach is up next and on an average year Long Beach draws a three day total attendance nearly as large as St Pete and Barber combined. But this is no average year in LA. Rubens is part of the show, a new car prowls the street and a Major motion picture is on the horizon…all things likely to provide a west coast attendance boost towards besting the Long Beach attendance mark for the Reunification era.

Early indications for what May brings are also very encouraging. Open the track gates for anything at IMS – an open test, an easter egg hunt and twice the people show up than are expected. (then of course people bitch about concessions not being open).

Make no mistake that the TV number is the most important number towards driving sponsorship. It represents success in a simple, established and understood marketing/advertising equation. Sponsor stickers are on the sides of cars and as the cars go around and around the people watching at home are mesmerized into buying the products advertised. The TV number simply represents how many people were mesmerized.

TV ratings represent the easiest way to provide sponsor value, But it is not the only way to do so.

A schedule of strong, impressively attended events can also provide value to a sponsor. Strong events can create opportunity for sponsors whose end clients are businesses – not fans – the chance to entertain those clients and network with invited prospects for future sales opportunities. Think this is a big deal? Do a quick look at the client list for Barracuda Networks, then try to find a Barracuda network product in stores. Truth is they care less whether the TV was good than if the meet n greet for their clients with Alex Tagliani went well or if the food in the hospitality tent was tasty. The same holds true for a sponsor like ABC supply that entertains local builders and building supply distributors.

Other examples can be had, but talking wine n dine for corporate clients puts off some fans who will point to some sort of “wine n cheese” crowd of ancient CART lore.

Some companies may be content with the idea that impression based advertising leads to awareness which leads to product trial. Others are not nearly so patient or trusting of the power of the Madison Avenue Mad Men. So what do these companies do instead? They give it away, their product that is. Product Sampling is another marketing strategy to build brand and market share. Give it to them once, hope they like it and buy some more. Cut past all the uncertainty around the persuasiveness of advertising and straight to guaranteed trial.

Back in the day, most sampling came through the mail, but given changes to postal rates and policies other outlets and venues have come to the fore: the “try our yummy sausage” kiosks at a grocery store, the bag of dental goodies from the dentist, the “enjoy your new pet” kit from the pet adoption agency, the fan village at the race track.

I noticed a year or so ago that IndyCar struck up a relationship with the Octagon marketing agency. Here’s some information as to what Octagon does. Amongst other things, Octagon is paid by its clients to essentially give stuff away. To do so, Octagon maintains a network and list of “events” in which they own, operate or have connections with. They know the demographics of the attendees of these events. At these events, they have clients pay them to give stuff away. A client will come to them with a demographic profile of who they want to give their product to and Octagon will find events whose demographic profile is a match.

So are there sampling programs in play at IndyCar events? Yes and here’s evidence of a couple…(note these may not be Octagon gigs…they are just ones I have observed in action and have handy images of).

In 2010 we did Long Beach. One thing that caught our eye was that everyone was walking around with plastic bags and in that plastic back was a small bottle of Cholula Hot Sauce. After heading into the expo hall we saw where all the bags were coming from. Later in May, we saw at IMS more evidence that the Cholula folks were out in force giving their stuff away. So does a sampling strategy work? YES. Cholula is the fastest growing brand in the hot sauce/condiment category devouring the brand share previously held by Tabasco and Frank’s Red Hot. Cholula fans such as Paul Dalbey put Cholula on everything from Birthday cake to Popsicles and find the flavor of the food at hand enhanced.

Here’s another example from Iowa observed in both 2010 and 2011 (and by no means am I encouraging the use of these products). The tents you see below are run by the Conwood and Swedish Match tobacco companies – both market brands of snuff. Since tobacco companies can no longer do broad based advertising given the risk that those campaigns might accidentally create new users, the marketing programs they can implement to steal share from each other have become very constrained. Sampling is one such marketing strategy still available to them.  

Within these tents, you walk through, sign a waiver that you use snuff, you love using snuff, that you never intend to stop using snuff and that you hope to die from the effects of using snuff and then you sign up for free deals from the companies. The company then starts sending you batches of coupons to try their product for free. After getting a coupon for 50 free cans of Grizzley you decide to give it a try. After burning through your 50 free cans, you try your old brand again and since you have been conditioned to like the free brand, you find that the old brand tastes funny and start buying the brand you used to get for free. In this example, sampling through in person interaction at events is the only way that the necessary legal waiver can be obtained to begin the sampling process.

At the end of the day, if IndyCar can create large event crowds (even if those crowds are at the evil “street festivals o speed”), it can draw in sponsors dropping swag and samples in the fan village, but also on the side of a car sensitizing event attendees to the brand’s presence in the fan village. So from that perspective, with attendance up, IndyCar is off to a good start so far this year.

One final example of the power of the crow and of a fan base…

Aside from testing product labels for condiments, doing ad hoc research for snuff companies and other research aimed at increasing marketing effectiveness for clients at the day job I do a fair amount of work towards helping credit card companies acquire new card holders. So needless to say, when IndyCar announced the creation of a branded credit card with Discover, I thought to myself…About freakin time.

This number is conveniently dated to keep me out of trouble, but before the stock market crash, the costs associated with a card company acquiring a new card account with a prime customer was nearly $200. That number is higher now, but $200 still makes a compelling case…That $200 includes all the ad impressions that you were exposed to and all the Direct Mail solicitations you were ever sent before you signed up for a new card. Why so expensive? If a credit card offer costs $1 to print and mail, and over 99.5% of demographically targeted DM offers ever sent are thrown into the trash can, it is easy enough to think through the costs involved.

So let’s think about this…Discover sets up a tent in the Fan village hoping to entice IndyCar fans to sign up for a card that offers special IndyCar related redemption items for points accrued from using the card. What if … 1% of the fans attending the Race signed up for the card…and if across the complete schedule, 2M fans attended IndyCar events, that would mean Discover could potentially garner 20,000 new card holders. If the alternative strategy of acquiring these same customers through Direct Mail had been used, the market value of these new customers would be $4,000,000. Enough to be a primary sponsor for someone. Of course this only works if fans attend the races and apply for the cards. I can’t help but think that the Discover Logo on the side of Josef Newgarden’s car might help the conversion rate in the fan village…Just saying…

Another comment about the IndyCarD. Right now it is designed such that redemption points can be used to obtain special IndyCar rewards. Don’t know what they are off the top of my head, but here’s one not on the list that I would be very open to …Redeeming points to fund my favorite driver. If a certain number of points were redeemed for a driver then that driver could carry a primary Discover card sponsorship for the year, a lower amount of points might obtain an associate sponsorship. Point accruals not sufficient to help a driver find a ride would be refunded back to the cardholder to use on another driver or for other benefits.

Of course the question becomes…Are enough points earned by card holders to really make a difference here? Let’s suppose, that in two years of acquisition, there are 30,000 new IndyCarD holders. If the average credit card in America accrues $6,000 of charges per year (another dated but useful example number) and rewards are redeemed at a 2% rate then a redemption pool of $3,600,000 is created. Noticeable huh?

Of course would card holders forego personal benefits to improve the fortunes of their favorite driver? What if redeeming points towards a specific driver obligated the driver to sponsorship duties benefitting the point redeemers that they would otherwise be doing for a normal sponsor? Redeem 5000 points, get a signed Hero card, 10,000 points, attend a special autograph session featuring your driver, 20,000 points get into meet n greet social with your driver in the paddock hospitality tent, or dare I say 100,000 points for a bubble bath with your favorite driver!

Of course…all this only works if the events are strong and well attended, and if the attendees find the IndyCar Village and if they partake of the offers the sponsors in the village make available. SO the next time you attend a race…perhaps get there an hour early…and poke around the fan zone a bit…

1 comment:

  1. Great stuff, JP. But shame on you for providing stuff like "numbers" and "facts" to back up your arguments. That just isn't going to fly around here.


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