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SBJ/November 17 - 23, 2003/SBJ In Depth
Published November 17, 2003
The walls are bare, mostly, save for those in the racing-themed, trophy-filled lobby, and in the half-dozen offices that remained in use through the final, melancholy days.
The 13th floor of R.J. Reynolds' Plaza building used to be a place with a pulse, the nerve center of the most expensive, most expansive sponsorship in U.S. sports, an endeavor that at its peak occupied 75 full-time employees in an RJR division known as Sports Marketing Enterprises.
But this was RJR's last season as sponsor of NASCAR's premier stock car series. Its red-and-white Winston Cup logo gives way to the black-and-yellow Nextel Cup mark after the championship banquet on Dec. 5.
With two weeks left in the final Winston Cup season, SME was down to six employees — with a target of zero set for year's end. No one left in a division that annually was spending an estimated $60 million on its NASCAR sponsorship.
"It hasn't been fun, seeing friends you've worked with for 21 years walk out the door," said Rich Habegger, an SME vice president whose office became a holding tank for the plaques, photos and other memorabilia that used to hang in the hallways.
Habegger hopes RJR will create a "shrine" at the company's Winston-Salem, N.C., headquarters that commemorates its Winston Cup program. If so, it may want some of the items. If not, he plans to turn them over for use in a local stock car museum.
"Thirty-three years of this sponsorship is not something that's insignificant," said Habegger, who has worked on SME's Winston Cup program for five years. "It's part of the company. A big part of the company."
Building the brand
You could burn through a carton of Winstons trying to sort out whether it was RJR that needed NASCAR or NASCAR that needed RJR. All you'd get is a reprimand from your physician and the realization that it was a dead heat.
Winston infused cash into NASCAR at a time when the sport was low on finances, promoting it into a sports marketing phenomenon that needed 30 years to outgrow the limitations of tobacco sponsorship.
NASCAR gave Winston a vehicle to reach consumers at a time when it was losing access to television viewers, a restriction that threatened its greatest edge over competing brands.
And what did Winston make of that vehicle?
In the last 20 years, Winston's market share among NASCAR ticket buyers has always been triple its share among all U.S. smokers. In recent years, the brand's share among spectators at Winston Cup events grew to 30 — or five times higher than its current national share.
"What's the expression? Necessity is the mother of invention, right?" said Ned Leary, who managed SME for the last two years after heading the Winston brand. "That's one of the things I'm proudest of throughout my career. As a company, we've always been the ones out there innovating."
Brian France, who this year replaced his father, Bill France Jr., as NASCAR's CEO, was struck by that creative thinking from the time he began visiting SME's offices as a junior NASCAR staff member.
"They always understood the dual obligation of selling their product and making investments in growing the sport," he said. "For a lot of years, it was the perfect match."
Money to spend
As the story goes, NASCAR and Winston found each other thanks to Junior Johnson, the hellion race team owner who learned to make cars go fast while running moonshine through the Carolinas.
"They always understood the dual obligation of selling their product and making investments in growing the sport."
Brian France, NASCAR
It was Johnson who approached RJR about sponsoring his race team late in 1970, after the tobacco companies had been banned from advertising on TV. While intrigued by the proposition, Winston quickly realized it had the money to do far more.
On the other side of the equation, NASCAR desperately needed more.
The automakers that had funded most of the top stock car teams had withdrawn their support after the 1970 season, breaking ties after years of quarreling with NASCAR. Without backing from Ford and Chrysler, all but one of the top teams — Richard Petty's — were on the verge of shutting down. Tracks were filing for bankruptcy. NASCAR's major touring series, then known as the Grand National, was headed for life support.
Into that breach stepped Winston, a brand faced with restrictions that threatened its standing as the nation's No. 1 seller. Winston had hitched its identity to television and radio advertising. Its chief competitor, Marlboro, could put its strapping cowboy on billboards or in magazines. But Winston's hook was a jingle — Winston tastes good, like a cigarette should — that was destined to fade from memory.
For the leading company in an industry that had spent $220 million on television advertising in 1970, the cost of sponsoring a national racing series — $100,000 for the points fund that attracted the top drivers — amounted to pocket change.
"Money, I promise you, just flat out didn't matter," said Cliff Pennell, a marketing consultant who worked for RJR for 20 years and headed Sports Marketing Enterprises in 1998 and '99. "We've got all this cash. TV is going away and we need to find other ways to reach adult smokers.
"You spend whatever you have to."
Aside from a propensity to turn left, the NASCAR that Winston found in 1971 looked nothing like the multibillion-dollar enterprise that it is today. Only eight of the 30 points races run that year attracted more than 40,000 spectators. The largest, the Daytona 500, drew 80,000, or about half of the track's current capacity. Neither NASCAR nor the speedways had the staff or budget to promote their events.
So Winston began building, not only strategically, but with hammer and nails.
When the first surveys that Winston conducted with stock car fans showed that their No. 1 complaint was that they missed half the race while waiting in line to use the rest rooms, Winston paid to build more rest rooms.
When track operators said they couldn't get media outlets to cover their events, Winston paid to build better press facilities.
SME sold fans on NASCAR’s fender-rubbing competition while making a pitch for fans to replace their Kools and Marlboros with Winstons.
When the millions that Winston spent on promotion began to pay dividends and tracks started filling to the rim, Winston paid to build more grandstands.
When sponsors asked for better accommodations to entertain clients, Winston wrote checks to add suites.
"All that expensive new infrastructure of these old tracks, we just about financed all of it," said Denny Darnell, an SME spokesman who worked at Bristol Motor Speedway in the 1980s. "If a track needed something, we usually built it."
What RJR didn't build, it painted.
Winston decided early on that it wanted to embed its trademark red in the minds of race fans. It also wanted to improve the look of tracks across the United States, many of which were aging and run down. So RJR struck a deal with a Winston-Salem company and began shipping red and white paint to racetracks across the country. If a track had a NASCAR-sanctioned event, it got a shipment of paint every few years. Tracks that played host to Winston Cup events got at least 100 gallons. Some got 200 gallons. SME executives estimate that the total exceeded 100,000 gallons.
RJR also spent heavily on race promotion.
Winston was the first company to bring point-of-purchase displays to NASCAR, giving the sport a level of promotion that track operators couldn't afford. It was the first to develop a show-car program, a tactic now viewed as essential by sponsors who trade appearances by the cars for shelf space for their products. It took out national print ads promoting the sport, another first that was beyond NASCAR's budget.
"We were nonexistent when they joined us in terms of marketing and promotions," said Brian France, NASCAR's third-generation CEO. "They put their resources in an area that was necessary for this sport to grow and took the lead and went well beyond a promotional partner.
"We couldn't have afforded it. The tracks couldn't have afforded it. Without [RJR], it probably doesn't get done."
Winston also understood that its tactics could work for other brands. And that if it could convince them of that, they, too, would promote the sport, helping Winston extend its reach.
With that as a goal, RJR instituted a stunning program meant to attract more sponsors for race teams. RJR would fund the first year of a sponsorship for a brand, allowing it to put its name on the hood and doors for free. All the company had to do was promise to match RJR's cost by running NASCAR-themed promotions.
If the relationship drove business for the sponsor, it could take over the entire program. If not, the sponsor was free to leave. RJR put its resources and expertise not only behind the execution of a sports sponsorship, but into the foundation of the sport itself.
At the memorial service honoring T. Wayne Robertson, the longtime SME head who was killed in a boating accident in 1998, NASCAR Chairman Bill France Jr. said Robertson was so devoted to growing the sport, at times he had to remind him that his business was cigarettes, not racing.
In reality, Winston's business had become both.
"That thought process, I think, is what changed sports sponsorships in general," Pennell said. "It was this belief that we've got to grow us and them together in order to truly benefit.
"NASCAR had a vision and Winston had the clout and business savvy to help NASCAR get there. They did a lot of things because they had a vested interest in each other's equities, not just their own."
When Pennell describes the goal of Winston's massive promotional effort as "putting butts in seats," he doesn't realize that his phrasing can be taken two, equally accurate ways.
"Money, I promise you, just flat out didn’t matter. We’ve got all this cash. TV is going away and we need to find other ways to reach adult smokers."
Cliff Pennell, Former director, Sports Marketing Enterprises
Winston wanted to put spectators' butts in seats. But throughout the 33 years of the sponsorship, Winston's angle was the same: getting its product between the fingers of NASCAR fans who smoked.
"Everything we did was meant to get interest built up for that Winston Cup event," Habegger said. "Why? Because the more people that attended that event, the more that we could impact. If we've got 100,000 instead of 50,000, the percentage of smokers is going to go up and it's going to make more sense for us."
From the beginning, the core of the company's efforts was in sampling. It's how Pennell used NASCAR when he started his career with RJR as a salesman in Florence, S.C.
"People talk about exclusive, but we didn't always have exclusive [at the tracks]," Pennell said. "I used to have to go to the concessionaire at Darlington Raceway, a guy named Mac McBride, who was an accountant the rest of the year but who had the concessions [rights] at Darlington. I had to give him the product for nothing to have the exclusive."
Pennell remembers the conversations and chuckles.
"People want Marlboros and Kools," McBride would say.
Pennell would offer him 50 cartons free and the rest of his supply for the race weekend at cost.
"Forget your Marlboros and Kools," Pennell would tell him. "I want nothing but Winston sold here."
Similar negotiations played out at speedways across the United States.
"In my day, they sold right many at the track," Pennell said. "It still wasn't any more than a pimple on a whale's ass, but you wanted to make sure that if somebody did run out, that was an opportunity you didn't miss. And you believed you had bought that right."
By the early '80s, sampling had evolved into conversion, an initiative meant to not only put Winstons in smokers' hands, but get Marlboros and Kools out of them.
"We were very effective at switching adult smokers to our brand," said Leary, who was the Winston brand manager before taking over SME. He called it "a great example of fishing where the fish were."
Winston's conversion program became the heart of its marketing efforts at the track.
It worked this way: At each Winston Cup event, SME would contract with local agencies to canvass the speedway grounds, where they approached adult smokers and
Trackside conversion programs allowed consumers to trade their smokes for free Winstons.
Winston offered access to tents where fans could cool off, kill time and be entertained — while being pummeled by Winston brand messages and filling out surveys that could land them more free cigarettes. Winston even offered some fans the opportunity to upgrade their seats.
All smokers had to do was show their cigarettes — and a photo ID that allowed Winston to collect their names and addresses for future direct-marketing pitches.
"Because of the value of converting an adult smoker from Marlboro to Winston, we made a fortune on the program," Pennell said. "Once you convert somebody over on a product that is smoked, on average, a pack a day, 365 days a year, even with the margins hurting like hell you can justify spending quite a bit of money [on the program]."
With time, Winston's conversion tactics grew in sophistication. Beginning in 2000, the company began to input names and addresses into computers at the track. The company also tracked smokers that it had converted, contacting them several weeks after the race to see if the switch had stuck and plying them with more benefits when it didn't. That sort of follow-up, data-based marketing also enabled SME to measure which of its trackside hires were performing most effectively and which sales pitches worked best.
When escalating costs forced Winston to bag the conversion programs at the end of the 2002 season, it was closing in on a system that would pay the field staff based on how many smokers switched to Winston and stuck with it.
"Once you convert somebody over on a product that is smoked, on average, a pack a day, 365 days a year, even with the margins hurting like hell you can justify spending quite a bit of money."
"That was one of the most exciting things we were doing," Leary said. "We were in the process of building a mobile sales force that wasn't just interested in 'How many hours do I have to stay?' and 'How many packs do I have to hand out?' But, more importantly, 'How many adult smokers can I switch today?' In other words, a business focus."
Winston's NASCAR merchandise promotions played upon fans' unquenchable thirst for all things racing. Each week, fans would show up at Winston's redemption tents with trash bags filled with proof of purchase seals that they could use to bid on premium merchandise or exchange for T-shirts and caps.
When Winston sensed that fans would go bonkers for items used during a race, it came up with the "Crash Tray," a tire-shaped, clear-bottomed ash tray that held a piece of sheet metal. The Crash Tray came with a certificate of authenticity that revealed whose car the memento came from and in which race it was used.
SME also hatched lug-nut key chains, which it collected at no cost, dispatching the driver of its mobile marketing rig to sweep nuts up in the pits after all the teams had left the track.
As brand manager of Winston, Leary wanted SME to do two things: spend less money and align more closely with the messages that he designed for the brand.
He couldn't get the former. Industry insiders estimate that about 40 percent of Winston's discretionary marketing budget went toward NASCAR in recent years. But Leary got the latter beginning in 1998, when Winston rolled out a new brand position.
"When we repositioned Winston around the concept of 'No Bull,' we were able to tap into the attributes of the sport and make those things work in tandem," Leary said. "That's when a sponsorship is really hitting on all cylinders: when the sponsorship and the sport's assets line up with the brand's. The 'No Bull' concept was hand-in-glove with the sport."
Truth be told, NASCAR didn't always see it that way. It loved the "No Bull Five," the Winston promotion that gave both drivers and fans a chance to win $1 million five times a season. But when Winston hatched the "No Bull" slogan, NASCAR blanched at one of the campaign's first ads, which featured a towering, tattooed biker who was meant to be taken with tongue in cheek.
NASCAR was at the early stages of pitching itself as a sport that was angling toward the mainstream. "We're trying to move beyond tattoos," NASCAR patriarch Bill France Jr. told Pennell, failing to see the distinction between Winston advertising and NASCAR advertising.
In hindsight, it was an early indication that the marriage was headed for a break.
From the time he began dealing with NASCAR in 1996, Pennell heard concerns that Winston's advertising limitations, along with mounting public displeasure with tobacco companies, might be holding back the sport's growth.
He responded by welcoming NASCAR to explore other options.
"Folks," Pennell told NASCAR senior executives during a meeting in 1998, "the day that you believe that we are getting in the way of you growing your equity and causing you more harm than good, you raise your hand, because that's the day we don't have an effective partnership. And all we're going to ask is that we make sure that we manage our way jointly out of this partnership.
"That day came some four years later."
Leary describes Winston's exit as equal parts inevitable and inconceivable.
"In the back of your mind, you knew that one day it was going to happen," Leary said. "It just can't be this day, can it?"