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SBJ/Dec. 6-12, 2010/This Week's Issue
For Sprint rival, NASCAR road was never smooth
Published December 6, 2010
When the NASCAR season officially ended with last weekend’s awards banquet in Las Vegas, Verizon Wireless’ involvement in the sport ended as well.
Instead, the company will shift an estimated $12 million to $17 million of motorsports spending to IndyCar, where it will sponsor Penske Racing’s No. 12 car driven by Will Power and activate against a series sponsorship it signed in August.
Verizon is leaving NASCAR after just two years, and its swift entrance and exit from the sport makes it the second major telecommunications partner to depart in the last three years. Its experience underscores both the challenges a telecommunications company faces in attempting to operate in the shadow of Sprint and the success the sanctioning body has had in protecting the exclusivity of its title partner.
“Regardless of the category, it’s always bad for a property to lose a major brand,” said Dan Richlen, vice president and group account director at Wunderman, which works in motorsports with brands like Panasonic. “This is another leading indicator that everyone needs to stay focused and find better return for sponsors because at the end of the day, if there were enough return, [Verizon] would be here in spades.”
NASCAR has more than 400 companies that sponsor the sport, and it encourages competition in most categories. As a result, sanctioning body partners like Coors Light and UPS race side-by-side with cars sponsored by competitors like Budweiser and FedEx. But when it comes to its series title sponsors, as well as the fuel and tire categories, NASCAR provides complete exclusivity. That means it protects Nationwide against insurers in its secondary series and Sprint from wireless competitors in its premier series.
“That’s the model we’ve had for a long time, and it’s a successful model,” said NASCAR chief marketer Steve Phelps. “That’s a sacrifice we understand we need to make, and one that allows us to fund the sport.”
Trip Wheeler, president of the motorsports agency The Wheeler Co., added, “You want flexibility. The more people spend, the more their competitors activate. But Sprint has been very good for the sport. Everyone [teams and tracks] can say, ‘I get it.’ NASCAR has to protect them.”
When Verizon acquired Alltel in 2008, the biggest sports asset it inherited was the Arkansas-based wireless company’s sponsorship with Penske Racing. Verizon had sponsored Gillett Evernham Motorsports’ No. 9 Dodge in the Nationwide Series, but its executives saw potential to do more with Penske because the sponsorship included rights to the No. 12 Sprint Cup Series car.
“It wasn’t looked at as, ‘OK, we have this, [we have to do something with it],’” said Suzy Deering, executive director of media and sponsorships at Verizon Wireless. “It was more, ‘This can be a good asset for us.’”
Verizon executives knew it would be difficult to turn the asset into something that delivered a return. Just two years before, AT&T acquired Cingular and inherited its sponsorship of Richard Childress Racing’s No. 31 car driven by Jeff Burton.
As pre-existing sponsors, Cingular and Alltel were grandfathered in as sponsors prior to Nextel (now Sprint) assuming the Cup series title sponsorship in 2004 in a 10-year, $750 million agreement. NASCAR’s contract with Sprint specified that the Cingular and Alltel brands couldn’t be changed, and no other telecommunications companies could have a presence in the sport’s top series.
AT&T sued to allow its logo to be placed on Burton’s car. NASCAR filed a countersuit and won, effectively pushing AT&T out of the Sprint Cup Series in 2008.
“You can’t justify staying in a sport if you can’t market your brand,” said Eric Fernandez, senior partner at MediaLink and a former sports marketing executive at AT&T. “If you’re striving to be an iconic brand, you want to be in the premier series. That’s not a knock on the Nationwide Series, but there’s a clear pecking order. When you can’t market your core brand, that’s a problem.”
Verizon executives knew NASCAR would protect Sprint but were optimistic there was enough wiggle room within the rules that they could get a return on their investment in the sport.
Penske, Verizon and their motorsports marketing agency, Just Marketing International, developed the Verizon Championship Racing moniker as a way to brand its involvement in the sport. The umbrella brand was designed to illustrate the heft of Verizon’s investment in motorsports by tying together its primary sponsorship of the No. 12 Nationwide car, as well as associate support of Penske’s IndyCars and Grand-Am car. It also provided a discrete and limited connection to Penske’s No. 12 Sprint Cup Car, which Verizon was funding but couldn’t brand because of Sprint’s exclusive rights in that series. A primary Cup deal alone typically runs in the $15 million to $18 million range for a team such as Penske.
Verizon backed up its loose tie to the Sprint Cup car by using the same black-and-red paint scheme on both the No. 12 Nationwide and No. 12 Sprint Cup cars. The only difference between the two was that the Nationwide Series car featured a Verizon logo, while the Sprint Cup Series car featured a Penske Racing logo.
The hope was that the similarities between the cars racing Saturday and Sunday would be strong enough that consumers would associate both with Verizon in the same way they associated Marlboro with the red-and-white, unbranded Ferrari car in Formula One.
NASCAR, which has final say over the paint schemes of the cars, approved the No. 12, and Penske Racing President Tim Cindric and NASCAR spokesman Ramsey Poston called the paint scheme agreement a good compromise.
“Everything about the sport is conflict and compromise and cooperation, and that’s what happened here,” Poston told NASCAR.com in 2009.
Verizon Wireless targeted the Daytona 500 in 2009 as the moment when it would trumpet its new presence in NASCAR. It branded a dozen Smart cars that toured and passed out flyers on Daytona Beach; it rebranded a popular local spot, the Ocean Deck, as the V Lounge for four days; and it used its retail store across from the speedway as the site for driver autograph signings. The promotions were the cornerstone of a yearlong activation campaign comparable to the more than $10 million the average primary partner spends to activate in NASCAR.
Verizon planned to supplement its spending around town with a creative buy on Fox during the race. Together they developed a plan to superimpose Verizon logos electronically on the roll bars and interior of the No. 12 car during in-car shots during the race, similar to the way the yellow “1st & Ten” marker is applied during a football game. It tested the idea at the Bud Shootout, the week before the Daytona race.
On race day, word spread that Sprint and NASCAR didn’t like the idea. NASCAR called a meeting with Fox, Verizon and Penske executives and said that they couldn’t apply the Verizon logo to the No. 12 car during the race broadcast. The sanctioning body executives threatened to black flag the car driven by David Stremme if the logo appeared during the race broadcast. Verizon executives abandoned the plan rather than risk affecting the race, sources familiar with the meeting said.
Verizon declined to comment on the meeting, but Deering said, “There are constraints we face every day from a media standpoint. We always shoot for the moon, and if we get pulled back, we get pulled back.”
Sprint officials deferred questions regarding Verizon’s involvement in NASCAR to the sanctioning body.
There were other problems that arose during the year, as well. Verizon couldn’t use Stremme at retail. It couldn’t feature him in creative. And while Verizon could invest in a driver like Penske’s Justin Allgaier in the Nationwide Series, if he succeeded and moved up to the Sprint Cup Series, all the equity Verizon created would be worthless because they couldn’t stay with him.
All of those things were challenges Verizon officials knew about up front, but it wasn’t until they got fully involved with the sponsorship that they understood just how limiting the restrictions could be. Verizon’s enthusiasm and optimism about its opportunity in NASCAR waned.
“There were a lot of limitations that made it apparent business could be driven more effectively elsewhere,” said Jon Flack, president and COO of Just Marketing International, the marketing agency that worked with Verizon on its NASCAR sponsorship.
Verizon’s deal for the No. 12 Nationwide and Cup Series cars was due to end in 2010. It continued to fulfill its commitment and didn’t cut back on its activation spending, but it began to make plans to leave the sport.
Earlier this year, it signed on as the primary sponsor on Penske’s No. 12 IndyCar entry. It later negotiated an IndyCar Series deal that allowed it to develop a mobile app and provide content to IndyCar fans on its V-Cast network.
The two deals allowed Verizon to exit NASCAR but stay in motorsports. It made its final appearance on the No. 12 car last month at Homestead-Miami Speedway.
Deering said the decision to double down on IndyCar was driven by the fact that there were fewer races and the company felt it could do more concentrated hospitality as a result. It also gave Verizon the chance to be the category leader and allowed it to maintain its commitment to Penske.
“The overall thinking is focus,” Deering said. “It’s about maximizing what we have, elevating our brand and reaching our consumers.”
NASCAR executives hope Verizon returns to the Nationwide Series or Camping World Series, but it’s unlikely the sport will change its exclusivity in a way that makes room for Verizon in the Sprint Cup Series.
“I wouldn’t say never, but it’s hard to predict,” Phelps said. “With so many categories out there, having limitations in three or four categories doesn’t seem too onerous. But at the same time, we want to be sure we have race cars on racetracks and teams are fully funded.
“There are still 400 sponsors in this sport, which is incredible, and the reason they are there is that they’re getting a solid return on their investment.”