‘New reality’ shapes teams’ renewal efforts

Editor's note: This story is revised from the print edition.

Steve Newmark knew this season wouldn’t be easy for Roush Fenway Racing.

GETTY IMAGES For Roush Fenway Racing, team sponsor Aflac’s contract  is up this year, while 3M’s has already been renewed.

“One of our focuses has been continuity of partners and drivers, so that’s a great first step,” said Newmark, Roush Fenway’s president. “Hopefully we can continue to tick them off.”

Roush Fenway Racing is only one of five major NASCAR teams who began 2011 needing to renew significant sponsorships on a total of nine cars. As renewal negotiations ramp up this month and continue through the summer, team, sponsorship and marketing executives say a lot has changed since many of the sponsors negotiated their last deals three years ago.

The recession put added pressure on corporate marketers’ need for strong returns on their investments at the same time that NASCAR ratings and attendance declines caused them to scrutinize the sport more closely. The combination has put pressure on sponsorship prices, caused teams to look for ways to add value to the partnership packages and put new emphasis on performance on the track.

“Let’s be honest: The world has changed a lot since the economy crashed,” said Ron Rogowski, the director of sponsorship and events at UPS, which is in renewal conversations with Roush for the No. 6 car. “NASCAR has had a few setbacks. The numbers haven’t been where they used to be. You have this economic impact and the state of the sport. You sit down with teams, and there’s a very active discussion to make an investment work harder.”

Team Epic Principal Dave Grant added, “The type of money the marketplace was commanding a few years ago isn’t there anymore. The pricing has maxed out. Teams are recognizing the new reality, and that’s part of it.”

In the boom period of the early 2000s, NASCAR teams carried most of the leverage in sponsorship negotiations. There seemed to be no shortage of companies interested in entering the sport by sponsoring a team. But the recession shifted the leverage in negotiations to sponsors. AARP was the only significant new team sponsor to enter the sport in 2010, and teams have put more emphasis on the old maxim that keeping a sponsor is easier than finding a new one.

Three renewals have been completed so far this season: Mars with Joe Gibbs Racing, 3M with Roush Fenway and Caterpillar with Richard Childress Racing. All three teams declined to comment on pricing, but 3M is paying for fewer races, which can decrease a sponsor’s overall spend on a sponsorship.

Such pricing shifts are part of a new reality for NASCAR teams. Some teams are trying to hold value by taking the same amount of money for fewer races, which leaves additional inventory for them to sell, while others are settling for less money for the same amount of races.

“Three years ago you saw deals in the $18 (million) to $22 million range and today we’re probably in that $13 (million) to $17 million range,” said Tamera Green, GMR Marketing’s vice president, group account director who works on Best Buy’s NASCAR activation. “What’s driving the cost changes is what caused it for all businesses — the economy.”

Andrew Campagnone, formerly of Wunderman Sports and now with newly formed Sports Marketing Consultants, agreed, saying, “There’s downward pressure. Some people didn’t adjust (during the recession), and they’re having to adjust now.”

But the economy isn’t the only issue sponsors are raising in renewal discussions. The U.S. Army, which annually renegotiates its deal with Stewart-Haas Racing, went from 23 to 15 races this year and lowered the cost per race of its sponsorship. Matt Petersen, who handles the Army account as Momentum Worldwide’s director of motorsports, said the changes “took into account audience, TV ratings and where the market is moving.”

Petersen said teams have reacted to those trends by offering sponsors more assets and value. He pointed to Stewart-Haas offering up Tony Stewart’s suite at the Indianapolis Motor Speedway for the Indy 500 and Brickyard races. The team also has been more generous with driver appearances and proactive in bringing opportunities to the Army, going so far as to recommend that the No. 39 crew and driver Ryan Newman spend a day at Fort Benning in Georgia.

“Sponsors expect more flexibility,” Petersen said. “It’s a healthy sport, but teams recognize they need to recalibrate so that more rights go back to the rights holder.”

Teams are increasing the assets they provide in part because sponsors are focused increasingly on quantifying the return on their investments. It’s a trend that’s been true across all sports as marketers are pressed to justify their spending.

“We’re seeing a lot of discussions around measurement and showing how activating in NASCAR generates greater sales, greater exposure and greater brand awareness,” Newmark said.

One of the ways sponsors are trying to address that is by making their contracts more performance-based, said Rogowski of UPS. Doing so would follow a formula adopted by Bank of America a few years ago when it began negotiating deals with a team like the Boston Red Sox that would see the bank pay more if the team made the playoffs or won the World Series.

“Teams are very open to a deal that’s more flexible like that than in the past,” Rogowski said.

Teams are optimistic that new money will flow into the sport as the season progresses. Average viewership on Fox is up 18 percent to 7 million fans a race through seven races, and attendance has been strong at all but one track.

Farmers Insurance last week announced a new, five-race agreement with Hendrick Motorsports and driver Mark Martin, and teams say other new companies have been researching the sport. The arrival of new sponsorship dollars would ease some of the urgency in renewing existing partners.

“You’re seeing increased interest from sponsors across the board from where we were a year ago,” Newmark said. “Whether that materializes into sales remains to be seen, but we’re optimistic.”