SBJ/May 28-June 3, 2012/Marketing and Sponsorship

Driver deals running on empty

Changing market, demands curtail NASCAR endorsements

A few weeks ago, Just Marketing International’s Zak Brown headed out to Del Frisco’s in New York for a steak dinner with his client Jeff Gordon and 20 executives from advertising agencies, media buying firms and major international brands. Brown, who has represented Gordon since early 2010, hoped that putting the four-time NASCAR champion in front of advertising decision-makers would make the driver a top candidate for their clients and brands the next time they hired a spokesman.

The going’s tough even for stars like Gordon.
Photo by: GETTY IMAGES
“Jeff’s always on his ‘A’ game,” Brown said before leaving his hotel. “This is a great way to show others that.”

While Brown was optimistic the dinner would result in new endorsement deals, he acknowledged a new reality that he and other driver representatives are accepting: The driver endorsement business is not what it used to be.

Since the recession in 2008, NASCAR’s most endorsable drivers, according to The Marketing Arm’s DBI, which measures an athlete’s ability to influence brand affinity and consumer purchase intent, have cut only a handful of endorsements.

Kasey Kahne and Jeff Burton both signed two deals during that time, while Gordon, Denny Hamlin, Carl Edwards, Mark Martin and Kurt Busch each signed one. Five-time champion Jimmie Johnson, on the other hand, signed no new endorsements in the last four years. Kyle Busch, Tony Stewart and Dale Earnhardt Jr., three of the sport’s most recognizable drivers, shied away from personal endorsements in favor of deals that included inventory with their Sprint Cup and Nationwide series teams.

The only driver to sign more than two personal endorsements since ’08 has been Danica Patrick, the former IndyCar star who established herself as a personal brand long before she made the move to NASCAR. Since joining the sport in 2010, she has announced new deals with Tissot, Nationwide, COPD, Chevrolet and Coke Zero.

Marketers and driver representatives say the dearth of deals not only reflects the economic downturn and a general pullback in corporate spending in NASCAR, but also demonstrates a change in the NASCAR marketplace.

Driver representatives and team experts point to a host of factors that have decreased driver endorsement activity, including the rise of co-primary team sponsorships, an abundance of unsold team inventory, and an evolving business model where teams are offering drivers incentives to deliver team sponsorships rather than sign personal endorsements.

“I don’t think there’s a driver you could talk to who could say their endorsements aren’t down from where they were in 2005 or 2006,” said Alan Miller, a Michigan-based attorney who works with Johnson and other drivers. “It’s a reflection, in some ways, of attendance at the track and TV ratings.”

Photo by: GETTY IMAGES
Brett Frood, executive vice president of Stewart-Haas Racing, who represented Stewart for endorsements for several years before the team was formed, added, “The whole marketplace has evolved. It’s different than it was in 2007 or 2006. We were just looking for [personal endorsements] then because we could. Now, drivers and teams are working more closely together.”

Five-time Sprint Cup champion Jimmie Johnson (top left) hasn’t signed a new endorsement in years, while former IndyCar star Danica Patrick (top right) has maintained a healthy number of new deals and Tony Stewart has pushed companies to become sponsors of the team he co-owns.
A single endorsement typically adds anywhere from $250,000 to $1 million to a NASCAR driver’s annual earnings. The deals offer drivers a chance not only to increase their non-salary earnings but also raise their profile by affiliating with brands that aren’t sponsoring their cars.

Drivers through the years have endorsed everything from Wranglers and Coca-Cola to Armor All and lemonade. But in recent years, big brands like Gillette and Gatorade have cut the work they do with NASCAR drivers.

In 2003, Gillette built an entire marketing program around NASCAR drivers it called “Young Guns.” The effort initially featured five drivers. Gillette stuck with the NASCAR-specific campaign for seven years before shifting to a broader sports campaign and cutting the total number of drivers from six to two — Kyle Busch and Hamlin.

Gatorade made a similar move. In the 2000s, the PepsiCo brand endorsed four drivers — Johnson, Matt Kenseth, Ryan Newman and Mark Martin — but it has trimmed that total in recent years to just two, Johnson and Kenseth.

“How many drivers do you see on TV now? It’s not what it used to be,” said a senior marketing executive who’s worked in NASCAR for more than a decade.

National awareness of more than half of NASCAR’s most endorsable drivers fell over the last four years, according to DBI’s measurements (see chart below). Those declines have coincided with some fundamental changes in the sport. Teams used to be funded by a primary sponsor that underwrote the cost of the entire season, but the number of sponsors willing to do that declined as the cost of sponsorship rose and the recession put pressure on marketing budgets.

Budweiser, Home Depot and UPS are among the full-season sponsors who now fund fewer races. Their decisions to cut back have created new inventory on cars, making it possible for brands that were once locked out of the sport to get space on a car along with an affiliation with the driver.

Frood pointed to Stewart as an example of how that’s changed a driver’s endorsement potential. When Stewart drove for Joe Gibbs Racing from 1999 to 2008, he had one sponsor (Home Depot) for all 36 Sprint Cup races. Because inventory on Stewart’s car was taken, the only way brands could affiliate with him was through endorsements, Frood said. That allowed him to sign personal deals with Old Spice, Coca-Cola, Bass Pro Shops and Armor All.

He still has many of those endorsements, but any new deals he does now include sponsorship of the team that he co-owns.

“We don’t want to do a [personal endorsement] for Tony that locks the team out of a category and blocks our ability to get a sponsorship on the No. 39 or No. 10,” Frood said.

The demise of primary sponsorships also means drivers have more sponsors to represent, which puts more demands on their time.

For example, Hendrick Motorsports’ Gordon has three primary sponsors — DuPont, Pepsi and AARP — on his No. 24 car, and Roush Fenway Racing’s Edwards has six primary sponsors — Kellogg’s, Fastenal, Aflac, Subway, UPS and Best Buy — on his No. 99 car. That can mean as many as 25 to 40 appearances in a year for each driver.

At a point, driver representatives say their clients begin to ask: Is it worth $250,000 if they have to do three to five more appearances a year?

It also makes it harder to find a category in which the driver can take on an endorsement. For example, the six primary sponsorships on Edwards’ No. 99 car preclude him from doing an endorsement in the cereal, fast food or retail categories, and any endorsement he wants to sign requires Roush Fenway’s approval.

Teams also have begun giving sponsors access to all of the drivers in their stable. As a result, Gordon not only works with DuPont, Pepsi and AARP, which are on his car on Sundays, but also Quaker State, which is a primary sponsor on the team’s No. 5 car driven by Kahne.

“[Multiple sponsors] does present a challenge,” said Brown, who represents Gordon and consults with brands such as Farmers Insurance and Crown Royal. “We have to be mindful of all the Hendrick sponsors. We can’t do a personal service deal with Coke because Hendrick’s a Pepsi shop. We can’t do something with a manufacturer because Hendrick’s a General Motors team.”

But it’s not just conflicts holding drivers back these days. There is a glut of primary inventory on top-tier cars, including Kenseth’s No. 17 car, which has 12 races available this year, and Kahne’s No. 5 car, which has five races available. The open inventory gives brands interested in the sport a choice they didn’t have just a few years ago. Do they endorse a top driver for $250,000 to $1 million a year, or sign a car sponsorship that includes a driver for $400,000-plus per race?

“When you had little inventory on the cars, driver endorsements were an attractive alternative because it didn’t cost as much as a car sponsorship, and if you had a good media budget, you could get a lot of value out of it,” said Mark Dyer, senior vice president of strategic planning and development for IMG, which represents Patrick. “There’s too much inventory now.”

In the hierarchy of NASCAR sponsorship, filling that team inventory takes precedent. Contracts require drivers to get their teams’ approval before signing an endorsement, and driver representatives say the glut in sponsorship inventory has made getting approval more difficult.

To avoid conflicts, teams are encouraging drivers to bring potential endorsers to the team. Michael Waltrip Racing driver Clint Bowyer did that a year ago when he hooked up with 5-Hour Energy.

Kahne made a similar move when his agency, Fuel Sports Management, took the interest Rockwell Tools expressed in an endorsement deal, which would have been worth more than $250,000, and converted it into a primary sponsorship — valued at more than $400,000 — on the No. 5 car at Darlington during the Bojangles’ Southern 500.

Fuel Sports Management CEO Rod Moskowitz sees the shift away from driver endorsements to deals that incorporate team inventory as an opportunity for both drivers and brands.

“To really do an endorsement deal the right way, it’s best to have branding on a car,” Moskowitz said. “If you can use the driver with the car and have him in a uniform with your brand, it’s more authentic and sponsors get more value, and if you can get more deals to fill up the car, then the driver has a chance to make more money. That’s best for the sponsor and the team, and ultimately good things come from that.”





















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