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]> NASCAR, the second-most watched sport on TV, is launching new strategies to build
April 6, 2018
About 140,000 fans descended on Charlotte, N.C., for the Dollar General 300 and the Bank of America 500 in a scene best described as part Woodstock, part Disneyland. Two days prior to the mid-October races, RVs had started forming a solid one-mile ring around the Lowe's Motor Speedway filling up parking lots and campgrounds. Those RVs come in every shape and size imaginable from the state-of-the-art models with small satellite dishes to the '60s-themed camper covered in psychedelic spray paint offering body piercing. Tents, grills and lawn chairs are wedged into every patch of grass able to hold them. Bands entertain race-goers from small stages set up throughout the area.
"NASCAR is a lifestyle, that is what sustains it. It's not a stick-and-ball sport," says Blake Davidson, managing director of licensed products at NASCAR. "Fans plan their vacations around NASCAR events. Fans think, 'My friends and family are here,' and they share a common passion and a sense of belonging and enthusiasm."
NASCAR has built a devoted fan base that numbers 70 million, and those fans bought up licensed product to the tune of $2 billion in 2007.
Corporate sponsorships are the fuel that keeps the NASCAR engine running, and those sponsorships are given a prominence equivalent to New York's Times Square. NASCAR has elevated corporate sponsorship to a level unseen in any other sport: Racetracks, cars and team uniforms are covered with corporate logos. Sponsorship deals can be made with NASCAR, with specific racetracks and with individual teams and drivers.
And while the importance of sponsors hasn't changed throughout NASCAR's 60-year history, the face of the sponsor has: Where once it was Winston and Penske, today it is also M&M's, Nicoderm and Prilosec. No sponsorship opportunity is left unexplored. There are the obvious tie-ins for insurance, tools and tires, but also official sponsorships for deodorant, pet food and shaving products.
Sponsorships are crucial because NASCAR is an expensive sport to participate in, especially for drivers just starting out. A car costs about $200,000 to build, and each driver brings two cards to a race. Trailers are needed to haul the cars from place to place. Garages, mechanics and engineers are needed to build, test and maintain vehicles.
"You have to earn your space on the track. It's difficult to get to the elite stage. It's a costly investment in time and money. Lives revolve around that effort. People can take out two, three mortgages to fund a career," says Davidson.
Like many sports, NASCAR race attendance and TV ratings dipped for the last two years after experiencing steady growth through the '90s and early 2000s. NASCAR also had to contend with a number of popular drivers retiring. Unlike team sports, fans connect with a particular driver, and time passes before a fan will make the leap to get behind a new face.
In response, NASCAR made a number of changes to appeal to a new fan base, encountering a little resistance from core fans in the process. Race locations were expanded to include California, Miami, Chicago, Las Vegas and Phoenix to expand the brand geographically.
Blake describes the process as an evolution designed to make the product better for fans. "Few sports will make as many changes as we do. We went through a big push with new markets to reach casual fans, but we understand that hard-core fans drive this sport. They are the ones attending the events and buying the product," says Davidson.
And that effort has paid off. According to Davidson there are now as many fans in the state of Washington or Wisconsin as there are in North Carolina.
One of the sports' biggest appeals is its accessibility. "You couldn't imagine being an NFL fan and getting access to the locker room. Drivers are accessible to fans, and fans buy the product from the companies that sponsor the cars because they know that money goes right back into the success of the teams," says Paul Sparrow, NASCAR's director of account management and business development.
Drivers understand that meet-and-greets with fans and appearances for sponsors are as much part of the sport as driving the car. Drivers regularly spend three or four hours before a race making stops at sponsors' events or signing autographs at their souvenir trailers.
Fans also reward sponsors. NASCAR fans, of which 42 percent earn over $50,000 a year, are three times more likely to purchase a sponsor's product. Seventy-two percent of fans are more likely to buy a NASCAR product than an unrelated product.
Sponsorships come in a variety of forms. The primary sponsor on the hood of a winning car costs about $24 million annually. Companies can even opt to sponsor a car for one night only. If a retailer becomes the primary sponsor on the hood, it can choose to parcel that space out to its vendors.
Individual contractors go around to each team to purchase rights. Teams deliver cars, while NASCAR delivers infrastructure by adding retail development, a major accounts group and creating increased opportunity for licensees and retailers. NASCAR serves as the umbrella group that works with all the individual constituencies, such as tracks, drivers and teams, and provides research on how the sport indices at retail.
"We do a lot more education at retail for NASCAR—it's not as intuitive as other sports. We have to be more aggressive with a bigger educational process," says Sparrow.
NASCAR's biggest promotions are at Walmart, but NASCAR reaches across channels with a presence in camping stores, tractor supply stores and specialty. The sport is even making a push into drug stores. A hall of fame planned for 2010 will a catalyst for a retro program, and the sport also is gaining new signatures in stores such as Urban Outfitters.
In 2005, in conjunction with DuPont, NASCAR rolled out a hangtag hologram program to curb the sale of counterfeit goods. Now NASCAR is incorporating a rewards program via serial codes on the hangtags that allow fans to register at NASCAR.com and take part in weekly prize giveaways and year-long sweepstakes, download wallpapers and view highlight videos from races, among other things. In turn, NASCAR benefits from the added information with a more detailed database to understand who is buying product.
NASCAR is a retail-friendly sport with 36 races and a long selling season running February through November. The popularity of some of the drivers makes them brands in their own right. Jeff Gordon, Jimmie Johnson and Dale Earnhardt Jr. are represented by Hendrick-Gordon Licensing. Those three drivers represent about 50 percent of sales.
"This business really capitalizes on the personality in the sport. These drivers are really athletes. There is no time-out in our sport, the amount of concentration needed is phenomenal, drivers lose 7 to 10 pounds in a race, and there is 400 pounds of resistance on the wheel," says Scott Hammonds, vice president of licensing and new business development for Hendrick-Gordon Licensing. Temperatures inside a car can hit 120 degrees Fahrenheit or higher, races last three hours or longer, and drivers speed through at about 160 miles an hour inches away from other cars.
That fans buy souvenirs and shirts sporting their favorite driver's face is not new, where they are buying that licensed product is changing.
"Retail in this sport has changed drastically over the last five years. Fifteen years ago, Dale Earnhardt did 80 percent of revenue trackside and at mom-and-pops, and 20 percent came from retail. It's 50/50 now, and there will be a true switch in the future where it will be 80 percent retail and 20 percent trackside," says Joe Mattes, vice president of licensing for JR Motorsports, the management company and racing operation for Dale Earnhardt Jr.
In the next two years, he sees the biggest growth in sporting good and specialty stores. Mattes believes relatively soon online sales will outpace the business done at trackside. Trackside, however, remains a viable selling space for second-tier drivers who place out of the top 12.
Those in the business agree that kids' products are an underdeveloped category. JR Motorsports is looking at a baby chair in 2009 and has just rolled out a branded memory stick and mouse pads in Circuit City. In spring '09, Kellogg will roll out Pop-Tarts decorated in the drivers' colors and sporting their car numbers.
Part of the experience of a NASCAR race is trackside selling, essentially a racetrack flea market loaded with licensed product. There are about 50 trailers selling merchandise at the Lowe's Motor Speedway on the weekend of the Dollar General and Bank of America races. Motorsports Authentics runs 27 of those units.
Dale Earnhardt Jr. moves the most merchandise, followed by Jeff Gordon and Jimmie Johnson, according to Mark Dyer, president of Motorsports Authentics, NASCAR's biggest licensee. Up-and-comer Kyle Busch, driver of the M&M's-sponsored car, has made his mark winning a third of the first 26 races in this season and has seen the biggest increases in sales of merchandise.
The economy is posing some challenges. Manufacturing and transportation costs are up, according to Dyer, and attendance at events is good but off, and volume is down. But still, for Dyer, weekend sales at an event like the Daytona 500 will be about $3 million.
With drivers changing sponsors more frequently, NASCAR can be a challenging sport for a company selling merchandise. "Imagine if a third of the way through the season the New York Yankees up and move to Newark, N.J.," says Dyer.
A new sponsor or paint scheme can renew selling excitement around a driver but also can result in unsold product. Inventory was lost last year when late in the season top seller Dale Earnhardt Jr. traded in Dale Earnhardt Inc., the team started by his late NASCAR legend father, to join Hendrick Motorsports and changed sponsors from Budweiser to Mountain Dew's Amp and the National Guard. Budweiser subsequently became the sponsor of driver Kasey Kahne's car.
As lead times on products get shorter, businesses like Motorsports Authentics must continue to improve their execution. Dyer is considering new options in trackside selling, a business that he says has matured, such as more permanent structures to sell product from, and plans to be more aggressive with new channels of retail distribution. NASCAR products sell in a myriad of mainstream retailers as well as in the specialty store such as Bass Pros, Academy and even QVC, which offers NASCAR product on its "For Race Fans Only" Friday night segment.
While NASCAR has been working to grow its U.S. fan base, it also is looking to build its brand globally in the future.
"In six years, we've come a long way to introducing the brand. We didn't distribute internationally until 2001," says Robbie Weiss, NASCAR's vice president of broadcasting and managing director of international.
NASCAR is concentrating its focus on Canada and Mexico and is working to "build a meaningful, sustainable business before moving into other geographic areas," says Weiss.
The Canadian Tires Series was launched two years ago, and there are currently 14 races May through September. There is a longer 10-month window for racing in Mexico, and five tracks have been built there. In Mexico, car counts are up and attendance is at capacity.
"The key to developing new countries," according to Weiss, "is to take the time and energy needed to build a loyal fan base, build a slate of drivers with local relevancy and support local racing at a grass-roots level.
"We want to be a lifestyle, not a trend," says Weiss. "These two countries that we are in now have completely different likes and dislikes. It's not a one-size-fits-all."
The first step in building a global presence was establishing ownership rights and a strong trademark program. "We've spent the last six years, from South America to Australia, resolving trademark issues in major markets," says Weiss.
With a strong business foundation in place, Weiss says NASCAR will look to expand its brand significantly, incorporating quality, licensed product, particularly in the kids' market, along with a women's line and paint. Currently, NASCAR has international fulfillment in 10 countries.
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