Marketing Weblog: ARE YOU SURE YOU WANT TO BE A SPONSOR IN THE FORMULA 1? THE MICHELIN CASE

Nearly everybody would say yes if they have the budget. Being a sponsor or a supplier of the Formula 1, GP Motorbikes or Rallies seems to be really cool. You have to invest a big chunk of money, but the publicity (or advertising) is guaranteed. However, as some well-known brands are experiencing, there are high risks involved.

1. The publicity that your brand gets.
2. The association that your brand gets with values such as leadership, innovation, coolness and so on.
3. The advertising that you can do with the Team you are sponsoring.
4. The marketing activities you can do around your sponsoring such as events with clients + dealers, exclusive promotions, etc.
5. In case you are a supplier, the development and trial of new products.

The amounts of money to be invested can be up to the 60 million € per year that the big sponsors are investing in Ferrari and Mc Laren. So you definitively have to be sure that the ROI (considering the return not only in terms of money) is there.

What is nowadays going on with Mc Laren is not for sure what their sponsors are looking for. Looks like that Mc Laren will win the championship, but the sponsor brands are subject to be associated with unexpected things such as individualism, conflict, faking, miscommunication etc.

Among all the cases, one of the most interesting ones is MICHELIN. Michelin, a French tyre manufacturer, has been for years both a supplier and sponsor in F1, GP Motorbikes and Rallies. I do not have the figures that they have invested in product development and sponsoring, but I can guarantee that the investment has been huge. For many years it has worked well for them, but during the last years things have turned around. Here is a quick summary:

• Both in F1 and Rallies they have been an official supplier for tyres together with their main competitors. However, problems with their tyres performance (take for instance what happened in Canada in F1 one year ago), fostered the decision to go along with only one supplier (their competitors) and let them apart.
• To make matters worse, something similar has happened in GP Motorbikes, where one of the main reasons given for the unexpected championship of Ducatti, has been the performance of the tyres supplied by competition. Due to the latter, it has been decided to work only with one tyre supplier and exclude them again.

For sure, being a sponsor and supplier in these sports has given many benefits to Michelin and their brand image. Actually, I do not think they would have built such a strong brand without them. But the late events have been disastrous for them and have definitively hurt their brand image significantly. Some of them can be attributed to them (according to the press they could have done a better job with the product development), but others were definitively out of their control

What do you think about this? Would you invest in sponsoring or look for other marketing activities?

My personal opinion is that you have to think carefully when you go ahead with a sponsoring. You may not control factors that can ultimately lead to unexpected consequences.

Comments

Hello Ignacio:

Interesting topic you brought up here. I think sponsorship is part of the marketing mix you can use to communicate your brands; obviously not many brands have the potential and the money to do this. So the question here is not whether you put your money in sponsorship or in any other marketing activities.

Let’s take the cigarette industry, for instance. Marlboro sponsored Ferrari for many years, and I believe the results during the Schumacher era were outstanding, considering all the restrictions in the Tobacco industry related to consumer communication. The most selling cigarette brand in the world sponsored the world’s champion team. In the other hand, you had Lucky Strike that sponsored BAR-Honda team for many years, who didn’t win too many races. What was the real impact on those occasionally fans? I’m not sure.

The problem with Michelin is not a problem of sponsorship; it’s a problem of the product and its performance. The question we should ask ourselves is... Do I have the right product? Does my product really offer what I say it offers?

Another interesting example is Red Bull, sponsoring extreme sports events.

Mauricio Yury summarizes it pretty well in the discussion forum: High exposure, high impact, high risk.

Potential benefits are huge but so are the risks. Many things are out of control, and might turn into an unexpected and undesired situation.

I agree Edurardo: The main problem that Michelin has was the product quality. And the consequences were highly exposed because it was an official supplier and sponsor.

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