Last weekend, the Formula One circus rolled into town with the Singapore Grand Prix. Loud, flashy, and ostentatious, F1 is a spectacle littered with tons of celebrity tinsel.
One thing you will not fail to notice are the corporate logos decorating each and every surface. On the cars, drivers’ outfits, around the track, and even in the post-race press conference, no chance is wasted to plaster a wall with whoever forks out the cash to do so. Even naming rights aren’t exempt – the Singapore GP’s full name is the Formula 1 Singapore Airlines Singapore Grand Prix.
Big names like Petronas, UPS, Dell, and Coca-Cola vie for 600 million eyeballs across the globe – not to mention the carmakers as well, whose machines scream around the track. Of course, logos in prime positions cost more, but getting your logo on a car isn’t cheap in the first place. Even sponsoring a backmarker will start from upwards of half a million dollars. Today, it is estimated that brands are sponsoring F1 to the tune of US$30 billion.
So why, exactly, do brands spend so much money? What are they getting out of it?
A Sporting Association
Corporate sponsorship started in 1968, when Lotus turned up at the Monaco Grand Prix sporting Imperial Tobacco’s Gold Leaf branding on their cars. This has since opened the floodgates for corporate money to flow into the sport.
There is good reason for this – brands want to be associated with F1. Repeated market research has revealed that consumers consider Formula 1 “sophisticated, dynamic and prestigious”. Some of the larger sponsors commit hundreds of millions, over several years, to associate their brands with these appealing characteristics.
Take Red Bull for instance. The Austrian energy drinks giant has cultivated the image as a brand for active, passionate lifestyles. By associating the brand with F1, it entwines the dynamic image of F1 with the aspirations of its consumers.
Other brands are also associated with F1 due to its position at the pinnacle of motorsport. Racing an F1 car is a technical tour de force – cars go round the track not just due to the driver, but also to an army of technical and scientific engineers behind his team.
A great example of this would be Petronas and Mercedes F1. Petronas has worked very closely with Mercedes to deliver the perfect lubricant for their engines, and this helped to produce one of the most successful and reliable engines in the history of the sport. They have won 74 per cent of all races since 2014, and the collaboration with Petronas keeps getting stronger and stronger.
This is the archetype of technical collaboration that has worked since the dawn of motorsport. But for non-traditional brands like IT companies, this also provides a great opportunity for partnership.
BT, for example, is official technology partner for Williams F1. It is not just a sponsorship deal; BT also provides technical assistance to the engineering team. As modern F1 cars are effectively 200mph data centres, BT helped in removing latency and improving data processing generated by cars during racing.
Being able to integrate your products into a team to make it go faster, to increase performance and to see it rise to the top: it makes for a powerful brand story. These stories can be used to differentiate yourself from the pack, while honing your team’s technical expertise.
More Than Just a Logo
Sponsorship in F1 is about more than visibility of a logo – the cars screaming past at 200mph don’t give viewers much time for thoughtful reflection.
Think of sponsorship as a package deal. Modern sponsorship contracts in F1 are tailored to the needs of both the sponsor and the team. This often includes activities and promotions outside of the races themselves.
Drivers frequently do product commercials, while sponsors also have rights to use team imagery to promote their products. Petronas, for example, frequently uses images of Lewis Hamilton and the Mercedes F1 team at its petrol stations.
Sponsoring a team also gives a company the possibility to tap into a vast network of potential customers among its fellow sponsors, as the sport has already attracted some very strong brands from various different sectors.
Logistics giant DHL, tyre manufacturer Pirelli, watchmaker Rolex, and Internet cloud computing behemoth AWS are official F1 partners for 2019. Not to mention the big brands sponsoring the individual teams like Lenovo for Ferrari, Hewlett Packard for Mercedes, and even Alibaba’s Tmall for Renault make it a paddock crowded with blue-chip names.
This gives an unrivalled networking opportunity for executives at these companies. Where else but at Grands Prix can senior executives of lifestyle brands casually rub shoulders with car manufacturers and the bosses of IT firms? This opportunity to network and exchange business ideas is a benefit of sponsoring a F1 team not to be overlooked.
Branding through Sponsorship
Consequently, the branding power of the F1 circus cannot be downplayed as a vanity project. It provides tangible, financial returns for sponsors. A study was done on this subject in 2007 – it showed that the average positive return on investment in 2007 was £19.24 million after spending an average of £8.37 million on sponsorship.
When encompassing other activities like sales promotions, advertising and B2B sales, F1 sponsorship makes for a potent marketing combination. The bottom line is, though it takes some investment, sponsorship of activities by brands can be good branding if the activity is packaged properly.