As a business leader or entrepreneur, generating new business leads and more sales is a key business goal. This is one of the reasons why you might consider sponsoring events. When it comes to sports, and formula one sponsorship in particular, I have been wondering; how do F1 sponsors get a return on their investment?
If you are a fan of formula one, you have seen the various brands across venues, F1 cars and driver’s coveralls. It is part of the sponsorship, which is one way F1 makes money.
Formula one motor sport is one of the biggest racing show in the world. It is big, and takes place across the globe.
It is a sport that provides businesses and brands with a great opportunity to leverage the platform through sponsorship.
How Do F1 Sponsors Get a Return?
When a brand or company decides to sponsor something, it is usually a business decision.
The way a sponsor will get a return on investment based on activities that are going to take place outside the racing circuit. A sponsor makes money in F1 through B2B or B2C sales from increased visibility, rise in value of the brand and increased consumer sales.
You would expect to generate a return on sponsorship investment. The idea is that every marketing dollar spent should be able to provide a positive return to the company.
I expect that F1 sponsors make the same decisions in terms of the expectations from investment made in sponsoring the sport or a formula one team.
It can be purely from a marketing point of view, or the sponsorship can extend to technical aspects.
7 Ways on How F1 Sponsors Gets a Return on Investment.
An F1 sponsors gets a return on their investment in the following ways;
- Helps to build brand awareness.
- Drives excitement around the brand.
- Increased product or service sales.
- Market expansion.
- Helps to market new products or services.
- Drive more website traffic.
- Sell to a new target audience.
I would like you to learn more about how this works in terms of giving an F1 sponsor return on their marketing investment.
How F1 Sponsors Get a Return from Sponsorship Deals
For a formula one team, securing a sponsorship deal is a very important part of the business.
The money and support a team receives from a sponsor help the team to develop and cover F1 expenses.
Helps to build brand awareness.
You brand is going to leverage the marketing benefits that come from F1 sponsorship.
Formula one provides you with a highly visible opportunity, providing you with exposure to millions of consumers across different markets.
Drives excitement around the brand.
If you are an F1 fan like me, then you know how excited you get about the sport. I always look forward to the racing weekend.
It is an exciting feeling.
Formula 1 excites consumers. It can be a very good and strategic idea for your brand to leverage on this excitement.
You can do this by sponsoring F1 and your return on investment is going to be huge.
Increased Product or Service Sales.
When it comes to the value you get as an F1 sponsor, it is possible to increase your sales.
A formula one event directly drives sales for your products or services.
This is another way in which an F1 sponsor gets return on their investments.
A brand or company can leverage the F1 sponsorship with a team to announce a new product or service.
It is possible to generate a lot of marketing buzz by using a formula one racing event at different geographic locations across the world.
This allows a sponsor to reach new target audience and expand into new markets.
Helps to market new products or services.
As an F1 sponsor, your brand or company can drive excitement and build awareness about new products or services.
This would be an advantage because you will create attention and generate sales.
Ultimately, this will increase your bottom line or profitability. This is what every marketing leaders wants to get from the money invested in sponsorship.
Drive more website traffic.
In today’s world of internet and content-based marketing, getting traffic to your website is very important.
Having increased website traffic is part of an F1 sponsor’s return on investment.
This can come from a logo placement on the partner’s digital assets, a ling from F1 social media channels or from blog content from a formula 1 team.
Sell to a new target audience.
Formula one drivers spend a lot of money on gadgets, services, fashion and luxury goods.
You can get a return on your investment by reaching into this elite community through a sponsorship deal with an F1 team.
Word of mouth is a powerful marketing tool among the F1 community.
You can increase your sales for your products or services by leveraging on F1 sponsorship.
5 Benefits of Sponsoring a Formula 1 team.
When a company or brand is considering sponsoring formula one or an F1 team, it is common for them to consider both financial and non-financial value proposition.
Here are the top five benefits of sponsoring a formula oneteam;
- Increased Consumer Sales.
- Business to Business Sales.
- Brand Visibility and Recognition.
- Product Licensing
- Higher Employee Engagement
Let me discuss these further with you.
Increased Consumer Sales.
People like products, they like brands and they like other people because they personally relate with them. For example sponsorship helps Red Bull reach its target audience through communication linked with their passions.
For many, sport provides an escape from everyday life and forms part of their self-identity. By entwining the Red Bull brand with extreme sports and F1, the Red Bull brand becomes part of any person’s self-identity that shares these passions.
This emotional connection is an attractive vehicle when communicating with consumers and helps to build brand preference.
Business to Business Sales.
The total volume of global B2B transactions is much higher than the volume of B2C transactions due to supply chains. Many businesses that sell to consumers also sell to the business market, and some even just sell B2B.
Take BlackBerry for an example. The first thought that comes to most people’s minds is that BlackBerry is in F1 to sell mobile phones to consumers. Wrong, through their F1 sponsorship they are also able to sell into the B2B market.
How do they do this? Well today F1 has a business network of more than 220 global businesses which are involved in the sport as sponsors in one way or another. Using the F1 paddock as a networking base, BlackBerry can meet many of these businesses over the course of the season and can establish whether these companies are open to BlackBerry supplying them phones for their staff.
They can also meet other sponsors at races who provide complimentary services such as Vodafone for example. As a team sponsor, they can also invite decision makers of businesses that are not involved in the sport to initiative conversations that have never taken place otherwise.
Sponsorship and the hospitality options available to brands are a proven platform for client cultivation. Many sponsors are involved in F1 purely for B2B opportunities allowing them to increase willingness to purchase and increase sales. Many also run effective B2B marketing promotions.
In fact Vodafone were able to increase the effectiveness of their small and medium enterprise promotions by approximately 250% by using F1-themed activity.
Brand Visibility and Recognition.
One of the benefits of sponsorship is increased brand visibility and recognition.
Formula one is a global sport with a huge viewership across different countries and different audiences.
I think this is such a great opportunity for a brand or company.
In terms of the financial benefits, this creates brand value. It is an intangible asset in a company’s balance sheet, and ultimately this increases wealth for the shareholders.
Sponsorship can also increase the range of products a company offers by creation of a licensed product.
A licensing agreement authorises a company to use a team’s brand in relation to a particular product. Many recent licensed products relate to the advanced technology on modern day F1 cars, but it need not be limited to technology.
Many teams have licensing partnerships with watch brands that align with the style and sophistication of F1. Examples include TW Steel, Oris, IWC and French brand Richard Mille.
Some licensed products simply use the team’s brand name; others design a product in partnership or take their inspiration from the team or the car.
McLaren are one team that have created numerous licensed products.
Higher Employee Engagement
One day companies may be entirely run by computers and machines, but that time hasn’t arrived yet, so for now at least the most important resource in a company is its employees.
One area that sponsorship can be extremely effective and is often neglected is employee engagement. Sponsorship can be used to promote better operational performance and demonstrate, inspire and motivate a workforce.
As well as B2C and B2B sales, the Spanish banking giant Santander has used F1 to actively engage their employees. The company has correctly adopted the philosophy that when you have a global workforce you need to give them some motivational tools that reflect positively on the business and communicate its aspirations for the future.
To measure F1’s effectiveness, Santander conducted an internal staff survey. The results were surprising and revealed that 96% of its employees agreed that the sponsorship generated improved business results.
In all sponsorships, businesses can use their rights to foster employee pride and create staff development and incentive programmes to help generate strong business results.
In F1 for example, most of the teams have several turn-key initiatives such as pit stop challenges that their sponsors can use to engage to their employees. Others run prizes for top sales representatives that award them a few days soaking in the whole glamorous and aspirational F1 lifestyle.
How Do Sponsors Make Money in F1?
Making money as a sponsor in F1 is a tricky affair and requires that you think about this objectively.
While brand visibility and promotion is very important, I do not think you can make money based on the one weekend when a race takes place at a venue.
The way a sponsor will make money is based on activities that are going to take place outside the racing circuit.
This is how a sponsor makes money in F1;
- B2B sales that comes from the visibility.
- Increased value in the intangible assets like goodwill.
- Increased consumer sales.
These are ways in which an F1 sponsor makes money from the money they invest in formula one or in sponsoring an F1 team.
How Do Formula 1 Sponsors Make Money?
This is a very interesting question, because it depends with the marketing objective of the sponsor.
However, the simple answer is that when done well, a formula 1 sponsor makes money from their sponsorship.
This can be achieved in various ways.
When you think of Formula 1 as a whole, sponsorship is one of the sources of revenue for an F1 team.
Some of the popular sponsors that you see every weekend include Mercedes, Petronas, Red Bull, Shell and Vodafone among others.
It would be fair to say that sponsorship costs depend on how a team performs. This would mean that it might cost more to sponsor Mercedes team than the Williams team.
How Much Does It Cost to be an F1 Sponsor?
It is important to note that there is no uniform or set price for sponsorship in Formula 1.
Every sponsor discusses with the formula one team or driver at an individual level. It is therefore possible that the sponsorship deals secured by Mercedes F1 team are different from the deals made by Red Bull or Ferrari.
It depends on the perceived value of the F1 team or brand. This means the top three teams can command more sponsorship dollars than the smaller team.
It also depends on how long you want to sponsor the formula one team.
The costs of being an F1 sponsor can range from as low as $1 million to over $250 million for a full F1 season.
2022 F1 Sponsorship Deals
In the 2022 season, some teams have announced new sponsorship deals. They include;
- Red Bull – Oracle
- Aston Martin – Saudi Aramco
- Alpine – BWT
Oracle is sponsoring Red Bull for a period of 5 years. This deal is worth $500 million, meaning a $100 million sponsorship per year.
When it comes to Alpine F1 team, they have entered into a title sponsorship deal with BWT.
Aston Martin F1 team have agreed a deal with the Saudi Arabian state-owned oil firm, Aramco, for co-title rights to the racing outfit.
It is being said to be a ‘long-term strategic partnership’. It is a deal that will see the team renamed as Aston Martin Aramco Cognizant
Why Do F1 Drivers Have Sponsors?
Formula one racing is an expensive affair. It takes a huge investment for a person to become an F1 driver.
It helps a person if he has someone with a huge financial muscle to back him up.
For example, Sergio Perez has had corporate backers behind his F1 career.
You also have family wealth that plays a role in securing someone a seat in an F1 team. In this category are drivers such as Lance Stroll and Nikita Mazepin.
Lance Stroll’s father invested in Aston Martin, while Nikita Mazepin’s father is the title sponsor of Haas F1 team.
Sometimes the sponsorship comes in ways like discounts on parts.
For example, when Ferrari want one of their academy drivers to get a seat on a team like Haas or Alfa Romeo, they give them discounts on parts they buy from them like engines or in Haas’s case, well, most of the car.
In conclusion, understanding how F1 sponsors get a return on their investment will help you to know how formula one makes money.
This is because sponsorship is one of the ways in which a brand can leverage F1 racing to advance business goals.
There are ways in which F1 sponsors can get a return on their marketing investment.
You need to remember that the money spent on sponsorship by a company or a brand is expected to generate value. This value comes from the benefits that the brands accrue over the course of the sponsorship deal.
I do hope that this piece of content has helped you to understand how F1 sponsors get a return on their investment.
As a business leader or entrepreneur, this should help to also consider ways in which you can join F1 as a sponsor.