How we Killed the Value of a Partnership

How we Killed the Value of a Partnership

by Mike Bonanni & Jordan Yost

Partnership, sponsorship, what’s the difference right? Although most of the automotive industry uses “sponsorship” as a general blanket term there is a major difference between a sponsorship and a partnership and they should in no way, shape, or form be treated the same way. A sponsorship is one sided, a charitable donation if you will; I will give you something with no expectation of anything in return just to be a part of what you are doing. You sponsor a youth soccer team by buying their uniforms, you slap your logo on them and you write the entire thing off as a marketing expense. You don’t actually expect a team of 8 year old soccer players to sell your product, you just like giving back to your community. That’s a sponsorship.

A partnership is much different. A partnership is a two way street where both parties give and both parties receive. There are expectations on both ends and both parties have a vested interest in one another’s success. Everyone has something tangible to lose and something tangible to gain.

 

An image from the proposal created for the construction of the Yost Autosport YAE92 which was ultimately sucessful.

Partnerships, and even sponsorships, can have invaluable benefits for all involved if done properly but somewhere along the line things got messed up…badly. The way this part of our industry is handled currently has completely devoid all value in these types of relationships. There’s no longer any exclusivity or prestige in partnerships and sponsorships and the benefits of these types of relationships are being left completely by the wayside in so many instances. The part people don’t realize or perhaps just don’t like to admit is that the companies are just as much a part of the problem as the race teams, personalities, builders, etc. that usually take the blame for a bad relationship.

Bear in mind that this article is tailored to the aftermarket automotive industry, more specifically at a grassroots level, but the basic principles of the value of these types of relationships can be applied to almost any industry and at any level.

How Companies Killed Partnerships

I started to get my first taste of the industry side of aftermarket manufacturers when I started racing in 2004. By then things were already messed up unfortunately so I can’t comment on if it was ever any different than it is now, but I can tell you there’s a much better way. Somewhere along the line a very clever marketing executive figured out a way to get their customers to actively advertise their company for them without spending a single dime. In fact, they would make even more money off of it. They called it grassroots sponsorship and thousands of people fall for it every year. What these companies don’t realize is that this practice is killing the industry from the ground up and while it is a short term gain on the pocket book, it’s a long term loss to the bottom line. The popular term “race on Sunday, sell on Monday” no longer applies.

 

The car that ultimately became the YAE92 after several evolutions.

The Sponsorship Racket

The racket here is simple; when someone comes in with a partnership proposal we rarely say no. Instead, make them feel like we want them to be a part of our team, tell them how great their car looks, and how we would love to have them representing our product. Then offer them a “generous” discount of dealer pricing and make them promise to actively promote our brand in return. They buy the product and we make the exact same amount of money as we would have if they bought the product from one of our dealers. We give up absolutely nothing and they turn around and advertise for us for free. The customer is happy because they got a small discount on a product they were hopefully going to buy anyway and the company is very happy because they guarantee a sale that won’t go over to their competitor instead, they make the exact same amount of money, and they get free advertising. So where’s the bad in this? This worked out so well that companies started “sponsoring” hundreds of people in this way. They started advertising sponsorship programs to try and drive more of these types of customers in. And they made lots of money and got lots of free publicity from it. In the end though, everyone suffers in the big picture. Now you’re taking hundreds of customers away from your dealers so they suffer and even worse, since you have made sponsorship so easily attainable, everyone with an Instagram account thinks they’re entitled to it. It always starts out with a flowery message about how much they love your product and how badly they want to promote it for you but if you turn them down they don’t go buy the product, instead they go to your competitor and try the same thing. They never liked your product in the first place, not enough to pay for it, they just wanted it for free or for a discount. You have created a world of people who are no longer willing to pay full price for anything and they are less concerned with who makes the best product than they are on who gives them the biggest discount. Now the only way you can get the sale is to offer a bigger discount than your competitors. It’s no longer about making the best product.

 

SEMA, where all sorts of deals for “sponsorship” are consumated but not always carried out.

On the other side of this story are the people that everyone loves to complain about; the people who take your discount or your free product and disappear never to be heard from again. The crazy thing is only some of them ever get caught doing this, which is why so many of them do it. They go to large companies who hand out sponsorships like Halloween candy because they know those companies are less likely to check up on them to see if they delivered on their promises. Many large companies are completely under-staffed in this department to follow up on the hundreds of free parts they give away every year. There’s a sponsor…yes a sponsor… on our race car that gave us nearly $2000 worth of free product and I guarantee you if every employee at that company walked by our car they would have no idea they sponsored us. We could have done absolutely nothing else but take the free product and run. We didn’t of course, even though we are almost positive none of our efforts are noticed by that company, we are still men of our words, and it is not for lack of trying on our part. My point is, this is so common that there are people who pride themselves on how much free stuff they get for having their car in SEMA and the week after the show it’s all up for sale. It is a very high quantity low quality form of marketing and it’s hurting a lot more aspects of this industry than people realize.

The Over-Ask

The over-ask is just as it sounds, expecting far too much for what you are giving in return. This one is all too common place as well and again goes back to the issue of quality. Both sides of the program should know exactly what that program is realistically worth and the problem on the side of companies is that many of them have a skewed sense of that worth. I have had a company ask me to do a complete wrap of my car in their company colors and logo on my own dime in exchange for a $500 product. A wrap that would cost me $2000 to have done…this is not a joke, this actually happened. I paid full retail for the $500 part with no strings attached instead. Companies get so used to the discount style sponsorship where they get paid to let someone put their logo on their car that once you graduate to free product or even money, sometimes they grossly over-valuate their contribution. Companies need to realize that not all programs are created equal. You can give $5,000.00 to a grassroots time attack driver and probably get a pretty sizeable logo on his or her time attack car but if you give $5,000.00 to a Formula 1 team you’re not even getting tickets to a race. Yet again though, people are out there that will accept these crazy deals just to say they are a part of your brand. So where’s the problem for the company if they can find these people that will wrap their car in your logos for a free intake? These people don’t have any concept of partnership valuation and they will never really end up doing much for your brand. Their program will never grow, and your risk of their program failing prematurely is much higher. Again, it’s an issue of quality. There are many price levels for parachutes, but do you really want to jump out of the plane with the cheapest one?

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