They say that in adversity there is opportunity and one of the best examples of this across the world of sport is the McLaren Formula One auto racing team.
McLaren has been racing in F1 since 1966 and is the second most-successful team in its history with only Ferrari having more drivers’ titles. It is famous for winning in F1 with legendary champions like Ayrton Senna and Alain Prost but it hasn’t won the title since 2008 when Britain’s Lewis Hamilton steered the team to victory. In recent years its performance has steadily reversed.
The downward trend was driven by F1 changing its engines from 2.4-liter V8s to 1.6-liter turbocharged V6 hybrids in 2014. McLaren made the bold decision to switch to Honda engines from ones made by Mercedes, which had powered the team since 1995. Mercedes has dominated the V6 era whereas Honda has struggled as it returned to F1 after a six-year hiatus. It led to McLaren slipping down the standings from fifth in 2014 to ninth the following year.
It raced back up the running order to finish sixth last year but its 2017 campaign has yet to rev up and it currently lies at the bottom of the standings. Despite this, McLaren is in rude financial health, has been responsible for some of this year’s most electrifying on-track performances and has been behind the biggest talking point of the season so far. It is thanks to one man.
In November sponsorship guru Zak Brown took over the driving seat as McLaren’s executive director. Although it is most famous for its F1 team McLaren also has a successful supercar division and and an Applied Technologies department which uses developments from F1 in other industries. It was too late for him to influence this year’s performance by then but it didn’t stop him putting his marketing expertise to work.
Brown was born in Los Angeles and dreamt of driving in F1 which may seem unusual for an American now as the series lags in popularity behind home-grown rivals NASCAR and IndyCar. However, when Brown was growing up F1 was at the height of its popularity in the United States with Mario Andretti taking the title in 1978.
Brown travelled to England staying with friends and working his way up the racing ladder. Along the way he honed his skills at selling sponsorship and eventually realised that he could make more money doing this than chasing the dream of becoming an F1 driver. Sponsorship agency Just Marketing Inc (JMI) was born.
Since it was founded in 1995 JMI has represented many of the world’s leading brands including consumer healthcare company GSK, Johnnie Walker whisky, investment bank UBS and logistics firm UPS in F1. Over at NASCAR its roster has included pharma firm Eli Lilly, Farmers Insurance and Subway whilst Brown signed telecoms firm Verizon to become IndyCar’s title sponsor in 2014.
As Forbes has reported JMI has done well over $1 billion of deals and this put the agency on the radar of sports marketing firms culminating in it being sold for $76 million in 2013. JMI was bought by CSM Sport & Entertainment, the sports agency owned by marketing firm Chime Communications and run by Sebastian Coe, the former athlete and front man of the London 2012 Olympic Games. It made the 45-year-old a rich man and left him ready for a new challenge.
Given Brown’s background in leveraging world-class sporting partnerships for a number of blue-chip corporations he makes an ideal candidate for the role at McLaren which is already a leader in F1 campaign creativity and sponsorship engagement. It only seems to be matter of time before his influence is felt on its roster of partners which include Santander, Hilton, Richard Mille, Michael Kors, SAP, Chandon, Johnnie Walker, CNN, NTT Communications, Logitech, Norton Rose Fulbright and many more.
The limitations of Honda’s engine have simply served to highlight the talent of two-time F1 champion Fernando Alonso. He has been behind some of the most determined drives of the year carving through the pack and pulling off daring overtaking manoeuvres despite being behind the wheel of a car that is still not in top gear. Brown hasn’t just managed his frustrations but given McLaren’s partners a shot in the arm and generated tremendous publicity in one fell swoop.
Brown’s master-stroke drew on his contacts in IndyCar as he has lined up a drive for Alonso in the fabled Indianapolis 500 which takes place in little over a week. Alonso will race for the aptly-named McLaren Honda Andretti team run by Andretti Autosport giving him a shot at winning auto racing’s triple crown – the 500, the Monaco Grand Prix and the Le Mans 24-hour race. Alonso is a two-time winner of the Monaco Grand Prix so will be well on his way to the triple if he takes victory on 28 May. Only Graham Hill, father of former F1 champion Damon Hill, has won all three.
McLaren’s partners get their logos on Alonso’s McLaren Honda Andretti car, which attracted 2.1 million views on YouTube and Facebook just for a test run. The decals will also be seen at the Monaco Grand Prix which takes place at the same time. Former McLaren driver Jenson Button will replace Alonso in the race whilst his team mate Stoffel Vandoorne will be at the wheel of the second McLaren.
This gives its partners two bites of the cherry, gives Alonso a new target to aim for and has already driven massive media exposure. Surprisingly, partners aren’t paying a premium for it. McLaren’s rates aren’t as high-octane as those of Ferrari or reigning champions Mercedes and its run of bad luck ironically makes it all the more attractive. Anyone in business knows that the worst time to invest is at the top of the market and McLaren certainly isn’t close to its peak at the moment. However, it isn’t at risk either.
Despite suffering one of the worst seasons in its 50-year history, 2015 was a bumper year for McLaren commercially. Its latest financial statements show that the team raced to a $5.1 million (£3.4 million) net profit from a $38.4 million (£24.7 million) net loss the previous year when the company was burdened with costs associated with the switch from Mercedes to Honda.
Brown is supported by a supremely-skilled team including Eric Boullier, one of the finest racing directors in F1. Thanks to this expertise, the team was able to reduce powertrain costs in 2015 leading to it spending 9.7% less than the previous year which thereby boosted its profit.
McLaren’s revenue accelerated 8.2% to $279 million (£188.2 million) driven by an increase in prize money as although it finished fifth in both 2013 and 2014, F1’s profit increased in this time and the teams take a 63% share of these spoils. McLaren gets a bonus due to its historic success and as this is locked in until the end of 2020 it gives the team additional security.
In the turbocharged world of F1 the cars are designed during the year before they race on track so actually 2018 will be the biggest indication of Brown’s impact. He exclusively spoke to Forbes about how his plans are revving up.
Why did you take the position at McLaren?
I’ve been a Formula 1 fan since I was a little kid, and specifically a McLaren fan. There was always something about McLaren that was special, and there still is. I guess I really fell in love with the team in the Ayrton Senna / Alain Prost days, when McLaren won World Championship after World Championship in the late ’80s and early ’90s, and Ayrton has always been one of my all-time heroes. Another of my all-time heroes is Mika Hakkinen, who of course won both his Formula 1 world championships for McLaren, in the late ’90s.
So, for me to now be in the hot seat at McLaren, and every morning to walk past the cars that Ayrton and Mika drove to glory back in the day, is an enormous privilege. It really makes the little hairs on the back of my neck stand up. I may be a businessman and a marketer nowadays, but at heart I’ll always be a racer.
More than that, though, I’m firmly of the view that McLaren has enormous untapped potential. It’s a fantastic name with awesome heritage, and I’m very confident that it’s therefore a brand that can be leveraged commercially in order to generate the necessary sponsorship revenues that will recreate the successes of its past. And being part of a group of people who’ll put their shoulders to the wheel to make that happen is about the best kind of job satisfaction I could ever imagine.
What do you bring to McLaren and how will it boost it commercially?
As I say, I’m a racer, a businessman and a marketer. I’ve been around Formula 1 for a long time now, and I know how many beans make five. In my JMI [Just Marketing International] days I did a lot of sponsorship deals for quite a few Formula 1 teams, McLaren included. In fact I was responsible for bringing on board quite a number of McLaren’s current major partners – Johnnie Walker, Hilton, Chandon, NTT – and adding further to that partner roster is one of my first objectives. I’m not going to say who or when or how much, but McLaren has been without a title partner for too long, and I mean to right that wrong if not this year then definitely next year.
Why should brands sponsor F1 and McLaren in particular?
Formula 1 is a uniquely attractive sponsorship proposition for companies looking for annually consistent global reach. Put it this way: a company can of course create a global portfolio of sporting sponsorships that achieves annually consistent global reach, by striking deals in a combination of, say, golf, tennis, basketball and cricket. But a Formula 1 sponsorship achieves the same result, more efficiently and less expensively, and it’s a one-stop shop, all under the same ‘roof’. The only rivals to Formula 1 in terms of achieving consistent global reach are World Cup soccer and the Olympic Games; but they occur only once every four years; by contrast there’s a Formula 1 race every two weeks.
In addition to that, Formula 1’s brand values tick a lot of the marketing boxes that global multinationals are anxious to tick: hi-tech, luxury, glamour, drama, heroism even. Formula 1 is sirloin steak and fine claret, not hot dog and root beer.
Finally, McLaren is special. The company has been in existence for 54 years, and it’s been racing in Formula 1 for the past 51 of those 54 years. In that time McLaren has won 20 Formula 1 World Championships with some of the most legendary names in the history of the sport – Emerson Fittipaldi, James Hunt, Niki Lauda, Alain Prost, Ayrton Senna, Mika Hakkinen, Lewis Hamilton. I tend to look forward rather than backward, but undoubtedly a brand’s history is central to its appeal. When Henry Ford said ‘History is bunk’, he was wrong.
How can you help sponsors maximise their ROI?
We don’t use the word ‘sponsors’ at McLaren; instead we talk about ‘partners’. And the reason for that is that we see the companies we do deals with as part of a genuinely collaborative co-operation. So our marketers work side by side with our partners, truly immersively, in an effort to really understand what their marketing objectives are and thereby achieve consistently impressive ROI for them.
But it isn’t only about ROI; it’s also about ROO [return on objective]. Yes, our partners require instant returns in exchange for their investments – ROI – but they also want to see longer-term benefits around market penetration and brand metrics.
In addition, in a digital world, we know that our partners want and require bespoke activation packages centring on relevant, global fan communities. Via our 6.5 million followers on social media, as well as our online and mobile audiences, we can deliver those fan activations very powerfully, tailored to each partner’s individual objectives.
We’re passionate about finding new ways to engage our fans on an emotional and personal level, and to reward loyalty with unique and personalised content and experiences. These are traits that expose huge partner opportunities.
The days of charging a huge sticker price for a logo on the side of a race car, and then sitting back and counting the money, are gone. Our partners pay handsomely for their associations with the McLaren brand, but those fees include a series of after-market journeys, so to speak; and we’re committed to voyaging alongside our partners as fellow travellers on those after-market journeys, to ensure that they get the best bang for their buck possible.
What can McLaren offer partners that other teams can’t?
McLaren includes McLaren Racing, McLaren Automotive and McLaren Applied Technologies. No other Formula 1 team is part of such a powerful tripartite grouping, and that gives McLaren a very real advantage, which I’ll be aiming to work hard to leverage commercially from now on.
In a nutshell, we help companies sell their products and services - by supporting their marketing objectives, but we also help them actually make their products and services, via the skills and knowledge we bring them via McLaren Applied Technologies, which we set up in order to market and monetize the ultra-high-tech capabilities we’d developed and perfected in Formula 1. We’re doing that currently with both a leading pharmaceutical company, and Deloitte – a recently announced partnership. It’s a win-win for them.
Last but not least, McLaren has always been a marketing innovator in Formula 1, and I intend to make sure we retain that mantle. Watch this space!
Does McLaren help partners monitor their ROI and if so how?
Our partnerships are truly immersive. That means we make real efforts to understand our partners’ businesses, and to collaborate with them dynamically on their partnership activations. In so doing, we can track the media exposure we generate together – digital, social and conventional – as well as measuring the impact and value of activities such as hospitality engagements and driver appearances. But we can do that best collaboratively, as I say. So, for example, Johnnie Walker’s ‘Join The Pact’ campaign has been proven to be very powerful and very effective, and we can monitor the number of people who’ve been persuaded to pledge never to drink and drive as a result of that campaign, but we can really measure the effectiveness of campaigns like that when we work closely with our partners on making sure we exploit such campaigns by sharing knowledge and data.
What are the top 3 results that partners look for and how does McLaren deliver them?
On-track performance is always important – and, believe me, McLaren will be winning again before too long. Brand exposure is also very important, and always will be. But the third factor I want to mention is fan engagement. That’s increasingly crucial. And, via clever marketing techniques, we can tailor our partnership activation offerings to support the fan engagement ambitions of a wide variety of partners’ customers and potential customers – whether it be a 60-something man who is in the market for a $100,000-plus Richard Mille watch or a 20-something woman who is in the market for a $300 Michael Kors handbag. Because both Richard Mille and Michael Kors are both partners of ours, of course.
Are you seeing green shoots in the sponsorship sector and, if so, where are they coming from?
I guess sponsorship trends ebb and flow. The tech sector is currently under-represented in terms of Formula 1 engagement, and we’re working on that, leaning on McLaren Applied Technologies.
How has F1’s sponsorship proposition changed over the past decade?
The biggest change has been the arrival and corporate adoption of digital and social media. Without a robust and dynamic digital and social media offering, no sports stakeholder can hope to attract sponsorship nowadays. At McLaren we work incredibly hard on our social and digital media operations, so as to win and engage more fans, and then convert those fans to a monetizable asset that our partners and prospective partners are anxious to access and leverage to win and engage more customers and ultimately make more money. Oh, and it’s fun too. I tweet myself – I’m at @ZakBrownCEO so give me a follow – and I engage with fans when they direct-message me. It’s important. The fans are paramount. Without fans, Formula 1 is nothing.
What do you think will be the biggest growth regions in sponsorship over the next decade?
We’re focusing on a number of both emerging and core markets, and in particular, North America. Now, North America is hardly an emerging market – but, from a Formula 1 perspective, it kind of is, because Formula 1 has never really cracked the States. Well, the arrival of Liberty Media, which is of course an American corporation, will change all that – and, as an American myself, I’m determined that McLaren will be in pole position when it comes to making commercial gains in the States.
Our brand is already well known and well loved in America, for two main reasons: first, our high-performance road cars have a devoted and enthusiastic following there, and, second, McLaren totally dominated the famous Can-Am [Canadian-American] Championship in the late ’60s and early ’70s, winning it outright five years in a row in fact [’67 thru ’71], our founder Bruce McLaren leading the charge from behind the wheel. McLaren has also won the fabled Indy 500 three times – in 1971 as a privateer entry run by Roger Penske, and in ’74 and ’76 with our own works McLaren IndyCar team and Johnny Rutherford at the wheel. And, at a sprightly 79, Johnny still works for us, by the way, as a McLaren brand ambassador.
And, talking of Liberty Media, we at McLaren intend to do all we can to assist them improve the sport from every angle – on-track, off-track, technical, sporting, marketing, everything.
What is the secret to creating long-lasting partnerships?
The secret, if you can call it that, is understanding our partners’ goals and objectives, meeting their challenges, and being flexible, honest and hard-working. You have to look at the bigger picture. Creating long-lasting partnerships can’t be achieved if you focus only on securing fees; no, creating long-lasting partnerships should be about building relationships; and, to do that, sometimes you have to take a step back today in order to be able to take two steps forward tomorrow.
