Strategic partnerships that work: Shell and Ferrari sign for another five years

April 15, 2010

Luca di Montezemolo and Mark Williams sign the new deal

Yesterday Shell and Ferrari announced that their enduring partnership would be extended for a further five years until 2015, making this latest phase in their relationship last for at least twenty years (the deal started in 1995). I often hold up the Ferrari/Shell relationship as one of the great examples of where strategically thought through sponsorship can be incredibly effective and outstanding value for both parties. Formula 1 has moved on from the times when sponsors would pay to get their brand on the car and then magically expect customers to buy more of their product, or at least I hope it has! I’m told by those who know that the rule of thumb is that you spend twice the value of your sponsorship in telling the market that you have the sponsorship, so if Shell spend $30million annually with Ferrari they should be spending another $60million in exploiting the relationship – a total of $90million annually.

Shell had sponsored Ferrari in the early 1950s, but the team had moved to the Italian fuel company Agip, a relationship that lasted through the sixties, seventies and eighties. Ferrari and Shell came back together again in 1995, but it wasn’t until 1999 when Shell conducted some research into the sponsorship and found that only 15% of their customers were aware of the relationship with Ferrari, that they moved things up a gear. They renegotiated the contract to focus on exploitation and based the newly launched ‘V-Power’ range of fuels and lubricants specifically around their relationship with Ferrari. In 2004 27% of their customers were aware of the link with Ferrari. If you look at any Shell product, advertising, fuel station or fuel tanker, you will normally see the black prancing horse of Ferrari, on a yellow shield (the colour of Ferrari’s home city, Modena) on a red background – their colour schemes were made for each other!

But this is not just a commercial arrangement, although Shell will pay some cash for the sponsorship, much of it is also ‘in kind’ through products and technological support. The technology side is important to both parties, during Ferrari’s successful period in the early 2000s, Shell had developed a fuel with high combustibility (and therefore power), but which actually weighed less than competitors products – a Ferrari on a full tank of fuel therefore had a weight advantage over the other teams – such a competitive edge is worth a great deal. There are many examples of where companies have wasted a lot of money in Formula 1, but it’s good to recognize that if properly thought through such relationships can deliver real benefits to both sides.

One Response to “Strategic partnerships that work: Shell and Ferrari sign for another five years”

  1. Vijay Krishna Says:

    Nicely penned blog about strategic development of two parties concerned. Gives a good narration about how sponsorship can be combined to become a good partner and grow business mutually. Sir its always a pleasure reading your artciles, papers, books and blogs

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