Saturday, August 29, 2009

Franchitti & Dixon Part of IndyCar Problem

The Republic loves Pressdog. Good-natured satire is hard to find in the Age of Colbert, but the Dog does it right. We also appreciate his ability to blend fan-based insight and hilarious one-liners.

Reporting from Chicagoland this weekend, P-dog subtly identified the primary obstacles that prevent IndyCar racing from producing a racing product that is competitive in the marketplace. These, of course, are the series' own drivers and teams.

"Dario is not a fan of Chicagoland. Questioners
after qualifying asked Dario Franchitti and Scott Dixon how Chicagoland ranked among their favorite tracks. Dario said it wasn't high on his list, although he did give it credit for entertaining fans. I think Dixon felt about the same."

The Republic would like to know why citizens should give a damn whether or not Dario Franchitti and Scott Dixon enjoy racing at Chicagoland? They probably don't like Texas, either, but that race actually draws a legitimately competitive audience at the track and on television.
When the IRL first announced that it would race on the streets of St. Petersburg, Roggespierre asked a league official to explain the decision. The response was chilling.

"We're doing it because our teams want it."

This is gross negligence with regard to product management. The personal tastes of suppliers are irrelevant to strategic decisions further up the supply chain.

Serve the Firm, not the Suppliers
For example, Wal-Mart does not consider the wishes of Mattel, Samsung and Wrangler when it selects new store locations. Wal-Mart is hated by suppliers because its market share gives it power to dictate pricing, scheduling and payment terms. Suppliers can either live with the unfavorable terms or not sell their products at Wal-Mart.

IRL management can't match Wal-Mart, but it does possess more buying power than it seems to recognize. IRL cars and engines can't be used anywhere else. Other racing series are downsizing. Some teams might want to leave IndyCar, but they really have nowhere else to go. And it isn't as if IndyCar teams are furnishing a racing product that's easy to sell.

Franchitti and Dixon: Non-Performing Assets

Dario Franchitti and Scott Dixon are two of the biggest stars in IndyCar. Unfortunately, in the greater sports entertainment marketplace, they are not stars at all. IndyCar is not a competitive product, and one reason is that Franchitti and Dixon are not competitive with Tony Stewart and Jimmie Johnson, Tiger Woods and Phil Mickelson, Venus and Serena Williams, and so on.

There is a very good option for road racers who don't make it to Formula 1. It is called sports car racing, and it's a good fit.
  1. High tech cars

  2. Road and street courses

  3. Financing not contingent on spectator support or market demand for the product

Franchitti and Dixon are talented racing drivers who have been rejected in the marketplace. If they and other top IndyCar drivers and teams were attracting fans in droves, then the Committee of Public Safety would advise IRL management to keep them happy. But that is not the case.

Would the IndyCar racing product become less competitive if Franchitti and Dixon were replaced by Paul Tracy and Buddy Rice? Casey Mears and A.J. Allmendinger? A.J. Foyt IV and Al Unser III?

TV ratings were better and attendance was similar when Greg Ray and Scott Sharp were the stars. The product was therefore more competitive in the marketplace despite the presence of CART, an entrenched and well capitalized direct competitor that no longer exists.

Franchitti and Dixon are talented but not valuable. NASCAR (sans-culottes!) has demonstrated where U.S. customer demand for motorsports can be found. The locations include lots of tracks that Franchitti and Dixon probably don't like. Ironically, they also include two road courses, so long as domestic oval racers are doing the driving.

Is that fair? No, but that's the marketplace. Despite their wishes, IRL management and IndyCar drivers and teams aren't going to change it. Past attempts ended in financial ruin. IndyCar will grow after it adapts to market demand, whether Franchitti and Dixon like it or not.


Friday, August 28, 2009

IRL Management Quiz Answer: Hot Zips

Hot Zips are zip codes that are disproportionately represented in Nielsen television ratings samples. Product managers and television promotions personnel can purchase hot zips information from Nielsen and then use it to allocate advertising and promotions expenditures to the over-represented areas.

Contrary to claims made by Al Sharpton and others, the poor and lower middle classes tend to be over-represented in Nielsen samples.

This is important information for product managers and marketers who seek to establish a mass market television audience. There are not only fewer rich than poor, but also fewer of the rich than of the poor represented in television ratings. In addition, it is well known in the broadcast industry that less wealthy individuals tend to watch more television than their wealthy counterparts.

Hot Zips also tend to be clustered in regions that are within a mile or two of major Interstate highways. This makes sense because it aids Nielsen in its data collection efforts.


IndyCar - Another IMS Executive Defection

The Indianapolis Business Journal (subscription required) reports that Charlie Morgan has vacated the top broadcast position at the Indianapolis Motor Speedway and the Indy Racing League. Morgan, a respected radio talent and manager in Indianapolis, will run radio operations at Emmis Communications.

We shall have more to say about this in the near future. IMS Corp CEO Jeff Belskus is said to be forming a new leadership team.

Thursday, August 27, 2009

IndyCar: Versus by the Numbers

We like numbers at The Indy Idea. Numbers provide tangible data points from which we can derive a reasonably accurate assessment of IndyCar's positioning and performance in the competitive marketplace.

The size of the average IndyCar television audience is particularly instructive. Television ratings in many ways constitute a perfectly competitive market. After cable and satellite fees have been paid, the only remaining costs are opportunity costs. Watching one live program necessarily means not watching another. At any particular point in time, the only additional option is to not watch any live television program at all.

Connections, personal sales, and inflated capitalization ratios can not buy good television ratings. TV numbers can't be skewed by complimentary race tickets and compulsory participation in corporate sales outings. TV viewership therefore gives us a reasonable approximation of citizens' relative preferences based on their behavior in the marketplace. The egalitarian foundation of TV ratings strips away noise and lays bare the truths of market acceptance and rejection.

Publicly available data regarding IndyCar ratings on Versus are a mixed bag. Yes, the overall numbers are bad, but such an assessment hardly qualifies as serious analysis. More to the point, mere observation is not a useful management tool. It is clear that IRL management must devise a strategy to increase the competitiveness of IndyCar racing in the television viewership marketplace.

This is a fundamental metric in the sports entertainment sector. That IRL managers are not held accountable for achieving competitive TV ratings is beyond comprehension.

IRL management must identify sources of competitive advantage that enable some broadcast properties to thrive on Versus. What are the key variables that separate the winners and losers? If IRL managers were to seriously engage in product development - a leap, we admit, given their history of refusing to manage the product - then how might they manipulate and manage those key variables? Which metrics should be used to determine success and failure?

Roggespierre, with aid from Danton and Marat, shall examine the available numbers and explore the questions above in the coming days. We encourage those who work at 4565 West 16th Street to join us. If the knitters conclude that TV ratings do in fact fall under IRL management purview, then it could be the Montagnards here that save your heads!


IndyCar IRL Management Quiz for the Citizens

Good Morning, citizens! We begin today with a question for IRL management. We encourage those who care about the future of IndyCar racing to forward this question to management and let us know whether or not you receive an answer. This could be fun!

Question: What has IRL management done this season to leverage hot zips to increase the value of the IndyCar racing product? What were the results?

The Indy Idea is curious to learn whether or not anyone at IRL management even knows about hot zips. Don't bother looking on Google - the answer isn't there. Only product managers and professionals in a few select industries would know. We ask that they keep the answer to themselves until tonight. We'll give the answer then... unless IRL management beats us to it.

Wednesday, August 26, 2009

Pink Lloyd to Newman Haas Lanigan?

That's the story that Autoweek buried in this report. It looks like Her Energy will stick with the promising Englishman. Lloyd finished 13th at Indianapolis, driving with the leaders all day following an early pit stop that put him a lap down.

The pink suit proved to be a successful marketing prop. We have no reason to believe that it won't return, as well.

The Chicagoland entry list indicates that veteran Oriol Servia will get his third consecutive start in the #06 Newman Haas Lanigan Racing machine. But that, of course, is subject to change. With few exceptions, IndyCar seats are effectively put out to bid by the various teams. Drivers and their financiers are the bidders. Some seats are re-bid annually, some weekly, but the characteristics of the auction market are largely the same.

This is because the cost of fielding an IndyCar team is far greater than the collective enterprise value of the racing product that IndyCar teams produce. Team sponsors, therefore, are limited to those that are willing, for one reason or another, to incur expenses that are in excess of five times the fair market value of sponsorship.

This problem can be solved only by either:
  1. a drastic price correction - meaning cars and engines that are at least 80% less costly to run than the current specs, or...
  2. a simultaneous five-fold increase in race attendance and television viewership.
These facts are inconvenient. But the Republic shall continue to not only recognize and publicize them but also offer plausible solutions. We eagerly anticipate IRL management doing the same.


IndyCar Schedule Changes

The IndyCar Series announced today that three race dates will change on the 2010 schedule.

The race at Texas Motor Speedway was moved up a week, to Saturday night, June 5. The IRL appears to have agreed to the switch in order to accommodate TMS's wish to keep the NASCAR Truck Series and IndyCar Series events on the same weekend.

The Kentucky IndyCar event was switched to Saturday night, September 4.

The Indy 300 at Twin Ring Motegi, Japan was moved to September 19 in order to take advantage of a national holiday September 20.

Tuesday, August 25, 2009

Indy Lights: Leilani Munter Returns

Hawaii native and former part-time Indy Lights competitor Leilani Munter will return to the IRL competition at Chicagoland. Munter will drive in the Indy Lights finale for Team 3G with funding from Women's ExtenZe (a natural female enhancement supplement, not that there's anything wrong with that), Novicomm LED Lighting Technology and Ecobabble.

Munter has worked for more than two years to leverage her environmental activism into racing sponsorship. This announcement is the first real demonstration of success.

We suggest that Leilani look to much larger enviro-organizations. These would include the U.S. Green Buildings Council. In addition, many vendors and products have attained the Energy Star designation that is becoming essential for those who serve the leviathan U.S. General Services Administration. Gathering a consortium of such vendors would seem to hold promise.

We note that these ideas are not new. The late Paul Dana, perhaps the most savvy driver in IRL history with regard to finding sponsorship, essentially created the Ethanol Promotion and Information Council, his sponsor at Hemelgarn Racing and later at Rahal Letterman Racing. EPIC dissolved following the predictable push-back against Ethanol fuel. We suspect that the ever resourceful Dana would have been in front of the story and done something about it. Bobby Rahal, whose team inherited the EPIC sponsorship after Dana's death, was not prepared. We know this because Rahal Letterman is not, in fact, an operating IndyCar team this season.

Good luck to Leilani, Jaques Lazier and Greg Beck. The latter two are among our favorite people in all of IndyCar racing. We would love to see them get a real deal in place for 2010.


Monday, August 24, 2009

Is this the new Indy Car? If so, then Why?

Could this be the next Indy car? Sources have informed the Committee of Public Safety that the model pictured above is getting serious consideration. The IRL is expected to announce new technical specs for the 2012 IndyCar Season.

What would this car allow the series to accomplish? How would it improve the strategic positioning of IndyCar? We must drill down to get the answers. That's why we're here.

Identifying the Job

We adopt a test first published by Harvard Business School Professor Clayton Christensen. The author of The Innovator's Dilemma and other worthy titles suggests that, when considering product development as a function of marketing, the correct question to ask is this.
  • What are the jobs that the customers are trying to get done?
Three Dimensions of Marketing & Product Development

Christensen argues that each "job" people want to do has three dimensions: social, functional and emotional. IndyCar racing has traditionally focused on the functional aspect, staging motorsports events to entertain fans.
But citizens of Indianapolis know that the city has long been emotionally invested in the Indy 500 - many locals care about racing just one month per year. Apparently, citizens of Edmonton can relate, as well. Events that confirm the communities we live in are "somewhere" can take on momentum and endure hardship that other events can not. That's one reason why Baltimore is a lousy idea. If you have to street race, then we reiterate that Bridgeport, Connecticut, a stinking pile of urban blight in an otherwise privileged area, is the place to do it.

The social dimension has always been difficult for IndyCar racing. Following World War II, the Indianapolis 500 drew a multi-tiered audience that would not occupy the same place at the same time under normal circumstances. The elite could be found in the pits, garage area, hospitality tents, and suites. Families shared the main grandstands with hard-core fans. Partiers took over the infield, creating a subhuman cesspool that provided more entertainment than the race in some years.

Danton argues that the social dimension was critical to NASCAR's economic rise. Feeding on the subculture of the former Confederacy, NASCAR became a blue collar, sociologically based phenomenon that overwhelmed the motorsports marketplace in the United States. But it is not given that NASCAR's homogeneity will always provide a competitive advantage in the marketplace.

When Roggespierre attended his first Indianapolis 500 in 1978, it looked like a NASCAR race. The starting field was composed of 31 drivers born in the United States, naturalized U.S. citizen Mario Andretti and Canadian Cliff Hucul. We do not advocate a return to those days. However, a healthy base of competitive U.S. drivers would be helpful in making the Indianapolis 500 economically competitive.

Danton thinks the car in the photo looks a bit video-gamish. We're guessing that somebody told the IRL that its age demographics suck, and that young people like video games. These are facts. But the solution isn't that simple. Kids who like video games tend to get that particular job done by playing video games and not by watching IndyCar races.

Give the parents a product they want to see, don't blow junior's eardrums to smithereens, and you'll get the kids. Every other child in Middle America owned some article of Jeff Gordon merchandise in the late 1990s. His car looked like a Chevy Lumina. How many kids became fans because they liked the Lumina on the NASCAR video game? Cart, meet horse. Did Jeff Gordon make the kids NASCAR fans or did NASCAR make them Jeff Gordon fans? Now that's a question worth asking.

One way to nudge U.S. drivers toward IndyCar is to focus (not necessarily exclusively) on oval racing, a uniquely American form of the sport. Another is to reduce costs to allow the underlying economics of team participation to make sense. How much would the IRL have to slash expenses? Optimally, the cost of fielding a championship-caliber, one-car effort for the 17-race season should be approximately $1.3 million. That number is probably shocking to the present IndyCar teams, but so what? That's the value of the product they and the IRL offer in the competitive marketplace. The number would increase proportionately with television ratings and ticket sales.

So, the question becomes: would the chassis pictured above allow teams to compete for the IndyCar Championship at a cost of $1.3 million per season? If the answer is no and the projected per-season cost is nowhere near that amount, then why incur the initial capital outlay? The new car might or might not improve on-track competition, a probability that makes performance a less than compelling reason to switch cars. Conversely, the new car absolutely should increase the competition to qualify for the Indianapolis 500 - something that must happen if the Month of May in Indianapolis is to feel important enough (the emotional aspect) to attract fans on more than two days.

Another question: will this car require that teams contribute significantly its manufacture? This is absolutely necessary. IndyCar teams must recapture some of their present expenditures. Currently, virtually all racing-related expenditures flow in one direction: out of the series. Teams are happy to outsource these services so long as the IMS or somebody else subsidizes them. But that, too, must end.

So, will production of the new cars require that IndyCar teams do something more than assemble them? If the answer is no, then why do it? How does this change the consumer-competitor culture of IndyCar Racing? How does it establish new revenue streams that teams can count on when times get tough? How does it resolve the problem of monopolistic vendors? How will it enable the IndyCar Series to remain competitive when Apex Brasil determines that its stretegic objectives have been achieved? How does it differentiate IndyCar from NASCAR, where all cars look the same?

Citizens can probably tell that we are not optimistic about the new IndyCar spec. We would like to see the league 1) mandate a tub or driver compartment for driver safety, 2) publish a schedule of design constraints, and 3) let the teams and their smart engineers figure out the rest. We would like to see aero tunnels banned. We would like to see sphincter-wrenching qualifying runs at Indy again. We would like to see cars that are a little bit scary, the way race cars should be!

IRL Management: what are the jobs that your customers (ticket buyers and tv viewers, race promoters, league sponsors, broadcast partners) are trying to get done? Figure it out and help them do it!


IndyCar Maxim #4

Roggespierre's Maxim #4
Courtesy of Clayton Christensen, Harvard Business School

"...the job, not the customer, is the fundamental unit of analysis for a marketer who hopes to develop products that customers will buy."

We invite IndyCar management to re-read Professor Christensen's quote, taking time to note the implicit assumption that product development is the job of marketers. This is important.

If marketers are responsible for product development, then it follows that those who work either in racing operations or for suppliers of racing teams are not. These individuals should be consulted, but they should not have final authority.

Who Cares about Torque Curves? More Cup Holders!!

Auto sales in the United States provide a good example. Engineers and designers dream-up all sorts of neat technology-based ideas for cars. They are therefore loathe to admit that one of the most important design innovations so far as U.S. auto sales are concerned is.... more cup holders! This is why engineers should not have final authority in product development.

Product development of the modern Indianapolis 500 Mile Race was more or less accidental, and yet it worked out well. Such cases are increasingly rare as marketing evolves into an analytically sophisticated, data-driven exercise.

We invite IRL Management to consider, as Professor Christensen might say, the jobs that customers are trying to get done via IndyCar racing. Do they want to witness gut-wrenching danger? Have a good time with friends? Confirm that their city of residence is somewhere important? Establish lifelong memories of experiences shared with their children? Hang out with hot babes? Get drunk and engage in debauchery? Take in colorful pageantry? Feel as if they're hip? Get away from people who are not like them?

Like any product, IndyCar Racing can't assist in each of the "jobs" above. Serving one market, as we like to say, necessarily means not serving another. But we do know that establishing a product culture of some kind will be of far more benefit to IndyCar racing than marginal aerodynamic changes, push-to-pass, or even new race cars. The latter, in fact, should be consistent with the product culture.

That way, you need not claim in successive seasons to be the "green" racing series, the "value opportunity" of the sport, and the "international" series, when in fact you are none of the three.


Sunday, August 23, 2009

Franchitti wins at Sonoma; Briscoe Leads Points

Even a first-lap slobber knocker involving seven cars couldn't prevent Target Ganassi Racing and Team Penske from dominating Sunday's IndyCar race at Sonoma. Ganassi's Dario Franchitti won the event, and Penske's Ryan Briscoe claimed second and the series points lead.

Rookie Mike Conway finished third, the best result of the season for Dreyer & Reinbold Racing. Defending IndyCar Champion Scott Dixon crossed the line in tenth place, falling to third in points behind Briscoe and Franchitti, his teammate at Target Chip Ganassi Racing.

Team Penske's Will Power and Rookie Nelson Philippe of Conquest Racing were not replaced after both suffered significant injuries in a practice crash Saturday. Neither driver is expected to return this season.