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FUNDAMENTALS OF MARKETING
A CASE STUDY ON
THE MARKETING ENVIRONMENT FORMULA 1 AND TOBACCO
HAJI SAIF ULLAH
University of Gujrat
Formula One was first defined in 1946 by the Commission Sportive International (CSI) of the
FIA, forerunner of FISA, as the premier single seater racing category in worldwide
motorsport. F1 teams can spend $US350 million a year, facing a constant challenge to rise
funding. Sponsorship accounts for 80-85% of an F1 team’s income. In 1972 Philip Morris
joined the fray with its Marlboro brand and that followed Rothmans, Benson & Hedges, West
and Lucky Strike all became major players.
Income from formula one and other sports
His brother Ralf will only earn around $13 million - around £7 million, the same as David
Coulthard, only a paltry £134,615 per week. At the lower end of the scale, drivers such as
Nick Heidfeld at Jordan are reported to be earning around $1.5 million.
Cost of maintaining a team
The cost of maintaining the teams is also mind-boggling. Teams use around 900 tyros in a
year's racing, each around £1,500 a time; a gearbox costs £65,000 and around 16 of these will
be used - last year, they used one gearbox per race. Steering Wheels cost £30,000 each and
engines £180,000 per race but with 170 used throughout the race calendar, the bulk of the
money is spent on this technology.
Why formula one for tobacco industry?
The main objective to achieve was not to do with consumers, but in developing business-to-
business relationships in areas like the Middle East and the Far East, where there are number
of brands. So once thinking about annual events that take place on a regular basis, we are
limited in what sports you can be involved with. The World Cup is every four years, and so
are the Olympics. And although we are involved with the Olympics, we rapidly became
convinced that Formula One was the right place for us to be. There are a lot of races spread
throughout the year and also spread throughout the world, so it seemed to be a perfect fit.
Formula 1 is one area where the tobacco companies have been able to gain huge exposure as
the average viewing figures for each grand prix is over 354 million worldwide. Formula One
was seen as particularly valuable because “TV coverage is massive around the world and
“there is a genuine association with the team, vital for image building.” Young people are
traditionally early adopters of new media capabilities and consequently a very receptive
Ban on tobacco advertising in formula one
In 1990 the European Union proposed an EU-wide ban on tobacco sponsorship. The British
Medical Journal joined the battle by calling for a ban on tobacco sponsorship in sport, saying
that studies by academics at Manchester University had revealed that it encourages teenagers
to smoke. Tobacco companies fought back, arguing that they invest in motor racing not to
start people smoking but rather to convince them to switch brands.
Question 1: How has the marketing environment impacted on formula 1 racing?
F1 is one of the highest profit games which are popular and seen worldwide. A large sum of
money has been invested by promoters like $38 m by Benson and hedges sponsoring Jordan
team. By associating formula one game it increase brand loyalty, create awareness, change or
reinforce their image, drive retail or dealer traffic and stimulate sales, trial and usage. It gives
them global exposure on relatively cost-effective basis Brand leverage. In areas where we are
growing, like Singapore, Malaysia and China, it has given the brand enhanced exposure. The
association with Formula One, particularly in places like China where Formula One is hugely
popular gives another opportunity to promote the brand.
Question 2: How else could the cigarette producers promote their brands?
It can be done by making cigarette lighters as dummy and distributing it with a cigarette
pack, making clothing line and household commodities and can be used in restaurants for
menu holder purpose.
b) By doing sales promotion for ex all smokers prefer to use freshener after cigarette so
giving them freshener with x no of packets.
c)promotional schemes--for ex giving 1 pack of cigarette for x empty pack of the cigarette
and people buying more to get that extra benefit.
d) Promotion of new product as e-cigarette
e) Giving price discounts for x packets of cigarettes
f) Advertising in their popular local sport and in events