It's hard to pick up a newspaper these days and
not find a story about goodwill, or more precisely, the loss of it. Already
in 2002 this ethereal notion has snared such venerable institutions as the
FBI, the Catholic Church and Corporate America. In each case, a series of
high-profile scandals eventually erased in months the reputations it took
decades, or, in at least one case, millennia to build.
With such issues on everyone's mind these days, it is curious why companies
with solid reputations like Honda and Toyota would fail to consider the
fragility of the goodwill they have created with CART fans before deciding
where to put their motorsports dollars. Yet by deciding to switch to the
IRL-and, worse, by trying to bribe selective CART teams to go with them,
trying to force the remaining CART teams and fans to subsidize those efforts
and prohibit existing teams from purchase their chassis-both companies have
put themselves directly in the line of fire. By doing so, they also may have
destroyed whatever goodwill CART fans may have had for them.
This is no small matter, particularly for two companies in the highly
competitive global auto marketplace. If just 15,000 devoted, hardcore CART
fans are angry enough to boycott the companies' products, then the duo have
put an awful lot at risk. If, over the course of their lives, those fans buy
an average of 10 cars at an average cost of $25,000 and are just 33% more
likely to buy the cars of series supporters than the 10% in the general
public already buying Toyotas and the 6.9% buying Hondas, then the companies
could potentially miss out on nearly $2 billion worth (on a present-value
basis) of future car sales-$1.1 billion from Toyota and about $800 million
from Honda. That turns a seemingly minor decision on which open-wheel series
to support in the U.S. into a very expensive strategic blunder.
It is particularly difficult to understand why the companies took the
actions they did given their first-hand, up-close-and-personal experience
with open-wheel racing in the United States. Surely someone in each camp
noticed that race fans in general are a prickly bunch prone to holding
grudges and fighting to the end. More to the point, someone had to realize
that fans of CART and the IRL despise everything the other series
represents. To put a company and its financial health into the line of this
fire is sure to alienate a large chunk of a very profitable market.
Honda's actions are the most surprising given their history. Those who
support CART no doubt regretted last year's decision to leave the series.
The regret was based, in part, on the embarrassment many felt last summer
when CART's former administration screwed Honda in the pop-off valve
controversy. That salt later was thrown into the wound when the same
administration decided to go normally aspirated against Honda's wishes-and
those of most CART fans-further justified Honda's sense of betrayal in the
eyes of its fans. While those fans were sorry to see Honda leave the series,
they certainly understood.
However, you would think Honda, still stinging from its own betrayal, would
not turn around and do the same thing to the people who supported it for so
long. Yet, that is exactly what the company is doing by turning its back on
CART in favor of the IRL.
And for what?
Yes, Honda and Toyota will get to race at the Indy 500, still a giant of a
race. But these days, the Daytona 500 and CART's race in Mexico City-the
world's largest market-are nearly as big.
And yes, the companies also will get to race in front of a good crowd in
Kansas City, Kan., the number 24 MSA in the United States. In Fort Worth the
series draws enough fans to fill about one-third of Texas Motor Speedway's
massive facility.
Beyond that, though, there is little value in the series. In fact, most of
the IRL's 11 other races struggle to get 15,000 people interested enough to
accept free tickets. Again, it looks like people in charge of both
companies' motorsports operations were in a total fog in recent years.
Surely somebody at the companies noticed all the empty seats at IRL events,
even after six years of "controlled growth." In Miami, Phoenix, Fontana,
combined-the number 14, 12 and 2 markets in the United States-the series
drew fewer than CART drew for its Cleveland race last weekend. Didn't anyone
pay attention as attendance at Phoenix continued to slide?
Perhaps the companies' representatives believed Tony George's drunken boast
that the IRL would dominate global motorsports in a few years. Un, huh. If
they fell for that one then they deserve to have every huckster from around
the globe banging on their doors.
Perhaps they concluded that CART fans would suddenly change course and
support the IRL if Toyota and Honda were there. It's hard to imagine this is
the case because CART fans are the same people who have resisted a decade of
NASCAR marketing. And after six years, they are as bitterly opposed to the
IRL and its core beliefs as they were when the lamebrain idea for the series
was hatched. In fact, given no other choice, they will likely look to F1 or
even NASCAR before accepting the IRL.
In effect, both Honda and Toyota have decided that they would rather spend
an awful lot of money trying to create new engines and fans in the IRL than
to milk the investment they've already made by racing in front of existing
crowds at CART events-save for its domestic oval races. It is a lesson that
any 19-year-old marketing student could recite: it is far easier and
profitable to sell to existing customers than to go out and create new ones.
The sad part of it all is that neither company had to take such a risk. Had
either chosen to stay away from open-wheel racing in the United States they
would not have lost support from CART fans. They wouldn't have alienated IRL
fans by leaving, either. Nor would either have lost much had they chosen to
participate equally in both series in 2003 and beyond-charging both groups
the same price for the same equipment. In fact, such a strategy might have
added another, though demonstrably smaller, base of potentially loyal
customers to their customer rolls without alienating existing fans.
By deciding to go exclusively with the IRL, however, the two companies have
angered a lot of CART fans who, like Honda, will no doubt feel betrayed and
hold a grudge. What else can those fans do, after all? They couldn't stop
Tony George from splitting the sport. And they didn't have anything to do
with the pop-off valve controversy or the decision to go NA next year that
sent Honda over the edge. Yet in every case, they are the ones that have
paid the price for the inane decisions of others. And now, having been
betrayed now by both Honda and Toyota, that grudge is likely to seethe for
some time.
By getting mad at CART's former administration, Honda and Toyota have
neglected an important pool of existing customers. And in the end, then, it
seems these two reputable companies are well on their way toward joining
that ignominious group of institutions that have learned too late that it
doesn't take much to ruin the goodwill it takes years of careful work to
create.
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