What makes motorsports marketing and design work more or less expensive?

You want the answer upfront, so here it is. In a perfect world, the price of any marketing / design work should be directly correlated with how close or how far away it is from the pre-determined outcome you’re trying to achieve. Except, this isn't a perfect world, and people have cost preferences, pre-determined diagnosis of their business's problems, and varying levels of trust in who they work with. This blog is therefore a way for you to both determine what type of buyer you are, as well as be able to quickly assess what type of buyer your sponsors or partners are too.

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That's what we're going to dive into. And the pricing structures described in this blog can and should also be utilized by those who are negotiating with sponsors as well. You may also use this information in your own search for a studio or agency that can meet your needs.  

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Quality of the Work vs Quality of the Target Outcome

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You might have expected me to say that price = quality and that we can chart a sliding scale to represent this. But there are two ways to look at “quality” here. There’s the quality of the work itself (in a vacuum), and then there’s the quality of the actual outcome of the work. What defines “$$$$” (something that seems expensive) vs “$” (something that feels very affordable) is totally relative to you and your situation. The higher the price, the closer you should get to a quality outcome. The quality of the work independent of outcome can range dramatically, but thankfully, this tends to be something you can filter for as most studios and agencies openly document their work. With all of this in mind, let’s look at some common scenarios.

The Value & Outcome Based Price

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- Price = Value & Outcome Based ($$$$)

- Project Goal = A specific problem or set of problems is being solved for.  

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Contrary to some people’s beliefs, most (but not all) buyers at the “most expensive” end don’t care about the price. They care that the problem is solved, and they love certainty. They typically do not claim to know the solution and may not even know the specific underlying problem they’re trying to solve. Up-front strategy is deployed first to start diagnosing pain points before any work is performed.

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The price of performing this project will reflect one of two things. It will either reflect the value inherent in solving that problem as it relates to how costly that problem is if it’s not solved for. Or, it will reflect the potential upside generated (i.e. expected increase in revenue) if it’s well executed. If this is a new or somewhat unfamiliar concept, you should reread those last two sentences. This is, by all accounts, the most logical way of thinking about pricing. It's not how everyone thinks about pricing, but if certainty of outcome is what you want, then this is the model you follow.

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This is typically how larger businesses and corporate entities engage. If you can put a price on how costly it is to do nothing at all, you can then work backwards to figure out how valuable (and thus how expensive) it is to execute this project with the highest level of certainty of outcome. The same applies to determining upside by asking “if this work is performed, how much more money can we realistically expect to make?” The price of the project is therefore a fraction (usually 20%) of whatever that target number is.  

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The Output Based Price

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- Price = Output Based ($$ - $$$)

- Project Overview = You / Your business have identified a problem and the solution. You need someone to implement that solution.

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Performing this work is less expensive than the previous “most expensive” case, but only because the client has self-diagnosed their problem (right or wrong). Therefore, the risk assumed by any agency or studio is lower. What truly determines price at this level is the quality of execution, because even if they’re correct in their diagnosis, poor execution can produce underwhelming results. Conversely, high quality work performed on the wrong task via a misdiagnosis will also produce underwhelming results. Here’s an example of the latter.

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The $20,000 Espresso Machine Problem

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Analogy: Let’s say more often than not you feel tired. You think to yourself, “I need more energy because I’m always feeling tired”. This leads you to then think “Caffeine will give me more energy, and I want high quality work performed in order to provide me with the best energy possible”. You’ve both identified a problem and a potential solution, and you want the highest quality solution money can buy.

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By this (unknowingly faulty) logic, you decide to drop $20,000 on a high-end espresso machine so you can make the highest quality espresso shots on demand to solve your lack of energy. This is an example of high-quality work not equating to a high-quality result. Why? Had any form of strategy been deployed, you would have first asked yourself, why am even tired in the first place? And from such place, a more fitting solution would likely arise.

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I like to ask people after describing this analogy, “are we potentially building a $20,000 espresso machine for you? Or are we building something that actually gets to the root of what you’re trying to solve?”

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Here’s what’s worth restating. The quality of the work and quality of the work’s outcome are two totally different things. Quality work exists on a spectrum, but the quality of the outcome can usually be objectively measured.

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The Output Based Price (Continued)

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Output based work can also take the form of final deliverables which contain a high level of certainty baked in. For example, hero card design, business card design, livery design, and other similar services are typically priced based on quality alone because the end goal here is quite literally the finished product in most cases. That's not to say these things can't be looked at through the lens of the former "value & outcome" based pricing. But rarely are these marketing assets in isolation really worth pricing in that fashion.

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The Road Map Price

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-  Price = Information Based ($-$$)

-  Project Overview = You have a problem, you don’t know how to solve it, and before even considering executing solutions, you want clarity and information.

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In situations like this, people typically just need guidance. You don’t know what you don’t know, and in a lot of cases, simply talking and strategizing with an expert in the field is all you need. It’s also a lot faster and cheaper than trying to blindly build solutions without any additional insights on hand.

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In short, the instruction manual is the most important, highest value asset here. Once you have the instruction manual, you can shop it around, or decide to have the work done internally.

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Using these Models in Sponsorship / Partnership Conversations

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These pricing models should help you more clearly understand what you truly want when choosing a marketing agency or studio to work with. You might be the person who wants certainty, the person who can self-diagnose but needs a solid execution, or the person who just needs a solid foundation to build on.

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With these new models in mind though, think about how this may change your approach when connecting with sponsors or partners too. Do they potentially have unknown problems that would be extremely valuable if solved for? Are they looking for high-quality execution on a problem they already have? Or do they want someone in the motorsports domain to simply help guide them via your expertise and connections? When the conversation starts at these levels, you’re going to be able to address their pain-points more accurately, and hopefully produce better results longer term.