Sports Marketing

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					Sports Marketing: A Special
    Case of Marketing?
          Chapter 1
           Theory & Application
• General theories of marketing should ultimately
  possess superior predictive & explanatory
  powers of how marketing works.
• Does the application of sports marketing
  principles better explain and predict optimal
  buyer/seller relationships & exchanges better
  than traditional goods/services marketing?
  – In other words, if everyone marketed like sports
    marketers, would they be more successful?


                Team Sports Marketing                  2
How is sports marketing different from
traditional goods/services marketing?

  By understanding the differences we can understand
    the effectiveness of sports marketing principles.
                                                           #1

                  Fans vs. Customers

• Customer: ―One that buys            What are some
  goods or services.‖                  things you have
• Fan: ―An ardent devotee;            seen fans do at a
  an enthusiast;
                                          game that
• Fanatic: ―A person
  marked or motivated by
                                        customers at a
  an extreme, unreasoning            grocery store never
  enthusiasm, as for a                 do for a favorite
  cause                                    cereal or
                                         toothpaste?

                     Team Sports Marketing             4
                                                           #1

               Fans vs. Customers

• If a customer is a loyal Folgers coffee customer, we
  can predict that s/he will likely continue to buy Folgers
  coffee at the grocery store. A loyal Folger’s customer
  may, however, switch to similar coffee (Maxwell
  House) or buy Folgers at another store if appropriately
  discounted.
• You won’t see many Folger’s customers wearing shirts
  with its brand name emblazoned across the chest. Nor
  are you aware of many people, who of their own free
  will, frequently visit www.folgers.com. If so, they must
  be the same people who are visiting www.tide.com,
  www.zest.com, and www.crest.com.
• Why? Because most people don’t identify themselves
  by what detergent or toothpaste they use.
                  Team Sports Marketing                5
                                                                           #1

                      Fans vs. Customers

Fans:
•    Identify with and follow the behavior of the team and individual
     players on that team, on and off the field (via www.espn.com, team
     websites, newspapers, television, radio, wireless emails, etc.).
•    Purchase licensed merchandise (jerseys, automobile
     paraphernalia, caps, mugs, etc.) promoting the team.
•    Donate or pay extra for permanent seat-licenses (PSLs) in order to
     buy season tickets.
•    Travel to see games of that team outside of his local market.
•    Support tax-based initiatives to pay for a new arena or stadium for
     the team.
•    Are a supporter of the conference or league in which the team
     plays.
•    Devote significant social time attending, watching and discussing
     the team with others devoted to the same or other teams.
                            Team Sports Marketing                      6
                                                           #1

     Why? Consumer Surplus.




                 Team Sports Marketing                 7
How much would you pay to go to the Super Bowl? Why?
                                                                 #2

                 Identification vs. Loyalty

• Loyalty is the repeat                How did you feel when
  purchasing of a good or
  service by a consumer. A loyal        your team won or lost
  customer is sensitive to
  differences in brands and             in the play-offs
  prefers a brand or set of
  brands over others (see Odin,         recently?
  Odin and Valette-Florence
  2001).                               What exactly did you do
• Identification is when an             when your favorite
  individual reacts to events that
  occur to the team or player as        player succeeded or
  if the events happened to him
  or her (Kagan 1958).                  failed? Why did you
                                        do that?

                           Team Sports Marketing             8
#2                                                             #2




      Loyalty vs. Identification
 Transaction




                                         Social exchange

                 Team Sports Marketing                     9
                                                                                    #3
                            Who Pays?
                  Advertising & Promotion Costs
•   The manufacturer and/or retailer of          Can you think of any other
    goods and services pay for the
    development and placement of brand              goods or services that
    advertising and promotions.                     come close—such that
•   In contrast, sports teams and
    individuals (e.g., players and drivers)         customers promote the
    receive indirect and direct financial           organization the way
    support to advertise and promote
    themselves.                                     sports fans do?
•   Fans indirectly promote the team by          Is anyone else marketing as
    buying and wearing or displaying
    licensed team merchandise.                      effectively as sports
•   Sponsors directly promote the team              teams often do?
    and pay for advertising and media to
    do so.                                       What brands are people
     –   For instance, ATT pays the Dallas
         Stars at least $100,000 to host the
                                                    willing to pay extra for just
         team website                               so people can see the
         (www.attwireless.dallasstars.com).
     –   Radio and TV broadcasts of events are      logo?
         ―brought to you by‖ the sponsors.


                                     Team Sports Marketing                     10
                                                                                 #3
                          Who Pays?
                Advertising & Promotion Costs
• Much of the actual product,
  particularly in terms of
  revenue, is in the broadcast
  of the games or event.
• The fact that sports are
  broadcast, in and of itself,
  differentiates sports from
  other goods and services.
• Typical goods and services
                                                     Ab-dolly Infomercial
  find it difficult to entertain
  using its product as the star
  of a broadcast…although
  some try.                  Team Sports Marketing                          11
                                                            #3
                      Who Pays?
                      Media Costs
• Goods and services marketers typically pay for media
  to broadcast or print advertising and promotional
  information.
• The media pays sports teams for the right to broadcast
  or print team and event information.
   – For example, ABC/ESPN & Time-Warner are paying
     $4.48 billion for NASCAR (8 years).
   – Relatedly, the distribution for sports is increasingly
     electronic and not limited to static locations.



                   Team Sports Marketing               12
                                                                           #4
                     Geographic Distribution:
                        Static vs. Mobile
•   Goods and services are sold in            • Has anyone ever seen a
    specific geographic outlets.
•   Although retail locations may open
                                                U.S.-based sporting
    or close, customers typically visit or      event broadcast in
    receive service based from specific         another country? How is
    locations.                                  the product (i.e., the
•   Sporting events and teams, on the
    other hand, are basically traveling         broadcast) similar or
    road shows, moving from location            different from what is
    to location, city to city, nationally       seen in the U.S.?
    and globally.
      – The NFL, for example, is              • Has anyone ever bought
         broadcast in 205 countries             a Coke or gone to
         across 24 time zones for
         upwards of 4500 hours of
                                                McDonald’s in different
         weekly programming.                    countries? How is the
                                                product and marketing
                                                different?
                                  Team Sports Marketing               13
                                                                                         #5

                          Truly Global Products
•   From an international marketing perspective, sports such as soccer,
    basketball, baseball, tennis, golf and motorsports are global products
    that need little translation or alteration to be accepted across cultures.
•   Compared to most sports, frequently cited global products such as Coke
    and McDonald’s are not actually standardized global products.
     – Coke alters its packaging, name and syrup content in foreign
        countries.
     – McDonald’s offers beer in German restaurants and cooks its
        hamburgers rare in France.
•   The content or product of the NFL, Formula1 Racing, Olympics Downhill
    Racing, or World Cup Soccer remains the same throughout the world.
     – In a sense, given its electronic broadcasts, this distribution channel is
        standardized around the world.
     – Obviously, the promotion (e.g., language) and pricing (e.g., costs of
        cable or PPV) aspects of the marketing mix are adjusted to regional
        markets.



                                   Team Sports Marketing                            14
                                                                             Coke in Japan
                                                         #6

                  Two-part pricing
• Customers typically          Can you think of any
  pay one price for a           goods/services that
  given product or
  service.                      require an initial
• Professional sports           payment before you
  and major college             pay a second price for
  sports fans frequently        the actual use of the
  pay a two-part tariff         good/service?
  (or price).



                   Team Sports Marketing            15
                                                                           #6

                          Two-part pricing
• Demand is frequently sufficient      • Price-setting in most sports
  to require an initial payment          settings must consider various
  (donation to the university,           forms of price bundling.
  payment for a seat license,
  membership fees) for the right          – Season tickets are offered
  to pay more money as a                     at a bundled price for the
  means to allocate a limited                entire season and are de-
  inventory of preferable seats.             bundled in the form of
  Fans who pay the initial fee               smaller ticket packages or
  are then given the opportunity             individual tickets.
  to purchase tickets.                    – Offering tickets with a hot
• Another aspect of two-part                 dog and soft drink for a
  pricing in sports is the event             single price is another
  itself. Fans pay for a ticket to           example of price bundling
  enter the event (initial                   in that it combines the
  payment) and then purchase                 prices of what would
  other products (food, drink,               normally be two-part
  souvenirs) after entering.                 pricing.
                           Team Sports Marketing                      16
                                #6

  Two-part pricing

Why do you think fans
 are willing to pay so
 much money for food
 & drink at a sporting
 event?
Why don’t more people
 bring coolers (when
 allowed) or eat
 before/after the
 event?
   Team Sports Marketing   17
                                                                                #7
                       Tax-Payer Support:
                            Facilities
• Although the subject of much          • In contrast, the majority (18/29)
  public policy debate, sports            of NBA owners’ facilities are
  team owners frequently do not           largely or entirely paid by
  pay for their own stadiums or           taxpayers (see
  arenas. A new Nissan                    http://www.marquette.edu/law/
  automobile plant may be able            sports/sfr/nba22.pdf, 2001).
  to acquire favorable tax status       • In addition, naming rights by
  and property in Mississippi             sponsors add additional
  ($695 million in tax breaks and         revenue to the team. Even
  incentives over 20 years), but          when owners invest private
  will still pay for building their       dollars into the facility it is not
  own facilities ($930 million in         necessarily because public
  Canton, MS).                            monies are unavailable, but is
                                          often due to revenue control
                                          issues that will favor the team
                                          owners if they own the facility.

                            Team Sports Marketing                          18
                                                              #7
                            Tax-Payer Support:
                                 Facilities
Consider Reliant Stadium in Houston,
  Texas:
• As first planned, stadium officials had
  $367 million with which to work - $317
  million from bond issues, to be paid off
  with hotel and rental car tax revenue, and
  $50 million from the sale of permanent
  license seats by the Texans.
• Officials now concede they knew all
  along that wouldn't cover the costs for
  the stadium they wanted. They added a
  parking tax of $1 per vehicle and a ticket
  tax capped at $2 a ticket.
• Fans are helping pay off $82 million
  worth of extras that have increased the
  cost of the Reliant Stadium complex to
  $449 million.
• Among the items added to the original
  stadium proposal are extra restrooms,
  larger concession areas, 4,000 more
  parking spaces and landscaping.
                                 Team Sports Marketing   19
                                                                                        #7
               Why are communities willing to pay whatever
               it takes to attract pro sports?

From a broader sociological perspective,      How do people in your city or state
   sports teams provide a city (or state) a     represent themselves to others by the
   social identity that can represent who       success of their sports teams?
   they are to others.
                                                      •The successful state university
                                                      sports team allows constituents to
                                                      represent themselves to others as
                                                      winners.
                                                      •The tough blue-collar character
                                                      of the Steelers over the years
                                                      symbolizes who Pittsburgh fans
                                                      are to the rest of the country.
                                                      •The black uniforms, skull-and-
                                                      crossbones, and intimidating
                                                      players for the Oakland Raiders,
                                                      for better or worse, mostly identify
                                                      their fans.
                                                      •The Hogs at Redskins games20
                                  Team Sports Marketing
                                                      represent…ok, we don’t know
                 Competition:    #8

        Cooperation & Monopoly Power

• Branded goods and services have traditionally not
  cooperated in their marketing efforts.
   – At the wholesale level and in some highly competitive retail
     markets, goods and services may engage in co-branding or
     cooperative strategic alliances.
   – As a rule, however, goods and services marketers do not
     cooperate in cross-promotions and work in-league with each
     other on a permanent basis.
• Professional sports leagues have unique anti-trust
  exemption & monopoly powers
   – limiting production (expansion and contraction of its members)
   – providing revenue sharing (national TV contracts, etc.), and
   – Allowing profit maximization
                    Team Sports Marketing                     21
                                                                                                                      #9
                                          Exchange:
                                      Economic vs. Social
•   Customers pay an economic price for                    •    In sports, attendance is nearly always
    the goods or services they purchase…                        (98-99% of the time) with at least one
    while fans make a social investment in                      other person.
    the transaction.                                              –   The sports fan pays a price for the right to
                                                                      enjoy an emotional experience with others.
•   Customers typically give up monetary                          –   The fan goes to the game to be with others to
    value in exchange (what one gives up                              share the experience in this social
    for what one gets) for the good or                                exchange.
    service, although time and search
    effort may also be expended.
     –   In most cases only limited social exchange
         occurs.                                               1. What is the difference between a
     –   Consumers may join together to go out to a               good crowd at the mall and at the
         restaurant for primarily social reasons.
         However, the exchange with the restaurant is             game?
         still premised upon the purchase of the meal.              • How does it make people feel?
     –   Individual and groups of customers may at the
         same time purchase a meal in the same                      • Will they approach or avoid the
         venue where social exchange accounts for
         little or no part of the encounter. This rarely                 place?
         happens in sports settings.                           2. If it is not very crowded at the mall
     –   Crowds are generally a bad thing, with
         negative psychological effects.                          or the game, how will people
                                                                  respond?

                                            Team Sports Marketing                                                22
                                                                                   #10

                      Contractual Power

Goods & Services                      Sports
• The size and power of the           How can star players command
  manufacturer or retailer of             such high salaries? Why are
  goods and services affords the          teams & sponsors willing to
  owner contractual leverage
  over its employees.                     pay? How can they be worth
• Salaries, benefits and tenure           what they earn?
  are largely controlled by the       1. Tiger Woods: $81m
  owners.                             2. Michael Schumacher: $80m
• Employees have mobility, but        3. Peyton Manning: $42m
  are rarely able to single-
  handedly affect the outcome of      4. Michael Jordan: $35m
  the firm by making contractual      5. Shaquille O’Neal: $32m
  demands.                                    (2004 Salaries & Earnings, Forbes)




                          Team Sports Marketing                                    23
                                                                               #10

                         Contractual Power
Goods & Services
• The size and power of the manufacturer or retailer of goods and services
  affords the owner contractual leverage over its employees.
• Salaries, benefits and tenure are largely controlled by the owners.
• Employees have mobility, but are rarely able to single-handedly affect the
  outcome of the firm by making contractual demands.

Sports:
• Employees (viz., players) of sports teams are more likely to possess
   contractual power over employers.
• Contract concessions, renegotiations and arbitrations generally favor
   players.
• The scarcity of superstar talent has shifted the power to players over
   owners.
• Union membership has declined in manufacturing over the past four
   decades. At the same time, union membership in professional sports
   leagues have grown relatively strong due to the leverage held by the players.
   Consequently, work stoppages in major sports leagues have become nearly
   commonplace in the past decade.
                             Team Sports Marketing                             24
                 So,
is marketing a special case of sports
             marketing?
     Dimension              Goods/Service                      Sports

1    Purchasers             Customers                          Fans

2    Adoption               Loyalty                            Identification


3    Promotion & Media      Owner pays                         Fans, sponsors, & media pay


4    Distribution Channel   Static; More site-limited          Mobile; more flexible

5    Product                Adapted                            Global

6    Pricing                Single price for a given form of   Two-part: Fan pays for right to
                            product/service                    buy tickets
7    Facilities             Owner buys/builds own facilities   Government (taxpayers) pay
                                                               for facilities
8    Competition            Individual branding in             Cooperative contractual
                            competitive markets                relationshipsMonopoly power
                                                               & anti-trust exemption

9    Exchange               Principally economic               Principally social

10   Employees              Contractual power favors
                                Team Sports Marketing          Contractual power favors
                                                                                     26
                            owners                             players
  Goods/Services that approach the level of
effectiveness exemplified in sports marketing:


                                   – Harley Davidson
                                   – Polo
                                   – eBay
                                   – Borat, Austin
                                     Powers
                                   – Friends




           Team Sports Marketing                 27
            Definition of Sports
                Marketing

Sports marketing is building a highly
 identified fan base such that fans,
 sponsors, media and government pay to
 promote and support the organization for
 the benefits of social exchange and
 personal, group and community identity
 within a cooperative competitive
 environment.
               Team Sports Marketing    28
One of the advantages of being disorderly is that one is
        constantly making exciting discoveries.
                     ~A.A. Milne

				
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posted:10/28/2011
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