Sports Business Exam
Why do People Participate in Sports
- Over 100 motives identified by researchers, classified into 3 categories: 1. Achievement motivation 2. Social motivation 3. Mastery motivation
Consumption Motives
- Utilitarian motive: desire to achieve functional benefit from using product or service • Buying a gym membership to get in shape • Going to the dentist to ensure healthy teeth • Buying groceries to have food to eat - Hedonic motive: desire to have a sensory experience that elicits pleasure, fun, or excitement • Attending a sporting event • Going to the movies • Riding a roller coaster
Socio-Demographic Trends
-6 socio-demographic trends impacting marketing practices in the sports industry: 1. Aging population 2. Ethnic diversity 3. Buying power of women 4. Changes in different US regions 5. Decreased leisure time 6. Demand for social responsibility
A.G. Spalding & Brothers (Decentralized Organization)
-Each department is responsible for their own operations, accounting, etc -Separate divisions, sub-divisions, and departments that focused on certain products or functions in the company and could be run autonomously. - Best practices standardized and shared by senior management across divisions and departments.
Example: Miami Dolphins & the Latin American Market
-Miami: 66% • • Casting Latinos & Latinas in their marketing campaigns • Bring "Dolphins Fan Experience" to Spanish-speaking neighborhoods and Latino festivals • "Football Fiesta Program": introduce football to shoppers • Sun Life Stadium: hosts soccer matches; Latino festivals
Economy: Four Phases
-Prosperity: high consumer spending and business output • Recession: downward phase; spending and business output decreasing • Depression: low phase; spending and business output drastically low • Recovery: upward phase; spending and business output rising
What makes the Sports Industry Unique? (Financial Structure)
-Sport enterprises earn significant portion of their revenues not from the sale of core product (e.g. a game), but from television rights, sponsorships, concessions, parking, merchandise, licensing fees, etc.
Endorsement Advertising
-Using an athlete's name to sell a product • Endorsements link athlete performance to product quality • Spalding used this approach back in 1880s
Buying Power of Women
-Years ago, men were primarily responsible for family finances • Women's influence has increased over time: - Spend $5 trillion on goods and services - 57% of all college degrees earned by women - 50% of internet users are women • more likely to buy products online than men
International Timeline of Sports
1. 776 BC: Ancient Olympic Games 2. 1800s: UK Rugby 3. 1888: The Football League (Barclays Premier League) 4. 1903: Tour De France 5. 1963: Futbol-Bundesliga -Chariot racing preceded the creation of the Olympic Games • Free entry for the poor; wealthy paid for seating with shade • Betting took place • Drivers wore colors of their faction • Fans adopted colors, hairstyles, etc. of their favorite charioteer
Most Valuable Teams and Clubs
1. Manchester United- 1.86 billion 2. Dallas Cowboys- 1.81 billion 3. New York Yankees- 1.7 billion 4. Washington Redskins- 1.55 billion 5. Real Madrid- 1.45 billion
Fan Connection Points
1. Star 2. Place 3. Social Currency 4. Family 5. Vicarious Experience 6. Uncertainty 7. Utopian
United States Timeline of Sports
1860s: National Association of Professional Baseball Players 1876: National League 1900: American League 1903: Agreement between NL and AL forms modern MLB, first world series 1917: NHL 1920: NFL 1937: National Basketball League (NBL) 1946: BAA 1949: NBA (merger of NBL and BAA)
Developments Impacting the Sports Industry
1870s: Several developments underway that made emergence of the modern sports industry possible - Technological advances: railroads; telegraph; printing press • Growth of urban populations - Growth of local fan bases ready to follow sports - Practice of paying for sport entertainment • Standardization of sport product (rules, etc.) • Specialization of athletic skill - "Kinesiology" did not exist until 1967 • Knowledgeable entrepreneurs -Demand for sports uppppp
Involvement in Sports
3 components of involvement: • Cognitive component: • What someone knows about a sport • Acquisition of information and knowledge (rules, news, stats, etc.) • Affective component: • Attitudes, feelings, and emotions • Behavioral component: • "Doing" • Playing, watching, attending, rooting
Personal Motives
5) Aesthetic: follow sport/team/player because of style of play, performance level, or other observable characteristics: - Rafael Nadal: charismatic, intense style of play - Figure skating and gymnastics considered aesthetically beautiful • 6) Entertainment: Competition holds attention & interest; fun, spontaneous & unscripted. • 7) Sensory stimulation: sound; speed; movement; collisions; intensity • 8) Economic: monetary gains - Gambling and betting - Fantasy sports
Framework for Direct Consumption
6 potential influences on decision to attend a sporting event: - Perceived alternatives - Future availability - Cost - Convenience/Comfort - Level of involvement - Personal incentives
Star (Essential Connectors)
A sports industry product with the name and attraction potential to connect fans. - Star players - Coaches - Teams - Facilities
The Flow of Money in Sports
All arrows point in the direction $ is moving
Budget Competition
Any expenditure that a consumer might consider that would supersede a sports expenditure. • Limited money but various needs (savings; paying bills; food; transportation; clothing, vacations, etc.) • Threat especially in slow economic times
Cycle of Value in Sports
Athletes attract fans, fans attract media, media attracts marketers, marketers attract athletes
Sporting Event Consumption Decision (Direct Consumption)
Attending a live sporting event
Utopian (Search Connectors)
Attract fans to sports experiences that remind them of the past; nostalgic. - Ex: Throwback jerseys, emphasis on tradition.
5. Level of Involvement
Avid fans more likely to attend than casual fans
A.G. Spalding & Brothers (Vertical Integration)
Began as a retail store, but soon they established manufacturing & wholesale centers • Could better coordinate the manufacturing and distribution of sporting goods • Ownership and control of the entire supply chain - from the manufacturing of sporting goods to the sale in local stores -Controlled the manufacturing, wholesale, and retail
Demand for Social Responsibility
Businesses considered to have obligations to better society and conduct business in a way that positively impacts communities • Implications for marketers? - Support charities and causes that are important to your fan base - Green Business practices (production; distribution; promotion) that promote environmental protection • Recycling • Energy conservation
Vicarious Experience (Search Connectors)
Capitalize on fans' desire to feel or emulate the skills & performance of athletes & teams: - Ex: Cameras in NASCAR driver's cars, video games, fantasy camps
Place (Essential Connectors)
Capitalize on location of team: - "Boston Strong" following the Boston Marathon Bombing - Olympics as a source of national pride - PSU sports - bring together alumni & students
Uncertainty (Search Connectors)
Capitalize on unpredictability; attempts to predict the outcome - Ex: "What will happen? Who will be crowned the next champion?" - Appeals to gamblers, fantasy sports enthusiasts
Indirect Competition
Competition among suppliers of different types of products which satisfy the same or similar customer needs. (i.e., Entertainment) - Other sporting events: • Chicago: Bulls, Blackhawks, Bears, White Sox, Cubs, Northwestern Wildcats, U of Illinois, Wolves, etc. - Movies - Concerts - Restaurants, bars, clubs - Etc.
Competition
Competition: Anything that stands between your business and a customer 1. Direct competition 2. Indirect competition 3. Budget competition
4. Convenience/Comfort
Considerations: - Day and time of event - Weather - Driving time and distance to an event - Parking availability - Stadium cleanliness, seat comfort, food options • Availability of consumption via indirect means - TV; radio; online access - Indirect consumption possibility: Pros? Cons?
Social Currency (Communications Connectors)
Develop complete social experience sporting events to capitalize on the bonding potential of exchanged information that maintains & encourages social interaction - "The event everyone will be talking about!"
A.G. Spalding & Brothers (Diversification)
Diversification: New products added to the company's product mix. Spalding began by selling baseball equipment • Expanded to fishing equipment, ice skates, and croquet equipment • 1880s: football, soccer, boxing, track and field, tennis, boats, canoes, sport clothing (e.g. uniforms, shoes) • Early 1890s: produced first basketball for James Naismith and played a large role in introducing golf to US • Mid-1890s: leading company in bicycle market
Future Availability: Promotions
Enhance the perceived value of event attendance - Where "perceived value" = benefit divided by cost - Cost-based promotions: discount cost of tickets at times of year/day/week with low demand - Benefit-based promotions: giveaways; fireworks; events; bobble head night, celebrity autograph session; some unique attraction:
How the Sports Industry Creates Value?
Events - Gate revenues, concessions, parking • Content - Packaged content for digital, broadcast, print distribution • Properties - Leagues/tours/federations, teams, players • Rights Management - Licensing, merchandising, sponsorship rights • Sporting Goods - Footwear, apparel, hard goods, accessories
A.G. Spalding & Brothers
Example of growth and success of the sporting goods industry in 1880s • First modern sporting goods business enterprise • Many other companies copied its techniques, methods, and attitudes • Success attributed to four developments within firm 1. Vertical Integration 2. Diversification 3. Decentralized Organization 4. Promotional Skills
2. Future Availability
Future availability of that particular event: frequency of promotion, opponent, place in standings, etc. • Promotions challenge greater for sports properties with more events on their schedule - Offer a variety of events and promotions to appeal to wide range of audiences • How is this event unique?
Green Sports Alliance
Green Sports Alliance • The Green Sports Alliance • A non-profit organization with a mission to help sports teams, venues and leagues enhance their environmental performance. • Alliance members represent over 230 sports teams and venues from 20 different sports leagues.
High Involvement Fans
High Involvement fans have an enduring relationship with a sports entity not dependent on: - Time or situation - Success on field - Presence of geographic connection Emotion-based - Sports can stir emotions • Feel the highs and lows of a game, a season, or an off-season - More likely to regularly seek out team news, information, watch games on TV - Reward area of brain activated by positive performance - Likely to buy event tickets, merchandise Self-concept-based: possess same characteristics as emotion-based fans; differ in that being a fan is part of self-concept. • Fandom becomes part of their identity - Provides an outlet for people to form desired self- perceptions and influence how others view them. - Fully ensnared; "Super-fans" • May have tattoos of team logos, very emotional about their team - More likely to seek out non-game experiences • Meeting with coaches, players autographs; fantasy camps - Positive word-of-mouth = brand ambassadors • Social media affiliations with sports entity • Self-concept based segment - Key for marketers: • Focus on ways the sports organization can be supportive of their passion and identity - Example: Oakland Raiders • Fan club called Black Hole • Section of stadium known as "The Black Hole"
Sports Fan Entryways
How does someone initially become interested in a particular sport? - From The Elusive Fan - 5 Entryways: • Participation • On-Site Experience • Media • Word of Mouth • Mentoring
Post World War I: Demand Continued
Improved manufacturing techniques - Companies convert wartime production capability to manufacturing of sporting goods • Expansion in distribution outlets - Sporting goods became available to consumers at more non-traditional outlets (e.g. drugstores, clothing stores) - Manufacturers distributed directly to consumer • Many companies had significant capital, commitment to advertising and promotions • Increased supply, more efficient manufacturing, and improved distribution resulted in: - Lower prices for consumers - Increased demand
Sporting Event Consumption Decision (Indirect Consumption)
Indirect consumption: watching games on television; listening to radio broadcast; watching online; reading newspapers; etc
Levels of Involvement
Level of fan avidity varies with the level of involvement Low Involvement: Situation-based, geographic-based High Involvement: Emotion-based, self-concept based
Aging Population
Life stage change: approaching or at retirement - 2010: 40 million 65+ ("Baby Boomers" - born 1946-1964) - 2030: 72 million 65+ (~20% of population) • Increased time for leisure activities - Favorite sport: Baseball - Least favorite sport: Football
Decreased Leisure Time
Like money, time is a limited resource • Time spent on leisure activities has been decreasing in recent decades: - In 1976, 80% of Americans took a full week's vacation - In 2014, only 56% of Americans took a full week's vacation • Implications for marketers? - Offer variety of ticket options and incentives - Multi-game packages featuring weekend games
Low Involvement Fans
Low Involvement fans have a weak and/or inconsistent relationship with a sports entity: - May display indifference towards sports - Emotions not likely to be tied to the outcome of games - Unlikely to spend much money on sports -Situation-based: follow a team/player because of special event or circumstances that create heightened interest or attention - Team makes the playoffs - Recent signing of star player • Geography-based: identification due to proximity to a team past or present - Support local team as a means to show civic pride • Team nicknames and/or mascots reinforce geographic connection - Detroit Pistons - State College Spikes - Team USA • How sports entities can strengthen relationships with fans whose involvement is geography-based: - Community involvement part of business model: visible presence - Corporate sponsorships: Businesses benefit from sponsoring local teams and having big local sponsors enhances credibility of team in the eyes of local residents
Impact of World War I: 1914-1918
Military promoted sport as a means of soldier training and citizen development • Local and state governments saw benefits of sport in preparing soldiers, leading to: - Development of community recreation programs - Physical education became part of school curriculum - School and college athletic programs flourished
League Revenues
NFL: 9.2 Billion MLB: 7.1 Billion NBA: 4.6 Billion NHL: 2.6 Billion NCAA: 0.9 Billion MLS: 0.49 Billion
Do sports organizations need to win on the field in order to to be successful?
NO
Political, Legal, and Regulatory
Politics and politicians increasingly involved in sports industry - Stadiums & public funding - Sports commissions to attract sporting events to cities, states, regions (ex: Olympic bids) • Legal - Licensing and trademark violations - Players unions/Collective Bargaining Agreements (CBAs) • Industry regulation: Subject to rules set by organizations or sanctioning bodies that oversee a particular sport • Rules for the game itself - USGA: regulates equipment; caring for courses - NASCAR & F1: regulations around vehicle specs - NCAA: sanctions for recruiting violations, etc. • Rules for business and marketing practices - FIFA: virtual advertising forbidden - NFL: league sponsorships and competing local team sponsorships
Family (Communications Connectors)
Position the sports experience as a link between generations and a way to uphold family traditions - Research has shown: Fathers had greatest impact on choice to follow a particular team - More people become fans of a particular team between ages 6-10 than any other age group
What makes the Sports Industry Unique? (Product)
Product - Intangible and perishable - Inconsistent and unpredictable - Fluctuating demand - Psychological attachment
Sports Consumption Motives
Research has revealed 8 specific motives that apply to sports: - Grouped into 3 categories: 1. Social 2. Psychological 3. Personal
1. Perceived Alternatives
Resources (time & money) are required to attend a sporting event • Alternatives: How else could these resources be spent? - Time: • Sunday evening - stay home and watch TV? • Friday night - go out for drinks with friends? - Money: • Attend concert • Pay rent
What makes the Sports Industry Unique?
Results and changes are more immediate - Poor performance -> people get benched, traded, fired • Sports owners tend to be more vocal - Ownership more consolidated and ego-driven • Every decision is under the public microscope - Media, fans, pundits • Higher-risk assets - Injury, inappropriate behavior • Revenue sharing - A competitive-cooperative business model (Eagles vs. Packers) as opposed to the competitive model of most other industries (Toyota vs. Ford).
World War II and the Modern Era of Sports
Similar to WWI - Sports a part of soldier training - Encouraged in civilian life - Produced sports enthusiasts - increased participation and spectatorship • Key technological innovation between WWI and WWII: - Radio broadcasts of sporting events (1920s) - Led to boom in popularity of sports (college football, boxing, MLB)
Geographic growth rates of US regions
South and West regions population growth > Northeast and Midwest regions growth • Implications for marketers? - Relocation or expansion of teams - Leverage technological advances to maintain transplanted fans' connection with teams • Websites; regional sports networks; Satellite radio
3. Cost
Spending on sports entertainment is often more than paying for admission to the event - Concessions, parking, food - Up-front cost • Ability to buy tickets may require donations to organization's club program, (i.e. Nittany Lion Club) or • Personal Seat License (PSL): a fee in exchange for the right to purchase tickets • Opportunity cost: What else could this money be spent on? • Fan Cost Index (FCI): measures cost of typical outing to a sporting event (in dollars) • Allows team marketers to monitor their pricing relative to the league average: 2 adult tickets and 2 child tickets + 4 small drinks + beers + 4 hot dogs + 2 programs + Parking + 2 child-size caps = FCI
Endorsement Advertising: Babe Ruth
Sporting goods company Hillerich & Bradsby signed George Herman Ruth (Babe Ruth) in 1917 - Deal cost H&B $100 and a set of golf clubs - At the time, it was the most lucrative endorsement deal for an athlete in history -Association benefits for H&B: Ruth's autograph on Louisville Slugger Bats increased their perceived value (became the leading seller for H&B and outsold all other bats) -Ruth was a hero, a human interest story, an icon - People wanted to be like the Babe; talked about "Ruthian style" - In 2005, the Baby Ruth became the official candy bar of Major League Baseball.
Levels of Sports Fan Avidity
Sports Fan: Anyone with interest in some particular sport object, especially those who are enthusiastically devoted to that object. - Sport objects include: • A sport in general; • A team; • An individual athlete; • A specific sporting event • Level of fan avidity varies with the level of involvement
Economy
Sports and entertainment rely on discretionary purchases • Upward economic trend - More inclined to make sports & entertainment- related purchases • Downward economic trend - Less likely to spend on sports & entertainment
Marketing Environment
Term used to describe characteristics, developments, and trends occurring outside an organization that could potentially impact it. - 5 External Influences: 1. Competition 2. Economy 3. Technology 4. Political, Legal, Regulatory 5. Socio-Demographic Trends
World War II and the Modern Era of Sports (Continued)
The Elusive Fan: - Book discusses 3 generations of the modern U.S. sports industry: • Monopoly Generation 1900-1950 • Television Generation 1950-1990 • Highlight Generation 1990-present • Cultural shifts: - 1940s-1950s • Breaking of color barrier: Jackie Robinson signed with Brooklyn Dodgers in 1945 • Penn State's Role in this cultural shift - 1960s-1970s • Women's athletics: rapid growth as culture moved toward gender equality • Technological innovations improve fan options for the consumption of sports: - Television - Internet - Mobile
Most popular sports and sporting events by viewership
The Olympic Games: Viewers: 2-3 Billion Revenues: 3.9 Billion Sponsorship Revenues: 957 Million
Conclusion: How to win, off the field?
The best-run organizations are: • problem-oriented • committed to differentiation • attentive to technology • and always revenue focused
Commitment
The frequency, duration, and intensity of involvement in a sport; or the willingness to expend money, time, and energy in a pattern of sport involvement. • Generally, higher up the escalator = deeper commitment • The committed fan or athlete thinks, feels, and does more
Technology
The most rapidly changing external influence - Advances can influence: • Mix of sports products • Facilities/fan experience • Marketing strategy - Examples: • HDTV • Wi-Fi in stadiums • Mobile apps • E-tickets vs. paper tickets • Social media Challenge: Determining which technologies have potential to affect business • Availability and innovation ≠ success and acceptance by consumers
Sports Industry Size:
U.S.: $485 Billion Global: $1.5 Trillion Annual Company Spending on Sports Advertising (U.S.): $33.1 Billion -Sports industry is twice the size of the auto industry -Sports industry is seven times the size of the movie industry
Watershed event in 1890s
Watershed events: events or developments in an industry that cause significant changes throughout the industry Bicycle Craze 1890s - 1890: 27 companies - 1898: 312 companies - 1909: 94 companies - Influenced thinking about business and strategy • How to deal with intense competition: - Increased importance on incorporating successful marketing techniques to develop a recognizable brand.
The Winning Fallacy
Winning Fallacy: The widely held idea that sports organizations must win in order to be successful -sports organizations cannot rely on winning to be successful in the sports industry -Teams that win consistently can fail as businesses - Teams that lose consistently can achieve success as businesses
Conclusion: Winning
Winning: Is only one of factors that drives industry success • In order to prosper financially, organizations must stand out in a hyper-competitive industry
Reading 1/3: NY Times: Sports Psychology; It isn't just a game
http://www.nytimes.com/2000/08/11/sports/sports-psychology-it-isn-t-just-a-game-clues-to-avid-rooting.html?pagewanted=all
Recap: Direct Consumption
• 6 possible decision criteria for event attendance: - Perceived alternatives - Future availability - Cost - Convenience and comfort - Team or sport identification - Personal incentives
Psychological Motives
• Desire for internal satisfaction - 3) Self-esteem: identification with team enhances one's own personal identity • Basking in Reflected Glory (BIRGing) • Enjoy achievements of a team/player as their own - "We won!" • Cutting off Reflected Failure (CORFing) • "They lost!" - 4) Escape: diversion from daily responsibilities and problems • Watching sports allows for temporary departure
Achievement Motivation
• Desire to compete, to win, to be the best • Extrinsic rewards: rewards given to a person by someone else - Examples: MVP awards, all-star game selection, medals, trophies, prize money • Marketers: - Emphasize competitive elements of programs - Competitive league structure; playoff opportunities
Social Motives
• Desire to experience something with others: - 1) Family: strengthen bonds around sporting events • Watching the game with your dad/sister/grandfather - 2) Social interaction: sports consumption as a means of connecting with other people • Hanging out with friends at a tailgate before a big game • Talking with people at work or school about last week's/next week's game
Takeaways for Marketers
• Emphasize the following: - Uniqueness of event • Rivalries, records being broken, promotions, etc. - Value for cost & use of promotions • Add benefits: Event appealing beyond the game • Reduce costs: Discounted tickets, free parking promo - Convenience & comfort of venue • Enhance the at-game experience - Hospitality: Top-notch customer service - Technology: Make venue like living room... but more interesting Scoreboard: multimedia entertainment displays - Physical Environment: Ease of entry and exit, location of restrooms, concessions, seat comfort
A.G. Spalding & Brothers (Promotional Skills)
• Established brand identity: - Distanced itself from competitors by stating its status as "official producer" (e.g. official baseball for NL) - "First make sure it's Spalding, and then go buy" - Used popular sport figures to provide instruction in how to develop sports skills with Spalding products - Highlighted benefits of sport for participants - Spalding staff members offered lessons
Direct Competition
• Goods or services which perform nearly identical functions and are offered for sale within the same market as those produced by a competitor. • Typically geographic in pro sports; competing for fans' attention, loyalty, and dollars: - Ex: Two professional teams in the same league: • LA Clippers vs. LA Lakers • NY Yankees vs. NY Mets • NY Rangers vs. NY Islanders -Sporting Goods are also competition, NIKE vs Reebok vs Adidas
Spending Decisions
• Hedonic purchases - can be considered an indulgence • Tradeoff: tickets to Steelers game OR invest in mutual fund - Hedonic vs. Utilitarian motives • Why do people choose hedonic? - Strong feelings or emotions - Indulgence is rationalized and justified • Hedonic motives: pleasure, excitement
Takeaway for Marketers
• Importance of escalating casual fans into avid fans - No one is an avid fan the first time they see a particular sport - Leverage the things that might appeal to newer and/or more casual fans: • Community involvement • Star power • Individual game/partial season ticket packages • Group discounts
Social Motivation
• Seeking social opportunities through sports participation • Marketers: Highlight social interactions - Athletes having fun together before, during, and after competitions
Mastery Motivation
• Skill development, learning, personal challenge • Programs offering instruction, coaching, mentoring appeal to mastery-oriented participants • Intrinsic rewards: rewards received by a person from the experience itself - Less about winning - More about challenging oneself
Ethnic Diversity
• Slowing growth rates (US): Caucasian and African American populations • Increasing growth rates (US): Latin American and Asian populations - 4 major pro sports markets with largest Latin American populations • Miami, San Antonio, Los Angeles, Houston • Implications for marketers? - Go beyond translating content to different languages -Need an understanding of culture
6. Personal Incentives
• Social/psychological/financial consumption motives from previous lecture: - Social Interaction - Self-concept - Self-esteem (BIRGing: Basking in Reflected Glory) - Escape - Gambling
Historical Aspects of Sports Marketing
• Watershed event in 1890s • Endorsement Advertising • Increased Competition • Increased Participation and Spectatorship