Strategic Sports Marketing – The impact of sport advertising upon consumers

Table of contents

Abstract

Acknowledgements

Table of contents

List of abbreviations

List of tables and figures

Chapter 1 – Introduction
1.1. Background
1.2 AIMS AND OBJECTIVES

Chapter 2 – Literature Review
2.1. Marketing and Advertising
2.2. Brand Loyalty and Buying Decisions
2.3. The History of Adidas

Chapter 3 – Methodology

Chapter 4 – Analysis
4.1. The Structure of Adidas
4.2. SWOT Analysis

Chapter 5 – Conclusion

Appendix

Bibliography

Abstract

The study was based on the subject that is of great interest of the author and therefore attempted to illustrate an evaluation of the impact of Adidas advertising upon purchase decisions of consumers nowadays.

To enable the author to provide an evaluation of Adidas’ marketing strategies, the present importance of marketing and modern challenges of advertising decisions were determined as fundamentals of a global brand based on review of relevant literature. Furthermore, an investigation of the strengths, weaknesses, opportunities and threats (SWOT) related to companies in the sports industry was conducted. Moreover the benefits of a global brand were illustrated. This examination was mainly based on marketing specialised literature linked with selected examples of Adidas as no representative of the Adidas company was found to be interviewed.

On the one hand it was found that Adidas’ historically grown passion for sports in order to provide athletes with the best possible equipment positively contributes to improve brand awarness and brand image. On the other, it was found that the identified weaknesses reduce the effectiveness of global operations in order to improve consumer satisfaction throughout the world.

The research concluded that although the strategic marketing operations of the Adidas company can be reduced by weaknesses and threats, the advertising decisions represent a promising source of enhancing the brand image.

Acknowledgements

I would like to thank all the people who in some way or another have helped me to write this dissertation :

First of all, I would like to thank Phil Bradshaw, my dissertation supervisor for all his help and advice whilst I was writing my dissertation. Thank you for your patience, encouragement and support throughout!

I would also like to acknowledge the support and helpful guidance given to me from the library staff at Colchester Avenue, especially from my friend Anja.

Moreover I would like to thank my girlfriend Franziska and my family for all their support and always being there for me when I needed them most.

Finally I would like to appreciate the help from Salvina Maria Rodriguez, my boss at the restaurant La Trattoria Molisana for her financial support allowing me to work on this dissertation.

List of abbreviations

illustration not visible in this excerpt

List of tables and figures

Figure 1 : Adidas’ poster advertising ‘Impossible is nothing’ in China http://adsoftheworld.com/files/images/Adidassoccer.jpg

Figure 2 : The Adidas Group brands and divisions (2007)

http://www.adidas-group.com/en/ourbrands/welcome.asp

Figure 3 : Adidas Advertising the Olympic Games 2008 in China

http://adsoftheworld.com/files/images/Adidasbasketball.jpg

Figure 4 : Adidas’s locations

http://www.adidas-group.com/de/overview/locations/world.asp

Chapter 1 – Introduction

1.1. Background

The relationship between important advertising decisions and successful companies has become very close these days. There has to be a complex process in order to create an effective marketing campaign. Kotler et al (2001) as well as Tayeb (2000) state that marketers have to do at least five steps when developing an advertising scheme.

However, the aim of this research is to find out the similarities of theory and practice with a certain example, Adidas, a successful German company which symbol obtained global acceptance. How does such a global player achieve its marketing strategies ?

Wherever sports events take place, the Adidas outfit has been increasingly popular all over the world in recent years. The influence of sport product manufacturers on sports events nowadays grows endlessly. This industry has been created its own market with the orientation on an active target group. Interesting to find out would be what makes Adidas so special from other sport product manufacturers ? There may be the triple tracked target group orientation of sport heritage, sport performance and sport style a reason. However, during the last 75 years, Adidas has been created a legendary symbol which stands for innovation and success. It is a company with a strong global reputation.

This research intends to demonstrate the author’s immense interest in the sports industry as well as in the omnipresent advertising and marketing strategies of the Adidas company. Moreover the author was totally impressed of the development of Adidas within the last decade and their passion of providing athletes with the best equipment for their sports that led to the aim to study their story.

The second chapter carefully regards the basic literature of the research topic. Therefore it examines the marketing strategies, advertising decisions and presents a SWOT analysis in consideration of Adidas’ market, the sporting goods industry. Therefore it is aimed to identify the relevant importance of Adidas as a global brand and to provide a basic understanding of what a brand, brand loyalty and the buying behaviour of customers is. Moreover a historical overview of Adidas’ history reflects the development of the German company.

The methodology in chapter three is aimed to be a precise description of the used methods to achieve the research aims and objectives. As it was not possible to get an interview with an Adidas official, the research was limited to base the analysis on secondary data, received from books, journals, newspaper articles, government publications and from the internet. Moreover the methodoloy examines the decision making process of drawing upon theory on secondary sources and gives evidence of the final choice through its detailed comparison of primary and secondary data as well as links to their advantages and disadvantages.

The purpose of the fourth chapter is to analyse the interior structure of the Adidas Group and therefore it is aimed to examine its strenghts and weakness as well as its opportunities and threats in a SWOT analysis. Furthermore this chapter examines the diverse brands and divisions of the Adidas company.

As the strategies and marketing decisions are mainly focused in this paragraph, the analysis is the most important part of this research. Additionally this chapter assumes in detail the global operations and financial performance of the Adidas Group.

The last chapter concludes the results of this research as it is of great importance to utilise effective marketing communication tools to become global leadership in the sports industry.

1.2 AIMS AND OBJECTIVES

The aim of this research is to study how a global brand such as Adidas achieves its marketing strategies in order to create an effective marketing campaign. Therefore it aims to find out the similarities of theory and practice according to Adidas’ complex process as a sport product manufacturer. Moreover it is a study about the influence of advertising icons on consumer buying decisions nowadays, how both relate to each other.

The objectives therefore are as follows :

1. To critically review the available literature regarding the importance of marketing and modern challenges in advertising decisions in the sports industry nowadays.
2. To discuss consumer buying behaviour in order to brand loyalty and to identify types of buying behaviour.
3. To determine which factors might cause people to buy Adidas products.
4. To establish a historical overview of the interesting development of Adidas and their passion of providing athletes with the best equipment for their sports.
5. To analyse the interior structure of this sports company.
6. To discover the specific characteristic of the triple tracked target group orientation of sport heritage, sport performance and sport style.
7. To critical analyse Adidas’ understanding of success on the basis of a detailed SWOT analysis.

Chapter 2 – Literature Review

This chapter examines the marketing strategies, advertising decisions and SWOT analysis concerning Adidas’ market, the sports industry. Therefore it is aimed to identify the relevant importance of Adidas as a global brand and to provide a basic understanding of what a brand, brand loyalty and the buying behaviour of customers is. Moreover a historical overview of Adidas’ history reflects the development of the German company. Due to the huge amount of literature available to this topic this review aims to cover only the basic literature for reasons of practicability and limited scope.

2.1. Marketing and Advertising

The present importance of marketing

As Kotler et al (2005) state, marketing is a process where people receive their needs as a result of their production and replacement of goods and services with others.

The chief executive officers (CEO) of the world’s largest companies such as Nike or Adidas have noticed the customers need for their products and services. (Adidas Group, 2008) Therefore it is important for them to operate effective and competitive in international markets, for example in the sports industry. To achieve that aim they are obliged to create the relevant skills of its workforce, the outstanding expertise of its management team and an effective knowledge about innovative techniques of production.

The United Nations organisation estimated the world population to reach 10 billion by 2050. (United Nations, 2005) That results in global growing economies and a larger demand of goods. So companies such as Adidas or Nike have to compete in the sports industry markets by creating an international marketing orientation. (Doole and Lowe, 2004)

The strategic focus concentrates on getting a competitive advantage in comparison to other companies. In this context Doole and Lowe (2004) argue that marketing is important to concentrate on the needs of consumers, to know the most suitable method of satisfying those needs and to create the best way of purchasing that satisfaction. To judge that, the Adidas Group aims to hand out surveys to its customers in order to receive feedback from them. (Adidas Group, 2008) The reason the sports manufacturer does that is to remain and strengthen its leading position in the European sports industry throughout customer satisfaction.

Modern challenges in advertising decions

However Doole and Lowe (2004) argue that modern advertising is a part of the communication marketing tool which should include both ways, a sender and a receiver. A critical feedback from the receiver helps the sender to understand his intended message as realised positive or negative. In 2006, before the soccer world cup, poster advertsing on bus stations in Berlin illustrated the German captain Michael Ballack in a heroic position saying the Adidas slogan ‘Impossible is nothing’. (Adidas Group, 2005) There was meant to win the world cup which caused a tremendous euphoria within the German population and the belief in being stronger than the competitors.

In order that no communication failures appear, companies acquire two different methods : standardisation and adaptation. It is not only about creating world wide advertising campaigns but to indicate ‘cultural sensitivity and empathy with a wide range of international customers’. (Doole and Lowe, 2004) The advertising standardisation underlines benefits in order to cost-savings, for example media buying. Adidas tried to copy the effective marketing campaign of Nike. Therefore Nike’s ‘Just do it’ was adopted as simple as it is by the board of Adidas as their products manufactured for the best athletes in the world to the ‘Impossible is nothing’ slogan. (Adidas Group, 2007) One of the earliest advertising spots was the commercial with Muhammad Ali, the former world champion in boxing in the 1970s, who run with David Beckham, Zinedine Zidane and other current soccer players in order to achieve the crown of world boxing. Adidas aimed to demonstrate its absolute conviction in its proper products to be with the best. (Adidas Group, 2007) Otherwise when firms communicate in other countries they need to adapt cultural incidents and have to pay attention to either individualistic or collective attractions. There is a current example available about Zheng Zhi, a chinese soccer legend who is supported by the chinese population to reach the impossible, the Olympic Gold Medal in Bejing in 2008. (Figure 1) China is supposed to be a more collectivistic country than the individualistic Germany in order to achieve an strategic aim. (Hofstede and Hofstede, 2005) So Adidas illustrated its cultural understanding of Chinese issues due to its concentration of the fast growing Chinese sports industry market.

illustration not visible in this excerpt

Figure 1 : Adidas’ poster advertising ‘Impossible is nothing’ in China

The advertising strategies are very important decisions in marketing : setting the objectives such as presenting a new shoe in a main store of Adidas, determining the budget for a poster campaign with Michael Ballack in London, assessing the message of creating an innovative sports equipment for athleths and appraising the campaign of its possible profitability are just four of them to mention. (Kotler et al, 2005) Moreover modern advertising should be informative to create a first demand of the customer, persuasive in terms of the high quality of the product and comparative due to other brands with regard of the always existing market competition.

SWOT analysis

A SWOT analysis is the evaluation of an organisation’s or company’s primary internal strengths and weaknesses as well as external opportunities and threats. (Wood, 2007) Therefore many different types of important and reliable data are necessary to collect. It is useful for companies to see on which products a business should focus its attention in order to critically review its success factors. Strengths and weaknesses are relative. Due to what is important, the manager of a sports goods manufacturer should be able to critically analyse all features of a company. Therefore it is essential to have a look on the business because of a high competition between Nike and Adidas as an example, Nike’s strength in the Golf market (advertising Tiger Woods) can be stopped being a brand flag ship because of the Adidas Group’s growth in TaylorMade – Adidas Golf segment. So competition, especially the strengths of a company should be based on facts otherwise if a business fails to understand its true strengths, it can collapse.

The SWOT analysis is based on integrated marketing information of an organisation or company in order to create a customer – orientated philosophy and therefore it aims to build an effective and strategic orientation. Wilson and Gilligan (2005) assume that SWOT analysis as a tool of the marketing planning process is more strategically useful when its parts are identified in detail. Moreover the objectives guide to separate considerable data from that which is simply interesting and to discover management trends in market segments that need to be changed in future. Because of constant changes in the business environment, companies need to develop units for marketing information that are able to illustrate trends and developments within the marketplace.

The results can be categorised as opportunities or threats. So the company needs to balance between maximising opportunities and minimising threats. The opportunities signify environmental trends (PEST – political, economic, social / cultural and technological factors) with positive outcomes that lead to better performances of the company in the future and underline possible new areas of competitive advantage. On the other hand, threats reflect potentially negative impacts in consequences of higher risks of strategies or the reduction of performance expectations. In addition to that, a business needs to evaluate its strengths and weaknesses with diverse ratings to get a general picture of the company’s performance relate to the competition. These ratings are described by Wilson and Gilligan (2005) as fundamental strengths, marginal strengths, neutral factors, marginal weaknesses and fundamental weaknesses. Moreover the Adidas Group gives each factor a sub – rating such as high, medium or low. (Adidas Group, 2007) This might be good due to the fact the each factor is not of equal importance. A strength is only a competitive advantage when its outcome is relatively higher than that of the competitor. Therefore an critical evaluation of the relative importance has to be considered. In order to identify strengths and weaknesses, the author suggests to companies to deal with surveys in which the different departments are asked to analyse its own strengths and weaknesses of the department as well as other departments within the company.

There is another business model of the Boston Consulting Group which reflects an approach of the growth – market share matrix. (Wilson and Gilligan, 2005) As its portfolio of companies only regards market attractiveness in terms of the market growth and market share, it is not qualified for the Adidas Group due to the absence of clear strengths and weaknesses, opportunities and threats. Therefore the author does not further regard this model in detail.

2.2. Brand Loyalty and Buying Decisions

Definition brand

To phrase a clear definition of what a brand is, challenges even an expert such as Kapferer (2007). He suggests that a brand is always connected with a name that has an influence on the customers. The author of this dissertation agrees that brands of a particular value to create a future revenue only exist within a strong relationship of the product or service with its buyers.

Aaker (1996) who is regarded as the world's leading academic personality on branding describes a brand as a main source of competitive advantage and precious strategic unit. Moreover the expert adds the challenge is to create a clear picture that matters to customers and brings the company a unique competitive advantage.

Brand loyalty

The brand experts distinguish between brand loyalty as a behaviour and as an attitude. (Sheth et al, 1999) A customer who buys the same product of a brand again is behavioral brand loyal. However marketers have problems to measure that kind of customer satisfaction because external factors such as lower prices of competitors, competitive promotional activity or variety seeking influence the choice of buying. Surveys are used to analyse brand loyalty and to find out the customers attitude towards the brand. Rankings concerning the popularity of brands help to define the proper market position. Furthermore both definitions focus customer loyalty, so the relationship of clients to their products or services combined with a strong attitude to repurchase them.

From this, Assael (1995) deduces that there is no general brand loyal consumer but those who tend to be faithful buyers show the following characteristics :

(1) a higher self-confidence in buying decisions
(2) realise a higher level of risk in buying decisions
(3) seem to be more store loyal

In 2002 Adidas launched ‘mySAP’, an internal Customer Relationship Management programm that was focused on building stronger relationships to loyal key customers. (Adidas – Salomon AG, 2002) That step enabled Adidas to receive more feedback from its customers.

The importance of global brands

Kapferer (2007) as well as Kotler et al (2005) argue that competitive advantage is the most important reason of creating global brands. That might be correct in terms of the globalisation aspect. The history of world commerce reflects early exchanges of spices between Asia and Europe. The internationalisation of finance and business in the marketing era nowadays connects the economies.

However Kapferer (2007) argues that one of the most important goals of marketers is geographical extension which builds a basis of success. Products with a global market potential such as Nike or Adidas’ shoes definitely achieve a competitive advantage compared to local products or services. Customers pay attention to prices, so cheap global positioned products influence the choice of customers relating to locally goods, for example Adidas shoes are very cheap in the Czech Republic because their mass production is much more cheaper whereas local hand made shoes are expensive. The Czech shoes need more time to be produced because they are hand made and the technology of machines is relatively underdeveloped and their costs are higher.

Another fundamental aspect is innovation e.g. creating a suitable image for a brand or developing an excellent product or service. The prices of advertising within the sports industy are rising day by day. It is of importance to save costs in every single sector and department. Therefore Adidas saved money because they launched only one campaign for the Olympic Games in Pejing but focused different sports such as volleyball, basketball or soccer.

Global brands communicate in worldwide sports events such as Grand Slam Tennis tournaments, the Soccer World Cup or the Olympic Games. Often they act as sponsors for example Adidas formed one of the pillars during the Soccer World Cup 2006 in Germany.

Furthermore the benefits of a global brand image are :

[...]