Improving Customer Relationships in the Sports Industry through the Use of E-Business

Table of Contents

I. Introduction
I.I Introduction to the Study
I.II The Need of Marketing of Sport Organizations
I.III Aims and Objectives of the Research
I.IV Research Questions
I.V Methodological Approach
I.VI Structure
I.VII Summary

II. Literature Review
II.I Introduction
II.II Consumer Behavior in Sports
II.III Relationship Marketing in Sports
II.III.I Principles of Relationship Marketing
II.III.II The Fan Perspective
II.IV Online Marketing in Sports
II.IV.I The Importance of Online Marketing
II.IV.II Common Internet Applications used in the Sports Industry
II.V Characteristics of Successful E-Business in the Sports Industry
II.VI Summary

III. Research Methodology
III.I Introduction
III.II Research Design
III.II.I Research Data Acquisition
III.II.II Research Objectives
III.II.III Interview Design
III.II.IV Survey Design
III.III Validity and Reliability of the Research
III.IV Ethics and Confidentiality
III.V Summary

IV. Results, Analysis, and Discussion of Research Findings
IV.I Introduction
IV.II Results
IV.I.I Summary of the quantitative survey results
IV.I.II Summary of the qualitative survey results
IV.II Discussion of the Research Findings
IV.II.I Consumer Preferences when Making Use of E-Business
IV.II.II Consumer Satisfaction and Perception of E-Business Quality
IV.II.III Influence of E-Business on Customer Relationships and Loyalty
IV.II.IV Additional Thoughts from the Fan’s Perspective
IV.III Summary

V. Conclusions and Recommendations
V.I. Introduction
V.II Key Findings of the Study
V.III Recommendations for Sports Marketers
V.IV Limitations of the Research
V.V Recommendations for Further Research

References:

Appendices

Appendix 1: Questionnaire

ABSTRACT

Improving Customer Relationships in the Sports
Industry through the Use of E-Business:
A Case Study on VfL Bochum

by Philipp Sauer

The study examines the influence of online marketing on customer relationships in the sports industry. The primary aim was to investigate how customers perceive the use of online marketing and which factors and tools are most important for them. The enormous macroeconomic importance and the growing commercialization of the sports industry in general, have resulted in the emergence of a highly competitive market in which the building and maintaining of strong customer relationships is a key success factor for sports organizations. The study aims to identify the importance of the most common e-business tools today and to learn how consumers perceive future trends of e-business, like e.g. user interactivity or mobile commerce. All these factors were analyzed according to customer satisfaction and perception, and to their influence on improving customer relationships.

A combined methodological approach of quantitative and qualitative research was used in form of a questionnaire. This questionnaire was clearly divided into a quantitative section, which was built of 21 multiple choice questions, and a qualitative section, which was mainly designed to learn more about personal experiences from the customers. This methodological approach was designed to contrast individual perceptions from the customers to general trends.

The literature review indicated that the most commonly used Internet applications in the sports industry can roughly be divided into information applications, e-commerce applications and interactive applications. The results of the study discovered that the majority of customers prefer to make use of the club’s website for informative purposes. General trends, like user interactivity are acknowledged as less important, even in comparison to e-business tools like ticketing. In fact, customers have accepted the Internet as a helpful and trustful information and communication source, which has improved significantly the integration of customers to the happenings in and around the club itself.

This study is very helpful to sports marketers, as it reveals the factors of online marketing which are most efficient regarding customer satisfaction and customer loyalty and provides them with a number of recommendations how to most effectively make use of online marketing.

List of Figures

Fig.2.1: Influential factors according to Armstrong (2008, p.218-220)

Fig.2.2: Influential factors according to Hansen and Gauthier (1989)

Fig.2.3: Differences between relationship marketing and transaction marketing (Henning- Thurau & Hansen, 2000, p.5)

Fig.4.1: Frequency of Website visits

Fig.4.2: Most important website characteristics

Fig.4.3: Most important tools when visiting a sports club’s website

Fig.4.4: Usage of tools provided at the website

Fig.4.5: Importance of User Interactivity

Fig.4.6: Perception of existing interactivity tools

Fig.4.7: Preferred communication channel

Fig.4.8: Improvement of communication

Fig.4.9: Significance of website as informative tool

Fig.4.10: Common purposes when visiting the website

Fig.4.11: Future Importance of m-applications

Fig.4.12: Primary purpose when making use of the club’s mobile application

Fig.4.13: Reasons for visiting the website of another sports club

Fig.4.14: General feedback to the club’s website

Fig.4.15: Ways to improve the website

I. Introduction

I.I Introduction to the Study

Over the past decade the importance of sports marketing has significantly increased, especially as a result of the rising commercialization of sports as well as of changing structural and economical factors. Nowadays, a great extent of sports organizations can be compared to medium-sized companies regarding their business volume and number of employees (Nufer & Bühler, 2011). In Germany alone, the value of sponsorship in the sports industry is presently worth about 1.6bn EUR, which illustrates the macroeconomic importance of the sports industry in general (iST, 2010, p.3).

In 2000, the sports industry in the USA was considered to be the sixth-largest industry, having a gross domestic product of $213bn in that year (Brown, 2003).Sports marketing is an everyday occurrence in most people’s lives: the range is enormous – Schumacher, Nike, Beckham or Ferrari are names that call out to consumers from billboards, adverts, and countless other tools of marketing communication (Beech & Chadwick, 2007). All those names and well-known advertisements became synonymous with sports marketing. However, the Beckhams and Schumachers of the sports world are only the tip of the iceberg; for every one of those dominant and well-known figures of sports advertising, there are hundreds and maybe thousands “of other individuals, teams, clubs, business and organizations for whom survival or scratching together funds to compete is an important part of what they do” (Beech & Chadwick, 2007, p.4).

In this context, “building and maintaining healthy relationships with customers and stakeholders is a crucial success factor in today’s sports business” (Bühler & Nufer, 2010, p.5) . In fact, achieving customer loyalty has become an essential part of the sports marketing environment today. Sports organizations have to overcome the challenge of having a vast numbers of customers who interact with the club in many ways (Lovelock & Wirtz, 2007). New technological possibilities have expanded the potential communication methods between companies and customers. However, as some of those new communication channels have already proven to be strong and effective supplements to a company’s existing communication channels, other tools might not have fulfilled the expectations.

I.II The Need of Marketing of Sport Organizations

“Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” (Gundlach & Wilkin, 2009, p.259)

Though this definition might be useful for describing what marketing is about in general, it does not take into account the unique factors of marketing in the sports industry. Factors like marketing tangible factors like merchandising and intangible factors like tickets to see a match, against the background of an ongoing uncertainty of outcome, make sports marketing an inimitable kind of marketing. Beech and Chadwick (2007, p.4 - 5) therefore created the following definition of sports marketing:

“It is an ongoing process through which contests with an uncertain outcome are staged creating opportunities for the simultaneous fulfillment of direct and indirect objectives among sports customers, sports businesses and other related individuals and organizations.”

There are several reasons why those principles of marketing in general cannot be applied to sports marketing. The major difference between product marketing and sports marketing is that the spectators do not know what will happen. Finally, this uncertainty of outcome is why people decide to attend sport events. This also means that the actions of sports marketers are mainly influenced by what happens at a sport event. The core of sports marketing is, taking into account most actual factors to be successful.

Furthermore, the competitive situation in the sports environment significantly differs from other branches. In fact, the competitive environment is determined by those specific organizations in which leagues or competitions the sports clubs are active. Those competitions somehow reflect syndicate-related characteristics as rules and resources are strictly determined.

Another factor that illustrates the need for sports marketing in general is the fact that it is the customers who significantly influence the production of the product. A major reason for consumers who decide to attend a sport event is not only that they will be able to see a specific match, but it is also about the atmosphere, which they experience. The fact that other consumers have such an enormous influence upon the individual consumers’ experience differentiates the sports industry eminently from other industries.

Ultimately, it is the fans and people who have interest in a sports club who will determine the success of this sports organization. There are several examples in the history of sports that illustrate that a lack of interest in a sports club from the spectators’ and fans’ perspective will ultimately lead to total failure. A very good example, which illustrates how a lack of interest can result in closing down a sports organization, is the National Football League (NFL) Europe. This league was originally created as a European spin-off of the NFL from the USA. After 15 seasons that were characterized by up and downs of fan interest, the league closed down in 2007 as a result of lack of local interest. This example shows that sports marketers face the constant challenge of ensuring interest and excitement among their fans against the background of uncertainty, to ensure success of the sports club. A sports club’s team might be able to play successful and win trophies – however, as long as there is no interest from people in the sports club, a team will not be able to generate sufficient revenue, which enables them to survive.

I.III Aims and Objectives of the Research

This study aims to investigate how far the use of e-business might help sports organizations to improve customer relationships. Although there is existing research that deals with the importance of e-business in the sports industry, there is no research, which analyzes the efficiency of existing e-business tools individually. As this research is based on the collection of primary data, it will provide an objective and detailed view on the consumer’s perspective, by primarily learning about consumer awareness of e-business in general and consecutively focusing on consumer perceptions in this field. In detail, this study analyzes consumer perceptions regarding the quality of e-business what automatically illustrates the most important tools of e-business in the sports industry. Consumers will provide information about potential improvements of communication and the influence of online marketing on their involvement to the happenings in and around the sports club. It will focus on general trends, like user interactivity, to allow finally providing recommendations for the sports industry.

I.IV Research Questions

Based on those illustrations above, this paper seeks to answer the following research questions:

- Are consumers aware of e-business in general?
- Which e-business tools are currently most commonly used within the sports industry?
- What are the objectives from these tools?
- Which of these tools are the most effective ones in reference to customer relationship management?
- Does the use of e-business influence consumer behavior in the sports industry?
- How do consumers perceive potential trends, like user interactivity or mobile commerce?
- Does the use of e-business significantly improve communication between a sports club and its consumers?

I.V Methodological Approach

Based on the literature review in Chapter 2, this study makes use of a combination of quantitative and qualitative research in form of a survey. The survey was designed to learn more about consumer behavior concerning e-business in the sports industry, by generating information how the use of e-business tools influences the consumers’ interaction with their favorite sports club. All data is primary data, as it is collected through personal interviews.

I.VI Structure

Following this introductory chapter, Chapter 2 focuses on a critical review of existing literature of this topic. This chapter mainly provides basic information about consumer behavior and relationship management as well as about the present situation and divulgence of e-business within the sports industry. Chapter 3 can be identified as the heart of this study as it illustrates the actual research methodology. Subsequent, Chapter 4 presents and analyses the results generated from the research itself. Finally, the subject of Chapter 5 is to discuss the findings of the results in detail and provide a conclusion and recommendations for sports organizations. Furthermore, this chapter critically evaluates the limitations of the research as well as providing an outlook for potential future developments within this field.

I.VII Summary

This chapter provides a basic overview of the current state of sports marketing. It contains information about how sports marketing can be differentiated to marketing in general, by illustrating those factors which make sports marketing a very unique field. In fact, the major characteristic, which makes sports marketing so inimitable, can be identified in the fact that “sports is all about the uncertainty of outcome” (Beech & Chadwick, 2007, p.9).

Furthermore, this chapter illustrates the exceptionally role of consumers within this industry. There is probably no other industry whose dependence upon consumers is as high as in the sports industry. In fact, consumers can be identified as the heart of any successful sports organization, as without attracting a sufficient number of people, no sports organization will be able to survive. In this context, the emergence of the Internet as a worldwide communication network and a very important communication channel for consumers and their favorite sports clubs resulted in an increasing importance of customer relationship management for sports clubs. Consumers are continuously exposed to numerous amounts of advertisement and sports information on the web. Therefore, sports organizations nowadays should better understand how to strengthen customer relationships to avoid losing customers to competing clubs. Those findings will be analyzed in detail in Chapter 2.

II. Literature Review

II.I Introduction

This chapter aims to examine academic literature on this topic, by focusing on the following key concepts of this study:

- Consumer Behavior
- Relationship Marketing
- Online Marketing

This chapter should provide a critical insight into the topic, based on the existing knowledge of this subject (White, 2000, p.138).

In every business, it is essential for marketers to have in-depth knowledge about consumer behavior. Only by understanding how consumers are attracted to products or services and which criteria most influence their decision-making process, marketers can operate successfully. In this context, it is of outmost importance for further investigations to learn about the specific field of consumer behavior in sports. This chapter will provide detailed information about motivational factors and constraints for consumers in the sports industry.

Based on this knowledge, this chapter will illustrate the relationship aspects within the sports industry. As described in Chapter 1, relationship management in the sports industry is of outmost importance, as all types of sports marketing transactions involve some type of relationship marketing (Bühler & Nufer, 2010). This chapter will critically consider principles of relationship marketing and analyze why consumers decide to enter relationships in the sports industry. Furthermore, this chapter aims to investigate existing literature about online marketing in the sports industry. It will examine sports organizations’ objectives and activities in connection to existing and most commonly used online marketing applications. By illustrating potential opportunities and threats of e-business in the sports industry, literature will be used to illustrate characteristics of successful e-business in the sports industry.

II.II Consumer Behavior in Sports

“Organized sport activities always involve four groups of people: athletes, spectators, sponsors and commentators” (Baker, 1982 cited in Trenberth, Garland, 2007, p.84).

This paper limits its focus to the group of spectators, so the word consumer will be used synonymously for describing spectators, respectively the sports fan. However, independent of whether consumer behavior is watching or participating, the essence of sport consumer behavior is about the experience (Funk, 2008, p.4). In this context, Funk (2007, p.4) formulated a phrase, which perfectly reflects this characteristic.

“Sport consumer behavior is about the journey not the destination.”

Furthermore, Funk (2007, p.6) established the following definition of sport and event consumer behavior:

“Sport and Event Consumer Behavior is the process involved when individuals select, purchase, use, and dispose of sport and sport event related products and services to satisfy needs and receive benefits.”

Several researchers like Armstrong (2008), Hansen and Gauthier (1989) and James et al. (2006) have identified different factors, which can play a critical role in attracting sports fans.

Armstrong (2008, p.218) found that several groups of factors may influence attendance at sports events, including residual, functional, and symbolic factors.

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Fig.2.1: Influential factors according to Armstrong (2008, p.218-220)

However, in comparison to the research done by Hansen and Gauthier (1989), these factors mentioned above only reflect a small number of potential influential factors on consumer behavior in the sports industry. In fact, Hansen and Gauthier (1989) derived 40 factors, which affect attendance at professional sports events and divided them into the following four categories:

illustration not visible in this excerpt

Fig.2.2: Influential factors according to Hansen and Gauthier (1989)

Figure 2.2 represents a summary of those factors found by Hansen and Gauthier (1989).

As a result of the continuously growing number of factors that potentially influence consumer behavior in the sports industry, James et al. (2006) have worked out a core set of needs and benefits that should represent consumer’s motivation in the sports industry. This set contains the following five motives:

- Socialization: As already mentioned in Chapter 1, a major part of people attending sports events, are looking out for social interaction. People are looking out to interact with people having the same interests, and a sport event experience is a great possibility to do so.
- Performance: The quality of the performance can also strongly influence consumer behavior in the sports industry. E.g., the number of star players in a team or in the opponent’s team as well as the current capacity can seriously affect consumer behavior in the sports industry.
- Excitement: The most exciting thing about sports is the fact that nobody can tell the spectators what will happen. This uncertainty of outcome is one major aspect, which attracts consumers to watch sports. People are looking out for excitement and experiencing the atmosphere.
- Esteem: “Individuals are motivated to seek a sport event experience due to opportunities for achievement and challenge.” (Funk, 2008, p.24) In fact, they are looking out for improving their competency.
- Diversion: Another very important motivational factor for sports consumers is that people are looking to find a balance in their daily lives. By watching sports, people have a possibility to escape from their daily work and improve their own mental well-being.

Whereas research by Armstrong (2008) and Hansen and Gauthier (1989) are also focused on residual factors and economic factors, research by James et al. is mainly focused on the event experience itself. Residual factors were not considered by James et al. (2006) at all, though they can seriously affect consumer behavior according to Armstrong (2008) and Hansen and Gauthier (1989). Furthermore, research by Armstrong (2008) and James et al. (2006) does not take into account economic factors. Major sports events like NFL’s Superbowl or the FIFA World Cup prove that ticket prices or television coverage seriously affects consumer behavior in the sports industry. The last FIFA World Cup in South Africa has shown that factors like the average income of the population must be carefully considered by sports marketers in order operate successful. The range of attractiveness factors is considered by all researchers mentioned above and not only includes game-specific factors but also factors like excitement and the need for social interaction.

As illustrated above, motivational factors for sports consumers have been investigated by researchers in detail. In this context, analyzing those factors that constrain consumption behavior of sports consumers have been mostly neglected by researchers. Crawford and Godbey (1987) developed a theoretical framework of leisure constraints. This framework breaks down potential constraints to three major groups (cited in Kim and Trail, 2010):

- Intrapersonal: stress, group attitudes, religiosity, etc.
- Interpersonal: lack of relationships with others who might join the own interest
- Structural: environmental factors like date and time of events or financial resources

Though the study by Crawford and Godbey (1987) provides a short overview about potential constraints of consumers in the sports industry, the study does not take into account the sports industry’s dynamic. Furthermore, research needs to address those constraints, which may have emerged as a result of new technological possibilities, as so far research has focused only on how sports organizations might capitalize on new technological possibilities.

II.III Relationship Marketing in Sports

Strong customer relationships are of outmost importance for any business (Kotler & Keller, 2009). In fact, establishing strong customer relationships has become a core task for every marketer today (Rich, 2000). Customer relationship management can be identified as a strategic orientation, which underlies the concept that maintaining existing customers is much more profitable in the long term than acquiring new customers. Furthermore, the concept of customer relationship management perceives that customers themselves are rather looking out for long-term relationships to a company than for searching for new providers. There are several reasons why the use of customer relationship management can be suggestive from a company’s perspective. The most common goal can be identified in the fact that “CRM systems allow the company to better understand, segment, and tier its customer base, better target promotions and cross-selling, and even implement churn alert systems that signal if a customer is in danger of defecting.” (Lovelock & Wirtz, 2007, p.381)

The term “customers” does not only describe those people who buy a company’s products or services, but in fact describes all stakeholders of a company. The following definition of relationship marketing in the sports industry illustrates those findings:

“Relationship Marketing in sports refers to the establishment and maintenance of positive enduring and mutually beneficial relations between professional sporting organizations and their stakeholders.” (Bühler & Nufer, 2010, p.25)

According to Nufer and Bühler (2011) the three most important stakeholders in the sports industry are the fans, sponsors, and media. However, as the fans are definitely the major target group of sports clubs, the analysis will be limited to this group.

Fans can be identified as the core of every sports club. Without fans, who buy merchandising and attend matches, there would be no target groups for sponsors and media and therefore clubs would not be able to generate any revenue.

In this context, sport organizations face the problem that there is a high grade of heterogeneity among the attendants of a sport event. Though all those visitors share their interest for the sports club, they have different motivations and needs. Lenhard (2002) therefore classifies three different groups of sports event visitors:

- Consumption-oriented: The emotional attachment to the sports club is not very strong for visitors from this group. Those people are rather interested in experiencing entertainment.
- Sport-oriented: This group describes those people who have a very strong emotional attachment to the club. They have a high degree of loyalty towards their club.
- Event-oriented: Similarly to the consumption-oriented fans, this group aims to experience fun and entertainment inside and outside of the stadium with the actual match playing a subordinate role.

The above-mentioned classification of sports fans might be helpful for sports marketers to gain a better understanding of those groups different motivation. However, sports organizations have neglected the importance of dividing their fans according to clearly defined characteristics, like e.g. age, sex or levels of turnover in order to establish a tailored customer relationship management. In fact, sports fans cannot be treated as a homogenous group, but must be divided to several target groups to ensure successful customer relationship management.

Consumer loyalty is universally acknowledged as a key success factor for marketing strategies. The dynamic characteristic of the sports industry requires sports marketers to analyze constantly those variables, which influence the loyalty of sports consumers to operate most effective. Bee and Havitz (2010, p.141) suggest in their study that “fan attraction, involvement, psychological commitment and resistance to change are predictors of behavioural loyalty.”

II.III.I Principles of Relationship Marketing

According to Solomon et al. (2009, p.13), marketers are “defining customer segments and listening to people as never before.” In fact, they have understood that building strong bonds with customers is a key success factor for organizations. As Buttle (1996, p.1) worked out:

“Marketing is no longer simply about developing, selling, and delivering products. It is progressively more concerned with development and maintenance of mutually satisfying long-term relationships.”

Henning-Thurau and Hansen (2000) established an overview about key differences of relationship and transaction marketing. The following figure illustrates the characteristics of relationship marketing and to differentiate relationship marketing from the traditional transactional marketing approach:

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Fig.2.3: Differences between relationship marketing and transaction marketing (Henning- Thurau & Hansen, 2000, p.5)

As mentioned above, the basis of customer relationships are strong bonds. More and more companies have therefore established customer relationship management programs, which aim on strengthening bonds between companies and customers. In this context, Bühler and Nufer (2010, p.28) mention three basic key variables, which ultimately define the success of relationship marketing: satisfaction, commitment, and trust.

Consumers’ expectations have significantly changed as a result of new technological communication possibilities (Williams & Chinn, 2010). Despite the fact that marketers have to operate in a very dynamic environment anyway, the latest challenge is to establish new approaches of relationship management to take advantage of new communication methods.

II.III.II The Fan Perspective

As mentioned in Chapter 1, fans can be identified as the lifeblood for any sports organization. A thorough understanding of the fans’ perception is therefore of outmost importance for a successful relationship management in the sports industry. Based on a segmentation of fans according to clearly defined characteristics, like age or sex, sports organizations must be aware of which factors drive consumer behavior in the sports industry.

To enable fans to identify with a team, strongly influences consumer satisfaction and enjoyment and should be considered carefully by sports marketers (Madrigal, 1995 cited in Laverie and Arnett, 2000).

Providing fans with the possibility to identify with a club, by involving them to club activities, e.g. by a membership can significantly improve relationships (Bühler & Nufer, 2010). In fact, as a result of the emerging of e-business, interactive features have become very popular marketing tools within the sports industry to improve customer relationships. A very good example is the Website of New Zealand’s national rugby team. This website allows fans to submit their motivations to the team, which will be collected and hang up in the team’s booth (Nufer & Bühler 2011).

Another important tool for relationship management can be identified in so-called fan loyalty programs. Those programs, which are widely common for grocery stores or airlines, reward consumers for their purchases. A good example is the launch of Nascar’s Race points program. This is “a new rewards program designed for Nascar fans who use the products and services of official Nascar sponsors” (Nascar, 2005). Customers earn certain Racepoints for each dollar they spent to a Nascar sponsor. Those racepoints can be redeemed for Nascar products, like merchandising or tickets.

Furthermore, Bühler and Nufer (2010) highlight the importance for sports organizations to establish effective complaint management systems, which enable them to seriously take care of customer complaints.

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