I recall reading an article in the online sports edition of the Guardian about odd instances of ‘football marketing’. The article mentioned that Manchester United had an ‘official noodles partner’ and Liverpool FC sold branded body mops. Delving into that matter, the article raised the question “what has happened to elite sport?”
One of the concluding statements in the article provides a clear answer: MONEY. Simply, football has undergone rapid commercialization rates over the past decades. Over the years, clubs have been forced to bring in more revenue to cover a cost structure influenced highly by excessive player wages. The Bosman ruling in the 1990’s shifted power towards the players. Market conditions became altered with the influx of the ruling in the sense that players experienced more freedom to move from one club to another. Free-agency meant even more money in the pockets of the players in terms of sign-on fees and wages since the new club did not have to pay a huge transfer fee. Additionally, the ruling meant that European clubs (within the EU) had the freedom to hire an unrestricted number of EU players. Suddenly, the market for players was increased and it brought along intense competition between top clubs in pursuit of the best players. Thus, it became difficult for clubs to prevent their best players from leaving for a better offer at the end of their contracts. This led to clubs being pressured to meet escalating player wages; this was especially true when clubs wanted to secure their profile players on long-term contracts. In a time, where player wages for the best players has showed no sign of slowing down, clubs are being met by requirements from UEFA, which restrict clubs from ‘over spending’ resulting in consecutive financial losses. This means that clubs participating in the ‘bidding extravaganza’ for the best players must find even more (or bigger) revenue sources to balance revenues and costs (sometimes done in creative alliances with billionaire owners and related business networks). In that regard, the ‘commercialization spiral‘ to fill the financial gaps from player investments makes sense.
Therefore, top clubs have learned an important lesson: the needs of fans are more fragmented and unpredictable than years ago but taking advantage of data collection and segmentation through market-led methods has helped spark commercialization efforts even further. Commercialization has provided clubs with ‘huge impact’ television deals. Of course, skyrocketing television deals have been a significant revenue source for football clubs but some places in Europe these deals have put lower tier clubs (or clubs where the quality of the product on the field is far from top-class) in a dilemma; a dilemma centered around whether or not television has a negative effect on gate receipts (should ticket prices eventually be lowered to bring fans to the stadium). Research shows that a ‘full stadium’ has a positive effect on areas such as sponsorship, fan experiences and stadium-related revenue sources. These clubs must struggle to find the best trade-off between the ‘televised product’ and the ‘live product’ to optimize revenues. In the US, the NFL apply ‘blackouts’ where televised games are restricted to guarantee ticket sales. This is not going to happen in European football.
Another problem area of many clubs is the fact that many clubs face enormous costs when trying to stay on top of their game. Signing or renewing contracts to obtain or keep a ‘winning streak’ often lead to disproportionate spending. To account for this development, clubs can sit back and hope that they will not end up being one of football’s worst-case scenarios concerning ‘over-spending’ or they can apply ‘value creating’ and ‘market-led’ methods to bring in a sufficient amount of revenues. It is a difficult discipline to master for clubs and it requires great business competences while balancing the essential ‘tipping point’ for many clubs: maintaining a relatively good sporting level (it is costly to be relegated). Part of value creation for football clubs links to sponsorship as touched in the Guardian article. Another important value creation strategy for football clubs – and not mentioned in the article – concerns investments in stadiums. Investing in a stadium and building a fan base is key in securing extended ROIs. The fan base should be managed through CRM systems underlining management of effective communication and loyalty as it refers to the fan base. That way, clubs can emphasize income-generating information via ticket sales, web sites and other communication platforms. It seems as a relevant scheme to create ‘hype’ around a club and its core product ‘the premier football team’ – one vital step in building a strong club brand. Effective communication structures form a muscular basis for ‘creating demand’ and that is an underlying premise for any professional sports team. Development in the football industry has placed a pressure on football clubs to commercialize at high rates, which means that a club must constantly investigate its CRM-processes and strive to brand or re-brand itself in the process of catering to new and existing target groups. Sponsors are interested in being directed to appropriate target groups in response to their investments in a club. Extending existing sponsorship portfolios may stem from re-inventing target groups – exemplified by clubs spreading their commercial focus to rely on more than traditional consumption patterns such as ‘father and son’ attending a football game. Why not reach out to wider target groups such as families or women? Some clubs have been successful in that regard. At the end of the day, the desire for a professional football club should be to control and extend its revenue streams – Manchester United and FC Barcelona are two benchmark examples in that case. Manchester United recently signed a new sponsorship deal with Chevrolet (GM) worth approximate $80 mio. annually over a period of 7 years according to Financial Times. FC Barcelona saw a commercial revolution when Laporta was elected as president 10 years ago (2003) and the club started to take off in terms of building brand equity.
Examples of commercial partnerships in football:
Arsenal and Malta Guinness – a campaign involving key Arsenal players.
Manchester United and Casillero del Diablo – a campaign involving key Manchester United players.