Tough Mudder: Analysis - Case Study Example

Tough Mudder: An Analysis Introduction This report is based on the case study of Tough Mudder. Tough Mudder is an endurance race that has been growing in popularity across the world in the recent past. The focus of the report is on Tough Mudder within the Australian market. The report is divided into two main sections. Part A is about situation analysis for the event. The market environment for the event is presented in this section. Analysis of the environment is based on Porter’s 5 Forces model as well as the SWOT framework. In addition to analysis of the environment, analysis of the segmentation, targeting and positioning of the event in the Australian market is carried out in this section. Part B of the report is about competitive strategic evaluation. Here, the manner in which Tough Mudder is positioned within the Australian market and the gaps that can be used by a competitor organisation to create a rival product are explored. This is done using the Blue Ocean Strategy. Part A: Situational Analysis The external environment (macro/micro) The marketing environment for an event such as Tough Mudder can be analysed using Porter’s Five Forces model. In theory, the model is used to analyse how the rivalry among companies that operate in a particular industry at a time is shaped by the following factors: the bargaining power of suppliers, threat of entry of new competitors, threat of substitute products and bargaining power of buyers (Porter 1980, n.pag). This framework can be used to determine the attractiveness of an industry based on its future profitability and how the different forces interact with each other (Dalken 2014, p. 2; Luck 2010, p. 38). All the factors in Porter’s Five Forces model shape the marketing environment of Tough Mudder. First of all, the threat of new entrants into the extreme events industry remains relatively high. This is because of several reasons. For example, the barriers to entry are low, given that starting such an event is not a capital-intensive venture. Ozanian (2010) observes that Tough Mudder was started with a capital of only $20,000. On the other hand, the state of rivalry within the industry is high. According to Grant and Jordan (2015, p. 32), there has been a high increase in the number of extreme events since the late 1980s when obstacle races were first introduced. Currently, Tough Mudder faces competition from the likes of Spartan Race and Colour Run (Jessop 2014). Therefore, there are many extreme races events that currently compete with each other in the industry. Lastly, the high number of obstacle races or extreme events that are currently available in the market means that the bargaining power of buyers is high while that of suppliers is relatively low. In addition to this, it can be seen that the marketing environment of Tough Mudder can be analysed using the SWOT framework. SWOT analysis is an important framework that can be used to determine the ability of a firm or a product to take advantage of opportunities while minimising the effect of threats and its internal weaknesses. Two of the key strengths of Tough Mudder are as follows: leveraging on the use of social media and increasing collaboration with other companies (Grant & Jordan 2015, p. 32). These factors have enabled the event to grow over the course of time. However, one of Tough Mudder’s weaknesses is associated with the fact that it is relatively easy to successfully copy the business model. Similarly, the fact that there are many other obstacle races that are being developed means that Tough Mudder constantly faces the threat of falling out of favour. This is a threat when one considers that other races have different features that define them. For instance, Spartan Race has been defined by its ranking nature and its appeal to competitors as a way of training them to overcome real life obstacles (De Sena & O’Connell 2014, p. 6). The increase in the number of races that have different features is a threat to Tough Mudder. Lastly, the growing size of the young population and the need for outdoor activities in general are opportunities that Tough Mudder can exploit to expand to different countries in the world. Lastly, it is important to note that the popularity of Tough Mudder over the recent past has been fuelled by several changes in the overall marketing environment. One of them has been the overall change in demographics. According to Armstrong, Adam and Denize (2014, p. 74) the Australian population has been undergoing constant changes in terms of the relative size of the different generational groups. Essentially, the population is made up of the following groups: baby boomers, generation X and the Millenials. These generational groups have different distinctive characteristics that are reflected in the goods and services that they purchase. However, what is important to note about demographic changes in Australia and the rise in popularity of Tough Muddder is that the population has been experiencing an increase of Millenials or Generation Y (people born between the 1980s and early 2000s). Currently, Generation Y group is composed of 9.3 million individuals (Armstrong, Adam & Denize 2014, p. 78). Given that the average age of the individuals who participate in Tough Mudder races is 29, it means that many of the participants actually fall within the young adult cohort of the Millenials age group. This increase in the ‘young adults’ population fuels demand for Tough Mudder. Further, changes in the use of technology and increasing interest in extreme sports among individuals who fall within Generation Y are some of the factors that have fuelled the popularity of Tough Mudder over the years (Askwith 2013). The nature of the race is modelled to appeal to the desires of young adults. In addition to this, members of Generation Y have been largely associated with being comfortable in the use of technology (Armstrong, Adam & Denize 2014, p. 78). Incidentally, social media has provided an effective platform for the marketing of Tough Mudder. Therefore, growth in the use of social media has complemented demographic changes to increase the popularity of the sport. Market segmentation and consumer behaviour Segmentation, targeting and positioning is an important process that helps firms to accurately identify specific customer groups, define their unique needs and desires and model products or services to meet the specific requirements of the customers (Mohr, Sengupta & Slater 2009, p. 249). Through this approach, companies are able to streamline their marketing activities. The manner in which Tough Mudder is run depicts a carefully conducted process of market segmentation, targeting and positioning. This is analysed as follows. Segmentation refers to the process by which a market of potential customers is divided into specific groups that are based on specific characteristics that the customers share (Cant, Strydom & Jooste 2009, p. 103). This approach helps a company to identify characteristics that are common within every single segment of the market. The variables that are used to define market segments vary. They may be demographic, psychographic or even geographical. In this case, the market segment for Tough Mudder is based on the demographic and psychographic characteristics of the customers. The first segment can be defined as comprising individuals who are interested in participating in extreme sports. These are mainly young and employed male members of the society who are willing to participate in extreme sports as a way of their lifestyle. On the other hand, there is the segment of individuals who are willing to participate in the event as a way of having fun rather than as a way of proving a point. Based on demographic characteristics, two market segments for the event emerge. The first one is made of up of grown-up individuals who are willing to participate in the event. The second segment is made up of Generation Y individuals who are fuelled by the desire to experience the adrenaline rush that is associated with such an event. Target marketing is used to help companies decide the market segments that they need to focus their efforts on (Lamb, Hair & McDaniel 2011, p. 275). Through the process of targeting, companies are able to address the specific needs of a specific segment of their market. In the case of Tough Mudder, the event is targeted specifically at young male individuals whose average age is 29 years old. The typical Mudder in Australia is, therefore, a professional young man who participates in endurance races as a way of lifestyle. Belonging to the ‘young adults’ cohort of Generation Y, such an individual sees participation in an endurance race as a way of breaking the monotony of ordinary work. Participation in the race provides the individual with an opportunity to engage with others in a tough and fun-filled setting that is provided by the events. Finally, through positioning, marketers are able to develop a particular image of a product within its target market (Lamb, Hair & McDaniel 2011, p. 275). The image that is created is usually that which resonates with the specific needs and requirements of individuals in the target market. In this case, Tough Mudder has been modelled on the desire to test the level of endurance of the participants (Tough Mudder 2016). Similarly, the event has been modelled as a way of helping individuals experience a meaningful and fun-filled day outdoors as opposed to the ordinary days that they spend at work (Tough Mudder 2016). These attributes that are used to market the race resonate with the needs and desires of the target market which are defined by the behavioural characteristics of the typical young adults who belong to Generation Y. According to Grant (2016, p. 441), the positioning of Tough Mudder as an endurance race that is based on the theme of toughness and the need for teamwork has been so far effective in helping the event to beat its main competitor, Spartan Race, in terms of the number of participants and revenue. What this means is that Tough Mudder has been effective in creating an image that is appealing to its target market so far. Part B: Competitive Strategic Evaluation One aspect of the behaviour of the consumers of Tough Mudder that can form the basis for a competitor to develop a service that has a greater appeal to the market is the attitude of the consumers. Individual attitude is an important behavioural aspect because of several reasons. First, product offering for Tough Mudder is based on the attitudes of the individuals who form the target market. The themes of toughness, resilience and the need for teamwork are important attributes of the event that make it highly appealing to the typical young professional male who belongs to Generation Y. Compared to their older counterparts, it is apparent that the individual who participates in the events is driven by the desire to do something extraordinary and to prove his sense of worth outside the typical world of everyday work. The tough nature of the race and its need for a high level of mental and physical resilience provides a strong appeal to the attitude of the members who belong to the target market. The attitude of individuals can be effectively used to increase participation in the event. More importantly, an organisation can effectively develop a product and position it in the market by tuning it with the attitudes of the individuals who form the target market. Such an approach can help the competitor organisation to develop a relatively new market for endurance events as compared to what is currently being done by Tough Mudder. One of the most effective ways that a competitor organisation can use to create a product offering that effectively competes with Tough Mudder is the Blue Ocean Strategy (BOS). The basis of the strategy is to reconstruct existing industries by creating new markets for products and services as opposed to competing for existing markets (Kim & Mauborgne 2015, p. 27). In conventional business practice, also referred to as the Red Ocean, businesses are said to compete on the value-cost trade-off principle (Kim & Mauborgne 2015, p. 16). Based on this, companies simply seek to beat the ever-increasing competition by exploiting the highest level of a trade-off between cost and value that can be achieved in the market (Stackpole & Oksendahl 2010, p. 70). However, increasing competition means that companies have to contend with decreasing industry profits over the course of time. This creates the need for the adoption of the BOS. The strategy helps firms to break from the intense competition in the existing markets by creating new and uncontested markets (Stackpole & Oksendahl 2010, p. 70). The first step that can be used by a competitor organisation to create a product that competes with Tough Mudder more effectively is to define the path that can be use to do so. In theory, there are six paths that can be used to create a BOS opportunity (Stackpole & Oksendahl 2010, p. 72). However, as indicated earlier, Tough Mudder is basically based on the attitude of the consumers. Hence, the functional/emotional pathway can be the most effective way of identifying an opportunity that can be filled by creating an event that can effectively compete with Tough Mudder. In general, it can be seen that the industry in which Tough Mudder belongs focuses more on functionality as opposed to the emotional appeal. Tough Mudder for example is reputed as an event whose course is created by ex-military personnel (Prentice 2015, p. 285). The essence of the different stages of the race is the extent of the difficulty that the different barriers present to the participants and how this tests the mental and physical endurance of the participants. Similarly, Spartan Race, which is the main competitor of Tough Mudder, is modelled on the concept of endurance. In Spartan Race, participants are required to run through sections of mud (Prentice 2015, p. 286). The essence of this approach is to make the race highly functional and appeal to the needs of the participants to test their endurance by participating in a race that has been designed for such a purpose. What this implies is that it is possible for a competitor organisation to create a new event that is focused more on the emotional appeal rather than on the functional appeal. Ideally, creating such a new event will not have significant financial ramifications as compared to what it cost to create Tough Mudder. Therefore, the budget for creating a new event, a large part of which may be devoted to intense marketing activities, may only be double the original amount of $20,000 that was used to create Tough Mudder. The next step in the process is to apply the four action frameworks of the BOS. The basis of using the framework is to identify factors which are associated with a product that need to be reduced, raised, eliminated or created (Stackpole & Oksendahl 2010, p. 71). It is when these four action frameworks are applied to a specific pathway that a new Blue Ocean is finally created. In this case, there are several factors that are associated with the endurance races that currently exist in the market that can be altered as part of applying the BOS. First, with regard to factors that should be reduced below the standards that are currently in use in the industry, it is necessary for the new competitor to reduce the level of endurance that is associated with the race. This means that instead of making the race tougher by the introduction of more obstacles or making the obstacles that are in current use more severe, it will be important to reduce the number and even severity of the obstacles. This means that a new event that can effectively compete with Tough Mudder in Australian market will be one that is less extreme. This will tie in with the approach of the pathway of the BOS strategy that is based on reducing the functional aspects of the race while at the same time increasing the emotional ones. This will make the race to appeal further to the emotions of the would-be participants and appeal to the attitude of the would-be participants of engaging in the event as a way of experiencing fun without necessarily testing one’s level of mental and physical endurance as it is the case with Tough Mudder. Additionally, it will be necessary to increase the association of the sport with overall physical fitness and collaboration as opposed to physical and mental endurance. This approach will help to make the new event popular among a wider segment of the market that is composed of other individuals apart from the typical 29-year-old male. Retirees who are interested in being physically fit and other physical fitness enthusiasts are some of the groups to whom the new event will appeal. Therefore, it will be necessary to eliminate the association of the event with endurance and create a new association with overall fitness, engagement and outdoor fun. Conclusion In conclusion, changes in demographics and technological use are some of the most important trends that have contributed to the growth in popularity of Tough Mudder. The nature of the event makes it easy for new entrants to copy it and offer effective competition to the event. This is the case even though the company has effectively used segmentation, targeting and positioning strategies to appeal to the typical male member of the ‘young adult’ cohort of Generation Y in Australia. Using the BOS, a competitor organisation can develop an event that can effectively compete with Tough Mudder. Such a new event should appeal to the emotional aspects of the attitudes of the would-be participants. This will create a new market of individuals who do not necessarily fall within the target market of Tough Mudder but who see such an event as an opportunity to engage with others and have fun rather than a taste of endurance. 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