Should Red Bull keep on investing in the Formula 1 Championship for next year - Essay Example

?Running Head: Sponsorship Based Marketing Sponsorship Based Marketing Inserts His/her Table of Contents Table of Figures Figure 1: Brand Association Model …………..............................................................................7 Figure 2: Inductive and Deductive research process.....................................................................10 Introduction Marketing through sponsorships of events has attracted attention of organizations since the evolution of communication technology. When televisions became popular in households and events were aired live on televisions, organizations found it useful to associate their brands with these events through sponsoring them. The increasing trend of marketing through sponsorships of events is visible to everyone. Around 15 years ago less than 25 percent of events had some sort of corporate support and involvement but today this percentage has increased to 80 percent (McDowell, 1999). These events are an easy way through which an organization can communicate their messages to the customers. Red Bull is a soft drink company that is using sponsorships as a way to market its soft drink. Red Bull sponsors Formula 1 racing events all over the world. They also have many sports teams that take part in sporting events. Red Bull Racing is a Formula 1 racing team that is owned by Red Bull. The company also owns another racing team in Formula 1 known as Scuderia Toro Rosso (Formula 1.com, 2008). The company also sponsors other extreme sport like snowboarding and wakeboarding. The marketing technique of Red Bull is well known and it is known to work for the company. Associating the brand with extreme sports also communicates a brand image of the product to the consumers. This is one great advantage of sponsorships of events. Sponsorships of events actually communicate with consumers in a better way than conventional marketing (Meenaghan, 1991). Therefore the efficacy of marketing through sponsorships of events is well established. The financial situation of the world is not hidden to anyone and companies are facing problems due to it. Now in such a situation it is important to find out whether spending on sponsorships is still important or cost effectiveness should be implemented in this area. It is vital to find the efficacy of this marketing technique in times of financial crisis. This is the main problem that we will attempt to solve. The topic of this research proposal is that whether Red Bull should continue to invest in Formula 1 championships or not in the next year that is 2012. This investment includes the sponsorships of the event and the racing teams of the company. This research proposal will identify the process in which the answer to the above question will be obtained. Aims and objective of the research alongside with a comprehensive literature review on the subject of marketing through sponsorship will be presented. Research methodology will also be discussed in the proposal. Aims and Objective Research Topic The Marketing of Red Bull through sponsorships of sports events like Formula 1 Business Question Should Red Bull continue to invest in Formula 1 championship in the next year? Aim The aim is to help Red Bull make a decision about its marketing techniques in the wake of the financial crisis the world is facing today. Objectives 1) To understand what marketing through sponsorships of event it and its importance 2) To seek the economic worth of sponsorship marketing 3) To evaluate the benefit of sponsorships for Red Bull 4) To gain insight on the effect of Formula 1 Championship on brand awareness of Red Bull by collecting responses from customers Literature Review Marketing through Sponsorships Different marketing techniques have been developed over the years and all of them aim at better communication with the target audience. Sponsorship is a way through which a product can be marketed to the customers. Research has suggested that sponsorships do help a product achieve competitive advantage over other products in the market (Fahy, Farrelly, & Quester, 2002). This makes it clear that marketing through sponsorships is indeed helpful for the firms. Another advantage of sponsorship based marketing is that it can help firms market their product globally by transcending cultural boundaries (Miyazaki & Morgan, 2001). In today’s world it is vital that firms market their product on a global scale in order to achieve competitive advantage over other firms. It is important that companies see sponsorship based marketing as a resource that should not be wasted. Sponsorships are resources that cannot easily be imitated by competitors. If other firms are allowed to acquire resources then the advantage of the resource will not be sustainable (Grant, 1991). It is therefore important that sponsorships cannot be imitated by competitors. In order to be inimitable sponsorship should produce effect that fits with the image of the product or the company (Amis, et al. 1997). Another important feature of sponsorship based marketing is that it is a heterogeneous resource. Another criteria of sustainable competitive advantage is that resources should be heterogeneous in nature, is that they should not be equally distributed among firms (Barney, 1991). If this is the case then all firms will have access to the resource and the competitive advantage will not be sustainable. Some successful sponsorship based marketing has shown us that if sponsorship decisions are taken keeping in mind the target audience and future plans of company then it can yield amazing results for the company (Crader & Santomier, 2011). Sponsorships of events can lead to profits for the company in the long run. It has been identified that use of products of the sponsor during the event can enhance the positive effect of the sponsorship (Sneath et.al. 2005). Also the success of a sponsorship based marketing strategy also lies in correct identification of the target market (Renard & Sitz, 2011). Brand Image and Sponsorship based Marketing An important reason of success of sponsorship based marketing is that it promotes favorable image of the brand of the sponsor (Gardner & Shuman, 1987; Javalgi et.al. 1994). A firm sponsors an event in order to enhance the brand image of their product or company. It is commonly seen in today’s world. Football teams and baseball tournaments are sponsored regularly. All this is done in order to promote a positive image of the brand. The relationship therefore between brand image and sponsorship based marketing is very strong. Sponsorship of events helps propagate the uniqueness of a brand. Image transfer was found to be one of the advantages of sponsorships (Urriolagoitia & Planellas, 2007). The unique characteristic of the brand is promoted through sponsorships of events. There is always an association between the sponsor and the event. This association is used to market the uniqueness of the sponsor. A sporting event is sponsored by a brand because the sporting event is somehow related to the brand. It is therefore understandable for Coca Cola to sponsor a football event because it can associate its refreshing taste with the sport. Sponsorship is not always of a particular event. There are many examples of successful sponsorships of teams and individual players. They can act brand ambassadors and can generate attention from media and consumers all over the world. Sponsorships of stars whether they are from sports or movies can enhance brand awareness significantly. Everyone knows Michael Jordan and Nike sponsorship relation. It has been described as “commercial sponsorship match made in heaven” (Ring, 1998). Such sponsorship marketing techniques also works in the favor of the brand or the company if there is a match between the product and the person being sponsored. The match is visible between Michael Jordan and Nike. Sponsorship of Roger Federer by Rolex is another example of the match between the product and the person being sponsored. Rolex is a high class watch and it started sponsoring Roger Federer when he became the number 1 player of tennis. Such relationships help the brand by increasing the value of brand in the eyes of the customer (Beck-Burridge & Walton, 2001). The main reason why there should be a relationship between the brand and sponsored star is that people can easily identify the brand with the positive attributes of the star (Urriolagoitia & Planellas, 2007). The aim of sponsorship is to promote a link between product and the star. In this way the popularity of the firm or the brand is increased. The below figure explains the brand association with product and organizational association. Both product and organizational association can be made through sponsorship. Source: Chen (2001) Figure 1 Performance and Sponsorship As mentioned above firms not only sponsor events but they also sponsor individuals and teams. The performance of the teams and individuals also has an impact on the success of sponsor brand (Ngan et.al. 2011). The message that the sponsor is trying to give to the audience is positive and if teams are not successful then the association between the brand and the team or individual will not be positive. Purchase intention of customers is negatively affected when the performance of the sponsored team is bad (Ngan et.al. 2011). This shows the importance of choosing the right team or individual. In sports fans are always involved in the game therefore it is vital that the team they are cheering for wins. Only then it can be expected that sponsorship will produce results as expected. Investing in Sponsorships There is no doubt that sponsorships are expensive and require a great amount of investment. The need right now is to provide adequate justification for spending such a significant amount of money on sponsorships (Rust et. al. 2004). It is very important that investment in sponsorships should have a direct impact on the sales and in turn the profits of a company. Only then spending this much amount of money is justified. Further research is important if we are to find out more about the real economic worthiness of sponsorships to the firm. Research Methodology Introduction In this section we will discuss the research methodology for the study. The purpose of this section is to throw light on the strategies that will be used in order to collect and analyzed data. The analysis of data will also be discussed alongside with the reliability and validity of the method. Limitations will also be discussed in the end. In this research we will be conducting secondary research. According to Glass (1976) secondary analysis is the reanalysis of data for the purpose of answering the original research question with better statistical techniques… This research is done when access to primary or firsthand data is difficult. Secondary researches actually allow us to better explain a problem and provide solutions. Because so much data is at our disposal there are no restraints of sample sizes. Different results of different researches are combined together and analyzed in order to better suggest answers to the research question. There are different approaches a researcher can use to find answers to the research questions. Deductive research moves from general to specific and is known as top-down approach (Burney, 2008). In this type of research facts are collected and those facts conclusion is based. General information is collected and then results are based on that general information. The second approach for research is the inductive research approach. In this approach research moves from specific to general and it is generally called bottom-up approach (Burney, 2008). A few observations are initially made and their results are generalized over a population. In this research there exists a certain degree of uncertainty as results are based on only a few observations. The following figure explains both the research approaches Source: Deshpande (1983) Figure 2 In this research we will be using the deductive method of research. On the basis of our data we will suggest an answer to the question that is troubling Red Bull. We will start from a general theory then we will form hypotheses. Data collection will follow (from secondary sources) and finally we will make suggestions on the basis of our results. Data Collection Data will be collected from the secondary sources that are at our disposal. Databases and internet research will be done keeping in mind our topic. Sponsorship based marketing is a well researched topic and a lot of data is available on the internet. Also data regarding Formula 1 championship will be analyzed. In this research we will be analyzing both qualitative and quantitative data. A deductive research is usually quantitative in nature and an inductive research is qualitative in nature (Creswell, J. 2002). Because we are doing a deductive research the data that we will be collecting will be quantitative in nature. Results of the studies will be analyzed and then a suggestion will be made regarding the investment of Red Bull in Formula 1 Championship. Data Analysis In data analysis we will analyze all the data that has been collected throughout this research. The analysis of data will be done by using software of SPSS. Through this software an in depth analysis is possible. The reliability of the results will be tested and significance of sponsorships on brand image will be analyzed. The different researches we will go through will act as sample of the research. The outcomes of each research will be analyzed and then an overall conclusion will be made regarding the problem Red Bull is facing. The two main variables that will be tested will be sponsorship based marketing and brand image. The relationship between these two variables will be analyzed and it will be concluded whether brand image really increases through sponsors or not. Reliability and Validity The reliability of data will be established on when data that is collected is reliable. In this research we will only select articles that are published in peer review journals. This will ensure reliability of the results of those articles. The results of those articles will act as a sample for our research. The main aim is to identify the benefits of sponsorships with regards to brand image. The possible benefits of sponsorships will also be identified through conceptual model that will be developed based on the findings. Red Bull is also a soft drink company that is sponsoring extreme sports. It is therefore visible that they have identified some similarity between their brand and extreme sports. In this research validity will be achieved when data will collected on similar firms. Limitations The main limitation of the research is the use of secondary research. We will not be collecting primary data therefore we cannot add anything new to the previous research that has been done in the area of sponsorships. Also the scope of the research is limited to only on organization therefore the results cannot be applied to other firms. Also this is a quantitative research but still it is will be based on a wide range of data therefore it is not necessary that it will give the exact results. It can only guide Red Bull but cannot accurately predict the future efficacy of the sponsorship of Formula 1 Championship. Gantt Chart Should Red Bull keep on investing in the Formula 1Championships next year? Activities Months July August September October November Week # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Data collection                                       Read literature                                       Tutorial                                       Rough draft (1)                                       Data collection                                       Read literature                                       Data analysis                                       Improve draft (2)                                       Tutorial                                       Improve draft (3)                                       Data collection                                       Data analysis                                       Further searching and reading                                       Improve draft (4)                                       Tutorial                                       Review data analysis                                       Review literature review                                       Final Version                                       Review all                                       Print                                       Final submission                                       References Amis, Pant, & Slack. (1997).Achieving a sustainable competitive advantage: A resource-based view of sport sponsorship, Journal of Sport Management, 11:80-96 Barney, J. (1991).Firm resources and sustained competitive advantage, Journal of Management, 17 (1): 99-120 Burridge & Walton. (2001). Sports sponsorship and brand development: the Subaru and Jaguar stories. New York: Palgrave Macmillan Chen, H. (2001). Using free association to examine the relationship between the characteristics of brand associations and brand equity, Journal of Product & Brand Management, 10 (7): 439 – 451 Crader & Santomier. (2011).Imagination at work and play: a case-study analysis of General Electric’s Olympic sponsorship, Sport Business and Management: An International Journal, 1(1): 61-75 Creswell, J. (2002). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. London: Sage Publication Deshpande, R. (1983). Paradigms lost: on theory and method in research in marketing, Journal of Marketing, 47: 91-110 Dr. Burney, A. (2008). Inductive and Deductive Research Approach. Burney.net. Retrieved from http://www.drburney.net/INDUCTIVE%20&%20DEDUCTIVE%20RESEARCH%20APPROACH%2006032008.pdf Fahy, Farrelly, & Quester. (2002). Competitive advantage through sponsorship conceptual model and research propositions, European Journal of Marketing, 38(8): 1013-1030 Gardner & Shuman. (1987). Sponsorship: an important component of the promotion mix, Journal of Advertising, 16: 11-17 Glass, G. (1976). Primary, Secondary, and Meta-Analysis of Research, Educational Researcher, 5(10): 3-8 Grant, R. (1991).The resource-based theory of competitive advantage: Implications for strategy formulation, California Management Review, 33 (3): 114-135 Javalgi, Traylor, Gross, & Lampman. (1994). Awareness of sponsorship and corporate image: an empirical investigation, Journal of Advertising, 23: 47-58 McDonald, C. (1991). Sponsorship and the image of the sponsor. European Journal of Marketing, 25 (11): 31-38 Meenaghan, T. (1991). Sponsorship – Legitimizing the medium, European Journal of Marketing, 25 (11): 5-10 Miyazaki & Morgan. (2001).Assessing market value of event sponsorship: corporate Olympic sponsorships, Journal of Advertising Research, 41(1): 9-15 Ngan, Prendergast, & Tsang. (2011).Linking sports sponsorship with purchase intentions: Team performance, stars, and the moderating role of team identification, European Journal of Marketing, 45(4): 551 – 566 Red Bull to buy out Berger at Toro Rosso. (2008). Formula 1. Retrieved from http://www.formula1.com/news/headlines/2008/11/8738.html Renard & Sitz. (2011).Maximizing sponsorship opportunities: a brand model approach, Journal of Product & Brand Management, 20(2): 121 – 129 Ring, L. (1998). Sponsorship, the new dragon, Marketing Bulletin, pp. 23-5 Rust, Ambler, Carpenter, Kumar, & Srivastava. (2004).Measuring marketing productivity: current knowledge and future directions, Journal of Marketing, 68(4): 76-89 Sneath, Finney, & Close. (2005). An IMC Approach to Event Marketing: The effect of Sponsorship and Experience on Customer Attitudes, Journal of Advertising Research, 45:373-381 Urriolagoitia & Planellas. (2007). Sponsorship relationships as strategic alliances: a life cycle model approach, Business Horizons, 50: 157-66   Read More