Digital Marketing in Sporting Industry - Essay Example

Introduction Global sporting goods industry has brands that reflect the passion for sports and sporting lifestyles of the people. Among these brands, the adidas is currently rated as the second-largest sports goods maker in the world and the largest in the Europe (Bloomberg L.P, 2014). Creative marketing strategy, innovation and new business design largely contributed to the success story of the “adidas Group.” This case study illustrates the use of digital marketing in the “adidas Group” strategy for gaining competitive market position. Customers, suppliers and competitors as well as a number of other factors that are not central in the traditional business models affect the modern day businesses (Wiedemann, 2001). Companies increasingly invent new business models–or strategies–for selling as the markets globalize, competition intensifies, and both consumers and investors become more demanding. The new business challenges of the Internet era largely stems from the globalization. Digital methods such as the real time marketing tools have become an essential part of the global business giants today. Researchers have reported three distinct waves in the direct and interactive marketing during the past 30 years namely; mainstreaming, database marketing and the Internet stage (Wiedemann, 2001). The new horizon in the Internet stage brings fascinating opportunities for the marketers, enabling them to actually realize the goals of one-to one marketing while also encouraging them to learn, deploy, and adopt information technologies strategically. In other words online technology and marketing have joined during the above third wave. Any business that chooses to ignore these new changes will most likely die out from the market eventually because the intensifying global competition has made it almost impossible to do any effective marketing without in some way using the technology of the Internet (Wiedemann, 2001). For example, the “adidas Group” stated its brands needed to make more relevant to the online audiences in order to propel demand. Hence the company is now engaged in accelerating its shift to the online technology by strengthening the “moments of celebration and acknowledgement” marketing strategy (Joseph, 2014). The specific objectives of the current study are; to investigate the digital opportunities, tools, hardware and software used for digital marketing and to suggest a model that optimizes the “adida Group” company’s digital marketing strategy. For this purpose some of the adida Group’s digital marketing initiatives and the RACE framework developed by Dave Chaffey will be thoroughly examined. Chapters of this report are organized as follows. Background of the “adidas Group” is illustrated in the proceeding section focusing on its brands, market positioning and the digital marketing initiatives adopted for achieving the business goals. Second chapter on literature review illustrates the concepts of digital marketing, its advantages and the disadvantages. Third chapter describes the approaches for setting up a “digital marketing optimization” program, including a review of how people, process, measures and tools can be combined as suggested by Dave Chaffey and Mark Patron in 2012. The Company Overview Adidas was founded by Adolf Dassler on 18 August 1949 in Germany. Since then the adidas brand has become a household brand name with its trade mark, three stripes logo, recognized in markets across the world. Its main competitors in the market are Nike, Puma and New Balance which cumulatively comprise approximately 70 percentage proportion of the market share in sports footwear and apparel industry. Cooperate mission stated in the “adidas Group” Annual Report (2013) says “striving to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle” (p. 24). Nevertheless, the company observed drop down in its sales in 2013 especially in the European rejoin markets. Currently the key brands of “adidas Group” include: adidas; improves athletes performances in football, basketball, running, training and outdoor, TaylorMade; leader in the metal-wood, golf industry, Reebok; American-inspired fitness brand, Rockport; comfortable fashion footwear made by the latest technologies, Reebok-CCM Hockey; combines the two brands, Reebok Hockey and CCM to create the leading designer and marketer of ice hockey equipment and apparel and NEO; the newest addition (Adidas, 2013). The company positions itself in the market as a business driven by passion, ambition and achievement that offers the best sporting wear for the field of play or stadium or track or gym or golf course or catwalk runaway or the street. Components of the marketing mix and the key strategies are: commitment to continuously strengthening brands and products to improve its competitive market position; innovation and design to help athletes of all skill levels to achieve peak performance; consumer-focused continuous improvement of the products’ quality, look, feel and image and the organizations’ structure to match and exceed consumer expectations and to provide them with the highest value; socially and environmentally responsible global operations that is financially rewarding for the employees and shareholders in the long run and; dedication to consistently delivering outstanding financial results (p. 24). The Group strategy states that company targets the leading position in all markets irrespective of the geographic location however, priorities its investments based on the medium-to long-term growth and profitability. In this respect, the group has currently placed a considerable emphasis on increasing sales in North America, Greater China, Russia, Latin America, Japan and the UK as the key growth markets. Of those markets, North America, Greater China and Russia are recognized as the three ”attack markets” which are expected to contribute to around 50 per cent proportion of the total sales growth by the year 2015, recording a double-digit compound annual growth rate. The company states its brands have enormous potential to gain market share by improved distribution and product differentiation in the USA. Furthermore, rising standards of living, increasing disposable income, positive demographic trends and growing sports participation in China and Russia are ideal for the company to make business investments (p.72). These opportunities have been identified and articulated in the company’s strategic business plan “Route 2015,” a document that outlines the long-term business priorities. Accordingly, the Global Sales team of the “adidas Group” have identified the following priority investments to boost the demand for its brands and market share through wholesale partners, own-retail stores and e-commerce activities; increasing the share of controlled space to over 50% of Group sales by 2015, driving growth and maximizing brand potential in key demographic locations and leveraging cross-channel sales opportunities and range efficiencies, facilitated by omni-channel approach (Adidas, n.d.) The “adidas Group” is a public company. According to the company share register 2013, the company had approximately 60,000 shareholders of which 32percentage proportion was in the North American market, 1032percentage proportion was in the German institutional investors, 32percentage proportion was in Europe excluding Germany, and 5% of institutional shareholders were in other regions of the world. Adidas Group Management, which comprises current members of the Executive and Supervisory Boards, holds less than 2% in total (figure 1). Omni-Channel Marketing Approach Conventionally businesses specifically invest on one type of marketing strategy (either the cost leadership or product differentiation or niche market) for gaining the competitive market position. The changing consumer behaviors today have largely restricted the growth opportunities for conventional businesses. Today, the consumers are increasingly informed about product and service offers, are socially engaged, and they shop wherever and whenever they like, regardless of country borders or opening hours. Such fundamental changes in the consumer behavior have encouraged many brick & mortar retailers to harmonize their market approach across channels, and grow business across country borders, creating multi-format, multi-channel and multi-local global companies such as Carrefour, Tesco, and Coach Inc. This environment provides an ideal situation for the “adidas Group” to accelerate its shift into E-commerce. Multichannel approach is very popular among the marketers due to its revenue enhancing and cost reduction opportunities while utilizing the advancements of Information Technologies (Baroto et al., 2012). However, implementation complexities of the multichannel strategies, and the dynamism of contemporary external environments makes omni-channel approach more difficult compared to the ‘traditional’ single channel marketing. For example, Valos et al., 2010 revealed, (1) understanding multichannel customer behaviour; (2) delivering sales, service and pre-purchase information; and (3) dealing with organizational politics and conflict caused by emerging channels are some of the implementation difficulties associated with the multichannel marketing. However, dynamic strategic frameworks can be used to better address the complexity and uncertainty, and overcome implementation difficulties of the omni-channel marketing approach. Real time marketing and E-commerce are very suitable for the dynamic strategic frameworks. Digital, “is a means for representing the instantaneous amplitudes of a signal as a series of numbers. These numbers or digits are usually encoded in binary form as a series of binary ones and zeros” (Noll, 1998, p.145). Digital marketing is advantageous and almost inevitable, but is also expensive example, the digital tools consumes large amounts of company’s Internet bandwidth. Some critiques claim that the commercial benefit of digital technology is commonly overestimated in the modern literature (Rowan, 2002). Such authors suggest current claims on the immediacy of the discontinuity, real-time marketing and one-one marketing in digital arena fails to address the economic and social costs of the operational difficulties and technological deficiencies associated with the digital tools. In most of the industrial sectors a genuine, one-to-one digital marketing strategy is still not developed. However, recent successful stories of real time marketing suggest that development is happening now. The proceeding section illustrates some of the digital tools adopted by the “adidas Group” and their impacts on the market. 1. Social Media Moments of celebration and acknowledgement strategy of the “adidas Group” is designed to bolsterer the company’s real time marketing and accelerate its shift to the online marketing. Recent initiatives of the company enabled up-to-the-minute messages to the forefront of online conversations in social media. The adidas UK for instance employed social media experts in 2013 to work collaboratively with the marketers, artists and agency members to create tactical campaigns around sports fans’ conversations especially during the key sporting moments while facilitating the company’s real time marketing. These personals are authorized for making decisions instantly (Everiss, 2012). The popular real-time marketing effort which inspired even the “adidas Group” is Oreos Real-Time Super Bowl Slam Dunk. The related post garnered nearly 20,000 likes on Facebook and nearly 15,000 re-tweets on Twitter while increasing the number of Instagram followers of Oreo from 2,000 (before the game) to 36,000 (after the game) and attracting over 16,000 consumer participants to the “votes for Cookie or Crème” contest which was intend brand promotion (Rooney, 2013). This is recorded as the new world, real time marketing in which brands respond real time to the environment and capitalized on–an unprecedented event instantly on brand communication. The “adidas Group” stated “Moments of celebration and acknowledgement strategy” attempts to recreate the impact of Oreos Real-Time Super Bowl Slam Dunk, especially in FIFA 2014. 2. Digital News Rooms Market research has revealed that youth are driven by a desire for ownership and participation. Therefore, youth involvement can increase the impact of marketing during sports events. Adidas Group is currently engaged in establishing a global web of digital newsrooms in partnership with video platform the TheNewsMarket. It is expected to increase the online brand awareness through these newsrooms. The digital outposts also allow the company to timely aware on trends, topics and the pulse of popular culture (Jenkins, 2014). As the core target consumers of this company are those individuals engaged in sporting and popular culture, the company has to project its brands to resemble the lifestyle of these consumers. Therefore, aggressive online marketing is expected to resurrect a slump in its net sales example, in 2013, decline of 6 per cent net sales was recorded across the Western Europe which is expected to resurrect by strengthening the social media marketing. 3. Blogging The “adidas Group” used Blogging to increase the youth’s participation in the Beijing Olympics in 2008. In general 18 million Chinese high school students use the Internet and the overall rate of Internet use among them is steadily growing. This environment provided the ideal situation to use digital media as the key to boosting brand image during the Beijing Olympics in which adidas sponsored the Chinese Women’s Volleyball Team. Accordingly, the Chinese Olympic team blog was created to open a dialogue and bring fans closer to the individual team members. Photos of the players and professional makeover drove traffic to the blog reporting nearly 161,000 unique visits in the first three months (Ogilvy PR, n.d.). Furthermore, the “adidas Group” blog provides a platform for the consumers and the marketers to express their thoughts. Blog posts such as “Help us find the new way of working and learning,” “Poverty Wages” in the sporting goods industry – What does this mean?”and “How taking back sports shoes is part of the Brazilian mentality” not only promote the adidas brand but also offer some utility, information or even a laugh in an authentic, relevant message. These properties are very powerful in real time marketing (Adidas, n.d.). 4. Viral Videos Viral films are very powerful in digital marketing example, such videos can project sports as something more than a game by using stunts and emotions to show the games’ speed and power. The “adidas Group” make edgy, dangerous and exciting videos targeted to a young audience. For example, a volleyball spike reaching a speed of 92 kilometers per hour was shown alongside water gushing from a fire hydrant at the same speed and hitting a passerby during the Beijing Olympics in 2008 (Ogilvy PR, n.d.). Over 400 videos posted by the “adidas Group” in adidas-football category are available in YouTube and some of these such as “Match ball of the 2014 FIFA World Cup” was viewed by over 2.5milion fans in less than 2 months (Adidas Football, 2013). Furthermore, the adidas ranked number one by London 2012 Nielsen audience tracking for categories ‘inspiring’ and ‘empowering (Nielsen, n.d.), its ‘Dont stop me now’ video was the most viewed video on www.bbc.co.uk during the Games (BBC, 2012). Under different categories a number of other popular videos have been posted example, Skateboarding Skate Copa under adidas-Skateboarding (Adidas Skateboarding, 2014). These simple and short videos show the emotions of sports while increasing the brand awareness and building reputation. 5. Online competitions Online polls and competitions also increase the youth involvement in games. For example, the volleyball chant competition spiked youthful involvement in the Beijing Olympics. Adidas sponsored the first Chinese chant competition in this event and invited the public to create a national chant, cheer, or jingle that can relate to the volleyball. Participants were allowed to upload chants to an official website and vote for them. Furthermore, the company has launched online adidas game for the football fans (Adidas, n.d.). Literature Review Day, 1998, reported that three categories of company behaviors relating to the market orientation are less successful, namely: self-centered; who may have been market driven at one time but don’t realize until they encounter trouble that they have lost their focus, customer compelled; who fundamentally misunderstand the concept, lacking a clear focus and uncoordinated efforts of different parts of the organization and skeptical; who doubt the advisability of being led by customers and put their faith in superior judgment and technology as the key to a long-run competitive advantage (p.2). Considering the costs of brand promotion activities it is important to monitor the market impact of such activities regularly. Measuring the impacts of promotional campaign in comparison to the investment can help businesses recognize the effectiveness of their marketing strategy. The ability to quantify the impact is a distinctive advantage of digital marketing compared to the conventional marketing such as advertising in the mass media. In the digital arena it is possible to track the traffic to a website by using the web analytics such as Google Analytics. Web Analytics is defined as the measurement, collection, analysis, and reporting of the Internet data for the purposes of understanding and optimizing Web usage (Chaffey and Patron, 2012, p.34). The use of web analytics to improve online marketing dates back to the 1990s when the first web analytics systems were developed. Nevertheless, some authors suggest that many companies fail to use the best practices and hence fail to get the potential return from digital marketing (Chaffey and Patron, 2012). For example, the Econsultancy-RedEye report revealed that companies are required to improve their analytics activities across the following practices; identifying key performance indicators (KPIs), funnel analysis, mining internal search data, and integrating user testing and analytics. However some companies simply use Google Analytics to track numbers of visitors or unique viewers to a web page without investigating the trends in those numbers. Results and Discussion By using web analytics the effectiveness of the adidas Group digital promoting can be monitored and improved regularly. Six Sigma (Truscott, 2003), DMAIC (Define-Measure-Analyze-Implement-Control improvement framework), Six Sigma-DMAIC combined framework (Decker, 2006), RedEye (Gibbins et al., 2012) REAN (Reach-Engage-Activate-Nurture framework) (Jackson, 2006) and RACE (Reach-Act-Convert-Engage) (Chaffey and Patron, 2012) are some of the established approaches for reviewing and improving business performances. Furthermore, Chaffey and Patron, 2012, suggest the following best practices are important to increase the effectiveness of company’s digital marketing; acting on the data to improve site performance, business decisions driven by analytics, best practices implementation, KPI development, developing process / implementing process, executive management awareness and support and integration of current and new solutions (p. 33). Conclusion Today, the cost of acquiring a youth customer online is much less compared to the conventional methods of brand promoting. The “adidas Group” is also interested in accelerating its shift to the digital marketing as a measure to resurrect some of the lost sales during the economic downturn. However, the digital marketing comes with a price. Therefore, the companies should review the structure and investments on digital marketing to ensure that its costs are paid off and the potential profits are earned. Increasing the adoption of web analytics to a “digital marketing optimization” process is therefore very important. Tools, plans as well as experienced personals are very important to this process. Optimized digital marketing processes can overcome some of the major challenges in virtual marketing. References Adidas Football. (2013). I am brazuca. Match ball of the 2014 FIFA World Cup. [video online]. 03 December. Available at: < http://www.youtube.com/watch?v=PImQsVsXCrI> [Accessed 01 April 2014]. Adidas Group, 2013. For the Love of Sports: adidas Group Annual R eport2013. [online]. Available at < http://www.adidas-group.com/en/investors/financial-reports/> [Accessed 01 April 14]. Adidas Group. n.d. Global Sales Strategy. [online] Available at [Accessed 01 April 14]. Adidas Skateboarding. (2014). adidas Skateboarding Skate Copa. [video online]. Available at < http://www.youtube.com/watch?v=NLdyQ1oMmAo> [Accessed 01 April 2014]. Baroto M. B., Abdullah B. M. 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