Assessment of AC Milan's Marketing Strategy
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Assessment of AC Milan’s marketing activities using Value cycle
Introduction
AC Milan marketing activities will be identified, described and critically evaluated in this work. The assessment will be based on the theory of value cycle, which represents the marketing process between business or organization and consumers. The process has 4 main parts that are linked together and each part is built on the previous ones: understanding, creating, communicating and delivering. Each of the stages will be applied to the AC Milan marketing activities. It will help in evaluating how effective the organization, in this case- AC Milan, has been in meeting its marketing objectives. It will be integrated into the marketing process of the football club and all the marketing activities will be described and assessed with different types of data and information.
Figures and charts showed bellow give some information about club’s situations in past few years in terms of value of the club, revenues sources, season tickets sales and etc. Comparison with major European clubs in terms of revenues will be provided, in order to evaluate the differences between them.
However, the changes that are taking place in the world of football (Financial Fair Play) and different law systems regarding ownership of the sporting clubs, salary taxes and etc. in different countries can be the reasons why AC Milan seems financially poor comparing to other major football clubs.
The assessment will be started with describing and evaluating each of the stages of marketing process in terms of AC Milan. Recommendations for improving marketing process of the club as well as drawbacks of existing marketing strategy will be given while analyzing each stage. Some improvements will be recommended in regards to the current situation of the club will be based on the experience of other successful sport organizations.
Understanding
The first issue of sport marketing process in terms of value cycle is understanding the sport consumers of the market in which sport club operates. It includes attracting new customers and maintaining relationship with existing customers, examining and meeting their expectations as well as segmenting the consumer market (Aijo, 1996). In order to achieve the high level of involvement and long-term relationship between the club and its consumers, it’s essential to provide them with the products they want, when they want it and the price they are willing or able to pay (Rohm et al., 2006). Nowadays segments of sport consumers, such as sport supporters, sport sponsors and broadcasting media, can be identified. The effect of building strong relationship with customers can create high level of loyalty towards the team, the competitive advantage and increase the revenue from different sources which are, in terms of sport club, attendance, television rights, sponsorship deals, licensed products and etc.
Understanding AC Milan spectators
Strategies that can be used in understanding sport fans can be different and they depend on the variables that are used. The club is trying to use different factors in identifying perceptions and attitudes of its supporters. However, in order to segment consumers the club must have the database of fans that can help to understand behaviors and needs of the spectators. One of the methods of creating such base is through offering club’s membership cards, called “Cuore Rossonero Card”. Nevertheless, this method is limited geographically, as only supporters in Italy can apply for this card. Advances in online technologies allow AC Milan to create online database of supporters across the globe. The club has launched “AC Milan community”- a social network, where supporters across the globe can communicate with each other, share photos and blogs, discuss the matches online and even chat with the players. In addition to this, there is official Facebook page with more than one million members. Through online resources AC Milan makes questionnaires and surveys among the members. These resources create significant information base for the club in understanding perceptions, attitudes of its consumers globally. Online communities also generate the feeling of attachment to the club and people who share same values and beliefs towards the club. However, some of the information found in these sources is not up-to-date, for example last questionnaire was launched more than 5 months ago. Information gained from them can be different nowadays, and that’s why it’s vitally important to receive the newest data about latest dimensions in supporters’ perceptions. In order to improve this area, permanent updating of the information is strongly required. However, the club shouldn’t totally rely on online database, and must carry out proper market research for better understanding its fans.
Segmentation of AC Milan consumers
After the first step of gaining database of club’s supporters, AC Milan has to divide it into different segments in order to target more efficiently. Firstly, in club’s stores AC Milan offers variety of products for different gender, age, lifestyles and etc. groups of supporter. Merchandise products for males/females, kids/youth/adults, sport active supporter, low/high loyal fans and etc. can be found there. Segmenting the consumers on the basis of their loyalty created the idea of developing special products that fans with high level of commitment to the club would buy (pets’ accessories, home wear, exclusive wines and jewelry).
Secondly, the geographic segmentation of supporters is applied in club’s marketing strategy. Multilanguage website, number of online stores and official retail stores in different parts of the world (Europe, Asia) indicate that the club is trying to target consumers from different countries. Although, stores are offering big range of products for consumers, they are all identical in every store. This can be identified as a drawback of the strategy, as cultural and geographic differences are not taken in consideration. Same products are sold in Europe, USA and Japan, however developing new products and creating extensions for existing products that suit cultural context, may target geographically segmented fans more efficiently. For example, chopsticks with AC Milan logo might be sold in Asian market, more fashionable and branded clothes may be more successful in Japan then in Africa, while winter clothes are less likely to be sold in Australia and Africa. Therefore, while expanding to international consumers, the club must gain and enhance knowledge of specific nature of foreign consumers. This area requires improvement and market research in different parts of the world must be conducted.
Supporters of AC Milan are also segmented using different pricing strategies. The club offers different types of tickets for variety of prices: season tickets, group-tickets, season group-tickets, corporate tickets for companies, tickets for children and armchair supporters. By offering corporate tickets in luxury suits during the game the club targets businesses and commercial partners. On the other hand selling tickets for armchair supporters with discount and provision of good facilities (clear sightlines, easy access to the stadium, good security issues, decent standard of food and drinks, adequate toilets and etc.) at the stadium can be seen as targeting supporters with disabilities.
Providing car parking near the stadium allows people of old age group and fans that travel long distance to attend the game with easier excess; also smoking restriction at the stadium make the game more attractive to supporters with children. Fans with high commitment to the club, but with behavior that sometimes can be aggressive (shouting, singing, jumping) are separated from other supporters into south part of the stadium (“Curva Sud”). However, the queues at the catering services and toilets, the comfort of the seats at the staduim are issues that must be improved in order to enhance the experience of attending the game by females, families and older generations.
Although, as it was mentioned above, sponsors are considers as sport club’s consumers, the main focus on AC Milan sponsorship will be given in “Communicating” part of the essay.
Creating
Once the club has the understanding of its customers and their perceptions and attitudes, once the most valuable and profitable segments of the market are identified, the next step is creation the sport marketing experience. Basically, it refers to creating the sport products that club’s supporters are willing to experience. Buying the merchandise either online or at the store, such as shirts and hats; using sponsored credit card; subscribing for club newspaper or news online; buying the membership of the club- all these are considered as a product that sport organization must create in order to satisfy customers (Beech and Chadwick, 2007). The game that fans attend is also a part of the product that the club offers.
Merchandise
As it was mentioned before AC Milan offers big amount of merchandise products through the official store online and through high street retailers. However, products for not all of the segments can be found there. Firstly, there were no products for sport active woman found. Offering football boots for woman and training clothes with AC Milan logo can be one of the ways for improvement. Such category as lingerie for female consumers can be also created. Secondly, absence of rarity club’s kits and signed football boots and shirts creates an uncovered segment of fans-collectors. The club also can create online store/auction between supporters, where some of rare products can be sold and purchased by fans. Other product category that seems to be quite successful, as other sport clubs are offering it, is photos and posters with club’s players, triumphs moments of the team, stadium and etc. Although, a lot of improvements can be made in creating merchandise products, the club must have marketing strategy to drive the sells. For example, super-stars players can push merchandise products’ sells. That was one of the main reasons why AC Milan signed superstars like Ronaldo, Ronaldinho and Beckham in recent years. However, the latest squad of AC Milan doesn’t have a major super star player and it has been definitely reflected in decreasing of merchandise products sales.
One of the sections of the online store offers great number of books that different people attached to the club have written. However, taking as example autobiography book by Z. Ibrahimivich, some of the books can only be relevant when the person has current links with the club. After Z. Ibrahimovic left the team it’s less chances that his book will be demandable for AC Milan supporters. Now AC Milan offers this book with big discount and probably loses money. The same problem can arise with named football kits. However, these issues can be solved in the other way, rather then cutting the price for the products. These merchandise products can be donated to the charity organizations, that will enhance the image of the club in terms of social responsibility.
Game as a product
One of the essential products that AC Milan offers is game itself. In Italian football the success of the team highly influences the attendance and ticket sales, therefore if the team is having poor performance in domestic and international arenas, the revenue will decrease dramatically. Unfortunately, AC Milan is now in this situation. Figure 1 and Figure 3 shows how the demand for season tickets has decreased from season 1992-1993 and the decrease of the team value, respectively. However, AC Milan is still the most successful football club in the world in terms of international trophies. The club offers the game not only during Italian Seria A or Champion’s League, but also during pre-season friendlies cups and matches (World Football Challenge in Miami and New York, Audi Cup in Germany, Emirates Challenge in Dubai). It also tries to enter new markets in order to strengthen the brand equity and awareness. For example, SuperCoppa Italiana 2011 in Beijing National Stadium against Inter FC allows expanding teams’ merchandise products to Asian market. If the club offers game internationally, it must be done in regards to the cultural and behavioral issues of foreign consumers. In order to increase the awareness of the team in Asian market, the motives of the consumers for supporting the club must be studied. For consumers in China great history of the club is one of the main motives for supporting football club, while in South Korea fashionable and glamour parts are more preferable (Ratten and Ratten, 2011). The club with presence of native player and international “super star” are more likely to be supported by Asian consumers. Thus, AC Milan must focus on the markets that are more responsive for the club, in this case, China; also signing the player from Asian country can help the club in strengthening club awareness in this market.
Creating other products
Another product that AC Milan offers globally (Russia, Brazil, USA, Germany, UAE) is Junior Summer Camps. These camps offer several weeks of training by AC Milan coaches during summer holidays. However, the camps are temporary places for children training, and some improvements in this area can be made. For example, opening permanent children/junior official football schools in different countries. In countries that generate big number of high-class players (Brazil, Argentina etc.) the main aim for these schools can be scouting for future talents. While opening football schools in markets with a lot of consumers (Russia, China, Japan) may be seen as additional revenue source. It can also enhance the brand equity and awareness of AC Milan, not only as a football club but also as organization that cares about children.
Media-based products are one of the booming areas in sport industry and AC Milan provides its consumers with products from this category, although they are free and mainly used for communicating and delivering rather than generating revenues. Therefore they will be discussed in more details in these parts of the essay. However, in terms of creating new media-based products, some improvements can be made. Firstly, launching paid printed and digital AC Milan magazine with exclusive information can in one way increase revenues, and in other way, printed version can target old-aged consumer segment. Secondly, there are no alternative ways in watching AC Milan games, only on the stadium and on TV. Therefore, developing extensions for official apps and web page in terms of paid online broadcasting of football games can be a great improvement. However, additional market research must be conducted in order to explore to what degree sport fans regard online and mobile broadcasting as alternative ways to attending the game or watching it on TV.
The club also offers different products and services on its stadium (San Siro), although official owner of the stadium is Milan City Council. This creates limitations in using the stadium for other purposes and gaining extra revenue. AC Milan provides luxury hospitality services for sponsors and business partners in the stadium during the game by offering seats in VIP boxes with high-class catering services, and meeting rooms for presentations and business meetings. One of the trends for football clubs nowadays is show-presentation of new super star player on the stadium. It happened after signing Ronaldinho and Ibrahimovic. However, the revenue from the tickets was distributed to the club, while it can be used for charity purposes.
One of the product/service that can be created, and nowadays it became quite popular among football clubs, is opening official bars, where supporters can experience watching the game with the people of same attitudes towards the club. These bars can be opened not only in Italy but also internationally. They can be also used as the places where clubs officials meet fans for discussing different issues such as club performance or hooliganism problems.
Communicating
The third step in value cycle of marketing process is communication. After understanding the consumers of the club and creating products they are willing to buy or experience, it’s essential to communicate these products to these consumers. However, the club must identify the customers who will receive the information, the message type and the communication platform for this message and the outcomes for both sides. From the club’s perspective, finding the golden mean will resulted in increasing in purchases and memberships, enhancing brand equity and awareness and etc. On the other hand, consumers will receive the clear message without any clutter and will respond to it appropriately. AC Milan’s communication process exists in variety of forms, starting from advertising and media communication and finishing with sponsorship and personal selling.
Sponsorship
Starting with sponsorship, it’s important to say that from the season 2010/2011 AC Milan applied new marketing strategy regarding sponsors: the reduction from 43 to 32 sponsors took place and four-tier hierarchy of the sponsors was launched. This strategy will add much value to main AC Milan sponsors and improve their exclusivity and visibility. However, examined all the sponsors and official partners of the club, it must be said that most of them, are top luxury brands, such as Fly Emirates, D&G, Audi, Nivea. In order to enhance the image of the club in terms of social responsibility, it’s essential to have sponsor with social orientation (charity organizations, foundations). This can improve the communication with supporters, as they will feel club’s commitment to the social issues. Although the club has created its own Milan Foundation organization, but promotion of this organization is very poor comparing to other sponsors and partners. It must be changed; otherwise the image of the fashionable and glamour club, that doesn’t care about social problems, will stick with AC Milan.
Due to hierarchy of club’s sponsors, the billboards used during the games promote only top sponsors. It creates the exclusivity for the sponsor on one side, and sending clear without “noise” messages to the consumers.
Communication between team and supporters
Communication the product that the club offers to its supporters also takes place during special sessions in official stores, where players announce new products to the supporter. It’s not only increasing the promotion of the products but also improve the relationship with the consumers. It happened not only in the club store in Milan but also in the stores across the globe during AC Milan pre-season matches. However, the communication process in terms of personal selling can be improved. Due to advanced in online technologies, it’s not necessary for players to be in a shop physically. Online conferences between supporters and players in different stores across the globe can be launched. In cooperation with developer of FIFA video game, Electronic Arts, online tournaments between players and supporters will be beneficial to the club and consumers.
Communication through traditional and new channels
For AC Milan the prior way of reaching its supporters is through official website, and it’s considered as the main source of information about the club for supporters. As it was mentioned above, AC Milan uses online social networks (“AC Milan Community” and Facebook) in order to understanding its consumers, but nowadays it’s also used to communicate with supporters. However the club must understand that different segments of consumers require different communicating approaches, therefore AC Milan should use variety of sources to reach all the consumer segments. For example, using online channels (social networks, un/official websites, mobile web, emails, content distribution apps) allows the club to communicate mainly with Generation Y male consumers, but this strategy can be less affective in reaching old-age consumers or female supporters. Communication with these segments is made through AC Milan TV channel and local newspapers. However, some improvements can be made in communication strategy of the club. Launching AC Milan official radio channel and, as it was mentioned in “creating” section, AC Milan newspaper, SMS/MMS alerts can be used as other sources of communication club’s values to its supporters.
Delivering
The last but not the least issue of marketing process in value cycle is delivering. Delivering is where the exchange process between consumers and organizations takes place. Depending on the product delivering include different issues. For example, talking about merchandise goods, the key point of delivering is how these products are distributed to the consumers and how easy the access to these products is. On the other hand, the product that represents the game itself is delivered to customers through using and consuming it. Customers need to know what products are available and be able to use and consume them. Thus, delivering also means providing consumers with the information about products.
Delivering merchandise products
AC Milan uses different sources of distribution merchandise products: online store, mobile web and apps, retail outlets. However, the prior ways of distributing merchandise products are considered to be online store and retail outlets that can be found in several countries. However, the club must analyse the market and consumers before opening new stores in foreign countries. The popularity of the club in Japan, Middle East and China allowed AC Milan to open official stores there; however opening stores in the countries with high level of popularity of domestic football, such as Spain, Germany and England, can be risky. In cooperation with its official supplier, AC Milan also delivers some merchandise products (mainly t-shirts) through Adidas stores, which are located globally. To deliver merchandise products globally, AC Milan can use franchises in different countries, in order to minimize the risks of opening their own store.
Media and Stadium as delivery methods
AC Milan’s media products are used not only for understanding and communicating but also as tools for delivering information. For example AC Milan TV (24/7 broadcasting channel), official website, phone apps provide latest information about the team: news, fixtures, statistic, highlights of the games and interviews. Most of these sources are also used as distribution channels for tickets.
Stadium is also considered as the main source of delivering club’s products, services and values. The game, as one of the main products, is delivered through the stadium, as well as tickets and merchandises products. During the game AC Milan delivers services, such as food and beverage bars, to their consumers. Although, San Siro is high-level stadium, some improvements using advances in technologies can be applied. For example, the club can launch Bluetooth service on the ground during the game, which will provide supporters with up-to-date information (statistic) about the game they are watching; placing small TVs in the leisure facilities across the stadium will prevent fans of losing any single action during the game. In addition to this, the stadium represents the history of the club and is used for delivering historical values of the club. Stadium Tours and Museum Exhibitions, with AC Milan’s trophies and cups, legendary shirts, historical shoes and etc. enhance the club’s values and loyalty among supporters as well as generate extra revenue. However, the stadium is owned by Milan city council and building its own stadium can be beneficial for AC Milan in financial and marketing terms. Own stadium will enhance the club’s equity among the supporters and can lead to better attendance, hence increasing in tickets sales. It can be also used in the future for providing other sports and social events that will also improve the marketing process of the club. Nevertheless, looking at current financial situation of the club, AC Milan cannot afford building own new stadium, unless new investors will be found.
Summary
AC Milan marketing process has been described and evaluated in this work. As the club is one of the most successful football clubs, it was quite hard to find drawbacks of its marketing strategy. Issues of club’s marketing strategy are used in different parts of the value cycle; for example, variety of media-based communication sources is used also for segmenting the consumers and delivering the information to them. It will result that some points of the essay in one part can be overlapped in another parts. In this case, improvement in one part of value cycle will result in enhancing the process of another four and vice versa. Thus, segmenting the target audience will lead to creating the product that suits their perceptions; that in turn will result in choosing appropriate and clear communication message and medium; hence, the best delivering method will be provided. However, using different tools in several components of the value cycle is seen as effective and right marketing strategy as majority of the football clubs are using the same approach. Nevertheless, some weak points were identified and number of recommendations was given. Although, the improvements were recommended, they can only be applied after carrying out market research.