Borussia Dortmund Marketing Management

Tim Fipps

July 2013

BORUSSIA DORTMUND - MARKETING MANAGEMENT

TABLE OF CONTENT 1. Introduction .................................................................................................................... 2 2. The business: BVB Borussia Dortmund ......................................................................... 2 3. Marketing and marketing mix ........................................................................................ 4 4. Marketing mix of BVB Borussia Dortmund .................................................................. 7 5. Recommendations for BVB's marketing mix ............................................................... 10 6. Summary ....................................................................................................................... 13 References ........................................................................................................................ 14

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1. Introduction
This report deals with a top-flight German football club, BVB Borussia Dortmund, and how it manages its marketing. For analysis, the "four P" marketing mix framework of product, price, place and promotion is used.

2. The business: BVB Borussia Dortmund

Ballspielverein Borussia 09 e.V. Dortmund, or shorter BVB Borussia Dortmund (here also abbreviated "BVB"), is a German football club based in Dortmund, North Rhine-Westphalia. It was founded 1909, and named "Borussia" after a local brewery. (BVB, 2013) In 2000, the club was listed as Borussia Dortmund GmbH & Co. KGaA at Frankfurt Stock Exchange. It was the first and so far the only publicly traded sports club on the German stock market. (BVB, 2013) The focus of BVB's business activity is professional club football, "and the economic usage of the potential for revenue in conjunction with it", which includes marketing of the company-owned 80'000-capacity stadium (BVB, 2013). BVB has direct or indirect interests in the companies BVB Merchandising GmbH (100% of shares), BVB Stadion Holding GmbH (100%), Sports & Bytes GmbH (100%), BVB Stadion GmbH (100%), best travel dortmund GmbH (51%), and Orthomed Medizinisches Leistungsund Rehabilitationszentrum GmbH (33.4%). (BVB, 2013) BVB's shareholder structure comprises Bernd Geske (11,71%), BV. Borussia 09 e.V. Dortmund (7,24%), and free floating 81,05%, owned by diverse minority shareholders, mostly fans. (BVB, 2013)

BORUSSIA DORTMUND - MARKETING MANAGEMENT Since 1974, BVB's first team plays its home games at Westfalenstadion, meanwhile the biggest stadium in Germany. BVB's club colours are black and yellow, giving the club also its nickname.

2.1. History
The club won its first national title in 1956. BVB was the first German club to claim European honors, beating Liverpool FC to win the European Cup Winners' Cup in 1966. Few years later, in 1970s, BVB was playing four seasons in the second tier of the German football league system. Since 1976, the first team plays in Germany's top flight of the German football league system, the Bundesliga. In 1997, it finally won the European Champions League. The money raised from the stock market launch in 2000 helped to bring expensive stars to win the Bundesliga in 2002. But success was short-lived, and the club feared for its survival in 2005 due to losses and massive debt load of almost 120m euro, after years of high-priced player purchases and salaries. After flirting with relegation and bankruptcy, the club's fortunes changed for the better when, in 2005, Hans-Joachim Watzke and Michael Zorc were appointed CEO and sporting director respectively, and when Jrgen Klopp was appointed coach in 2008, culminating in the league title 2011. Since Watzke and Zorc took on management in 2005, reasonable spending of money was practiced. This has particularly shown in the restrain exercised on the player transfer market. The club focused on integrating young players in the first team, which was alleviated by the presence of a guard of young talented players in the team at that time. When Klopp was appointed coach in 2008, these players were continually fostered, culminating in the league title 2011 playing their brand of "tempo football". Even then, the club was not boasting with recently acquired riches. 3

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In financial year 2011/12, BVB reported a record profit of 34m euro, after winning the double of Bundesliga and German cup in 2012; the profit was achieved through revenues of 215m euro, generated from ticket sales, television rights, sponsoring, advertising, player sales, and merchandising (BVB, 2013). Concurrently, BVB managed to reduce its debt to 40m euro.

3. Marketing and marketing mix

3.1. Definition
Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services, with the aim to create exchanges that satisfy needs, wants, interests and objectives of individuals and organizations. (Jobber. & Ellis-Chadwick, 2013) For businesses, marketing serves the objective to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a vendor has control in such a way as to optimize this objective. These variables are the ingredients in a recipe that is designed to prove most attractive to customers (Borden, 1964): The ingredients are individual elements that marketing can manipulate into the most appropriate mix the "marketing mix". The function of the marketing mix is to help develop a package ('mix') that will not only satisfy the needs of the customers within the target markets, but simultaneously maximize the performance of the business.

3.2. Marketing mix approach

The "marketing mix approach" is used as a tool to assist in defining the marketing strategy. The "marketing mix" was first summarized by Jerome McCarthy (1981) in the four Ps product, price, promotion, and place (or distribution i.e. how the product reaches the customer). 4

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Often, the "4P marketing mix approach" is used as a starting framework to develop marketing strategies. According to the 4P framework, businesses compete for customers along the four activity sets of product, price, promotion and placement: to develop appropriate products and services for the chosen customer and end-user market segment(s) to price products and services attractively for them (including discounts or alternative revenue models such as leasing or service contracts) to promote using ways and media that the market segment(s) have access to to choose channels of distribution that make sure to get the goods and services in their reach and hands easily The traditional four Ps of marketing matter. They are the four areas in which a producer can make changes. It is important to understand that the marketing mix principles are controllable variables. The marketing mix can be adjusted on a frequent basis to meet the changing needs of the target group and the other dynamics of the marketing environment. Marketing research serves to identify and assess how changing elements of the marketing mix impact customer behaviour. (Malhotra, 2002)

3.3. Examples for "4P" marketing mix

Two examples for applying "four Ps": Highly innovative smartphone (product), offered for a high price (price) and distributed only through one single telecommunications provider (distribution), and promoted using intensive public communications, television advertisements and webpages in the internet (promotion). Standard margarine (product) that has received excellent test results in consumer tests, offered for low price (price) as an own-label brand by a food discounter chain (distribution), and regularly advertised in promotion flyers distributed at shops, in neighbourhood residential areas and local newspapers (promotion).

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3.4. Market segmentation, targeting and positioning

The 4P marketing mix approach has its origin in the marketing of consumer goods, where it is assumed that consumers have mass market properties. Since suppliers cannot be all things to all people, all of the time, and in order to introduce some flexibility to allow for variations in customer taste and demand, a market is usually divided into various segments. This market segmentation means dividing the market into well-defined segments of similar customers. Market targeting (differentiation) is the choice of which market segment(s) to serve, and differentiating the offer to satisfy the demand within the segment. Market positioning consists in developing a marketing mix for each segment, to position the product in the minds of the customers relative to the competitors. (Kotler, Armstrong, Wong & Saunders, 2005, p.391) Marketing mix approach is used in all three processes of market segmentation, targeting and positioning.

3.5. More than four Ps ....

There have been many attempts to increase the number of Ps from four in the marketing mix model. The most frequently mentioned variable is people or personnel. Particular interest has evolved into the importance of relationships, loyalty and retention, embraced by the discipline of "relationship marketing". Relationship marketing can be seen in line with the traditional marketing mix elements, though it is also often seen as a new paradigm. Relationship marketing is a more holistic approach than marketing mix' 4Ps. As part of marketing strategy, they both seek to recruit and retain customers. However, relationship marketing has communication at its center.

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The traditional marketing mix model was primarily directed and useful for tangible products. For services and also for knowledge-intensive environments, where delivery and customer experience are in the focus, Booms & Bitner (1980) have suggested a 7P approach, adding people, process and physical evidence to the original four Ps.

3.6. Other than four Ps ....

An alternative to the four 4Ps consists of using customer perspective Lauterborn's four Cs (Schultz, Tannenbaum & Lauterborn, 1993). The choice of activities selected along the four Ps depends ultimately on delivering value to customers, however, in a way that is profitable for the seller. Hence vendors should think from buyers' point of view rather than seller's. Therefore marketing studies and strategies should be based on the 4 Cs i.e. consumer needs, cost to satisfy, convenience to buy, and communication (Schultz, Tannenbaum & Lauterborn, 1993).

4. Marketing mix of BVB Borussia Dortmund

4.1. Product
BVB's core product is professional club football, represented by the team playing in Germany's and Europe's top tier competitions. The product 'consumed' is the intensive football experience, whether inside the stadium or in front of TV. This experience is linked with [t]he [Borussia] Dortmund identity [that] is based on intensity, and the supporting terms of authenticity, bonding force and ambition." (Fan Experience Forum, 2013) The matches are played in various competitions, the major ones being Bundesliga (Germany's top tier football league), German cup and European Champions League, if the team has qualified for latter. Participation in these competitions makes the club also part of these products (i.p. Bundesliga and Champions League), which are businesses on their own rights and have their own marketing activities. 7

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BVB's core customer are the fans (supporters) that patronize the stadium at matchday. These people come to watch their team in matches and to experience the atmosphere in and around such matches. They come out of "true love", the club's motto, describing the emotional relationship between club, Bundesliga team and supporters. Many supporters don garments in the same black and yellow colours as the club. The club colours serve also to differentiate the BVB product from competitors, who would mostly have their own, different colours. These colours also are like a package of the BVB product, whether shown in the team attire, in the club emblem or on the webpage. Merchandising of articles in these colours are further products of the club, and serve also promoting the club. BVB's stadium for their home games since 1974, the Westfalenstadion, is another BVB product as the club is its owner. After several extensions, it is meanwhile the biggest stadium in Germany. Besides for their own matches, the club rents it also for other events, such as national football matches. To reduce debts, the stadium was renamed "Signal Iduna Park" in 2006, after a local insurance company, under a sponsorship agreement that runs until 2021. But the stadium is also place and part of the channel how the club football reaches the consumer, and therefore also part of the place dimension in the marketing mix. In 2000, BVB listed at the stock exchange. (BVB, 2013) Since the majority of the shares is floated free, acquisition and ownership of BVB shares has also been used as marketing tool, to enhance the bonding to the club. On the other hand, the current management uses the listing as reminder to perform the football business with economic rational, making decisions for sustained performance of the club, and not falling victim to pure emotion or short-term effects. The incredible loyalty and affection of their supporters, showing as matchday attendance of more than 70.000 also in less successful times, is one of BVB's major asset. But this "love" is related to specific expectations, such as utilizing youthful players in the first team, and playing a game concept that is not defensive-reserved but is initiative and attacking. 8

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4.2. Price
For Bundesliga matches, the BVB stadium "Signal Iduna Park" also accommodates spaces for people to stand. This standing room is priced lower than seats, enabling also lower income spectators to pay for a visit.

4.3. Place
BVB's stadium, the "Signal Iduna Park", was chosen by the British daily The Times as the best and most beautiful football stadium in the world (Evans, 2009). With its square layout of the spectator terraces ("football pure"), without separating field tracks between playground and terraces, the stadium enhances the intensive football experience. Retail of merchandising is done at the stadium, in fan shops and in sports attire shops in Germany and around the globe; furthermore through internet channels.

4.4. Promotion
The club "cherishes its working-class roots in the local community" (Turner & Hallam, 2011). The club also puts pride on and promotes city, region and state where it is based in: Dortmund, Ruhr valley, and North Rhine-Westphalia. These connections might not only be emphasized out of 'true love' and to touch hearts and souls of people from around, but is also used to allow promotions and tap on channels by their communities and entities. And lastly, in more dire times, to receive their goodwill and support if and where required (financing, logistics, etc). The BVB experience, as embodied at home matches inside the own stadium, is stressed also in many statements of club officials. The emotional bonding of supporters has been used in many symbols, such as slogans ("true love") or club colours.

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Selling club merchandise and using coverage space in media such as newspapers, TV, radio and internet serves to provide a sense of closeness and authenticity. The appointment of the first team coach Jrgen Klopp, with his communicative, extroverted and creative demeanor, fits ideally this picture. With his casual little games he likes to play with media representatives, he entertains supporters, spectators and media, and keeps the club in the headlines. Awareness and emotional potential has been augmented by identifying 'eternal' competitors, similar to situations in England or Spain with Liverpool vs Manchester vs London, or Barcelona vs Madrid. The Ruhr derby with Gelsenkirchen club FC Schalke 04 has history and stories going back decades. The rivalry is rooted in the close proximity of both cities, and the polarisation can be strongly sensed in the build-up of such matches, whether in both cities and their catchment areas or in the media. It culminates in the thrilling atmosphere at the match. Another competitive relationship has been produced in rather recent times with Bayern Munich, in the contest for national and European honors particularly since the 1990s. This "classic" has been illustrated as "poor vs rich", as "previous beggar vs Croesus". Both comparisons emphasize differentiation, but especially the Munich competition is also aimed to carry the name beyond region and even beyond national borders. For the latter, allusion to the Barcelona-Madrid "classico" is not accidental.

5. Recommendations for BVB's marketing mix

5.1. Product
With key players poached by other bigger-spending clubs, and reaching the final Champions League stages, opportunity and patience for providing playing practice for young talents might decline. Competing in these new heights requires hiring more accomplished players, with even less connection to city and people, and with different price tag and reputation on them. The impact on club-supporter bonding and identity at the core of the BVB popularity has to be managed well.

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The stretch between roots and expansion requires a re-look at market segmentation, targeting and positioning, since a business particularly when loaded with so many emotions cannot be everything, to everyone, at all times. The club has been known for young talents, and they have bonded well in the team. But seasoned top class players have not chosen BVB nor have they been hired, and many talents would leave BVB to revel elsewhere in their peak years and also to cash in. The question is: how far can youth and talent go, versus teams with higher paid seasoned recruits? Sustainability and youth have their strength also, but money might always lure away some individuals players that could eventually make the difference. If sticking to the sustainable youth tag, the club cannot too much single out individuals but foster and care for the community and team experience, and hold out for their day. Other product areas to be explored could be video or internet games, other sports (such as ice hockey or handball), futsal arenas, or engagement in youth programs and education ("sports academy").

5.2. Price
If the club wants to stick to its working class roots and enjoy a huge following at home, it has to keep prices for tickets and fan articles at affordable levels. Otherwise it would not only risk reducing the number of supporters and purchases, but also impair affection and image. One way to play with pricing could be to offer preferential and long-term tickets, such as 'early bird' ticket purchase, or package deals (whole season, several seasons, several competitions). This could save financing and transaction costs for BVB. If price cannot be raised to get more from transactions, the club would have to look for other ways of increasing revenue and financing. This could be in enhancing product portfolio and expanding distribution channels. 11

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5.3. Place
With the international success, the club can expand its distribution to the global stage, particularly in home countries of its foreign players. With the ubiquitousness of internet and social media, these media can be explored further, particularly to reach today's IT- and media-savvy generations. Adding physical outlets and filling shelves in sports attire or other shops beyond the city's boundaries need to consider also the emotions it might raise with stanch supporters of rival clubs. If the competitive spirit with other clubs is driven too far, it can backfire on the physical presence.

5.4. Promotion
The challenge in creating competitive differentiation campaigns is to avoid exceeding sportsmanlike behaviour which could spoil the exciting vibes emanating from such competitive spirits. In sticking to sustainable player stock, the club can establish itself as choice of heart for workers and 'social underdogs', while promoting values such as team, community, and social responsibility. Organizing and/or promoting local and regional sports events (e.g. futsal tournaments, running and cycling events), and running or participating in community events could build and maintain popularity and image in the local population. After the recent successes at national and European stage, one of the biggest challenges will be managing the expectations of everybody involved, particularly supporters and players.

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6. Summary
BVB Borussia Dortmund is a German football club based in Dortmund, North RhineWestphalia, which listed in 2000 at Frankfurt Stock Exchange. The club owns Germany's biggest stadium, which is designed to maximize football experience due to its proximity of and among spectators and players. The first team enjoys popularity in its home town and region, but also far beyond due to its blend of youthful player talent and working class roots. It plays a brand of attacking football that can exhilarate supporters as well as neutral observers, coached by a manager that knows to entertain the media. With the stadium at its center, the club has built up further channels of revenue, such as retail of merchandise in shops and via internet. It is also highly present in media, social media and internet, communicating to and with the public, offering news, insights as well as products. Promoting its youthful band of players and reasonable spending of money, together with its bonding to home town, region and particularly the working class, the club has recently reached heights of success at national and European stages that can hardly be topped. One of the biggest challenges will be managing the expectations of everybody involved, particularly supporters and players. This needs to be managed well, as it means a stretch between sustainable, local, youthful roots and glossy, international, dearly bought stage. The club has achieved this success by sticking patiently to its roots, and would be well advised to continue so, unless to change its image and operations completely. Remembering what happened after its stock launch, the club might be ill-advised to deviate. Building further on communication and distribution channels (internet, social media, outlets) and carefully expanding its product portfolio (events, other sports, and engagement in youth programs and education) could establish the BVB brand in a sustainable manner, rather independent of individual stars and glitter. < word count: 3'338 > 13

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References

Booms B. H. & Bitner B. J. (1980). Marketing strategies and organisation structures for service firms. In: Donnelly, J. & George W. R. (eds.). Marketing of services. American Marketing Association, 47-51. Borden, N.H. (1964). The concept of the marketing mix. Journal of Advertising Research, vol 4 (June), 2-7. Borussia Dortmund GmbH & Co. KGaA. (2013). Retrieved July 13, 2013, from http://aktie.bvb.de/eng Evans, T. (2009, August 9). The top ten football stadiums. London: The Times. Fan Experience Forum. (2013, January 24). Speaker preview: Engaging with supporters Lessons from Borussia Dortmund. Retrieved from http://www.fanexperienceforum.com/borussia-dortmund/ Jobber, D. & Ellis-Chadwick, F. (2013). Principles and practice of marketing, 7th ed. Maidenhead Berkshire (UK): McGraw-Hill Education. Kotler, P., Armstrong, G., Wong, V., & Saunders, J. (2005). Principles of marketing, 4th European edition. Financial Times Prentice Hall, Pearson Education, Prentice Hall. Malhotra, N.K. (2002). Basic marketing research: A decision-making approach. Upper Saddle River, NJ: Prentice Hall. McCarthy, E.J. (1981). Basic marketing: A managerial approach, 7th ed. Homewood, IL: Richard D. Irwin, Inc. Schultz, D.E., Tannenbaum, S.I., & Lauterborn, R.F. (1993). Integrated marketing communications. Lincolnwood, Ill., USA: NTC Business Books. 14

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Turner, R., & Hallam, M. (2011, May 13). Borussia Dortmund fans and investors aren't on the same team. Deutsche Welle. Retrieved from http://www.dw.de/borussia-dortmund-fansand-investors-arent-on-the-same-team/a-15074555

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