Strategy

Strategy

Does the business of football have a value proposition?

Dr Marco Arraya

Posted: June 8, 2014

During the last decades football has consolidated its position as an entertainment industry. For the next World Cup Brazil’s projected budget is $13.3 billion (in South Africa it was $4.5 billion), with an expected revenue of more than $11 billion, more than 20 times what South Africa earned in 2010 ($513 million). The regulator FIFA is expecting $4 billion in revenues.

The engine that drives this industry is competitiveness, rivalry between countries and above all a passion for the game. Commercial maximization from these factors is reflected in the underlying business areas:match-day ticket and corporate hospitality sales, broadcast rights and sponsorship, merchandising and other commercial operations. According to FIFA’s Secretary General Jerome Valcke between 60% and 65% of World Cup revenues come from the sale of broadcast rights, another 35-40% in marketing (including sponsorship on the field) and ticket sales represent a small percentage of the income of the tournament.

The creation of wealth for all organizations (special clubs and national federations) that participated in this industry is not a choice, it is an imperative. Because sustainable revenue is a key driver of value for any organization (Hoque, 2005) and can only be achieved by presenting a compelling value position to supporters/customers.

Creating and delivering a value proposition is an essential task for a business model of marketing oriented organizations (Day, 1999; Katkalo, 2008), and a strong motivation for business strategy (Srivastava et al., 2001), because supporters/customers when choosing between competitive offerings will choose the offering perceived to deliver superior value, thus potentially creating organization competitive advantage (Doyle, 2000). Therefore, reaching superior value proposition is vital to achieving and maintaining competitive advantage (Davidson 1997).

Most researchers agree that it is decisive for organization’s competitive offer that supporters/customers understand the value proposition, because that reflects the organization’s strategic position and by implication, the organization’s competitive performance. This logic is reflected in a focus on the contribution of the business model and marketing to organization performance (Hogan et al. 2002).

In football a value proposition describes how a club/national federation’s offer differs from those of its competitors (sports and entertainment industry) and explains why supporters/customers buy tickets, merchandising, broadcast rights and sponsorship. The value proposition is perhaps one of the most important tools for the marketer’s toolset, because it creates wealth. It is the foundation for understanding how the football industry as an entertainment product will pragmatically be valued by the target costumer. The value proposition includes the benefits a target costumer would experience.

The creation of value proposition is directly related to the target costumer the organization wants to reach, making it essential segmentation by business area and inside. As mentioned the football industry has four main business areas, so the question that arises has to be, is there a unique value proposition or are there several in line with the business area?

The answer to this question is crucial for greater professionalism, efficiency and funding at a time when the struggle for survival, wealth creation and commitments of “financial fair play” are the beacon of football.

IDavidson, H. (1997). Even More Offensive Marketing. London: Penguin Business.

IIDay, G. (1999). Creating a market-driven organization. Sloan Management Review (Fall), pp. 11-22.

IIIDoyle, P. (2000). Value-Based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value. Chichester: John Wiley & Sons.

IVForbes Magazine. (2014). The World's Most Valuable Soccer Teams. Access at 11of May 2014. [Link]

VHogan, J., Lehmann, D., Merino, Srivastava, M., R. K., Thomas, J. S, & Verhoef, P. (2002). Linking customer assets to financial performance. Journal of Service Research, 5 (1), pp. 26-38.

VIHoque, Z. (2005). Linking environmental uncertainty to non-financial performance measures and performance: a research note. The British Accounting Review, 37(4), pp. 471–481.

VIIKatkalo, V. S. (2008). The Evolution of Strategic Management Theory. St. Petersburg: GraduateSchool of Management Publications; St.Petersburg State University Press.

VIIISrivastava, R. K, Fahey, L. & Christensen, H. K. (2001). The resource based view and marketing: The role of market-based assets in gaining competitive advantage. Journal of Management, 27 (6), pp. 777-802.

About Dr Marco Arraya

Marco Arraya is a manager and consultant in the sports and health equipment industry. He holds a PhD in strategic management from the Universidade Aberta (Portugal) and an MSc in sports management from FMH/Universidade Técnica de Lisboa (Portugal). His research interests are in business management practices, dynamic capabilities, resource based view, business models and learning organisation. He writes for several Portuguese sports and economics magazines/journals and can be contacted at: marco.arraya@marcoarraya.com