Case Analysis: Real Madrid Club de Futbol

A.) Introduction

Over time, soccer has developed into one of world’s most popular games. Its simple rules and ease of playing has made it attractive to boys and girls of all ages from country to country. The rise of popularity of soccer can be seen in many places. From video games to clothing merchandise, soccer fans are spending more money and time involving their passion. One’s own home is another place the rise of popularity in soccer can be seen with more games being televised. World Cup games raise the interest in many people from throughout the world. Magazine covers are featuring the sport and its stars on a regular basis.

Even with the constant growth in popularity, soccer remains a business. The ultimate goal for each and every soccer franchise or club is to be profitable. To do this, many marketing techniques must be exploited. World-class talent can be brought in to help put a better product on the field and also to help increase the interest in the team itself. The New York Yankees of Major League Baseball’s American League is a prime example of this. Year after year the Yankees bring in baseball’s top free agents to help put a competitive team on the field that seems to always be in contention for the league championship. By increasing the payroll and remaining competitive, fans keep coming to the games and remain interested in the team itself, which helps sells tickets and increase revenues.

B.) Situation Analysis:

Nature of demand

The product, the actual brand of the Real Madrid Soccer Club already exists. With soccer being a popular sport, over 240 million people kick a soccer ball at least once a week, soccer has a large target market. Although its target market is relatively large; targeting soccer fans all across Spain, but not limiting themselves and wanting to spread internationally, soccer fans throughout the world used products from either Real Madrid or its competition to show loyalty to his or her favorite team. There is a seasonal nature to demand with soccer season representing high demand and the off-season monthly showing a noticeably lower demand. The Real Madrid Brand products can be purchased in many places all throughout Spain, and in today’s society, the internet has proved to be very beneficial in product sales. All competing products consist of the same core things, so it is truly the consumer’s choice to which he or she selects.

With only six soccer confederations, brand awareness is quite high. Households usually show loyalty and do not buy multiple brands. Each soccer club has its own franchise. There is no set audience, with boys and girls of all ages being soccer fans in today’s society, and all having some say so in the buying decision. The buying decision is seen as a creator of satisfaction. The Real Madrid is trying to find a way to market its product and be a brand itself. They are trying to increase its fan base which would in turn take away from its competitors. The decision to expand the Real Madrid’s fan base came from upper management including the club president, Florentino Perez.

Extent of demand

It is said that over 240 million kick a soccer ball each week. Soccer is the world’s most popular sport. England, France, Germany, Italy, and Spain make up the big-five soccer countries in Europe, while Argentina, Brazil, and Mexico make up the Americas with the United States not far behind. About 75% of Latin Americans and 50% of all Europeans are interested in televised soccer. Television coverage of the 2002 World Cup reached 213 countries, with over 410,000 hours of programming. There were a combined 28.8 billion viewers compared to the Super Bowl having 750 million viewers worldwide. TV viewers for the 2004 Summer Olympic Games had a continued interest with over 4 billion viewers. With this trend and the rise in youth playing soccer, there is great growth potential within the market.

Nature of competition

The Real Madrid has several key competitors, most noticeably Manchester United. Manchester United has become a soccer powerhouse just as the Real Madrid once was and desires to be. Most other soccer clubs have structured marketing campaigns set out to gain a greater fan base. The Real Madrid and its president, Florentino Perez, want the same out of its team without losing on the business side. To compete, they must continue to bring in world class talent on the field. The Real Madrid is a 29-time Spanish national and nine-time European champion and wishes to continue that greatness. All competitors have developed a strategy vision and when elected club president in 2000, Perez quickly developed a vision for the Real Madrid. The Real Madrid’s mission statement was as follows, “Our mission is to nurture and project the Real Madrid brand worldwide.”

Environmental climate

In its current form, there are no social or economic threats to the soccer world. Soccer is considered a leisure activity, meaning in slow economic times, soccer could not be affordable by all. There is always the threat that an existing soccer team could get a player to better enhance their current team, increasing its fan base. There are no governmental regulations regarding competition. Just as the Real Madrid is trying to better its brand, so is its competition.

Stage of product life cycle

The Real Madrid and its competition are in the maturity phase of the product life-cycle. Brand and product awareness are high in its target market, and growth has is in a steady pattern. The Real Madrid has been in existence since the early 1900’s. Just as the times have changed, the product and its ways produced to consumers have changed.

Cost Structure of the industry

All professional soccer clubs have to cover fixed costs and finance talent acquisition and retention. Professional soccer clubs often had to build their own stadiums, but stadium leasing was also common. Many expenses are accumulated to operate a soccer club. Many employees are needed to help that games run smoothly. All of the Real Madrid’s competition is in the same state in terms of financial stress.

Skills of the firm

It is evident that the Real Madrid has the skills to gain a large market share through efficient advertising and promotion. The club is rich in tradition and history which is very beneficial to them. The club might seem to be in a stagnant phase, but based on its past, it can overcome it easily. All indicators point to reorganization of its product line, instead of a rebuilding phase. Strong management skills can be seen with Florentino Perez being a well-known Spanish businessman.

Financial resources of the firm

The Real Madrid earned 192.9 Cm in 2003. Manchester United’s 2003 income was 251.4 Cm. The Real Madrid ranks in the top 5 year after year in revenues. A financial breakdown is not given, but one can clearly assume that there are enough revenues to have an efficient marketing campaign.

Distribution structure

The Real Madrid sells its products at the stadium, athletic stores, and on the internet. Local vendors also distribute some of its products to show support of their team.

C.) Identifying Problems and Opportunities

Problems for the Real Madrid started occurring with previous management. Florentino Perez is trying desperately to help them recover and become a top notch soccer team once again. Competition has also found new and innovative way to market their product, causing the stagnant phase for the Real Madrid. Key opportunities arise each time world class talent becomes available. The Real Madrid must acquire and retain these players to remain competitive to help keep the fans interested in them and to acquire new fans. Everyone likes a winner. Perez must also utilize his business skills to help the club remain profitable. Everything else aside, soccer is still a business. The Real Madrid must also make the most of their marketing opportunities, such as the internet, to help attract new fans and build their brand. Overall the Real Madrid has done a fair job in choosing its market segments. There is much room for improvement though as others have caught up. The competition is aggressive.

D.) Generating and Evaluating Alternatives

The Real Madrid has a couple of options. They can spend money and acquire and retain top class talent and put a championship caliber team on the field each and every year. Another option the Real Madrid has is to spend more money in their marketing and advertising sector. This could in turn increase their fan base and revenues as well.

E.) Decision and Conclusion

There will be a continual demand for products of the Real Madrid brand. In order to keep these in at a competitive state, the Real Madrid must put a competitive team on the field. As previously stated, this will sell more tickets and increase the fan base. Top talent brings much anticipation to a sports team. Take for example the Houston Astros. They signed one of the games greatest pitchers in Roger Clemens just before the 2004 season. The day of his signing, ticket sales rose through the roof. Additional phone lines had to be installed just to handle all of the calls in effect of the Clemens signing. To go along with this, more merchandise was sold thought the season. All throughout the stadium, you could spot #22 Clemens jerseys, which means dollars to the Astros organization. Bottom line is better teams produce better revenues.