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The importance of customer loyalty in the context of the organized sports movement (OSM) and presents models and good practices for achieving it. The author discusses the concepts of competitor advantage, satisfaction, perceived quality, brand image, and multiway communication, drawing on academic research and case studies. Innovative offers outside the field of traditional sport are emphasized as a key factor in customer loyalty.
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AUTHOR International Council of Sport Science and Physical Education e.V. Detlef Dumon, Keri McDonald, Rick Schmitz Sport Clubs for Health-enhancement, Activation, Modernisation and Participation Co-funded by the Erasmus+ Programme of the European Union
The CHAMP project has as official aim to “give the sport movement innovative tools and education for modernisation, offer- ing them fresh insights of current trends and solutions for physical activity promotion”. This report presents the findings on the third of five intellectual outputs outlined by the CHAMP project in order to achieve this aim. The third intellectual output of this project has the target to “collect innova- tive good practices in the fields outside of sport”. In order to establish this collection, relevant academic and non-academic case studies on innovative practices to gain cus- tomer loyalty outside the sport sector were consulted and performed. Additionally, we conducted an analysis of six businesses of different sizes using these three models: PESTLE Analysis, Porter’s Five Forces Mod- el and a SWOT analysis. Private companies need a loyal cus- tomer base to keep their business afloat, just as by its sheer purpose the organised sports movement needs a stable or growing num- ber of participants to exist. Global market leaders, e.g. Starbucks and McDonalds, have achieved to build such a loyal global custom- er base, which will frequent their restaurants and shops not only in their home country, but also whilst travelling abroad. However, both companies do not rest on their success, but keep issuing new offers and products to maintain their global leader status. Thus, as a starting point of the research these two companies were first examined, to be able to learn from their practices. Nevertheless, as the organised sports movement exists on different tiers: global, national and local, it would be un- reasonable to assume that at each tier an organisation could follow the practices of a globally operating business. Therefore, this report will also examine medium and smaller businesses, which have the reputation of be- ing innovative and having a loyal and growing customer base. The report is structured in the follow- ing way, a first part explains the different tier approach and the reasoning behind choosing particular case studies, a second part pre- sents a general model of how to generate a loyal customer base and a third and final part outlines best practices following from the model which sports organisations can adopt.
A PESTLE analysis provides valuable findings that are of interest to any business, regardless of industry or sector. It is a framework which analyses the complete external environment in which the business is op- erating within, or intends to operate in. This type of evaluation of external forces signifies key factors which may influence the outcome of the busi- ness, either positively or negatively. If a company remains vigilant in terms of their external environment it enhances their preparedness and allows for planning and reactionary measures, in a timely manner (Gillespie, 2007: Menet, 2016). The PESTLE framework assumes that external factors which characterise an industry have the capacity to influence its ability to pro- duce value; thus, individual businesses are directly impacted. The model comprises six categories as follows. The political environment refers to opportunities and threats as a result of government influence, changes in government, political party policies and strategies and rules and regulations enforced at governmental level. A change of government with differing mandates has the potential to significantly impact industries depending on objectives of the leading political party. The economic environment relates to the financial structure of a society, such as GDP, interest, inflation, deflation, stock exchange, nation- al economic policies, exchange rates, etc. These variables directly impact the nation’s economic activity and industries. The social environment includes variables such as demographics, population growth, birth rate, cultural attitudes, behaviours, ethical be- liefs, shared values, education and employment levels, etc. Taking these factors into consideration assists a business in consumer attainment and retention as well as maintaining a positive reputation within their chosen their target groups. Definitions and Background Research 4
Innovative offers outside the field of traditional sport 3.0 PESTLE Analysis 5
Technological factors include innovative and evolving technologies and a business’s ability to adapt to and transfer new technologies. This is fundamental for a business to maintain a competitive advantage. The legal environment refers to adhering to current – and adapt- ing to changes in – laws and regulations. Legal factors play a significant role in the business environment and compliance is key. It is imperative to pay close attention to laws and regulations which may differ between geographical regions. Environmental factors include an awareness of ecological and cli- mate related changes affecting the business environment. This is neces- sary to remain up to date with formal legal frameworks as well as informal trends and consumer expectations. As shown, the PESTLE analysis model aims to explain variables present in the macro environment which have a direct impact on industries. Although busi- ness cannot control this environment, awareness does help in preparedness in terms of both opportunities and threats (Ward, 2005).
This is the strength of consumers to reduce prices of services and products. The power relations depend on the number of buyers, i.e. if a company has many consumers then the company holds the majority of the power whereas if only there is a smaller number then the power lies with the customers. This refers to the extent to which different products and services can be used in place of what the business is offering, therefore the like- lihood of consumers finding alternatives to what you offer. A substitu- tion that is easy and cheap to make can weaken a company’s position and threaten their profitability. The threat of a new entry refers to the ease with which new com- petitors can enter the market if they see a successful and effective busi- ness strategy, which in turn leads to a drop in profit from the original com- pany. This is a threat in the instance that little money and effort is required to enter the market and compete effectively or when little protection is in place for required technologies. However, if strong and durable barriers are in place then it benefits the original company by placing them in a fa- vourable position. Porter’s model provides a general overview of the external environment, but the outcome of this ap- proach depends on the quality of the analysis and the capability and availability of resources to utilise the re- sults in an effective business strategy (Rivani, 2005). 3.0 Porter’s Five Forces Model
SWOT stands for Strengths, Weak- nesses, Opportunities, and Threats and this mode of analysis aims to evaluate the balance between the internal resources and capabil- ities of a company and external possibilities and threats. The analysis focuses on identify- ing the external and internal factors that have the potential to affect the future business performance and, ultimately success (Xin- gang et al, 2013). SWOT identifies the strat- egies used for creating a specific business model according to the company’s available resources and capabilities, including the en- vironment in which the company operates. The analysis helps the company forecast or predict changing trends that benefit the de- cision-making process of the organisation (Kajanus et al, 2012). The four components of the SWOT analysis can be broken down as follows:
Strengths are the qualities that determine the success of the or- ganisation in achieving their vision and mission. These qualities may be tangible or intangible. Examples include personal traits of employees, fi- nancial resources, strong brand, etc. Weaknesses are the qualities that hinder an organisation’s produc- tivity and prevent it from achieving its full potential. However, weaknesses are largely manageable, and it is possible to reduce the detrimental impact but only if the weaknesses are easily identifiable. Conducting a SWOT anal- ysis provides an opportunity to do so. Examples include low quality prod- ucts, unskilled employees, poor business planning, etc. Surplus opportunities exist within the macro business environ- ment which benefit companies and help them thrive. Opportunities may derive from the market, competition or technology. Examples include, ad- vanced technology, change in government, failure of competitor, etc.
Innovative offers outside the field of traditional sport 6.0 Brand Loyalty Model 10 Using the models developed by Lin and Wang (2006) and Luarn and Lin (2003) for customer loyalty in the e-commerce setting and the papers of Dawes, Meyer-Waarden and Driesener (2015), Choy, Am and Lee (2012), Veloutsou and McAlonan (2012) and Sasmita and Mohd Suki (2015), the following model was created for the context of the OSM:and a business’s ability to adapt to and transfer new technologies. This is fundamental for a business to maintain a competitive advantage. Figure 1 - Model for customer loyalty in the organised sports movement Competitor advantage Satisfaction Brand Image Multiway communication Perceived Quality LOYALTY
The centre of the model (figure 1) figures customer loyalty. The five bubbles surrounding it contain five key features or concepts which are all positively increasing customer/member loyalty towards the OSM. In this section, first the concepts are ex- plained and second the good practices asso- ciated to each concept are presented. Starting from the top left, the first concept of the model is competitor advan- tage. This term captures that to be compet- itive for loyalty among customers the OSM should present a certain edge over its com- petitors. Its offer should be different and better. An example for this could be that us- ing the gym at the sporting organisation is cheaper or has more equipment than a gym of the private sector.
The second concept satisfaction is self-explanatory, satisfied customers are more likely to return and become loyal to an organisation that satisfies their demands than to an organisation that disappoints them. The third concept of the model, per- ceived quality, was added to the model based on the findings of the paper by Pappu and Quester (2016). Customers are more likely to become loyal to a brand if they have the feel- ing that the brand constantly spends funds in research and development to keep their product at the highest available technologi- cal standard. This feeling would then lead to trust in the brand of being the best option available and in terms of buying its products out of the belief that they are of the highest quality standard. For the OSM this could, for example, mean to always offer the newest training concepts to stay ahead of the offer of, for example, private fitness coaches. The fourth concept is brand image. In order to keep or increase a loyal customer base, brand image is as crucial as the other mentioned concepts. Customers will only align themselves to a brand with a good repu- tation (Doyle 2008). The corruption scandals of FIFA and UEFA showed that the OSM has to pay particular attention to their image, as crucial sponsorship deals can be lost (Gibson 2015). A decrease in sponsorship will fur- ther contribute to a loss in loyalty due to less funds being available to keep up the quality of the services. The fifth and last concept is multi- way communication. Communication with customers is important for a brand. It allows to be closer to the expectations of the cus- tomers and be ready to issue new products or services or to improve current products (see Sinha, Ahuja and Medury, 2011). Commu- nication with employees is also of great im- portance for the OSM, especially as smaller clubs and federations rely to a great deal on services offered by volunteers. Making sure volunteers feel appreciated and know which task they have to fulfil is primordial. 7.0 Concepts In summary, we can say that in order to maintain and increase customer loyalty, clubs and feder- ations should orient their activities and services around five major con- cepts: competitor advantage, sat- isfaction, perceived quality, brand image and multiway communica- tion. The remainder of this section lists good practices associated to each of the concepts.
USP is defined as a proposition that points out to the consumer that the product or service has a unique benefit that the com- petition does not have (Kippenberger 2000). For the OSM this means that it should focus on the uniqueness it has. The private sport- ing industry, i.e. fitness clubs, can never offer the sense of belonging that a sports club can. Thus, to attract members to use their facili- ties to train, the clubs or federations should not only focus on the quality of its equip- ment, but also on what other benefits the membership brings. Being part of the club enables cheaper or free access to the other activities of the club, such as for example events or matches held at the club. These ac- tivities greatly increase loyalty as they cause an identification with the club. Gamification is defined as: “a pro- cess of enhancing a service with affordances for gameful experiences in order to support user’s overall value creation” (Huotari and Hamari 2012). In the context of the OSM, gamification as a core activity of the OSM means to prepare and organise games. De- signing physical activity in a gamified form should not be an issue and will lead again to a competitive advantage over the private fit- ness industry. Referral and loyalty programmes are programmes specifically designed to reward being a long-time member of an organi- sation. As these types of programmes are common and widespread among the private sector (see Yi and Jeon 2003), here again the OSM should use the strength it naturally has through its structure and core activity. For example, the benefit for referring or staying loyal could be a free training T-Shirt with the emblem of the club printed on it. Such a re- ward not only gives the member the materi- al benefit of owning a new shirt, but it also strengthens her or his loyalty towards the sporting organisation, because the member is likely to use it while training at the club facilities, creating thereby an even bigger sense of belonging and loyalty, especially when other members wear the same shirt.
8.0 Good practices
The last good practice of the concept competitor advantage is to keep the price manageable for the services/products. This is especially important for organisation with smaller budgets. In competition, often a race for the lowest price is started. However, this is not always the best choice. In the concept perceived quality it will be explained that customers appreciate a high-quality prod- uct. Therefore in the race towards the low- est price, quality should not be sacrificed. This even more when a sporting organisation needs the revenue to keep coaches employed. In most cases solely relying on volunteer work for coaching makes customers seeking high end quality coaching leave the club. An example to further highlight this point is the company TESCO, one of the big- gest supermarkets in the UK with over 2000 stores nationwide. TESCO uses a personal approach on social media (predominantly twitter) to add personality and emption to their interactions with customers. This ap- proach makes customers more welcome in their stores, as compared to discounter su- permarkets, which only focus on setting the lowest price. Therefore, setting a slightly higher price than the competition can be jus- tified with more personal contact.
8.0 Good practices The first good practice of this con- cept is again of a larger scale, however with a few abstractions, every tier of the OSM can still make use of this practice. On the first and second tier of the OSM, budget can be al- located to perform a market study giving an- swers to the above raised question, and their offer should be adapted accordingly. Espe- cially, when organising a large scale event, a great attention should be laid on accessibil- ity and cultural appropriateness. If the local audience is new to the sport practiced at the event, cultural mistakes are likely to drive that audience further away from the sport. However, on the third tier, local clubs should - already due to their local composi- tion - have a feeling for what is their target demographic and their culture. Adapting the offer to this target group should be a contin- uous process.
This last good practice of the concept satisfaction enhances that if the OSM wants to increase and maintain loyalty it should lis- ten to what customers have to say about their services. This practice is applicable for each tier of the OSM. The most important aspect of this practice is to treat the customers with respect and thereby build a trusting relationship. Cus- tomers who feel respected and valued will like- ly return and contribute significant feedback about the services of the organisation. This will lead to better quality service and thereby complete the customer feedback loop. In the customer feedback loop, it is also important to follow up after the improvement of the ser- vice to check if the improvement was really what the customers were looking for.
8.0 Good practices The first good practice of the con- cept perceived quality invokes the cooper- ation with national policies and guidelines. This is especially crucial for the second tier of the OSM. A national federation that does not follow a national guideline, could send a bad message to the public. It either shows a distrust in national authorities or an inca- pacity to offer services according to the na- tional guidelines. Both could transmit to the customer the impresson that the service or product offered is of lower quality than is to be expected at national level and thus lead to a decrease in loyalty towards the organisa- tion. Therefore, the organisations of the OSM should always be monitoring the gov- ernmental strategies and guidelines. Fur- thermore, aligning completely to those strat- egies could lead to a cooperation with the national government and lead to an increase in funding and possibly increase the number of members of the sporting organisation.
A good long-term relationship is cen- tral to ensure loyalty towards an organisation of the OSM. As mentioned earlier, trust and understanding are key when dealing with cus- tomer requests. The additional feature that this practice brings into play is the longevity. For the OSM this means that it should have different offers for different age groups. This is suggested as by law of nature different age groups are not capable of following the same workout routines. An individual should be able to stay at the same organisation, but being re- ferred to in different schemes throughout her or his lifetime. This practice was already developed in the modelling section, it is of great impor- tance to keep the offer of products and ser- vices innovative, as a message to the custom- ers that the OSM is working hard to keep the offer at the highest possible quality level. An example for this is the music ser- vice Spotify. It offers its users the chance to look back at their whole year of music with their “Wrapped” feature (custom playlist of the user’s top 100 tunes from the previous year). Spotify encourages users to share that information with an automatically generat- ed personalised image across social media. This unique feature offers free advertisement for Spotify and highlights the trust that users have in the brand.
8.0 Good practices
A part of corporate social responsibil- ity as defined by Carrol (1991) is an ethical be- haviour of a brand. The ethical behaviour in- cludes creating a good working environment for your employees. A simple practice to adapt for the OSM is to allow its employees to train at its facilities as part of their working hours. For example an employee on a 40h contract could be allowed to use 3-5h of the 40h to do exercise in the organisations facilities, as the practice states happy employees are more likely to be motivated workers and promote the brand with ease. The last good practice for this con- cept only concerns the first tier of the sports movement. Before entering a new market/ country the two questions raised in this good practice should be answered. The first con- cerns the core activities. Is the situation in the country stable enough, that the activities of the OSM can be practiced there without major safety concern? The second question concerns the brand image directly. Entering a market means entering a political system and cooper- ating with the authorities in some way. If the authorities have a bad global reputation, as- sociating the brand with them has a bad influ- ence on the brand image, as it may contradict with the values the brand normally promotes. An example for this could be the FIFA world cup in Qatar 2022. Cooperating with Qatari au- thorities, which are accused to rely on working conditions close to slavery (Liew 2017) to build the stadiums, seems to have caused FIFA to loose some of its reputation of improving lo- cal communities and benefitting a country by staging a world cup.
8.0 Good practices
8.0 Good practices The first good practice of this con- cept relies on practices already mentioned for the other concepts. Via an app or other online form, the brand should communicate with its customers to be able to extract relevant infor- mation and data for product improvement. Zahay et al. (2004) in this context dis- tinguish between two types of data a busi- ness should collect, namely transaction and relational data. The first is straightforward to gather, as it consists of sales data. The second has to utilise the above-mentioned techniques. Again, collecting these kinds of data will help the OSM in increasing its loyal customer base. This last good principle calls to the use of social media campaigns to create loy- alty. Here the sports movement can inspire itself by campaigns from the private sector. Two social media campaigns are listed below: _ The Starbucks Unicorn Frappuccino Insta- gram campaign, Starbucks launched a new product with a massive online Instagram campaign, which went viral and induced a wave of people creating their own stories about the product. _ “Gillette: The Best Men Can Get” tackled toxic masculinity with a video that “calls on men to be better in light of the #MeToo movement.” The official YouTube video has over 33mil- lion views. Gillette also donated $3 million to charity as part of this campaign.
These two campaigns show that a well effectuated campaign can raise awareness about an important issue or a new product. With the aim of creating loyalty, the OSM should thus carefully build a social media campaign around that clear aim, and thus extracting the maximal benefit of it.
