Real Madrid Marketing Case

1. Describe Real Madrid's business model and describe how the market of football has evolved in time.

Real Madrid's concrete business strategy began to take shape upon Perez and his new management team's vision of building a professional organization by structuring itself as a company that provides content to its clients/consumers.

The company's vision to be the best soccer club in the world was reinforced by its mission to "nurture and project the Real Madrid brand worldwide." Their success was measured by 1) the size of the audience; 2) frequency of audience engagement with the brand; 3) socio demographic characteristics of the audience; 4) building bridges to link the brand and the audience.

The club's 3 goals for growth were:

A. Financial Flexibility

* Rezoning and selling off 20 % of the club's training pitches brought in 500m.

* Recaptured exploitation rights and licensees by buying back VIP boxes and reconfiguring contracts for in ground signage.

* Developed a stand-alone entity (Sociedad Mixta) to own and manage RM's rights such as merchandising and licensing, sponsorships and players image rights, distribution business, online and new technologies, and international development.

B. Top Players - Galacticos

* Engineering of at least one world-class player per year to make up a star studded team with equal salaries.

C. Brand and Content

* Attracting and retaining star players

* Specialized publishing, audio visual rights, video games, merchandising, internet, and tick and stadium development was designed and controlled from point of sale to distribution in order to convert RM fans into customers on a global scale.

* Expansion of RM tv station, club website features, mobile content and services via Telefonica, and retail store network/franchise.

RM claims that these initiatives strengthened the RM brand, which in turn increases the value of its content.

International Expansion

* Growth initiatives in Asia included expanding the Chinese market for merchandise which resulted in the development of soccer academies, fan clubs, specialty shops, restaurants and cafes.

* Growth initiatives in the U.S. included, 1) content development via training videos, cartoon series, etc, 2) fan loyalty via local youth orgs, McDonald sponsorships and domestic competitions, 3) development of intangible assets such as soccer academies, lectures, RM youth teams, etc. 4) asset deployment via team tours, merchandise licensing and distribution.

Traditional Business Model

Upon inception, there were 204 national organizations that were members of FIFA, specifically in the UEFA there were 52 national associations that would participate in the continent's most prestigious Champions Cup. At the time, UEFA would negotiate the marketing rights collectively for the entire cup, and with little regulation, the home teams were free to independently establish ticket prices, market the game and adopt other competitive strategies.

Since clubs were promoted or demoted to premier or secondary leagues based on their performance during the year, the managing team would focus on acquiring and retaining the best talent available. In theory, having the best players on the team meant better performance, and therefore better ticket sales and higher revenues. However, this model was unsustainable, and in some cases, teams were even demoted to lower divisions because of insolvency.

In the 90's, the business model transitioned from ticket sales to maximizing merchandising, sponsorships and television revenues on an international basis. As football caught on in different regions around the world, the club's starting capitalizing on the interested fans abroad, and the best way to get to them is through merchandising.

Match day revenues continue to be an important income for the teams, however merchandising and sponsorship opportunities continue to grow on a yearly basis. Regarding sponsorships, some clubs (including Real Madrid), require players to return a percentage of their earnings to the club.

In terms of TV rights, during the 90s, market deregulation made the selling of TV rights the principal revenue for many clubs. Today, more regulation is in place and collective selling of TV rights is no longer allowed. Some clubs, like Juventus, ventured into selling share capital and although initially investors were attracted to this option due to high revenue forecasts and operating profits, they soon turned away from the skyrocketing club expenses tied to the best-talent best-performance mentality.

2. Regarding segmentation, how many markets can you detect? Describe them.

Based on the previously discussed business model Real Madrid could focus on segmenting markets in order to more effectively focus resources into meeting specific customer needs.

We could clearly identify the following market segments:

International Fans: as mentioned