Adopting a relationship marketing paradigm: the case of the National Basketball Association. (Research Paper).

Abstract: This paper explores the adoption of a relationship marketing paradigm by the National Basketball Association. A contextualist framework was used to explore the context, content and processes of this change that evolved over a 17-year time period. Personal interviews were conducted with leaders of this league and over 80 documents were reviewed and content analyzed. The results of this study provide insights into relationship marketing and organizational change for sport managers.

Keywords: Relationship marketing, Organizational change, National Basketball Association

Executive Summary

A transformation in the business landscape of professional sport in North America has resulted in the widespread adoption of relationship marketing practices. The relationship marketing paradigm in sport is based upon the principle of attracting and maintaining long-term relationships with commercial and industrial buyers, corporate sponsors and fans. In order to identify factors that have affected the adoption of relationship marketing as the dominant paradigm in professional sport organizations, Pettigrew's (1987) contextualist framework was used. This perspective advocates that, when seeking to understand organizational transformations, an examination of the firm's environment (both the inner and outer context), the aspects of firms that are being changed (content), and the actions, reactions and interactions of interested parties (processes) are important.

Using the National Basketball Association (NBA) as a case study of a sport organization that has adopted relationship marketing as a dominant business level strategy, we examine the role played by these factors in the change process. The results of this investigation indicated that external contextual shifts such as the rise of pay TV, technological change, the globalization of world markets, and the growing entertainment economy all contributed to the paradigm shift. In addition, contextual changes within the organization that were influential included the specialization of staff, the restructuring of the organization, the identification of partners, and the adoption of a partnership philosophy by the league. Factors related to the content of the NBA's change from one marketing paradigm to another included the firm's commitment to quality, the emergence of marketing as a dominant function within the organization, and the evolving criteria employed to measure customer satisfaction. Finally, processual factors facilitating the adoption of relationship marketing within the NBA were the recruitment of a new visionary leader and the articulation of a partnership driven vision of the firm. In making a shift to a relationship marketing approach, managers must be aware of the organizational implications of partnering, of employee competencies, of partner readiness, and of a clearly articulated vision of the firm, and how these play a role in achieving a successful transition.

North American professional sport organizations changed dramatically over the last two decades. The nature of this change has been influenced by factors such as the globalization of world markets, the proliferation of television coverage of sporting events, shifts in technology (e.g. increasingly rapid communication, diffusion of sports information via the Internet and satellite television), and finally, the emergence of the entertainment economy marked by increased employment in the leisure and recreation industries and the introduction of new technology driven by entertainment products (Mandel, et al., 1994). These shifts have created opportunities for and necessitated the formation of proximal relations among sport organizations and between sport organizations and corporate partners. A consequence of these linkages has been the adoption of relationship marketing practices by professional sport leagues and individual franchises. Relationship marketing is the term employed to encapsulate a shift in marketing toward practices that emphasize flexibility, specialization and relationship management instead of market transactions (Webster, 1992). This type of marketing is underpinned by ongoing relationships that depend on negotiation as a principal basis for conducting business (Webster, 1992).

There exists an abundance of examples of relationship marketing practices in professional sport organizations. For instance, the San Diego Padres baseball team experienced unprecedented success with its initiative to reward valued customers. A program, comparable to a frequent flyer program, enabled fans to accumulate points by purchasing the franchise's products; these points were subsequently redeemed for rewards. The National Football League (NFL) also employed relationship marketing practices to strengthen its links with corporate sponsors, such as McDonald's. The fast food chain's "Kick Off" promotion used the league's footage for advertising and promoting its relationship with the NFL. At the retail level, customers can win NFL Game Day trading cards, enter contests for trips to the Super Bowl and Pro Bowl, win season tickets to any NFL team, or a player's salary for a day. McDonald's and the Miller beer company have similar agreements with the National Basketball Association (NBA), and Anheuser-Busch i s focusing on its relationship with Major League Baseball (MLB).

In 1997, a special issue of Sport Marketing Quarterly was dedicated to relationship marketing and corporate sponsorship within the sport context. The articles in this issue highlighted the use of relationship marketing practices by sport organizations and the changes in the ways practitioners in the field of sport attracted commercial and industrial buyers and maintained long-term relationships with them. This shift within professional sport from the traditional marketing paradigm has occurred for several strategic reasons. Specifically, these organizations have realized the importance of customer retention and developing strong ties with sponsors and partners. The relationship marketing approach serves as a vehicle to foster such ties (Gronroos, 1994). Furthermore, it provides previously untapped benefits for sport organizations and their partners such as securing a loyal customer base, fostering legitimacy, and improving quality and interdependency between the partners (Shani, 1997).

The National Basketball Association (NBA) has been a leader in the adoption of relationship marketing practices and is representative of the phenomena as they are occurring throughout professional sport. It appears that the shift in the dominant ideology, culture and practices of this league occurred between 1980 and 1997. Recent evidence from industry articles (cf Bittman, 1985; Grimm and Lefton, 1993; Kapp, 1991; Rifkin, 1997) suggests that this is the period over which the NBA has embraced the tenets of the relationship marketing paradigm. A network of long-term relationships with more than 150 companies including industry giants such as Coca Cola, McDonald's and Nike, has resulted in a 30fold revenue increase (i.e. $107 million in 1987 to over $3 billion in 1997) over the last ten years (Rifkin, 1997). In order to identify the environmental and organizational dimensions that affect the adoption of relationship marketing as a dominant paradigm by sport organizations the context, content and process of chan ge must be considered. The contextualist approach posited by (Pettigrew, 1987) advocated an examination of such factors when seeking to understand organizational change. Therefore, the purpose of this paper is to explore the context, content and process of change in one sport organization that has adopted relationship marketing as a dominant perspective. Given the apparent shifts in the marketing strategies it has employed since 1980, the professional sport league selected to investigate this phenomenon was the NBA. This organization was selected given the complete transformation of [this] once floundering league into the most powerful global sports brand in the world" (Hill and Rifkin, 1999, p.123).

In the first section of the paper we provide an overview of the relationship marketing paradigm and highlight the differences between this perspective and traditional marketing approaches. Next, the conceptual framework posited by Pettigrew (1987) for understanding organizational transformations such as the shift from traditional marketing to relationship marketing is presented. The research method employed in this investigation is then discussed. This is followed by an overview of the factors that facilitated changes in the NBA's marketing strategies over the last two decades. Specifically, the context, content and process of change that transpired in the NBA are discussed. A summary of the contributions of this research concludes the paper.

Overview: Relationship Marketing

Relationship marketing has emerged as an important discussion point among academics and practitioners interested in the field of marketing. Initial interest in this area was stimulated by Gronroos' (1994) seminal article, "From Marketing Mix to Relationship Marketing: Towards a Paradigm Shift in Marketing". This article highlighted a transformation In marketing that was underpinned by changing events, standards and expectations in this field. Furthermore, the recognition of the importance of customer retention underpinned the emergence of relationship marketing practices among organizations (Groonroos, 1994). The prominence of new forms of business organizations on the economic landscape, such as strategic alliances, partnerships and networks, which necessitate new ways to manage market transactions among economic actors has also been cited as a factor contributing to the appearance of new marketing practices (Webster, 1992).

Groonroos differentiated between the traditional marketing mix of short-term transaction type exchanges and the relationship marketing approach which focuses on building long term relationships with both organizational partners and consumers. He outlined several distinctions including: (i) the time perspective; (ii) the dominant marketing function; (iii) the dominant quality dimension (output or relationship); (iv) the measurement of customer satisfaction; and, (v) the customer information systems (surveys vs. real time feedback), This distinction between the traditional marketing mix and relationship marketing is significant in that the latter acknowledges not only the context of changes in the marketing environment, but also the greater organizational environment. Relationship marketing can be considered from several different perspectives (Cravens, 1995). It can be viewed as a means to enhance business to business relationships, to establish and build customer relationships, or to develop channel of distri bution relationships. The focus of this paper will be primarily on business to business (or strategic …