How The Nba Put The Bounce In The Basketball

If you promote it, the fans will come Its a crowded commercial world, where marketers fight for each moment of consumers time, the competition is first for share of mind and only then for market share. Nothing illustrates this battle for consumers attention span better than the jousting for fan support that is central to professional sports.

In the US, where baseball, football, hockey, hockey, golf and tennis, are all backed by powerful marketing machines, the National Basketball Association (NBA) has created an unsurpassed model for building brand equity. That model is even performing strongly beyond Americas border, where basketball is making a serious run at soccer, the most global of

 

sports in terms of fan popularity and participation.

Since taking over as the commissioner of the NBA a little more than a decade ago, David J Stern has transformed a collection of sagging franchises into a well-oiled money machine that flexes its muscles both on and off the court. In the process, the NBA has become a case study for any organisation struggling to break out of the pack, offering lessons in how to establish a brand name and then extend it in directions both obvious and innovative.

Last year the NBA took in $1.2 billion from ticket sales and television rights, more than four times the $225 million of a decade ago. But that is only for openers. The really big dollars now come from innumerable ancillary products and promotional tie-ins, the growing offspring of a network of licensing arrangements and sponsorship with more than 150 companies, including such giants as Coca-Cola, McDonalds and Nike. These relationships, many of which are long term in nature, brought in more than $3 billion in 1996, a thirty-fold increase from the $107 million of 10 years ago.

This combined $4 billion-plus revenue stream isnt a bad haul for a basic labour force that numbers just 348, the sum of the 12 man rooster of the leagues 29 teams. And it shows no signs of levelling off. Even though basketball is something of a mature business - its arenas are filled to 92 per cent capacity for the average game - its earning potential is limited by the size of world market itself. With offices in 8 foreign cities and television broadcasts in some 180 countries, the NBA has already become one of America's biggest exporters, ringing up 16 per cent of its $3 billion in product sales abroad. The league is now making a full-court press to raise that foreign contribution to fully a third of product sales within a decade.

It is not a far-fetched goal. The NBA, no less than Coca-Cola, Mc-Donald's and Nike, has carefully built and nurtured a deeply emotional bond between its product and its customers, a bond that transcends the game itself. The NBA logo triggers a marketer's dream response: respect, excitement, quality, dynamism and fun. It is a club people want to join, a community in which to participate. The sight of 12-year-old boys on the streets of Paris and Mexico City wearing Chicago Bulls jerseys no longer raises eyebrows. The stunning rise of the NBA's popularity in countries like Japan, which has virtually no basketball tradition or fan base, is testament to the league's marketing savvy.

"Stern and his colleagues had terrific vision," said Stephen A Greyser, a professor of consumer marketing at the Harvard Business School who teaches a course about the business of sports. The NBA, he said, became focused on brand equity in the early 1980's when no other sports leagues and very few companies even understood the concept.

It nurtured that brand by tightly controlling how its licensees presented its image and message. It imposed the same sort of quality assurance on its 29 sub-brands, the individual teams, through a strong - yet supportive central administration. And it kept the peace on its "factory" floors and in its front-office suites by pioneering salary and revenue-sharing arrangements that made players and management rich together without having to endure painful work stoppages, something that has eluded a

number of other sports, notably baseball.

Professor Greyser ticked off some of the winning plays, applicable to general consumer industries no less than sports leagues:

Develop line extensions for the brand. The NBA has done that numerous times over the years. Its newest extension

is the WNBA, a

professional women's league that will compete in eight cities starting in 1997.

Forge strategic alliances. The league has been extremely skilled at alliance building, not only with retailers but with critically important television networks.

Gain visibility using other people's money. In its symbiotic relationships with the networks and with corporate sponsors like Nike, the NBA has garnered endless advertising and marketing goodwill without spending any of its own money. And the league has taken a much-rewarded long view in its alliances by "not grabbing for every last dollar," Professor Greyser said. "The NBA realises that having your partners participate in the upside is a positive thing."

Find ways to stay in the limelight. The NBA has had an uncanny knack for creating attention-getting events, like the Olympic Dream Team. The league also sponsors off-the-court community programmes, like Stay in School and Fan Fest, which pay off in

marketing presence as well as in goodwill.

Mr Stern executes these moves with the help of a large team of pumped up assistants.

He has built a front-office staff, now 600 strong, in his own hard-charging image, said Edward Levin, a principal at Booz-Allen & Hamilton who recently completed a benchmark study of branding practices and looked closely at the NBA.

"Stern built an organisation that cared passionately about the game and the brand," Mr Levin said. "They bring a missionary fire and zeal because they really believe in it." Talk to NBA employees and they market the product, whether they are in operations, finance, human resources or sales.

Professor Greyser added that the league has begun hiring MBAs in the last two or three years, specifically to help manage the brand

internationally.

"Other than the 10-foot basket, very little is untouchable," said Bill Daugherty, the NBA's vice president for business development. "We're always able to keep the sport contemporary."

Mr Stern gets the lion's share of the credit for all this. "David Stern is certainly the best brand manager in sports and I'd compare him to any of the great brand managers anywhere," said David Green, senior vice president for international marketing at McDonald's.

In the early years, Mr Stern used organisations like Disney and McDonald's as his marketing role models, rather than Major League Baseball or the NFL. He coupled his feel for the product with an unparalleled sense of the importance of television and sponsor relationships. Accordingly, he built the NBA as an entertainment conglomerate, extending the brand through dozens of licensed products much as Disney does with toy makers and clothing manufacturers.

Mr Levin, of Booz-Allen, credited Mr Stern with seeing the need to "transcend" the product. "By choice and by design, David Stern started looking at the NBA as a brand rather than as a loose association of clubs," Mr Levin said. "He also recognised the emergence of the players as three-dimensional personalities who would become much more than basketball players."

The NBA also benefited handsomely from two serendipitous but synergistic trends. The remarkable rise in the popularity of college basketball NCAA Final Four championships put emerging young stars like Shaquille ONeal, Grant Hill and Anfernee Hardaway on national television dozens of times before they entered the NBA. They were already celebrities when they arrived. And with aggressive sponsors like Nike and Reebok using innovative advertising campaigns to turn NBA stars into international sensations, the league reaped vast residual benefits at no cost. (Other sports have benefited in this way too, of course, but not to the same degree. The sponsors in those games tend not to be as heavily dependent for their business on sports advertising. Nike, by contrast, fuels almost all its growth and profits from basketball shoes.)

Mr Stern also established a powerful and intricate organisational structure - in some respects centralised, in others highly decentralised - that was designed to promote and protect the brand.

Part of the reason they have such control is that the teams have given it to them, said Mr Levin of Booz-Allen. Mr Stern had some early wins and rallied the owners around him. Unlike their counterparts in professional baseball and football, the NBA owners have all brought into Mr Sterns dictum to let the game and the players shine while they and their egos remain in the background.

Because its chief assets wear sneakers and are subject to injuries, retirement, unusual behaviour and other human frailties, the NBA has had to build a deep and broad foundation for its product to survive and prosper.

As with its television operations, the NBA retains tight control over every aspect of its marketing, Mr Levin of Booz-Allen pointed out, including veto power with even its most powerful sponsors, like Coca-Cola, McDonalds and Nike. A sponsor, for example, must demonstrate aggressive support of the NBA brand or the relationship will be terminated. The league recently parted company with a major cereal manufacturer because it simply wasnt demonstrating enough enthusiasm in its advertising for the NBA relationship. Such influence came slowly, with careful orchestration.

And as the leagues arenas began to sell out regularly in the 1980s, Mr Stern knew he had to extend the brand in ways other than ticket sales. He understands that he cant do it alone, said Mr Green, the senior vice president for international marketing at McDonalds. Hes made sure he has alliances and relationships with other companies and countries to ensure a robust spread of the brand.

The new excitement came just at the right time to capitalise on the explosive growth of cable television. The television set had truly become a global electronic fireplace and basketball broadcast remarkably well: fast, non-stop action, with highly recognisable players - not hidden by helmets, caps or padding - showing off their skills in an aesthetically pleasing game.

In the fall of 1984, the most photogenic athlete of his generation, a rookie named Michael Jordan, arrived in Chicago,

and his presence eventually raised the visibility of the NBA to levels that astounded even Mr Stern.

The simultaneous rise of the NBA, Nike and Mr Jordan was not coincidental. Each fed off the customer value of the others and like Mr Jordan soaring for a slam-dunk, they drove the visibility of each entity higher and higher. The confluence of star, product and television made it clear to Mr Stern and his fellow executives that the lure of the NBAs brand was personality driven. This was not always obvious, even to Mr Stern.

The NBA also gets a positive spillover from college basketball. The NCAA Final Four, one of the top televised sporting events each year, is a showcase for future NBA stars, and this smooth flow from one venue to the next has made even the NBA draft a nationally televised event viewed by millions.

And a decision in 1989 by FIBA, the international basketball governing body, to allow professional athletes to compete in the Olympics also proved a boost to the NBA. In 1992, the original Dream Team came together in Barcelona to represent the United States. The sight of these stars on one court competing for the US had a dramatic impact on the global game, so much that it caught everyone by surprise, including Mr Jordan. It was as if the Beatles had reunited for a tour. I dont think anyone knew what to expect, Mr Jordan said. This was the first time this had happened. But a we started travelling around and seeing helicopters and motorcades all over the place, we realised, Hey, this is really big. Added Magic Johnson, The Dream Team made basketball the game it is around the world.

But actually, Mr Stern deserves credit here as well because he had been busy laying down much of the groundwork.

Under his leadership, the NBA was an early adopter of the Think Global, Act Local approach to marketing and it set up league offices in Geneva, Hong Kong, London, Melbourne, Mexico City, Miami (for Latin America), Paris, Tokyo and Toronto. More than 70 full-time NBA staffers are stationed in these cities, giving the NBA more overseas personnel than all other American professional sports leagues combined. And there are plans to add

another 150 people over the next three years.

With these people on the ground for the NBA, we have a better record of television placement, media placement, consumer products with retailers and just a much greater overall presence, said Mr Daugherty, the vice president for business development. It is a key to the globalisation of the sport.

Professor Greyser of Harvard gives high marks to the Stern team for having that global vision and finding ways to implement it. Twelve years ago, the idea that basketball would become the second most popular sport in the world, and No 1 in some cases, was not that clear, he said. Now, if you walk down a street anywhere and say Michael or Shaq, they know who you are talking about.

As it chases soccer for sports supremacy, basketball has something soccer does not: a single league in which the best players in the world compete. As more and more foreign-born stars emerge from Europe, Africa, Australia and eventually China, to play in the US, the NBA will further epitomise a transnational corporation whose products cross all geographic boundaries.

These international stars, like new model cars or hit movies, keep the game at the forefront, which is a basic strategy of the league. Accordingly, the league goes to great lengths to promote these stars in their local markets.

As much as things are going well these days for the NBA, there is still a litany of problems facing league executives: too many low-scoring games, young players skipping college to rush into the NBA, injuries to marquee players like Mr ONeal, the erratic behaviour of a player like Chicagos

Mr Rodman and the inevitable retirement of Mr Jordan.

The all-too-human nature of the NBAs product creates an incredibly insecure environment, Mr Daugherty said, and like Intel or Cisco Systems, the league takes nothing for granted. We operate with the philosophy that it is all going to fall apart tomorrow, he added. But he also pointed out that the NBA had weathered countless crises that doomsayers predicted would cause its demise.

There will always be issues in a sports league, Mr Daugherty said. The fact that people around the world care and we make headlines over these things is the best news of all.n

Glenn Rifkin covers technology for The New York Times and has written for Harvard Business Review and Fasty Company. He is the co-author of The Ultimate Entrepreneur: the Story of Ken Olsen and Digital Equipment Corporation.

Reprinted from Strategy & Business, Booz-Allen & Hamiltons quarterly magazine.