Adidas - Crm Technology

Abstract

Purpose - In a seminal article, Webster argued in 1992 (Journal of Marketing, Vol. 56/October, pp. 1-17) that some changes in concept and practice have fundamentally reshaped the field of marketing. He claims that 'customer relationships' are now the key strategic resource of a business. Strategic partnerships and networks are replacing simple market-based transactions. The purpose of this paper is to investigate this claim in the context of various relationships maintained by the adidas® group.

Approach - A detailed analysis was carried out to consider how the organisation has adopted a customer-oriented approach as their key strategy for improved business. This includes factors like increased loyalty of the customers, innovation in creation of new products, use of technology to maintain customer information and the importance of strategic alliances with other businesses.

Findings - Customer Relationship management is an integral part of the marketing strategy in every organisation. Every department of the organisation works in a cumulative way to add value to the customer and thereby increase the efficiency of the organisation in terms of profits. Adidas® group has employed CRM as it core marketing strategy in both business-to-business relationships and business-to-consumer relationships using innovative products and latest technologies like mySAP-CRM.

Keywords - relationship marketing, customer retention, adidas® group

Introduction - A Paradigm shift

The sole purpose of business Peter Drucker (1973) once famously claimed was "to create a customer". However, keeping the customer has become regarded much more important, since Dawkins and Reichheld (1990) reported that a 5% increase in customer retention generated an increase in customer net present value of between 25 percent and 95 percent across a wide range of business environments . This is the shift in paradigm that has been argued by Webster in a seminal article in 1992. He claims that 'customer relationships' are now the key strategic resource of a business . There are no longer any simple buying-selling transactions. It is being replaced by strategic relationships where each partner maximises profits by linking with the other.

Customer retention has become the key marketing strategy for most organisations world-wide. As customer tenure lengthens, the volumes purchased grow and the customer referrals increase. Simultaneously, relationship maintenance costs fall as both customer and supplier learn more about each other. Because smaller numbers of customers churn, customer replacement costs fall. Finally retained customers may pay higher prices than newly acquired customers, and are less likely to receive discounted offers that are often made to acquire new customers. This leads to an increased present value of retained customers. Lindgreen et al. (2000, p.295), for example, compute that "it can be [up to] ten times more expensive to win a customer than retain a customer - and the cost of bringing a new customer to the same level of profitability as the lost one is up to 16 times more."

For the purpose of this paper, we look at relationship marketing in the context of the adidas® group. Firstly we examine a brief history of adidas® leading to what encouraged adidas® to adopt a customer-oriented approach rather than continue with a transactional approach. Further it is explained as to how Customer Relationship Management (CRM) forms a core of the missions and strategy outlined by the organisation. This is then followed by a detailed analysis of the adidas® CRM implementation in a B2C market supported by brief literature related to innovation, brand loyalty and increased satisfaction. Finally we explore the B2B market relationships of adidas® with other organisations, including co-branding and strategic alliances, with the aid of technological advancements that further enable CRM.

History

The adidas® - a name that stands for competence in all sectors of sports around the globe, began in 1920, when Adi Dassler made his first shoes using the few raw materials available after the First World War. Today, the adidas® product range extends from shoes, apparel and accessories for basketball, soccer, fitness and training to adventure, trail and golf . adidas®, like many companies during the 1960s, believed in large volume sales. Lot of effort was put into advertising the brand in the early days through sporting celebrities. One of the main reasons that the colour of the 3 stripes on the running shoes was changed from black or dark brown to white was to facilitate easy brand recognition and identification, which in turn would promote the overall sales. The ideology was that the ability of a brand to stand out in the market place will enhance its chance of standing out in the customers mind. adidas® produced shoes that could be used for different types of sports.

Changing market

However in the late 1960's, the concept of "jogging" started to spread in the U.S., which was by now a huge market for the adidas® group. The adidas technicians initially dismissed the jogging trend by contending that 'jogging is not a sport'. But their distributors in America started to demand for products for jogging. Finally when the technicians gave into the pleas of the American distributors, they still couldn't figure what the American customers required. While Germans tended to run on forest trails, the Americans jogged on roads and clamoured for soft shoes. When adidas® finally came up with the shoes, it was too little, too late. In the first year of these new trainers, it sold up to 100,000 pairs. And subsequently, the distributors raised the demand for the second year to nearly million pairs. But adidas® couldn't cope with the increased demand from their distributors and customers. Also, at the same time they ignored the competition they were facing from Nike, Reebok and Converse in the US market. Before they came along, adidas® owned more than half of the American market. But by the mid-eighties, the three stripes were in free fall. The time had come for drastic action. This was the age of a consumer-led market. Unless adidas® catered to the specific needs of its wholesale distributors and end-consumers, it would have just disappeared into oblivion.

Relationship Marketing

Over the years there has been a continuous shift of focus that has been oriented towards CRM. In the earlier days, the sole purpose of any organisation was to be successful in mass sales process. The marketing business unit of the organisation concentrated